HomeMy WebLinkAboutItem 06 - Request for Affordable Housing Funds - Toscano Apartments
Department Name: Community Development
Cost Center: 4008
For Agenda of: March 2, 2021
Placement: Consent
Estimated Time: N/A
FROM: Michael Codron, Community Development Director
Prepared By: Cara Vereschagin, Housing Coordinator
SUBJECT: REQUEST OF AFFORDABLE HOUSING FUNDS FROM THE HOUSING
AUTHORITY OF THE CITY OF SAN LUIS OBISPO FOR TOSCANO
APARTMENTS ($335,000)
RECOMMENDATION
Adopt a Resolution (Attachment A) approving an Affordable Housing Fund loan in the amount
of $335,000 to the Housing Authority of the City of San Luis Obispo to assist with construction
costs for Toscano Apartments, a 38-unit affordable housing project located at 3065 Lucca Lane.
DISCUSSION
Background – City’s Affordable Housing Fund
The City’s Affordable Housing Fund (AHF) receives funding from commercial and residential
developers to meet the City’s Inclusionary Housing Ordinance “in-lieu” of those developers
providing actual housing units within their projects. State planning and zoning law requires the
fund to be used only for the purpose that it was established – to support affordable housing in the
City of San Luis Obispo. These funds are awarded at the City Council’s sole discretion, based on
previously adopted criteria (Attachment B). Requests for AHF support are evaluated by staff
and forwarded to the City Council for consideration. The project requesting funds is described
below and is evaluated for how it meets these criteria and why this loan is being recommended
for funding.
Overview of Toscano Apartments Request
The Housing Authority of the City of San Luis Obispo (HASLO) is requesting an allocation of
$335,000 in AHFs for the Toscano Apartments Project (Attachment C).
The Toscano Apartments Project will be located within the City’s Margarita Area Specific Plan.
To comply with the City’s inclusionary housing requirements for Vesting Tentative Tract Map
2428 (Margarita Ranch), a minimum of 26 lower-income units are required to be constructed.
HASLO is developing the Toscano Apartments Project with a total of 38 affordable units, which
is 12 units beyond the original requirement. Additionally, HASLO is increasing the affordability
level of these units, such that the project will provide housing available to families earning 30%-
60% of the area median income (AMI). The number of units and increased affordability
proposed warrants the City’s consideration of an AFH loan award.
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Award Criteria
In making its recommendations to City Council for how AHFs should be allocated, staff
considers Council’s adopted criteria to support affordable housing projects including: eligibility,
need, suitability, timing, financial effectiveness, and readiness. The following is an analysis of
this particular request relative to the criteria, as provided by HASLO.
Eligibility. Use of the AHF for the requested purpose will increase or improve the City’s
affordable housing inventory and promote General Plan policies regarding housing, as follows:
Toscano Apartments meets the eligibility criteria because it will increase the supply of
affordable rental housing by constructing 38 new affordable units. The families served
will range from 30-60% AMI, an income bracket that has very limited housing options in
the City. Toscano Apartments will be restricted as affordable housing by the Low-
Income Housing Tax Credit (LIHTC) program for a minimum of 55 years. As an
additional overlay, HALSO, through its public agency status, will ensure that the housing
remains permanently affordable. HASLO will operate the housing and ensure long-term
compliance with all regulatory agreements as well as financial and physical sustainability
of the property. HASLO will utilize its affiliate non-profit, San Luis Obispo Non-Profit
Housing Corporation, as managing general partner in the Limited Partnership ownership
entity formed for purposes of the LIHTC program.
Need. There exists a substantial or overarching need for the type of unit to be assisted, as
follows:
Affordable housing is a critical need in the City as well as countywide. San Luis Obispo
County, including all seven cities, has one of the lowest rental housing vacancy rates in
the State of California according to the State Department of Finance. Since 2017, after
extensive public outreach and community input and engagement, the Council has adopted
the production of affordable housing as one of its top priority goals. Last, the City’s
Housing Element documents substantial unmet need during the previous 5-year planning
period.
Suitability. The project to be assisted is appropriate for its location both in terms of land use and
design, as follows:
The site is zoned Medium-Density Residential, Specific Plan and Planned Development
Overlay Zone (R-2-SP-PD), consistent with the proposed use. Upon the recommendation
of the Architectural Review Commission in June 2020, the Planning Commission
approved the project in September 2020 (Reso No. PC-1021-20).
Timing. The project would better serve the City’s needs if it were built immediately as opposed
to later, as follows:
Toscano Apartments has received all City discretionary approvals and is preparing to
submit for a building permit application. The project is assembling various competitive
sources of financing and will apply for low-income housing tax credits in March 2021. If
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awarded tax credits, construction is expected to begin in December 2021.
Financial Effectiveness. But for the requested assistance, the project would not be economically
feasible; or AHF funding “leverages” significant additional funding from other sources, as
follows:
This is a highly effective use of the AHFs; it will leverage an estimated $15 million in
other Federal, State, and private financing. The apartments will remain affordable for 55
years pursuant to a LIHTC regulatory agreement. Additionally, HASLO as a public
agency will do its best to ensure that the units remain a permanent affordable housing
resource for the community. Project financial feasibility is dependent upon AHF
allocations.
Readiness. The project has all necessary City approvals and is ready to proceed, as follows:
Toscano Apartments has obtained all the necessary City discretionary approvals. HASLO
intends to apply for a building permit in October 2021. Upon award of the AHF
allocations, HASLO will apply for LIHTCs. If an award of tax credits is received,
construction would start in December of 2021.
Policy Context
Providing financial assistance to affordable housing projects is a theme supported throughout the
City’s Housing Element (HE). HE Goal 2 is Affordability, which specifically states
“Accommodate affordable housing production that helps meet the City’s quantified objectives.”
HE Program 2.5 states “…Continue to manage the Affordable Housing Fund so that the fund
serves as a sustainable resource for supporting, at a minimum, 4 new affordable housing
developments during the planning period…” and “support high-quality housing projects that
would not be feasible without Affordable Housing Fund support.” This request of HASLO to
increase housing affordability for low-income persons is in alignment with this goal and
program, the current Housing Major City Goal for FY2019-21 of housing production, and
upcoming major City housing priorities for FY2021-23.
Public Engagement
As this is a request for City AHFs, the project has a “notify” level of engagement under the
Public Engagement and Notification Manual. Public comment can be provided to the City
Council through written correspondence prior to the meeting and through public testimony at the
meeting.
ENVIRONMENTAL REVIEW
The project to award affordable housing funds is exempt from environmental review per Section
15061(b)(3) General Rule of the CEQA Guidelines. It can be seen with certainty that the
proposed action to award grant funding will have no significant effect on the environment.
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FISCAL IMPACT
Budgeted: No Budget Year: 2020-2021
Funding Identified: Yes
Fiscal Analysis:
Funding Sources Current FY Cost
Annualized
On-going Cost
Staff Funding
Recommended
General Fund
State
Federal: City FY21
CDBG1
$333,506
Federal: County FY21
CDBG2
$479,196
Fees
Other: City AHF $335,000
Total $1,147,702
The Affordable Housing Fund has an uncommitted, available funding balance of $416,710.95 for
new affordable housing projects (Attachment D), and can support staff’s recommendation to
fund Toscano Apartments in the full ask, leaving a buffer of funds for additional projects staff
anticipates requests for in the coming year.
If this recommendation is approved by the City Council, the AHF will retain $81,710.95 liquid
available funds for assistance with future affordable housing projects. Current development
activity also indicates that additional impact fees will be collected in the AHF, which will
increase the available funding over time.
The recommended allocation would be in the form of a loan paid out of the AHF, which consists
of in-lieu fees collected under the City’s Inclusionary Housing Ordinance. The AHF may only
be used for projects or purposes that create or support affordable housing within the City. The
project will have no impact on the General Fund.
Additionally, as HASLO is developing the project with a unit count that exceeds the original
inclusionary minimum, it will be eligible to defer the collection of certain planning review and
associated impact fees pursuant to Resolutions No. 8415 and 9903. Estimation of the amount of
fees eligible for deferral will not be finalized until HASLO submits building permits. Both AHF
and Fee Deferral loans typically have a 55-year term with a rate of 3-4% simple interest. The
details of each loan will be finalized prior to release of funds and structured specific to the
project’s financing package.
1 City Community Development Block Grant (CDBG) allocations are being considered at the March 16, 2021
meeting as well. Should the HRC’s recommendation be adopted, this project will be selected for funding in the
preliminary estimated amount of $333,506.
2 The County has also selected this project to award their CDBG allocation towards, in the preliminary estimated
amount of $479,196. Final decision will be considered by the Board of Supervisors in mid -March
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As referenced above, funding allocations from all of these local funding sources (AHF, CDBG,
and fee deferrals) positively boost the project’s completeness to leveraging other Federal, State,
and private financing, which is absolutely crucial to the development of affordable housing in the
City.
ALTERNATIVES
1. Do not authorize AHF awards for the proposed project. This action is not recommended
because the project meets all of the criteria for AHF assistance and is consistent with the
Housing Element of the General Plan.
2. Approve an AHF award for a different amount. The City Council can approve an award for a
different amount other than the recommendation. This is not recommended as the project has
carefully considered its need for assistance and the amounts requested reflect what is needed
for successful financing of the project.
3. Continue consideration of the proposed award. The City Council can direct staff to return
with additional information regarding the funding request so that a final decision on the
award amount can be made. Staff does not recommend this action because this delay in time
would not allow for HASLO to apply for 9% competitive LIHTCs in March 2021.
Attachments:
a - Resolution
b - Affordable Housing Fund Request from HASLO
c - Adopted Affordable Housing Fund Criteria
d - Affordable Housing Fund Status Report January 2021
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R ______
RESOLUTION NO. _____ (2021 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, APPROVING AN AFFORDABLE HOUSING
FUND AWARD TO THE HOUSING AUTHORITY OF THE CITY OF SAN
LUIS OBISPO FOR TOSCANO APARTMENTS IN THE AMOUNT OF
$335,000.
WHEREAS, the City Council of the City of San Luis Obispo met via teleconference in
San Luis Obispo, California, on March 2, 2021, for the purpose of considering a request for
Affordable Housing Fund (AHF) assistance; and
WHEREAS, the proposed project by the Housing Authority of the City of San Luis Obispo
(HASLO) meet the eligibility criteria established by the City Council; and
WHEREAS, Housing Element policies and programs encourage and support the
construction of new affordable housing in the City; and
WHEREAS, the City Council has duly considered all evidence, including the testimony
of the applicant, interested parties, and the evaluation and recommendations by staff at the said
meeting.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo
as follows:
SECTION 1. Findings. The City Council does hereby make the following findings in
support of the proposed AHF awards:
1. Eligibility: Use of the AHF for the requested purpose will increase or improve the
City’s affordable housing inventory and promote General Plan policies regarding
housing, as follows:
Toscano Apartments meets the eligibility criteria because it will increase the supply of
affordable rental housing by constructing 38 new affordable units. The families served
will range from 30-60% AMI, an income bracket that has very limited housing options
in the City. Toscano Apartments will be restricted as affordable housing by the Low-
Income Housing Tax Credit (LIHTC) program for a minimum of 55 years. As an
additional overlay, HALSO, through its public agency status, will ensure that the
housing remains permanently affordable. HASLO will operate the housing and ensure
long-term compliance with all regulatory agreements as well as financial and physical
sustainability of the property. HASLO will utilize its affiliate non-profit, San Luis
Obispo Non-Profit Housing Corporation, as managing general partner in the Limited
Partnership ownership entity formed for purposes of the LIHTC program.
2. Need: There exists a substantial or overarching need for the type of unit to be assisted,
as follows:
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Resolution No. _____ (2021 Series) Page 2
R ______
Affordable housing is a critical need in the City as well as countywide. San Luis
Obispo County, including all seven cities, has one of the lowest rental housing vacancy
rates in the State of California according to the State Department of Finance. Since
2017, after extensive public outreach and community input and engagement, the
Council has adopted the production of affordable housing as one of its top priority
goals. Last, the City’s Housing Element documents substantial unmet need during the
previous 5-year planning period.
3. Suitability: The project to be assisted is appropriate for its location both in terms of
land use and design, as follows:
The site is zoned Medium-Density Residential, Specific Plan and Planned
Development Overlay Zone (R-2-SP-PD), consistent with the proposed use. Upon the
recommendation of the Architectural Review Commission in June 2020, the Planning
Commission approved the project in September 2020 (Reso No. PC-1021-20).
4. Timing: The project would better serve the City’s needs if it were built immediately as
opposed to later, as follows:
Toscano Apartments has received all City discretionary approvals and is preparing to
submit for a building permit application. The project is assembling various competitive
sources of financing, and will apply for low-income housing tax credits in March 2021.
If awarded tax credits, construction is expected to begin in December 2021.
5. Financial Effectiveness: But for the requested funding, the project would not be
economically feasible; or AHF funding “leverages” significant additional funding from
other sources, as follows:
This is a highly effective use of the AHFs; it will leverage an estimated $15 million in
other Federal, State, and private financing. The apartments will remain affordable for
55 years pursuant to a LIHTC regulatory agreement. Additionally, HASLO as a public
agency will do its best to ensure that the units remain a permanent affordable housing
resource for the community. Project financial feasibility is dependent upon AHF
allocations.
6. Readiness: The project has all necessary City approvals and is ready to proceed, as
follows:
Toscano Apartments has obtained all the necessary City discretionary approvals.
HASLO intends to apply for a building permit in October 2021. Upon award of the
AHF allocations, HASLO will apply for LIHTCs. If an award of tax credits is received,
construction would start in December of 2021.
SECTION 2. Environmental Determination. The project to award affordable housing
funds is exempt from environmental review per Section 15061(b)(3) General Rule of the CEQA
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Resolution No. _____ (2021 Series) Page 3
R ______
Guidelines. It can be seen with certainty that the proposed action to award grant funding will
have no significant effect on the environment.
SECTION 3. AHF Award for HASLO. The City Council does hereby approve an AHF
award in an amount not to exceed $335,000, subject to the following condition of approval:
1. Prior to release of any portion of the AHF award, the applicant shall enter into an
affordability agreement with the City for thirty-eight (38) for-rent affordable housing
units located at 3065 Lucca Lane for a term of fifty-five (55) years, which will be
recorded against the title of the property.
Upon motion of _______________________, seconded by _______________________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _____ day of _____________________ 2021.
____________________________________
Mayor Heidi Harmon
ATTEST:
____________________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
_____________________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City
of San Luis Obispo, California, this ______ day of ______________, _________.
____________________________________
Teresa Purrington
City Clerk
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Trial Balance Report Report Date 02/09/2021 4:23 PM
City of San Luis Obispo Page 1 of 1
Ledger City of San Luis Obispo
Fund 505 Affordable Housing Fund
Account Description Beginning Balance
(USD)
Debits
(USD)
Credits
(USD)
Ending Balance
(USD)
11001 Cash (including cash equivalents)2,481,192.97 128,637.87 58,200.00 2,551,630.84
12007 Allowance for Doubtful Accounts -215,000.00 0.00 0.00 -215,000.00
12010 Accrued Interest 1,372,279.60 0.00 0.00 1,372,279.60
13002 Loans Receivable 6,314,429.16 0.00 0.00 6,314,429.16
17001 Interfund 0.00 134,335.00 134,335.00 0.00
21015 Deferred Inflow Other (ex: unavailable
revenue)
-1,362,982.62 0.00 0.00 -1,362,982.62
31009 Restricted - Other -6,288,657.60 0.00 0.00 -6,288,657.60
32001 Undesignated -2,323,597.95 0.00 0.00 -2,323,597.95
33001 Budgetary Fund Balance 2,500,641.00 0.00 0.00 2,500,641.00
33002 Expenditure Budget Control -2,522,641.00 0.00 0.00 -2,522,641.00
33003 Revenue Budget Control 22,000.00 0.00 0.00 22,000.00
33004 Encumbrances 80,000.00 0.00 0.00 80,000.00
33005 Reserve for Encumbrances -80,000.00 0.00 0.00 -80,000.00
33006 Retained Earnings 22,336.44 0.00 0.00 22,336.44
44310 Miscellaneous Revenue 0.00 0.00 128,637.87 -128,637.87
75001 Transfers - Out 0.00 58,200.00 0.00 58,200.00
Total for Fund 505 Affordable Housing Fund 0.00 321,172.87 321,172.87 0.00
2020 Commitment to PSHH:($2,000,000)
Adjust to remove $35,524.87
of repaid FTHB loan payoff
(2975 Rockview Dr. #19);
Ending Balance = $93,113
Remainder Undesignated & Adjusted Miscellaneous Revenue Ending Balance Available:$416,710.95
Undesignated & Adjusted Miscellaneous Revenue Ending Balance:$2,416,710.95
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