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Home My WebLink About02/17/2004, BUS2 - SAN LUIS OBISPO COUNTY HOUSING TRUST FUND J i ADcouncil "` 2-17-04 aagenaa Report � CITY OF SAN LUIS OBI SPO FROM: John Mandeville; Director of CommunityjDev ent Prepared By: Jeff Hook,Associate PlannSUBJECT: SAN LUIS OBISPO COUNTY HOUSINTRUST FUND CAO RECOMMENDATION 1. Determine that the San Luis Obispo County Housing Trust Fund ("SLOTF") grant request for $60,000 meets City Affordable Housing Fund award criteria set by previous Council action. 2. Authorize the CAO to negotiate and execute an agreement with SLOTF, consistent with provisions set forth in this staff report, for a one-time grant of up to $60,000 from the City's Affordable Housing Fund. DISCUSSION Overview Council's Major City Goal for Housing includes in its work program continued effort to work with the San Luis Obispo County Housing Trust Fund. Up until now, SLOTF was not staffed and thus, had difficulty responding to City questions and concerns. However SLOTF is now staffed and has submitted an improved and more responsive proposal. SLOTF requests a City grant of$60,000 to help defray start-up and operating costs (Attachment 1). SLOTF has set a fundraising goal of raising $450,000 for its first two years of operation. In 2003 the Fund received grants of$304,000 from these sources: 1. County of San Luis Obispo—$225,000 2. San Luis Obispo County Economic Opportunity Commission (EOC)- $50,000 3. Housing Authority of the City of San Luis Obispo (HASLO) - $20,000 4. United Way of San Luis Obispo- $5,000 5. Community Foundation - $3,000. As a funding condition, the County required that SLOTF match the $225,000 grant on a dollar-for- dollar basis. SLOTF has received $79,000 in matching funds to date. This leaves $146,000 to be raised over the next 11 months to enable SLOTF to draw down the entire County grant. SLOTF hopes to fill the funding gap through funding from the City of San Luis Obispo and the other six cities in the County. SLOTF plans to present its requests at city council meetings in Arroyo Grande and Pismo Beach on February I O`' and March 16`x' respectively. What is the Housing Trust Fund SLOTF is a newly formed county-wide nonprofit corporation. Its purpose is to assist a broad range of affordable rental and ownership housing throughout San Luis Obispo County and to create new and preserve existing affordable housing. At least 40%of the corporation's resources will be dedicated to assisting housing for persons with special needs and very low income households. The balance may be used to assist households that earn up to 120% of county median income. As a nonprofit a - c i SLO County Housing Trust Fund Request Page 2 corporation, SLOTF is depending upon both public and private revenue sources to capitalize its loan fund. Other potential revenue sources include state and federal grants and loans and grants from foundations and social investment funds. Housing trust funds have been established throughout the U.S. to provide on-going, major funding for affordable housing within their geographic service area. An estimated 287 of such funds have been established to date to serve cities, counties, and multi-county regions. While most are public agencies, a number are nonprofit corporations. The common thread among them is that they receive funds from one or more dedicated public revenue sources. These revenues are committed by legislation, ordinance or resolution to provide on-going support for affordable housing. Historically, housing trust funds have used their dedicated funding to "leverage" additional resources from developers, banks, and state and federal housing programs. City Affordable Housing Fund One possible source of funds for SLOTF's request is the City's Affordable Housing Fund ("AHF"). Established in 1999, the AHF implements the Inclusionary Housing Program and is funded by the payment of in-lieu affordable housing fees. This Fund has a balance of$1.29 Million. Ordinance 1438 which established the fund describes it as a "fund established and administered by the City, containing in-lieu fees and other funds held and used exclusively to increase and improve the supply of affordable housing." The ordinance also says the fund shall be administered by the Finance Director and is allocated "at the discretion of the City Council." The fund's potential uses, award procedures and criteria are spelled out in Council Resolution 9263 (2001. Series), Attachment 4. Following those procedures, the City has approved one grant of$215,000 for Judson Terrace Lodge to help construct a 32-unit apartment project for frail, low-income elderly persons. A second grant request from Sojourn Services, Inc. for $25,000 was denied because it did.not meet the award criteria. No other Affordable Housing Fund requests have been received. Status of Affordable Housing Fund The current balance in the Affordable Housing Fund is $1,288,448. Revenues are shown in detail below, as of January 1, 2004: 2606-2001 2001-2002 2002-2003 YTD 2003-2004 Total In-lieu Fees 193,712 464,876 747,810 30,526 $1,436,924 Interest 8,163 20,028 28,273 10,060 66,524 Expenditures 0 0 215,000 0 215,000 TOTAL 201,875 48004 561,083 40,586 $1,288,448 City of San Luis Obispo,Finance Department Use of Affordable Housing Funds The AHF, the first such fund established in San Luis Obispo County, is relatively unfettered by the "strings" associated with State and Federal funding, making it exceptionally flexible and valuable for meeting local housing needs. Projects receiving City funds must meet State law regarding prevailing wage requirements, and this means developers of most assisted affordable housing developments must pay prevailing wages. Since AHF can be meted out at Council's sole discretion, the process is simple, direct, and efficient, without the long lead times associated with multi-agency grants. AHF funds were originally viewed as a tool to provide direct funding assistance for the purchase, C a. SLO County Housing Trust Fund Request Page 3 rehabilitation or construction of affordable housing. However, Council can use the funds any way it deems appropriate to promote affordable housing, following the provisions of Resolution 9263. Because the funds have been collected "in-lieu" from developers who chose to pay a fee instead of actually building required affordable housing, it is essential that Council allocate funds in a way that maximizes public benefits while considering both housing needs and opportunities. "Leveraging" these funds by assisting SLOTF may be viewed as another, albeit indirect, tool to achieving City affordable housing objectives. Council funding decisions must be guided by consistency, fairness, and reasonableness, and to assist that effort, Council decided to use these criteria when considering Affordable Housing Fund requests: 1. Eligibility. Use of the Affordable Housing Fund will increase or improve affordable housing and promote General Plan policies regarding housing and related community goals. 2. Suitability. The project to be assisted is appropriate for its location, both in terms of land use and design. 3. Urgency. There exists an urgent or overarching need for the type of housing to be assisted. 4. Financial Effectiveness. But for the requested assistance, the project would not be economically feasible; or AHF funding"leverages" significant additional funding from other sources. .5. Readiness. The project has all necessary City approvals and is ready to proceed. A funding request may not meet all of these criteria, or may only partially meet one or more criteria. This is, by nature, a subjective process in which the criteria provide a way to compare requests against City housing objectives and other practical considerations. Requests that meet most or all of these criteria are more likely to maximize public benefit and therefore, merit City support. Even if a request appears to meet these criteria, Council may still opt not to fund a particular request or to fund only a portion of the request. Council may instead choose to "save up" in-lieu.fees to wield a greater funding effect on a single large, future housing development or to offer a significant incentive to encourage a specific type of affordable housing. Analysis of the Request Key policy questions are 1) whether to use City funds for SLOTF start-up funding, and 2) whether the SLOTF can be an effective affordable housing tool given uncertain long-term funding prospects. Successful implementation ultimately will depend on securing a sizable, countywide funding source, such as establishment of real estate transfer tax, sales tax increase, or similar mechanism. With the recent hiring of staff, SLOTF is attempting to build its organizational capacity to serve County affordable housing needs and to secure long-term funding. With regard to affordable housing funding, the City of San Luis Obispo is in a unique position. It is the only jurisdiction in the County with an established affordable housing fund, and that fund is reaching the point at which the City could, on its own, leverage a significant affordable housing development Downtown or in expansion areas, for example. Committing City funds to another agency will, to a degree, surrender city control and flexibility in the use of the funds paid by local developers in support of local housing development. However given the City's high housing costs and jobs/housing imbalance, the City cannot afford to rely on a single approach, but rather, should utilize a variety of "tools" to achieve affordable housing objectives. And while there is no guarantee that providing City funds for SLOTF now will actually produce affordable housing in San Luis Obispo City in the future, it is fairly certain the lack of initial a�� SLO County Housing Trust Fund Request Page 4 support from San Luis Obispo and the other cities would make it unlikely, if not impossible, for SLOTF to succeed. Given the relatively small initial investment and potential long-term housing benefits to citizens, providing City funding for SLOTF start-up costs could be considered a reasonable gamble. Funding Strategy The County of San Luis Obispo and SLOTF have entered into an agreement, defining mutual expectations and responsibilities. To clarify expectations and provide some City oversight to use of the funds, staff recommends that any offer of City funding require SLOTF to enter into an agreement similar to the one with the County (excerpts in Attachment 5). It should clarify that City funding is provided on a one-time basis, and that there is no guarantee of additional funding beyond 2004. Future funding will depend upon availability of City funds, shared support from other cities, and SLOTF performance. Given the fiscal uncertainty facing local governments, San Luis Obispo City and County cannot and should not be expected to carry the entire burden. It is reasonable to expect start-up and operation costs to be shared among the County and all the cities on some fair, perhaps per capita, formula, with significant participation by non-profit agencies, and businesses. As yet, such a formula has not been developed. Any further funding beyond 2004 should be contingent upon this shared funding approach being in place. There has been some discussion of whether it would be more appropriate to use the AHF's earned interest rather than principal. From staffs perspective, if Council supports using the Affordable Housing Fund for this purpose, it makes no difference whether we use Fund "interest" or principal, since both are available at Council's sole discretion. The more important question is whether the Council is comfortable using these funds based on the adopted criteria discussed earlier. The criteria tend to be focused on the development of an actual "project.91 Conceptually, however, funding administrative support is consistent with the ideas expressed in criteria #1 and #4. And, as already indicated, Council does not require the funding request to meet all criteria. ALTERNATIVES I. Authorize the CAO to enter into an agreement with SLOTF to use up to $60,000 in Community Development Block Grant Funds (CDBG) on a one-time basis to help fund start-up costs. The City has approximately $115,000 in unused 1999, 2000 and 2002 CDBG funds, originally earmarked for the Huasna-Oceanaire Improvements, that could be reallocated to other eligible activities. "Capacity building", or financially assisting non-profits with start-up and expansion costs, is an eligible CDBG activity under "Planning and Administration." If this alternative is chosen, Council should provide staff direction to take the proposal to the HRC for a recommendation. If the HRC does not support the proposal, that recommendation could be brought back to the Council reconsideration, or the CAO could be authorized to proceed with funding through the proposed use of the Affordable Housing Fund. This approach has several advantages, in that it would maximize Affordable Housing Funds available for direct "bricks and mortar"assistance for affordable housing, avoid setting a precedent for using the City's Affordable Housing Funds for administrative costs, and involve the HRC in any future SLOTF requests for funding. However, the Human Relations Commission will not have time to considered this before the March 2 Council meeting on 2004 CDBG funding. In addition, there is more paperwork and bureaucracy involved in our use of CDBG funds. a-r� i SLO County Housing Trust Fund Request Page 5 2. Fund the request at a lesser amount. The $60,000 amount requested was chosen for both pragmatic and economic feasibility reasons. It was deemed small enough to not adversely affect the City's Affordable Housing Fund, but large enough to make a significant difference in SLOTF's funding picture. Council may decide to fund the request at a lesser amount. 3. Deny the funding request. Staff does not support this approach, since it would undermine both City and countywide efforts to take strong, innovative steps to address affordable housing needs and the Council's objective to continue working closely with the SLOTF. 4. Continue the request with a preliminary indication of funding support for up to $60,000, and direction to SLOTF or staff to provide additional information and/or a formula for shared participation in start-up funding. This approach has merit, in that it would give SLOTF conceptual funding support, allow additional time to craft a balanced funding scheme with other cities, and to consider possible reallocation of CDBG funds for SLOTF start-up costs. However, it will also take more time and, at this stage, SLOTF simply needs enough support to "get going. " Attachments: I. Housing Trust Fund—Request For Funding(November 14, 2003, Letter) 2. Housing Trust.Fund—Discussion of Funding Request(February 2,2004, Letter) 3. Housing Trust Fund—Grant Application and Supporting Information 4. Council Resolution No. 9263 (2001 Series)—Criteria for Affordable Housing Fund 5. County of San Luis Obispo funding agreement(excerpts) Council Reading File: 1. SLO County Housing Trust Fund newsletters 2. Background Information JMHOOMHousing Trust FunMAR2-17.04SLOTFrequest.doc Attachment 1 November 14, 2003 Ken Hampian City of San Luis Obispo 990 Palm Street San Luis Obispo, CA 93401 Re: Request for$60,000 in Matching Funds Dear Mr. Hampian: The San Luis Obispo County Housing Trust Fund (HTF) is a nonprofit revolving loan fund whose mission is to increase the availability of affordable housing for low and moderate income households throughout San Luis Obispo County. The HTF requests that the City of San Luis Obispo provide$60,000 to support the development and operation of the HTF during its first two years of existence. Our total budget for this period is $450,000. The County Board of Supervisors granted half of this amount to the RTF in July and challenged us to match their funds dollar for dollar with funds from local cities and other sources. To date, we have received commitments for$78,000 in matching funds. An additional $147,000 is needed to fully match the County grant and cover our costs through July 2005. We are asking the City for a relatively small contribution to the HTF to help ensure our success. During a meeting with John Mandeville, we identified the interest earned on the City's of for this seed ands anteousing fees as a potential d becoming a partner with he ATF shoo d reap numerous benefits fore requested theCity. seed funds Please contact me at (805)704-7721 or via e-mail at ferry@slochtf.or2,to discuss this request. Sincerely, Gerald L. Rioux Executive Director enclosures cc: John Mandeville Mayor Dave Romero and Members of the City Council 4111 Broad Street, Suite A-6, San Luis Obispo, CA 93401 ♦ phoneffax: (805) 543-5970/(805) 543-5972 a-L Feb 02 04 06:_33p SLOCHTF (805) $43-5972 S A N I_ U I S - O li 1 S P O • C O LI N T Y e kHOUSM, ) l Attachment 2 February 2,-2004 Delivered via facsimile to(805)781-7173, original will follow by personal delivery Jeff Hook Community Development Department City of San Luis Obispo 990 Palm Street San Luis Obispo,CA 93401 Dear Mr. Hook: I am writing to follow-up on our conversation concerning the Housing Trust Fund's request for a$60,000 grant from the City of San Luis Obispo. As we discussed,the requested grant will be for capacity building. City funds will help the 14TF to obtain the capacity to develop,capitalize and administer a revolving loan fund that will provide financing for affordable housing. The requested grant represents 15%of the HTF's budget for its first two years of operation. City funds will also help us match a$225,000 contract from the County of San Luis Obispo. The County provided 50%of our original two year budget and requires dollar for dollar match. The IITF adopted its first budgets in March of 2003. These are included in the Business Plan that was included with our proposal to Mr.I Iampian. In December 2003,the board adopted a new budget for calendar year 2004. This budget plus estimates for 2005 are attached. The HTF hopes to become self-sufficient as soon as possible,but we cannot say when our loan find will generate sufficient income to cover our operating costs. We will continue to seek operating grants in the future and may request additional funds from the City in 2005-6. A draft of the Fund Raising Pian for our February 2004 board meeting is also enclosed to show you the breadth of out planned fund raising efforts. I will e-mail the file for the proposal we sent to Mr. Hampian and will provide you with copies of the attachments for that proposal. Please contact me at(805)704-7721 or via e-mail at jerry a slochtf.org if you have any additional questions. Sincerely, n raid L. Ioux xecutive Director enclosures 4111 Broad Street,Suite Ate, San Luis Obispo, CA 93401 ♦ phone/fax: (805)543-59701(805)543-5972 a � � Feb 02 04 06: 33p SLQCHTF [8051 543-5972 p. 2 San Luis Obispo County Housing Trust Fund Attachmerj,, 2 Budgets for Calendar Years 2004 and 2005 Approved Estimated 2004 2005 Combined REVENUE SLO County $ 112,500 $ 100,000 $ 212,500 City of SLO $ 30,000 $ 30,000 $ 60,000 EOC (State subcontract) $ 50,000 $ - $ 50,000 United Way $ 2,500 $ 5,000 $ 7,500 Other $ 30,000 $ 100,000 $ 130,000. Total Revenues $ 225,000 $ 235,000 $ 460,000 EXPENSES Salary& Wages $ 95,000 $ 95,000 $ 190,000 Payroll Expenses $ 23,101 $ 23,101 $ 46,202 Outside Services $ 53,700 $ 53,700 $ 107,400 Furnishings & Equipment $ 4,750 $ $ 4,750 Supplies $ 2,400 $ 2,400 $ 4,800 Repairs & Maint. $ - $ - $ Marketing/Educational Material $ 5,000 $ 5,000 $ 10,000 Auto& Travel Exp. $ 3,000 $ 3,000 $ 6,000 Accounting & Legal Services $ 3,000 $ 4,000 $ 7,000 Rent& Utilities $ 9,575 $ 10,050 $ 19,625 Telephone $ 2,400 $ 2,400 $ 4,800 Insurance $ 3,300 $ 3,700 $ 7,000 Interest Expense $ 15,000 $ 27,500 $ 42,500 Other Expenses $ 4,774 $ 5,149 $ 9,923 Total Expenses $ 225,000 $ 235,000 $ 460,000 prepared by GLR: 12115/03 a � Feb 02 04 06:33p SLOCHTF (805) 543-5972 p. 3 OD N r- L.., O G u •„ CIS Altachmc. : � m m � h N O N >1 b !t N O d O 7 Q v u d O G <:- ,aO O u O O N N N N N p N N O O O L °ppn °mnnppo � +�• n�Cpcn �n�pp T n c R o to :2 Q � N_ V R N r CC v o C � arv � 40 O C u p y O y .m . j E L z 0 n r ^nn u o o O � u o udCC1 in .o m y EL m 0 C = O W m d C C C N d C > .•-. 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E C = �; w y h !- Lc Q •O r •per p o ? vEoo LTO _ F au° c� vvUvv3mc� Li° ca3 „ = U o a z V �9 Feb 02 04 06: 33p SLOCHTF [805] 543-5972 p.4 i OD N ` Attachment m £ � .E tip u v ° i E o � r � E N NC6R CR a C4 a3 � CL L n R R � Q Q 4 0 0 oc a 88 o N N uM N N Q ¢ o0 z Q "3 zz -< C4 > m y O w oo d 0 � 3 p U O p y C ° m C E p d: E e Rz O U y a E R e E Q e 4 v E p £ = U Y U x n as UoAE Ute & b0 UE01 b LA E ca s ae o v ° d _ o � U v CL � R O U L ODN rL u v v v i m E E •c c R S � ® y � � h F- 0 •G W � O O m C. C N _ o O o _ c C O OO C O '� O c O C Q 60 6q (AE _E Eov'o E Z FR s Q Q rri ;A- E Q c O H O O � u n x o c Q o m mtm C Q a CE E C4 3 0 cd 0. 0 o m m . U G II ix a ° w u c� - o E _] o �Vj h G o Q w C R rA x _ ❑ C in y N L caU c U f=. rn - J GRANT APPLICATION +, _ : l Submitted to the City of San Luis Obispo 14►�� it 3 Section I. Applicant Information Applicant: Snn Luis Obispo County Housing Trust Fund(HTF) Address: 4111 Broad Street, Suite A-6, San Luis Obispo, CA 93401 Type of Entity: California nonprofit public benefit corporation Federal Employer ID: 13-4243257 Corporation ID: C2499894 Incorporation Filed: 2/27/2003 501(c)(3) status: approved 10/20/03 (Advance Ruling period.: 2/27/03 to 12/31/07) Accounting Yea-.t; Calendar Year Areas Served:. San Luis Obispo County Contact Person: Gerald L. ("Jerry") Rioux,Executive Director PhondFax: (805) 543-5970/ (805) 543-5972 E-mail: ferry @ slochtf.ora Website: www slochtf.org Section II. Description of Request Amount Requested: `$60,000 Character of Funds: Unrestricted Grant Term: Through June 30, 2005 Source of Funds: Interest earned on available the City,s Inclusionary Housing Fund or other fun Disbursement: $15,000 upon approval and$7,500 per quarter until disbursed in full Section III. Mission and Goals of the HTF The mission of the San Luis Obispo Housing Trust Fund is to increase the availability, throughout San Luis Obispo County, of rental and ownership housing that is affordable for very low, low and moderate income households, including households with special needs. To achieve this mission, the HTF intends to provide both financing and technical assistance for a wide range of affordable housing projects, including the: �• Construction, acquisition and/or rehabilitation of ownership housing a Construction, acquisition and/or rehabilitation of rental housing • Construction, acquisition and/or rehabilitation of emergency and transitional housing Page 1 Application to City of San Luis Obispo i San Luis Obispo County Housing Trust Fund The HTF also intends to provide financing and/or technical assistance at any point in the housing development process. The range of financing that the HTF intends to offer includes: • Planning and predevelopment loans and recoverable grants Attachment 3 • Land acquisition loans • Site development loans • Construction and rehabilitation loans • Bridge loans • Home purchase loans for eligible home buyers The HTF's financing and technical assistance will be available to private profit motivated developers,nonprofit agencies and public agencies that commit to create or preserve affordable housing. Loans will also be available to individual home buyers. The HTF is not a housing developer and does not intend to become one. Instead, the HTF will provide financing and technical assistance to others to support the development of affordable housing. If the HTF receives title to land through its fund raising efforts,it will either make the land available for others to develop as an affordable housing site or sell the land and use the sales proceeds to assist affordable housing efforts. Section IV. Proposed Use of Funds Since the HTF is a newly incorporated agency,it must first develop the systems and capacity to provide the services described above. It also must raise capital for its loan funds and grants for its operating costs. The funds requested from the City of San Luis Obispo will finance a small portion of the HTF's start-up and operating costs though June 30, 2005, including salaries, consulting fees, office space and associated costs. The requested funds will enable the HTF to reach following goals, which were established for the organization's contract with the County of San Luis Obispo. This contract commits up to $225,000 in matching funds to the HTF through July 30, 2005. By that time, the HTF will be fully operational and actively financing affordable housing. Target Operational Objectives Dates Status Establish the HTF organizational structure: form a Board of 10/1/03 Completed Directors, hire an executive director, and hire support staff Secure adequate offices ace and office equipment 11/1/03 Completed Establish the HTF Commission (i.e. loan committee) and recruit 6/30/04 In process an em lovee, intern or volunteer to staff the Commission Develop loan guidelines, applications,forms,procedures and 12/30/04 In process le al documents Secure commitments for$225,000 in operating funds to match the Count t • Secure commitments for$125,000 to match County funds 1 3/30/04 1 $78,000to date • Secure funding from at least one of the 7 cities in the county 3/30/04 )nprocess • Secure commitments for$225,000 to match County funds 12/30/04 $78,000 to date • Secure funding from at least three cities in the count 12/30/04 In process Application to City of San Luis Obispo Page 2 4—` a Attachment 3 San Luis Obispo County Housing Trust Fund • Secure funding from at least five cities in the count 6/30/05 In process Initiate a long-term capitalization program to secure funding and revenue sources that will be loaned for affordable housing • Secure at least$1 million in equity-like loans 12/31/03 In process • Secure at least$1 million in grants 6/30/04 In process Award one or more loans to affordable housing project(s) 7/30/05 JStart 7/1/04 Section V. Benefits of Supporting the HTF The City should reap a number of benefits from supporting the HTF and assisting with its funding. The HTF is not a substitute for the City's housing programs, polices or staff,but a potential partner who can help address the local housing affordability crisis. The HTF will supplement the City's housing efforts,not compete with them. As a private nonprofit corporation,the HTF has access to charitable and corporate funds that are not available to government agencies. The HTF will bring more funds into the community and further leverage the City's investments in affordable housing. The HTF can also assist the City to design housing programs and secure funds. The HTF has a single purpose—increasing the supply of affordable housing throughout San Luis Obispo County—and it will offer a range of programs and services throughout the County. The HTF's county-wide operation will create some economies of scale and efficiencies. It should also enable the HTF to attract and retain more specialized staff than most individual cities can. As a regional organization, developers and individual home buyers will be able to obtain financial and technical assistance from the HTF rather than have to deal with up to eight different jurisdictions. This will better serve the needs of the City's constituents. Section VI. Sources of Administrative Funds The HTF will initially rely on grants and contracts to fund its operations. Over time, as the HTF's lending capital and loan volume increase,the corporation's operating revenues will cover an increasing percentage of its operating costs. Depending upon the HTF's cost of funds, interest and fee income will cover operating costs when the loan portfolio reaches between $5 and$10 million in short-term loans. Loans to individual home buyers and longer-term rental housing loans will tend to have deferred payments, so they will not generate significant revenue for many years. The HTF has secured more than $300,000 in administrative grants to date. The following funds are sufficient to cover the organization's budgeted start-up and operating cost for 16 months. Funds Committed to Date Funding Source Amount - County of San Luis Obispo $225,000 California Department of Community Services and Development $50,000 (through the Economic Opportunity Commission as prime contractor) Rousting Authority of the City of San Luis Obispo $20,000 Application to City of San Luis Obispo Page 3 , 3 Attachment 3 San Luis Obispo County Housing Trust Fund United Way of San Luis Obispo County $5,000 San Luis Obispo County Community Foundation $3,000 Total Funds Committed to Date $303,000 Applications have been submitted for the following grants, which will enable the HTF to operate for an additional eight months. Funds Requested to Date Funding Source Amount City of San Luis Obispo (this request) $60,000 Washington Mutual Foundation $50,000 California Association of Realtors (CAR) $259000 Total Funds Requested $135,000 If all of these requests are approved,the HTF will be only $12,000 short of matching the County's $225,000 grant. The HTF will continue to seek funds from corporations and foundations to cover its operating costs through July 2005 and beyond. Section VII. Capitalization of Loan Fund The HTF plans to capitalize its loan fund.frorn two distinct categories of funding sources. The first of these consists of loans and grants from various sources. The second include various dedicated revenue streams, typically from public or quasi-public sources. Having dedicated revenue sources is what distinguishes Housing Trust Funds from other types of private housing loan funds and government agencies that fund housing. The HTF is currently seeking funds from both funding categories. Thisapplicationfor a$1 million equity-like loan is in the first category. The HTF is also preparing an application for a$1 million grant from HCD's Local Housing Trust Fund Matching Grant Program. This grant is also in the first category. The HTF is also requesting that the County of San Luis Obispo commit to provide an $85,000 grant to the HTF each year for the next ten years. These funds fall into the second category. They provide a dedicated source of revenue for the HTF over a number of years. These funding sources are listed below along with their current status. The three are very closely tied together and both the Bank loan and the County's dedicated revenue stream must be secured in order to qualify for the HCD grant. This is because HCD requires proof that local HTFs have both $1 million on deposit and a dedicated revenue source. initial Capitalization of Loan Fund Source Amount Status Mission Community Bank $1 million under consideration,-. equity-like loan Cqunty of San Luis Obispo $850,000 grant will be considered by the County Board over ten.years of Supervisors on December 16 Application to City of San Luis Obispo Page r4 t , Attachment 3 San Luis Obispo county Housing Trust Fund HCD Local Housing Trust Fund $1 million grant will submit after$1 million in matching Matching Grant Program funds are received and a dedicated revenue source is committed While the HTF requested$850,000 over ten years from the County of San Luis Obispo,County staff may recommend that the Board of Supervisors consider granting a parcel of land instead. The parcel being considered is located behind General Hospital. . Section VIII. Long-Term Capitalization After this initial capitalization of its Loan Fund, the HTF will seek additional funds from a variety of sources. The HTF's primary objective will be to secure dedicated revenue sources. The ultimate goal is to receive $5 million per year from multiple dedicated revenue sources. The HTF also will seek loans and grants to leverage these dedicated sources. Housing trust funds throughout the country have secured a wide variety of dedicated revenue sources that are committed for affordable housing. Some housing trust funds and/or jurisdictions have increased taxes and fees to generate additional revenue. Others have transferred portions of existing revenues to housing trust funds. Alternatively, some have committed the growth in revenues from particular sources to housing trust funds. After an established base year, any added revenues collected from the tax or fee goes into the housing trust fund. The HTF will seek dedicated revenue sources that are both county-wide and specific to each city within the county. The potential revenue sources are likely to vary considerably from one jurisdiction to another. Some communities receive in-lieu fees under inclusionary housing or linkage fee programs. Others do not. Some generate funds through redevelopment, while others do not. The HTF will analyze potential sources within each jurisdiction and work with local staff members and elected officials to tailor a revenue stream that is most suitable for the jurisdiction. Examples of potential dedicated revenue sources include: • Real estate transfer fees Recording fee surcharge • Property tax override • Sales tax increase • Transient occupancy tax (reallocation or increase in hotel/motel room tax) • Tipping fees (tax or surcharge on garbage bills) • Surcharge on building permit fees • In-lieu fees from inclusionary zoning Linkage fees from non-residential development • Payments for density bonuses or transfers of density • Tax on conversion of rental units to condos and other uses • Proceeds from the sale of inclusionary units • Proceeds from the sale of publicly-owned land • Repayments from government loan programs ,Proceeds from from settlements for housing code violations • Fees on mortgage revenue bond and mortgage credit certification programs Application to City of San Luis Obispo . Page 5�1 a Attachment 3 San Luis Obispo County Housing Trust Fund • Fees on applications for bond revenues • Surplus from bond program reserves Most of these revenue sources will require a vote of the electorate to be enacted. Some can be enacted by a vote of elected officials. Additional research is needed to determine which of these or other potential revenue sources are most promising as dedicated revenue sources for the HTF. Section IX. Fund Administration Representatives from every jurisdiction in San Luis Obispo County have raised questions or concerns about contributing to a single county-wide loan fund. While it is more efficient and effective to administer a single loan fund, the HTF can create and administer individual loan funds for each and every funding source it has. It is actually very common for nonprofit lenders to have multiple funds. Nonprofit corporations are able to administer multiple loan funds because they use fund accounting. A nonprofit's funds are divided into three classes: unrestricted funds, temporarily restricted funds and restricted funds. The characteristics of these classes of assets are listed in the following table. Class of Assets Characteristics Unrestricted. Funds may be used for any purpose that is consistent with the organization's mission and charitable purpose. Temporarily Restricted Funds must initially be used for a specific purpose, but program income and repayments become unrestricted. Restricted Funds must be used exclusively for a specific purpose. The following table shows how some of the HTF's current and requested funds are treated under fund accounting. Source of Funds Conditions Asset Class SLO County Matching Grant Help start up HTF Unrestricted Housing Authority Grant (Gen'l Fund) United Way Grant Community Foundation Grant State HTF Grant Rental Housing with strict Income Targets Restricted in areas with Certified Housing Elements Mission Community Bank Committed as match for State HTF Grant Temporarily Loan until County funds are received Restricted Annual Grant from SLO Committed as ultimate matching funds for Restricted County State HTF Grant The HTF will work with local jurisdictions that help capitalize its loan funds to ensure that the funds they provide or help generate will be used within their boundaries. f � Application to City of San Luis Obispo Page 6 Attachment 3 J San Luis Obispo County Housing Trust Fund Section X. Supporting Documents The following documents are included as part of this application. Table of Attachments Attachment 1 Articles of Incorporation Attachment 2 Bylaws Attachment 3 IRS 501(c) (3)Determination Letter Attachment 4 Board Roster Attachment 5 Qualifications of Management and Staff Attachment 6 'Budgets and Financial Statements Attachment 7 Business Plan Application to City of San Luis Obispo Page 7 Attachment 3 Attachment 1 Articles of Incorporation The Articles of Incorporation of the SLO County Housing Trust Fund follow this page. (see counci.l reading file) (see Council Read°ng File) t y O Attachment 3 Attachment 2 Bylaws The Bylaws of the SLO County Housing Trust Fund follow this page. (see Council Reading File) "f l Attachment 3 Attachment 3 IRS 501(c)(3) determination letter A copy of the IRS 501(c) (3) determination letter for the SLO County Housing Trust Fund follows this page. (See Council Reading File) a �a�o Attachment 3 Attachment 4 Board Roster The five members of the SLO County Housing Trust Fund's Board of Directors, the offices they hold and their affiliations are: Board Member Office Affiliation Anita Robinson Chair Mission Community Bank, President/CEO Rachel Richardson Vice-Chair San Luis Obispo Supportive Housing Consortium,Chair and AIDS Support Network Dr. Allen Haile Secretary Cal Poly University, Community & Government Relations Director and SLO County Economic Advisory Committee Janna Nichols Treasurer United Way of San Luis Obispo County,Executive Director George Moylan Housing Authority of the City of SLO,Executive Director arm i Attachment 3 Attachment 5 Qualifications of Management and Staff The management and staff of the HTF are well qualified to manage the corporation and a two to three million dollar revolving loan fund. HTF Board Chair Anita Robinson is the President and CEO of Mission Community Bank. She has more than 20 years of management experience in banking and real estate lending. Treasurer Janna Nichols is Executive Director of United Way of San Luis Obispo County. She has considerable experience managing grants and contracts. Board Member George Moylan has been the Executive Director of the Housing Authority of San Luis Obispo for nearly two decades. He has development and managed affordable housing the HTF Executive Director Jerry Rioux has more than 20 years of management experience in the housing and community development field. He has developed, implemented and managed a number of loan and grant programs for state and local governments and a multi-state nonprofit housing intermediary. He implemented and managed the Rural Community Assistance Corporation (RCAC) Loan Fund in 1987. Within four years,the RCAC had$4 million in lending capital and had closed 17 loans in three states. Prior to joining RCAC,Mr. Rioux developed, implemented and managed California.Mobilehome Park Resident Ownership Program. He and his staff loaned$10 million to the residents of 14 mobile home parks so that they could buy out their landlords and convert the parks to cooperative and condominium ownership. A copy of Mr. Rioux's resume is included in this Attachment. Attachment 3 Attachment 6 Budgets and Financial Statements Copies of the budget projections that were adopted at the time the HTF was incorporated are included in the Business Plan, which is included as Attachment 9. The HTF's Board of Directors will consider the following proposed budget for Calendar Year 2004 at its December board meeting. While individual line items may change as cost estimates and assumptions are refined, a change in the total budget is not anticipated. Proposed Budget for Calendar Year 2004 Gross Wages $120,000 Payroll Expenses $23,100 Outside Services $36,000 Furnishings &Equipment $6,000 Office Supplies $2,400 Educational and Promotional Material $10,000 Auto&Travel Expenses $3,000 Accounting &Legal Services $3,000 Rent and Utilities $9;575 Telephone $2,400 Insurance $5,000 Other Expenses $4,525 Total Expenses $225,000 V r `� � � 1 Attachment 3 Attachment 7 Business Plan A copy of the SLO County Housing Trust.Fund's Business Plan follows this page. (See Council Reading File) a 7 ' ►�{ ��L RESOLUTION NO. 9263 (2001 Series) Attachment 4 A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ESTABLISHING AWARD CRITERIA AND A REVIEW PROCESS FOR ALLOCATING AFFORDABLE HOUSING FUNDS. WHEREAS, the City Council adopted Ordinance 1348 (1999 Series)establishing an Affordable Housing Fund for the collection and distribution of in-lieu housing fees to promote affordable housing in San Luis Obispo; and WHEREAS, as a result of the in-lieu fee payments to the City under the Inclusionary Housing Ordinance, the City has a balance of approximately$400,000 in the Affordable Housing Fund,and this fund is available to support affordable housing in San Luis Obispo at the sole discretion of the City Council; and WHEREAS,the City received requests by Judson Terrace Lodge and Sojourn Services,Inc. for the use of$215,000 and$25,000;respectively, of Affordable Housing Funds; and to evaluate these and future funding requests in a fair and timely manner, Council wishes to establish award criteria and a review process for the Affordable Housing Fund; and WHEREAS,the City Council held a meeting on December 4, 2001 to consider possible award criteria that balance the need to provide a fair,open and timely funding award process with the desire to maintain funding flexibility to address local housing needs and opportunities; NOW,THEREFORE,BE IT RESOLVED by the Council of the City of San Luis Obispo that based on its deliberations,public comments, the staff report,and on State law, the following: SECTION 1. Affordable Housing Fund Award Criteria. The City Council establishes the following criteria for evaluating requests for use of the Affordable Housing Fund: 1. Eligibility. Use of the Affordable Housing Fund(AHF)for the requested purpose will increase or improve the City's affordable housing inventory and promote General Plan policies regarding housing. 2. Need. There exists a substantial or overarching need for the type of housing to be assisted. 3. Suitability. The project to be assisted is appropriate for its location,both in terms of land use and design. 4. Timing. The project would be better serve the City's needs if it were built immediately as opposed to later. R 9263 Resolution No. 9263,_.i01 Series) Attachment 4 Page 2 S.Financial Effectiveness. But for the requested assistance,the project would not be economically feasible; or AHF funding"leverages"significant additional funding from other sources. 6. Readiness. The project has all necessary City approvals and is ready to proceed. SECTION 2. Use of Award Criteria. The Council will apply the above criteria when evaluating funding requests. Requests that most closely meet the criteria will be given the most favorable consideration in allocating Affordable Housing Funds. Under no circumstances is Council obligated to award Affordable Housing Funds. The decision whether to allocate funds and how much is at the sole discretion of the City Council whose decision is final. SECTION 3. Review Process. The Community Development Director shall be responsible for processing requests for use of Affordable Housing Funds. Such requests shall usually be considered concurrent with review of the City's Community Development Block Grant Program. The Director is authorized to bring urgent funding requests to the Council at any time, irrespective of the above review cycle. SECTION 4. Funding.Agreements. Recipients of Affordable Housing Funds shall be required to execute an agreement with the City describing the purpose and terms of funding. The project or program to be funded shall meet the City's Affordable Housing Standards,including the requirement for an affordability term of at least thirty (30)years, and City equity participation in the project where feasible and appropriate. The City Administrative Officer is authorized to execute such agreements for the City. Upon motion of Council Member Schwartz, seconded by Vice Mayor Marx, and on the following roll call vote: AM: Council Members Ewan,Mulholland, Schwartz,Vice Mayor Marx, and Mayor Settle NOES: None ABSENT: None The foregoing resolution was adopted this O day of December 2001 Mayor Allen Settle AT:: Lee Price, City Clerk a^� Resolution No:X263 (2i,w1 Series) - Page 3 Attachment 4 APPROVED AS TO FORM: JJor nse , ity omey i i _ Attachment--5 AGREEMENT BETWEEN THE COUNTY OF SAN LUIS OBISPO AND THE SAN LUIS OBISPO COUNTY HOUSING TRUST FUND, INC. FOR THE ESTABLISHMENT AND OPERATION OF AN AFFORDABLE HOUSING TRUST FUND THIS CONTRACT is made and entered into thi K day of , 2003, by and between the San Luis Obispo County Affordable Housing Tru und, Inc., (hereinafter referred to as "Contractor"), and the County of San Luis Obispo, a political subdivision of the State of California (hereinafter referred to as "the County"). WITNESSETH: WHEREAS, the County of San Luis Obispo sees a need to promote and protect suitable housing opportunities for residents of this county; and WHEREAS, on February 19, 2002, the San Luis Obispo County Board of Supervisors directed staff to work with the Leadership Team of the proposed San Luis Obispo County Housing Trust Fund to explore how County funding could be used to support a pilot project (hereinafter referred to as "Pilot Project"), and that the said Pilot Project is not a physical project but is instead a specific time period during which the Contractor shall establish an Affordable Housing Trust Fund (hereinafter referred to as "AHTF")and shall demonstrate the Cohtractoi's effectiveness and ability in securing other funds and revenues sources for the AHTF and in using the AHTF to create grants and/or loans to developers of affordable housing projects; and WHEREAS, on December 10, 2002, the San Luis Obispo County Board of Supervisors directed staff to prepare the necessary budget appropriation to provide $225,000 from the County of San Luis Obispo's General Fund to the Contractor for the purpose of paying for the organizational startup and operational costs of an AHTF, and that the said County funds shall be disbursed in incremental amounts equal to the matching funds secured from the local cities located within the County or from other sources; and WHEREAS, on December 10, 2002, the San Luis Obispo County Board of Supervisors adopted a resolution declaring that persons and families of low or moderate income in San Luis Obispo County are financially distressed by high housing costs relative to their incomes, and that an AHTF can facilitate the creation of affordable housing by providing locally-generated financial resources to affordable housing developments; and . WHEREAS, the AHTF shall be operated in a manner that serves and benefits the citizens of the unincorporated County of San Luis Obispo and also the citizens of the incorporated cities located within the County that contribute to the AHTF. NOW, THEREFORE in consideration of the mutual promises, recitals and other provisions hereof, the parties agree as follows: 1 Attachment 5 1. Scope of Activities The Contractor shall use the County funds to conduct an AHTF Pilot Project, and this project shall be conducted for a period of two years starting from the date first written above. During the two year Pilot Project period, the Contractor shall complete the following tasks: a. Establish the AHTF organizational structure pursuant to the Contractor's AHTF bylaws,form a Board of Directors, hire an executive director, and hire any/all necessary support staff. b. Secure adequate office space and office equipment for the AHTF organization. C. Establish the AHTF Commission pursuant to the AHTF organizational bylaws, and secure meeting facilities and support staff for the AHTF Commission. d. Initiate a long term program for attracting and securing funding and revenue sources for the AHTF that will be used to create loans and/or grants to be awarded by the AHTF Commission to developers of affordable housing projects. The said funding and revenue sources may be secured from incorporated cities within the county, and also other sources acceptable to the County. e. Award a loan and/or grant to one or more affordable housing projects during .the Pilot Project period. 2. Reporting. During the term of this Contract, the Contractor shall submit quarterly progress reports, using the attached "Exhibit A" form, to the County Department of Planning and Building. This information shall include a description of the organizational progress made,services rendered,problems encountered and corrective action taken,the number of clients served, a profile of the clients .served (e.g., for-profit or non-profit developers,the number of moderate/low/very low income household units within an AHTF funded project), and a description of all affordable housing projects served. The quarterly reports shall be submitted to the County within 30 days after the end of each quarter. The Contractor shall also submit a project completion report.by August 31, 2005; or as agreed upon thereafter. 3. Compensation. The County will pay Contractor a maximum amount of$225,000 for carrying out the AHTF Pilot Project. The Contractor understands that no County funds shall be disbursed to the Pilot Project until all of the insurance requirements described in Paragraph 12 (Insurance) below have been met to the satisfaction of the County. The County will pay the Contractor incrementally,whenever the Contractor demonstrates that it has secured matching funds, in a manner acceptable to the County, from the participating local cities or from other revenue sources that are acceptable to the County. 2 a-�9 Attachment 5 The County shall disburse $1.00 dollar of County funds to the Contractor for every$1.00 of funding secured from cities or other sources. The County funds will be disbursed to the Contractor in staged payments throughout the performance of this Contract. Contractor shall request payments from the County using the attached form as described in "Exhibit B". Contractor may designate another non-profit organization to receive payments from County underthis Contract until Contractor receives approval of its tax-exempt status from the United States Internal Revenue Service. In no instance shall the County be liable for any costs for the Pilot Project in excess of$225,000, nor for any unauthorized or ineligible costs. 4. Funding for Additional Services. Funding of any programs, projects, or services beyond the term of this Contract, by any new contract or amendment or extension of this Contract, have not been authorized and will depend upon County's determination of satisfactory performance of this Contract by the Contractor. Neither the County nor any employee of the County has made any promise or commitment, express or implied, that any additional funds will be paid or made available to the Contractor for the purpose of this Contract over and above the funds expressly allocated under the terms of this Contract. Furthermore;additional funding by the County will be based, in part, on the Contractor's ability to demonstrate, to the County's satisfaction, the following conditions exist: a. That the AHTF represents a cooperative regional arrangement in which the County and local cities participate. b. That the financial contributions from the County produce better results than would be obtained if the County funds to the AHTF were administered by the County's existing structure for administering the federal grants its receives, (i.e., the federal grants received from the Community Development Block Grant program and Home Investment Partnership Program). 5. Term of Agreement The term of this Contract shall commence on the date first above written and shall terminate within thirty (30) months unless sooner terminated as hereinafter provided. 6. Termination of Agreement for Cause. If County determines that Contractor has incurred obligations or made expenditures for purposes which are not permitted or are prohibited under the terms and provisions of this Contract, or if County determines that Contractor has failed to fulfill its obligations under this Contract in a timely and professional manner, or if Contractor is in violation of any of the terms or provisions of this Contract, or if Contractor should be adjudged to be bankrupt, or if Contractor makes a general assignment for the benefit of Contractor's creditors, or if a receiver should be appointed in the event of Contractor's insolvency, then County shall have the right to terminate this Contract effective immediately upon giving written notice thereof to Contractor. Termination shall have no effect upon the rights and obligations of the parties 3 RECEIVED ��►��P�ftco un c�l memo FEB � ; 2004 crty_of san tuws osis o. off!c of the city council —��-Cts`(-CLEF�K DATE: February 17, 2004 TO: Council ; FROM: John Ewan SUBJECT: Item 2—San Luis Obispo County Housing Trust Fund I apologize, but I will not be able to attend the early session of today's Council meeting due to a scheduling conflict. After meeting with staff and Trust Fund representatives, and reading the Council Agenda Report, I feel that the CAO recommendation to invest funds in the SLO County Housing Trust Fund would be a wise decision for this Council. Thank you. mrd_ . couN IL TCDD DIR RED FILE l.rd'CAO - IN DIR $ACAO IRE CHIEF MEETING AGENDA .ATTORNEYDIR Ef CLERK/ORIG �2 POLICE CHF DATE IIITEM # IL'a- D D T HEAD ;;,REC DIR t2l J ITIL DIR H-n^n DIR Housing Trust Fund Memo