Agenda

Return

C. 58

To:	Board of Supervisors
From:	John Kopchik, Director, Conservation & Development Department
Date:	May 18, 2021

Contra

Costa

County

Subject:

Approval of $1,800,000 CDBG Loan and Related Legal Documents for Hacienda Heights, an Affordable Development in Richmond

APPROVE	OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR	RECOMMENDATION OF BOARD COMMITTEE

Action of Board On: 05/18/2021

APPROVED AS RECOMMENDED

OTHER

Clerks Notes:

VOTE OF SUPERVISORS

AYE:

John Gioia, District I Supervisor
Candace Andersen, District II Supervisor
Diane Burgis, District III Supervisor
Karen Mitchoff, District IV Supervisor
Federal D. Glover, District V Supervisor

Contact:

Kristin Sherk (925) 655-2889

I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown.
ATTESTED: May 18, 2021
Monica Nino, County Administrator

BY:	, Deputy

RECOMMENDATION(S):

In the matter of making a loan of up to $1,800,000 in Community Development Block Grant (CDBG) funds to Richmond Hacienda, L.P., a California limited partnership, for Hacienda Heights, to acquire and rehabilitate 150 rental units in Richmond:
1. FIND, as the responsible agency, that on the basis of the whole record before the County including the California Environmental Quality Act (CEQA) review prepared by the City of Richmond as the lead agency that the development is categorically exempt under Section 15301, Existing Facilities of CEQA; and

2. DIRECT the Director of Conservation and Development, or designee, to file a Notice of Exemption for Hacienda Heights with the County Clerk, and pay any required fee for the filing; and

RECOMMENDATION(S): (CONT'D)

3. APPROVE and AUTHORIZE the Director of Conservation and Development, or designee, to execute legal documents subject to approval by the County Administrator and approval to form by County Counsel, to effect the loan.

FISCAL IMPACT:

No General Fund impact. CDBG funds are provided to the County on a formula allocation basis through the U.S. Department of Housing and Urban Development (HUD). CFDA #: CDBG - 14.218.

BACKGROUND:

On June 26, 2018, the Board of Supervisors allocated up to $1,800,000 in CDBG funds as a loan to Mercy Housing California (Mercy) and Community Housing Development Corporation of North Richmond (CHDC) for the acquisition and rehabilitation of Hacienda Heights at 1300 Roosevelt Avenue, Richmond. Hacienda Heights was built in the late 1960s and is owned by the Richmond Housing Authority (RHA). In 2015, due to poor condition of the building and the lack of adequate funding to repair the building, RHA relocated all of the tenants living at Hacienda Heights and closed the building. Mercy, in partnership with CHDC, was selected as the developer through a competitive process. Once the rehabilitation is complete at Hacienda Heights, there will be 150 rental units, 148 affordable to low-income households and two manager's units. The CDBG units will support 70 of the total units being affordable to households at or below 60% of the Area Median Income. RHA will lease the property to the limited partnership at a below market rate for a 99-year term.

In addition to the CDBG loan, the project will be funded with low income housing tax credits and tax-exempt bond financing as well as State of California Multifamily Housing Program funds, a seller carryback loan from the RHA, deferred developer fee, and a third party private contribution. CDBG funds will be provided in the form of a 55-year, residual receipts loan with a 3% interest rate. There may be some annual loan payments if the project has surplus cash flow. Affordability and use restrictions are incorporated into the County loan documents. The County will have a CDBG Regulatory Agreement with a 55-year term. The loan agreement (Agreement) and related documents are attached in their substantially final form and will be executed in a form approved by County Counsel.

Due to the high construction costs and limited revenue from the restricted rents, the total amount of the financing provided to the project will likely exceed the value of the completed project. Even though the proposed equity investment from low income housing tax credits is substantial compared to the amount of long term debt, the partnership agreement will have numerous safeguards of the investor's equity. Therefore, the County's CDBG funds may not be fully secured by the value of the property; however, CDBG funds are granted (not loaned) to the County and are dedicated to providing affordable housing options for low-income households and the same risk may be present in any comparable project using tax credits.

CDBG projects are subject to National Environmental Policy Act (NEPA) and 24 CFR Part 58 review, in addition to CEQA review for which the City of Richmond as lead agency has determined the project was exempt as an existing facility. The County's NEPA review for this project is complete and required mitigation measures are included in the Agreement. The County, as a responsible agency under CEQA, concurs with the City's CEQA determination and will file the appropriate notice with the Recorder's Office.

CONSEQUENCE OF NEGATIVE ACTION:

Without approval and execution of the CDBG legal documents, the acquisition and rehabilitation will not be completed and the property will remain vacant and unsuitable for tenants to live there. Richmond Hacienda, L.P. must close the transaction in June 2021, or forgo the housing tax credit allocation upon which the project's financing depends.

CHILDREN'S IMPACT STATEMENT:

The project supports one or more of the following children's outcomes:
(1) Children Ready for and Succeeding in School;
(2) Children and Youth Healthy and Preparing for Productive Adulthood;
(3) Families that are Economically Self Sufficient;
(4) Families that are Safe, Stable and Nurturing; and
(5) Communities that are Safe and Provide a High Quality of Life for Children and Families.