Agenda

Return

C. 48

To:	Board of Supervisors
From:	John Kopchik, Director, Conservation & Development Department
Date:	May 9, 2023

Contra

Costa

County

Subject:

Sale and Rehabilitation of the Affordable Housing Development Known as Rodeo Gateway Senior Apartments

APPROVE	OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR	RECOMMENDATION OF BOARD COMMITTEE

Action of Board On: 05/09/2023

APPROVED AS RECOMMENDED

OTHER

Clerks Notes:

VOTE OF SUPERVISORS

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 9, 2023
Monica Nino, County Administrator

BY:	, Deputy

RECOMMENDATION(S):

1. APPROVE and AUTHORIZE the Conservation and Development Director, or designee, to execute legal documents, subject to approval by the County Administrator and approval as to form by County Counsel, to refinance outstanding loans secured by Rodeo Gateway Apartments, at 710 Willow Avenue in Rodeo, forgive a 20-year-old revocable grant in the amount of $910,000, and provide an additional Community Development Block Grant loan of $2.2 million for the development.

RECOMMENDATION(S): (CONT'D)

2. DETERMINE that the activity is not subject to the California Environmental Quality Act (CEQA), pursuant to Article 5, Section 15061(b)(3).

3. DIRECT the Director of Conservation and Development, or designee, to file a Notice of Exemption for the Rodeo Gateway Senior Apartments Rehabilitation project with the County Clerk.

4. DIRECT the Director of Conservation and Development, or designee, to arrange for payment of $50 handling fee to the County Clerk for filing such Notice of Exemption.

FISCAL IMPACT:

There is no General Fund impact associated with this action. Community Development Block Grant funds (CFDA 14.218) are provided to the County on an annual formula allocation basis through the U.S. Department of Housing and Urban Development (HUD).

BACKGROUND:

Rodeo Gateway Senior Apartments, located at 710 Willow Avenue, in the unincorporated community of Rodeo, is a 50-unit multifamily senior residential rental development constructed 20 years ago by Rodeo Senior Apartments, Inc., a California nonprofit public benefit corporation formed by EAH, Inc. With the assistance of Community Development Block Grant (CDBG) funds, HOME Investment Partnership Program (HOME) funds, Redevelopment Agency funds (now known as Housing Successor funds), and funds from the U.S. Department of Housing and Urban Development (HUD) Section 202 Program, the project included 100% affordable units with deep affordability levels (for households earning between 30 percent and 50 percent of the Area Median Income) and units suitable for seniors. The initial tax credit period has passed,

and the building is in need of rehabilitation to meet current accessibility standards and to improve energy efficiency. The developer proposes to refinance the project with another tax credit allocation and to complete the needed rehabilitation.

The County actions needed to implement the proposed refinancing and rehabilitation include (i) restructuring the existing debt (which includes a CDBG loan in the original principal amount of $572,750, a HOME loan in the original principal amount of $896,425, and a Housing Successor loan in the original principal amount of $553,000), (ii) forgiving a revocable grant in the amount of $910,00, and (iii) loaning an additional $2,200,000 in County CDBG funds. Together, the refinancing and the new CDBG funds will result in a new loan of approximately $4,650,000. (The exact amount will depend on the amount of accrued interest at closing on the debt that is being refinanced.) The $910,000 revocable grant is being forgiven because the conditions set forth in the original Disposition, Development and Loan Agreement between the original developer and the former Redevelopment Agency for the use of the grant have been met.

The allocation of $2,200,000 of CDBG funds to this project was approved by the Board on June 21, 2022, following a recommendation from the Affordable Housing Advisory Committee. All of the loans (the $2.2 million of new funds, the previous CDBG funds, the previous HOME funds, and the previous Redevelopment Agency funds) will be included in one loan agreement with a 55-year term. That portion of the loan that is being refinanced will bear interest at the applicable federal interest rate at the time of transaction closing. That portion of the loan that is the new $2,200,000 CDBG loan will bear interest at three percent. Repayment of the entire loan will be deferred for 55 years unless there is surplus cash flow in any year of operation. The existing Regulatory Agreement on the property will be terminated, and a new Regulatory Agreement will be recorded on the property to reflect the updated terms and the extended term of affordability.

Additional non-County funding for the rehabilitation includes a new 20-year Section 8 rental assistance contract with HUD through a conversion of HUD Section 202 Program assistance to HUD Rental Assistance Demonstration (RAD) Program assistance, tax-exempt bonds, federal four percent low-income housing tax credits, California State credits, and tax credit equity.

The loans will be subordinate to the tax-exempt bond loan and the County may be requested to sign estoppel agreements to that effect. This action of the Board includes authorizing the DCD Director to execute estoppel and subordination agreements consistent with the subordination terms included in the Loan Agreement.

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.

These safeguards essentially subordinate the County’s debt to the investor’s equity. Therefore, the County CDBG funds may not be fully secured through the value of the property. However, the CDBG program funds are granted, not loaned, to the County, so the County general fund will not have any exposure as a result of this loan. The County structures its CDBG investments to affordable housing projects as loans rather than grants in order to maintain involvement in the financial team in the event the project experiences any serious issues over the 55-year term.

National Environmental Policy Act (NEPA): HOME and CDBG projects are subject to NEPA and 24 CFR Part 58 review. The NEPA review for this project has been completed and the project is exempt. This project is not subject to the CEQA pursuant to Article 5. Section 15061(b)(3) of the CEQA Guidelines.

CONSEQUENCE OF NEGATIVE ACTION:

Without the approval and execution of the legal documents, the acquisition and rehabilitation will not be done, and the property will continue to suffer from deferred maintenance. The project must close the transaction and begin construction end of May 2023, or forgo the low-income housing tax credits upon which the project’s financing depends on.

CHILDREN'S IMPACT STATEMENT:

N/A

CLERK'S ADDENDUM

Speaker: Caller 6770.