Title:
Title
(City Council / Housing Authority) Metro at 7th Phase I Tax Equity and Fiscal Responsibility Act Hearing, Approval of Tax-Exempt Bonds And Approval of Loan Commitment (Noticed 11/26/2019) [Two-Thirds Vote Required]
End
FileID
File ID: 2019-01503
Location
Location: Northwest corner of 7th Street and F Street, District 3
Recommendation:
Recommendation
Conduct a public hearing and upon conclusion: 1) pass a Motion by two-thirds vote waiving Sacramento City Code Section 4.04.020 and Council Rules of Procedure (Chapter 7, Section E.2.d) mandating that unless waived by a 2/3 vote of the City Council, all labor agreements and all agreements greater than $1,000,000 shall be made available to the public at least ten (10) days prior to council action; 2) a City Council Resolution indicating the City Council has conducted a Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing related to the proposed acquisition, construction and permanent financing of Metro at 7th Phase I (Project); 3) a Housing Authority Resolution which a) indicates the intention of the Housing Authority of the City of Sacramento to issue up to $26,000,000 in tax-exempt mortgage revenue bonds to provide acquisition and construction financing for the Project, b) authorizes an application to the California Debt Limit Allocation Committee (CDLAC) for allocation authority to issue the bonds, and c) authorizes the Executive Director, or designee, to execute the necessary documents associated with the transaction; and 4) a City Council Resolution authorizing the Sacramento Housing and Redevelopment Agency (SHRA) to: a) amend the SHRA budget, b) approve a loan commitment of $1,200,000 comprised of Housing Trust Funds to the Project (Loan Commitment), c) execute a Loan Commitment and all necessary documents associated with this transaction with USA Properties Fund, Inc. and Jamboree Housing Corporation or related entity, and d) make related findings.
Contact: Christine Weichert, Assistant Director, (916) 440-1353, Tyrone Roderick Williams, Director of Development, (916) 440-1316, Sacramento Housing and Redevelopment Agency
Body
Presenter: Anne Nicholls, Housing Finance Analyst, (916) 440-1353, Sacramento Housing and Redevelopment Agency
Attachments:
01-Description/Analysis and Background
02-Vicinity Map
03-Site Plan
04-Building Renderings
05-2019 Pre-Application Results
06-Project Summary - Metro at 7th Phase I
07-Project Summary - Metro at 7th Phase II
08-Cash Flow Proforma - Metro at 7th Phase I
09-Cash Flow Proforma - Metro at 7th Phase II
10-Maximum Income and Rent Limits
11-City Council TEFRA Resolution
12-Housing Authority Bond Inducement Authorization Resolution
13-City Council Loan Commitment Authorization Resolution
14-Exhibit A to Resolution: Loan Commitment and Scope of Development
Description/Analysis
Issue Detail: Metro at 7th Phase I (Project) is a proposed permanent supportive and workforce housing development proposed on a 2.35 acre site in the Sacramento Railyards Specific Plan area, located at the Northwest corner of 7th and F Streets. The site is currently vacant and is across from residential and commercial offices. The proposed Project consists of 65 units, including studio, one- and two-bedroom units.
The proposed Project is part of a two-phase project designed to take advantage of new Low Income Housing Tax Credit rules allowing the combination of both non-competitive and competitive programs for a single development. As currently proposed, Metro at 7th Phase II (Phase II) is also a permanent supportive and workforce housing development, but does not have a financing gap; therefore, no SHRA financing has been requested from the Developer for that phase. Information on Phase II is being included in this report as the projects will be constructed together and the SHRA financing proposed for Phase I is leveraging funding proposed for Phase II. A vicinity map, site plan and building renderings are included as Attachments 2, 3 and 4.
Project Based Vouchers and No Place Like Home
The Sacramento Housing and Redevelopment Agency (SHRA) awarded 70 Project Based Vouchers (PBV) to house homeless households at Metro at 7th Phases I and II. Inclusive of the 70 PBV units, 55 of the units will also be assisted through the State Department of Housing and Community Development (HCD) No Place Like Home Program (NPLH). The NPLH Program provides funding to households that have been designated homeless and that include at least one household member living with mental illness. On April 1, 2019, Sacramento County and SHRA jointly issued a “Request to Partner on No Place Like Home Developments” (RTP). The selection criteria contained in the RTP mirrored HCD’s threshold criteria, including development team experience, site control, integration, financial feasibility, capital and operational leverage, readiness and supportive services. On May 17, 2019, SHRA received two new construction development applications, Metro at 7th Phases I and II located in the City of Sacramento, and Mutual Housing on the Boulevard located in the unincorporated County of Sacramento.
On August 15, 2019, a NPLH Selection Committee (comprised of representative from the County Director of Homeless Initiatives, Division of Behavioral Health Services, SHRA Development Finance and Focus Strategies) recommended that both developments partner with Sacramento County as co-applicants for a NPLH funding application to HCD. The Board of Supervisors will be asked to support the application to HCD for the NPLH funding on December 10, 2019. NPLH applications are due to HCD on January 8, 2020. HCD is scheduled to announce the NPLH awards in June 2020. If Metro at 7th Phases I and II are successfully awarded NPLH funds, the Developer will apply for tax credits and mortgage revenue bonds in July 2020. Construction would be complete within two years after all financing is secured.
Project Description
USA Properties Fund, Inc. and Jamboree Housing Corporation (collectively, Developer) applied to SHRA for a $1,200,000 loan to finance the acquisition, construction and permanent financing of new permanent supportive and workforce housing development known as Metro at 7th Phase I.
Metro at 7th Phase I will be new construction of a four-story wood frame, slab-on-grade building, which will provide 65 units consisting of 64 affordable units and one unrestricted management unit. There will be 44 studio, seven one-bedroom and 14 two-bedroom units. Inclusive of the 64 affordable units, there will be seven units with Americans with Disability Act (ADA) accessibility and three units with communication features (e.g., wiring for audio and visual devices).
Metro at 7th Phase II will be new construction of a four-story wood frame, slab-on-grade building, which will provide 85 units consisting of 84 affordable units and one unrestricted management unit. There will be 20 studio, 38 one-bedroom and 27 two-bedroom units. There will be nine units with ADA accessibility and four units with communication features. All residents in Phases I and II will have access to the management office, community room, conference rooms, courtyard, community garden, pet area, vehicle parking and bike storage. Further details of the Project are included in the Scope of Development attached to the City Council Loan Commitment Resolution as Exhibit A.
Developers: USA Properties Fund, Inc. (USAPF) is dedicated to providing quality affordable housing to low-income persons in California. USAPF has approximately 40 years of experience in residential real estate, including 90 affordable developments consisting of more than 12,000 units and a portfolio of over $1 billion across California and Nevada. USAPF has 19 SHRA financed affordable housing properties in the Sacramento region.
Jamboree Housing Corporation (Jamboree) is an affordable housing developer with approximately 30 years of experience in residential development, including 91 developments consisting of more than 8,200 units and an asset portfolio of over $1 billion in California. In addition, Jamboree currently owns and operates Hotel Berry.
Property Management: Metro at 7th Phases I and II will be managed by The John Stewart Company (JSCo). The JSCo has over 40 years of property management experience; and there are over 420 properties in California consisting of more than 31,600 affordable and market rate residential units in their portfolio. The JSCo currently manages 16 SHRA financed affordable housing properties in the Sacramento region. The JSCo is qualified to manage this permanent supportive and workforce housing development given its experience with managing Hotel Berry, the Shasta Hotel and Cannery Place Apartments. Staff has reviewed the qualifications of JSCo and the property management plan and has found that the proposed property management agent and management plan meet SHRA requirements.
Supportive Services: Sacramento County Department of Health Services (DHS) will be responsible for the mental health supportive services and the coordination of other supportive services needed by the 55 NPLH residents for a minimum of 20 years as required by the State NPLH program and SHRA.
In addition to DHS on-site supportive services, TLCS, Inc.(TLCS) will dedicate one Full-Time Equivalent (FTE) case manager to provide services needed by the remaining 15 homeless residents not served by NPLH and one FTE supportive services coordinator to provide programs available to all residents which will be tailored to serve the special needs residents. TLCS is a private, non-profit, psychosocial rehabilitation agency with 38 years of experience assisting residents living in permanent supportive housing and providing a variety of other mental health services. DHS and SHRA staff have reviewed the qualifications of TLCS and the supportive services plan, and have found that the proposed supportive services provider and the supportive services plan meet SHRA requirements.
Resident Services: Resident services will be provided by Jamboree Housing Corporation. A minimum of 20 hours per week of on-site services will be available to all residents in Phases I and II. Resident services will include after school, education and enrichment programs, and transportation assistance (e.g., light rail/bus passes). An on-site coordinator will be assigned to the property. SHRA staff has reviewed Jamboree’s qualifications and the resident services plan, and has found that the proposed resident services provider and resident services plan meet SHRA requirements.
Security Plan: SHRA staff has reviewed and approved the security plan which includes security patrol services available 24 hours a day and seven days a week; installation of web-based security cameras and recording equipment; and installation of exterior lighting. In addition, two management staff will live at the development.
Project Financing: The Developers applied to SHRA for gap financing in the second competitive funding round in August 2019. The results of that SHRA 2019 funding rounds are included as Attachment 5.
The financing structure of Metro at 7th Phases I and II is part of a four percent and nine percent Low Income Housing Tax Credit (LIHTC) hybrid structure that allows affordable housing developers the flexibility to leverage funding to build new or rehabilitate affordable housing developments. The proposed Metro at 7th Phase I Project includes four percent LIHTC, state tax credits equity, tax-exempt bonds, NPLH loan, SHRA loan comprised of City Housing Trust Funds (HTF), land donation, deferred developer fee and development impact fee waivers. The proposed Metro at 7th Phase II Project includes nine percent LIHTC, NPLH loan, conventional loan, land donation, deferred developer fee and development impact fee waivers.
In addition, SHRA has committed a total of 70 PBV to this Project. Project Based Vouchers are awarded in accordance with the SHRA’s administration of the Housing Choice Voucher Program as authorized by section 8(o)(13) of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)) and is based on the Public Housing Authority’s Annual Plan. The Plan is approved annually by the federal Department of Housing and Urban Development (HUD). Funding sources and uses for Metro at 7th Phases I and II are provided in the Project Summary as Attachment 6 and 7. A Proforma for each phase of the development are included as Attachments 8 and 9.
Low-Income Set-Aside Requirements: As a condition of receiving tax credits, federal law requires that rental units be set aside for targeted-income groups. Income restrictions from LIHTC financing require that no households have income above 60 percent of Area Median Income (AMI). SHRA further requires that 20 percent of the units be restricted to households with incomes no greater than 50 percent AMI. The affordability restrictions will be specified in regulatory agreements with the Developer. A schedule of maximum income and rents is included as Attachment 10.
The anticipated funding sources and their affordability requirements are summarized in the tables below for each phase of the development:
Metro at 7th Phase I
|
Unit Type |
Units |
% of Units |
Affordability Restriction (55 years) |
|
4% LIHTC, State Tax Credits, Tax-exempt Bonds, NPLH & PBV |
28 |
43% |
Extremely Low Income 25% of Area Median Income (AMI) |
|
4% LIHTC, State Tax Credits, Tax-exempt Bonds, & PBV |
2 |
3% |
Extremely Low Income 30% of AMI |
|
4% LIHTC, State Tax Credits, Tax-exempt Bonds, & HTF |
34 |
52% |
Low Income 60% of AMI |
|
Management Unit |
1 |
2% |
Exempt Management Unit |
|
Total |
65 |
100% |
|
Metro at 7th Phase II
|
Unit TypeUnits % of UnitsAffordability Restriction (55 years) |
|
|
|
|
9% LIHTC, NPLH & PBV |
27 |
32% |
Extremely Low Income 25% of AMI |
|
9% LIHTC & PBV |
13 |
15% |
Extremely Low Income 30% of AMI |
|
9% LIHTC |
21 |
25% |
Very Low Income 50% of AMI |
|
9% LIHTC |
23 |
27% |
Low Income 60% of AMI |
|
Management Unit |
1 |
1% |
Exempt |
|
Total |
85 |
100% |
|
Policy Considerations: The recommended actions for both phases of the development are consistent with: a) SHRA’s previously approved Multifamily Lending and Mortgage Revenue Bond Policies, New Production priority; b) the 2013-2021 Housing Element, Goals H-1.1.1 Sustainable housing practices; H-1.3.2 Economic integration of new multifamily affordable housing projects; H-2.2.4, in part, Pursue and maximize the use of all appropriate state, federal, local and private funding for the development of housing affordable for extremely low-, very low-, and low-income households, while maintaining economic competitiveness in the region; H-3.1.1 Promote extremely low income housing; and H-5.1 to 5.4, in part, Promote and create accessible residential development (Resolution No. 2013-415); c) the Sacramento Promise Zone Plans and Goals, Sustainably Built Community sub-goal to increase housing types and transit growth to promote livability and connectivity within the Promise Zone (Resolution No. 2015-263); and d) Mixed Income Housing Strategy (Ordinance No. 2016-0044) that includes integrating a variety of housing that will benefit sustainability and success of Railyards over its multi-year build-out, as well as the greater community; specifically, diversity of housing targeted to residents with incomes at or below 60% of Area Median Income expands the financing options beyond conventional financing (e.g., State of California No Place Like Home Funds and City Housing Trust Funds).
In addition, the recommended actions for both phases of the development are located in a) the Downtown Housing Initiative and Initiation of the Downtown Specific Plan, to bring 10,000 places to live to Downtown Sacramento by 2025 (Resolution No. 2015-282); b) the Sacramento Railyards Specific Plan to create, in part, a mixture of housing products, including affordable housing and transit-oriented neighborhoods; and c) the Opportunity Zone that provides a federal tax incentive for investors, who invest in real estate projects and operating businesses located in designated low-income communities through deferral and partial tax reductions of reinvested capital gains and forgiveness of tax on new capital gains (enacted into federal law through the Tax Cuts and Jobs Act of 2017).
All affordable housing units will be regulated for a period of 55 years by the California Tax Credit Allocation Committee as a LIHTC funding requirement. Regulatory restrictions on the property will be specified in the bond regulatory agreement between the Developer and the Housing Authority of the City of Sacramento for a period of 55 years. Regulatory restrictions on the property will be specified in Housing Trust Funds regulatory agreement between the Developer and SHRA for a period of 55 years. Compliance with the regulatory agreement will be monitored by SHRA on an annual basis during the 55-year regulatory period.
The Sacramento City Code Section 4.04.020 and Council Rules of Procedure (Chapter 7, Section E.2.d) mandate that unless waived by a 2/3 vote of the City Council, all labor
agreements and all agreements greater than $1,000,000 shall be made available to the public at least ten (10) days prior to council action. This item was published for 10-day review on November 21, 2019 as required.
Economic Impacts: The Metro at 7th Phase I multifamily residential project is expected to create 153.28 total jobs (86.05 direct jobs and 67.23 jobs through indirect and induced activities) and create $13,445,692 in total economic output ($8,263,158 of direct output and another $5,182,534 of output through indirect and induced activities). The Metro at 7th Phase II multifamily residential project is expected to create 230.41 total jobs (129.35 direct jobs and 101.06 jobs through indirect and induced activities) and create $20,211,196 in total economic output ($12,420,953 of direct output and another $7,790,243 of output through indirect and induced activities).
The indicated economic impacts are estimates calculated using a calculation tool developed by the Center for Strategic Economic Research (CSER). CSER utilized the IMPLAN input-output model (2009 coefficients) to quantify the economic impacts of a hypothetical $1 million of spending in various construction categories within the City of Sacramento in an average one-year period. Actual impacts could differ significantly from the estimates and neither the City of Sacramento nor CSER shall be held responsible for consequences resulting from such differences.
Environmental Considerations:
California Environmental Quality Act (CEQA): Metro at 7th Phases I and II have been reviewed pursuant to the California Environmental Quality Act (CEQA), and it has been determined that the Project is consistent with the Railyards Specific Plan and EIR and the Project is therefore exempt from further environmental review pursuant to CEQA Guidelines section 15182.
National Environmental Policy Act (NEPA): An Environmental Assessment (EA) was completed pursuant to the National Environmental Policy Act (NEPA), and it was found that with mitigation measures incorporated, the Project will not result in a significant impact on the quality of the human environment.
Sustainability: The proposed Project has been reviewed for consistency with the goals, policies and targets of the Sustainability Master Plan and the 2030 General Plan. If approved, these projects will advance the following goal, policy and target of goal number one - Energy Independence, specifically by reducing the use of fossil fuels and providing long-term affordable and reliable energy.
Commission Action: At its meeting on November 6, 2019, the Sacramento Housing and Redevelopment Commission adopted a motion recommending approval of the attached resolutions. The votes were as follows:
AYES: Alcalay, Boyd, Griffin, Morgan, Staajabu
NOES: None
ABSENT: Macedo, Nunley, Starks, Wedding
Rationale for Recommendation: The actions recommended in this report enable SHRA to continue to fulfill its mission of providing a range of affordable housing opportunities in the City and are consistent with the SHRA’s previously approved Multifamily Lending and Mortgage Revenue Bond Policies, the City of Sacramento’s 2013-2021 Housing Element as part of Sacramento’s 2035 General Plan, Promise Zone Plans and Goals, Sacramento Railyards Mixed Income Housing Strategy, Downtown Housing Initiative and Initiation of the Downtown Specific Plan, Sacramento Railyards Specific Plan and Opportunity Zone Program.
Financial Considerations: For Metro at 7th Phase 1, SHRA will receive a one-time issuance fee of 0.25 percent of the bond amount, which is payable at bond closing, and annual payment for monitoring the regulatory restrictions and administration of the bonds, in the amount of 0.125 percent of the bond amount plus $100 per SHRA assisted units (eight) for the term of 55 years. The Developer will be responsible for payment of all costs, fees, and deposits relating to the bond application. Mortgage revenue bonds do not represent a financial obligation of SHRA, Housing Authority, or City of Sacramento. The law firm Orrick, Herrington and Sutcliffe, LLP, is acting as bond counsel for the Housing Authority.
The SHRA loan for Metro at 7th Phase I is comprised of $1,200,000 in Housing Trust Funds with an interest rate of three percent and a term of 57 years after closing escrow. Sacramento County Department of Health Services will provide social case management to the NPLH clients for a period of at least twenty years. These supportive services will be funded directly through the County.
LBE - M/WBE and Section 3 requirements: Minority and Women’s Business Enterprise requirements and Section 3 will be applied to all activities to the greatest extent possible and as required by federal funding and in accordance with the SHRA’s Section 3 Economic Opportunity Plan. The Developer and General Contractor will work with the SHRA’s Section 3 Coordinator, Sacramento Employment and Training Agency, the Greater Sacramento Urban League or similar programs, to promote employment opportunities. Local Business Enterprise requirements do not apply to this report.