MEETING DATE:
JUNE 26, 2018
RESOLUTION NO. SHA 2018-033 - APPROVAL OF WITHDRAWAL OF TAX CREDIT INVESTOR FROM THE TERRA COTTA AFFORDABLE HOUSING DEVELOPMENT
Recommendation
Recommendation
ADOPT a resolution approving the withdrawal of the tax credit investor from the development and authorizing the City Manager to finalize and execute the regulatory agreement modifications
Body
Board or Commission Action
Resolution No. RDA 96-268 of April 23, 1996 authorizing the project’s funding component
Resolution No. RDA 97-275 of January 28, 1997 authorizing bond financing for two affordable housing projects, including Terra Cotta
Resolution No. RDA 97-277 of April 8, 1997 authorizing financing for Terra Cotta
Relevant Council Strategic Theme
Planning for the Future
Relevant Department Goal
Facilitate Affordable Housing Production
Executive Summary
Terra Cotta Apartments, located at 523 Rush Dr., is a new-construction affordable development built and operated by Bridge Housing. It is a 168-unit family apartment complex; 166 apartments have 55-year deed restrictions. Direct project funding and bond funding was authorized by the Redevelopment Agency (RDA) in 1997. Terra Cotta was opened in 2001. The developer wishes to begin the year 15 event process by allowing the tax credit investor to withdraw from the project in an orderly and controlled manner. City approval is required for this to occur.
Discussion
This is not a re-syndication. Rather, this is only the initial step in the year 15 event process. The deed restrictions and initial funding package will remain unchanged at this time. The Developer does not intend to rehabilitate the project immediately upon tax credit investor withdrawal. However, Bridge Housing has indicated its intent to re-syndicate and rehabilitate within one to two years following the exit of the tax credit investor.
At this time, it is also appropriate for the City to evaluate the project to ensure that the regulatory agreement reflects current norms and best practices. To that end, it is requested that the residual receipts split be modified to reflect the City’s 50/50 norm and that an Annual Occupancy Monitoring and Inspection (AOMI) fee of $220 per unit be imposed. Terra Cotta has paid residual receipts averaging $44,982 per year for the past three years. The current residual receipt split is 100% to the City’s Successor Housing Agency (SHA) fund. The 50/50 split requested by the City establishes incentive parity and allows for a more efficient, streamlined process for both parties.
The AOMI fee is a fee for service and not a tax. It pays for the cost of annual occupancy monitoring and reporting and the City’s affordable housing inspection program. At present, no AOMI fee of any kind applies to the project. Due to the deep affordability associated with Terra Cotta, it is requested that the AOMI be increased in two increments. The first increase will be to $100 per unit beginning in 2019. Under the first incremental increase, the AOMI will increase from $0 to $16,600 for Terra Cotta. The remainder will be imposed upon re-syndication several years in the future.
In summary, the City Council is being asked to approve the following:
1. Withdrawal of the tax credit investor
2. Modifying the annual residual receipts split between the project and the SHA to the standard 50/50
3. Imposing the standard AOMI fee of $220 per unit commencing with an increase to $100 per unit effective in 2019 with the remainder to be imposed upon re-syndication several years in the future
These modifications will allow for withdrawal of the tax credit investor in an orderly and timely manner while simultaneously streamlining regulatory compliance.
Environmental Review
The proposed activity is not a project as defined under the California Environmental Quality Act (CEQA), and therefore does not require analysis under CEQA.
Fiscal Impact
There is no negative fiscal impact to the City. There is no request for any out-of-pocket financial assistance from the City or the SHA to finalize the approval modifications. The net effect of the residual receipts split in favor of the project and the imposition of an AOMI will provide for a more predictable, albeit minimal, impact on the SHA’s revenues.
Attachment(s)
1. Resolution No. SHA 2018 - XXX
Prepared by: Harry Williams, Housing Programs Manager
Submitted by: Beth Herzog, Administrative Services Manager
Reviewed by: Dahvia Lynch, Director, Development Services Department
Approved by: Jack Griffin, City Manager