MEETING DATE:
JUNE 26, 2018
RESOLUTION NO. SHA 2018-032 - APPROVAL OF WITHDRAWAL OF TAX CREDIT INVESTOR FROM THE COPPER CREEK 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 2002-330 of March 12, 2002 authorizing financing for Copper Creek 4%
Relevant Council Strategic Theme
Planning for the Future
Relevant Department Goal
Facilitate Affordable Housing Production
Executive Summary
Copper Creek Apartments, located at 1730 Elfin Forest Road, is a 204-unit new-construction affordable development built and operated by Bridge Housing. It is a bifurcated project built concurrently in two separate components using, in part, layered funding from 9% and 4% low income housing tax credits awarded by the California Tax Credit Allocation Committee. The Copper Creek 4% component is a 156-unit family apartment complex; 155 apartments have 55-year deed restrictions. Direct Redevelopment Agency (RDA) project funding of $3.5 million was authorized in 2002. The Copper Creek 9% component is a 48-unit family apartment complex; 47 apartments have 55-year deed restrictions. Because a portion of the project’s funding came about as a result of the City’s Inclusionary Ordinance, no direct RDA funding was required for the 9% component. Copper Creek opened in 2005. 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 approximately six 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.
With respect to Copper Creek 4%, it is requested that the residual receipts split be modified to reflect the City’s 50/50 norm. Copper Creek 4% has paid residual receipts averaging $6,400 per year for the past three years. The current residual receipt split is 90% to the City’s Successor Housing Agency (SHA) fund and 10% to the project. The 50/50 split requested establishes incentive parity and allows for a more efficient, streamlined process for both parties. Copper Creek 9% has no outstanding RDA loan; therefore, it does not pay residual receipts.
In regard to both Copper Creek 4% and Copper Creek 9%, it is requested that an Annual Occupancy Monitoring and Inspection (AOMI) fee of $220 per unit eventually replace the out-dated fee presently based on $65 per unit. The AOMI fee is a fee for service and not a tax. The updated AOMI fee uses a 2% annual increase instead of CPI. The AOMI pays for the cost of annual occupancy monitoring and reporting and the City’s affordable housing inspection program. Due to the deep affordability associated with Copper Creek, 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 $13,049 to $20,200 per year for both components of Copper Creek. 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 from both Copper Creek 4% and Copper Creek 9%
2. Modifying the annual residual receipts split between Copper Creek 4% and the SHA to 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