MEETING DATE:
FEBRUARY 14, 2017
SUBJECT:
Title
RESOLUTION NO. SHA 2017-023 - INCREASE TO THE PROJECT LOAN FOR THE PROMENADE AT CREEKSIDE II PROJECT DUE TO A DROP IN THE VALUE OF 9% LOW INCOME HOUSING TAX CREDITS
Body
Recommendation
Recommendation
ADOPT a resolution as the Successor Housing Agency (SHA) to approve an $800,000 increase to the project loan.
Body
Board or Commission Action
June 8, 2010 - RDA Board approval of Exclusive Negotiating Agreement and predevelopment loan
May 10, 2011 - RDA Board approval of $28,200,000 million loan for project
September 24, 2013 - City Council as SA & SHA approval of Rescission Agreement
September 24, 2013 - City Council approval of $250,000 as contingency to resolve property tax issue
September 24, 2013 - City Council as SA & SHA approval of ENA and predevelopment loan
January 28, 2014 - City Council as SA & SHA approval of $17,023,000 million loan for project
January 27, 2015 - City Council approval of a $250,000 reallocation
May 26, 2015 - City Council as SHA approval of $3,110,000 project loan increase due to an increase in property value and an additional $800,000 PFF levied on Phase II
Relevant Council Strategic Theme
Planning for the Future
Relevant Department Goal
Facilitate Affordable Housing Production
Introduction
On January 28, 2014 the City Council approved the Promenade at Creekside (PAC) development. The project is to be built in two phases. Phase I was completed in mid-2016. Phase II has repeatedly applied for 9% tax credits during each subsequent Tax Credit Allocation Committee (TCAC) round. In November 2016, the project was successful in competing for the competitive award. Unfortunately, the value of the tax credits concurrently dropped as a result of the national election and in anticipation of future corporate tax reform. This requested action is to partially compensate for the unexpected funding gap that has emerged.
Discussion
Immediately following the satisfaction over finally securing the highly competitive award, came the realization that the market reacted to the election by immediately devaluing the pricing of those same tax credits. The drop in tax credit pricing created an immediate funding gap of approximately $2.1 million.
In order to retain the tax credits and salvage the project, the Developer initiated three measures:
(1) Arranging for an additional $1 million loan from Bank of America
(2) Deferring $279,000 of the Developer Fee and
(3) Requesting an additional $800,000 from the SHA
Taken together, these measures will close the funding gap and enable the project to move forward.
The additional $800,000 will come from the SHA. Specifically, the entire $800,000 will come from the 2015 SERAF reimbursement totaling $1,893,145 and received in June 2016. Of the $1,893,145 total, only $550,000 has been previously authorized by the Council as SHA for the Mariposa II predevelopment loan. That leaves a remaining balance of approximately $1,343,145 currently available. If the Council were to authorize this request, the entire $800,000 would come from the $1,893,145, leaving a balance remaining of $543,145 in the 2015 SERAF reimbursement.
With the approval of the $800,000 residual receipts loan from the SHA, the 43-unit Promenade at Creekside II development can start construction in the April 2017 time frame and be completed about one year later.
Fiscal Impact
This is an out-of-pocket SHA expense of $800,000 from the balance remaining on deposit from the 2015 SERAF reimbursement. There are sufficient SHA funds on deposit for this request.
Attachment(s)
1. Resolution SHA No. 2017 - XXX
2. Parcel Map exhibit depicting Parcel 2, the Phase II project site
Prepared by: Harry Williams, Housing Programs Manager
Submitted by: Karl Schwarm, Director, Housing & Neighborhood Services Division
Approved by: Jack Griffin, City Manager