MEETING DATE:
February 25, 2020
RESOLUTION NO. SHA 2020-039 - APPROVAL OF PROJECT GAP FUNDING FOR PHASE 1 OF THE REDEVELOPED VILLA SERENA II AFFORDABLE HOUSING DEVELOPMENT, AND AUTHORIZING THE CITY MANAGER TO NEGOTIATE, FINALIZE, AND EXECUTE ALL REQUIRED REGULATORY AGREEMENTS AND FINANCING ARRANGEMENTS
Recommendation
Recommendation
ADOPT a resolution approving project gap funding for Phase 1 of the Villa Serena II affordable housing development, and authorizing the City Manager to negotiate, finalize, and execute all required regulatory agreements and financing arrangements
Body
Board or Commission Action
Resolution No. SHA 2014-009 dated Sept 9, 2014 authorizing predevelopment loan and ENA
Resolution No. SHA 2014-011 dated Dec 9, 2014 authorizing SHSA
Resolution No. SHA 2016-019 dated Jun 14, 2016 authorizing CDLAC approval letter
Resolution No. SHA 2019-037 dated Jul 9, 2019 authorizing roll-over of the legacy loan and the Replacement Housing Plan
Relevant Council Strategic Theme
Planning for the Future
Relevant Department Goal
Facilitate Affordable Housing Production
Executive Summary
The affordable housing development, known as “Villa Serena II” to distinguish it from the aging 136-unit Villa Serena affordable housing development on the same site, has been in the predevelopment phase since September 2014. The owner of the legacy project is National CORE. National CORE intends to redevelop the site with the new Villa Serena II project which received entitlements in February 2017. Villa Serena II will provide 148 residential units, a community room and leasing office to replace the current 136 units, for a net gain of 12 units along with a more diverse bedroom mix throughout the new development. Villa Serena II also offers significantly improved sustainability and efficiency over its predecessor. In July 2019, the SHA authorized the roll-over the existing Redevelopment Agency (RDA) loan made to the legacy Villa Serena project in 1998. Combining the original Project loan roll-over of $7,444,229 with the predevelopment loan authorization of $777,953 brought the total SHA funding package to $8,222,182 for the project as a whole as of July 2019. At the same time, the SHA also approved the Replacement Housing Plan required by Community Redevelopment Law. The SHA is now being asked to approve the final gap funding component for Phase 1 of the project in order to allow the Developer to apply at the California Tax Credit Allocation Committee (TCAC) for 9% low income housing tax credits.
Discussion
In February 2014, the City Council approved entitlements for entire Villa Serena II project. For funding reasons, it will be built in two separate phases, similar to Westlake Village and Promenade at Creekside. Phase 1, on the west side of the project site, will consist of 85 new residential apartments. Phase 2, on the east side of the site, will consist of 63 new apartments, bringing the total to 148 at the completion Phase 2. After receiving project entitlements, the Developer began assembling components of the Phase 1 project funding from various public sources. That initial process is complete. In order to continue to apply at TCAC for 9% low income housing tax credits, the project requires a formal funding commitment from the Agency for the gap financing.
Other external sources of funding for Phase 1 have been exhausted. The Developer has already secured a loan from the County of San Diego in the amount $5,504,285 from the County Innovative Housing Trust Fund. Also from the County of San Diego, the Developer has secured additional funding in the form of eight (8) units authorized for Mental Health Services Act (MHSA) funding. Both are significant commitments. The next step is to secure the final gap funding commitment from the Agency and then apply for competitive 9% low income housing tax credits via the Tax Credit Allocation Committee (TCAC) in this year and, if necessary, next year, as the award process is extremely competitive.
In summary, the City Council in its capacity as the SHA is being asked at the present time to (a) complete the Agency’s funding commitment to Phase 1 and approve project gap funding in the amount of $5,250,000 in order to fund Villa Serena II (Phase 1) to the degree to be sufficiently competitive to compete for 9% low income housing tax credits in 2020 and, if required, in 2021 (b) approve the First Amendment to the DLA and (c) authorize the City Manager to finalize and conclude all required regulatory agreements and financing arrangements consistent with the DLA and its amendments.
In all likelihood, additional future gap funding of similar magnitude will be required for Phase 2 of the project.
Environmental Review
All requirements of CEQA have been met, in that Mitigated Negative Declaration (ND 16-002) has been previously adopted for the proposed project and all potential impacts related to cultural resources, geology/soils, hazards and hazardous materials, hydrology and water quality, land use and planning, public services, and transportation/traffic will be mitigated to a level less than significant.
Fiscal Impact
$5,250,000 from deposits on account in restricted fund SHA 250. There are sufficient SHA funds on account to accommodate this request.
Attachment(s)
A- SHA Resolution No. 2020 - XXX
B- Project Site Map
C- Development and Loan Agreement dated July 9, 2019
D- First Amendment to Development and Loan Agreement (draft)
Prepared by: Harry Williams, Housing Programs Manager
Reviewed by: Beth Herzog, Administrative Services Manager, Development Services
Reviewed by: Dahvia Lynch, Director, Development Services Department
Approved by: Jack Griffin, City Manager