REPORT TO THE CITY COUNCIL June 26, 2014 FROM: JENNIFER K. CLARK, AICP, Director Development and Resource Management Department BY: JOHN ROBERTSON, Interim Manager Housing and Community Development Division CORRINA NUNEZ, Project Manager Housing and Community Development Division SUBJECT ..Title Approve a $1.3 million HOME Investment Partnerships Program Agreement with the Cesar Chavez Foundation for the construction of Kings Canyon Place, an 89-unit multi-family affordable housing development to be located on APNs: 472-021-58/60 (Council District 5) ..Body RECOMMENDATION Staff recommends that the City Council approve a $1.3 million HOME Investment Partnerships (HOME) Program Agreement with the Cesar Chavez Foundation (Developer) for the construction of Kings Canyon Place, an 89-unit multi-family affordable housing development to be located on APNs: 472-021-58/60 (Project). Approval of the HOME Agreement will be contingent upon completion of a National Environmental Policy Act (NEPA) assessment and approval as to form by the City Attorney. EXECUTIVE SUMMARY If approved as recommended, $1.3 million in HOME Program funds will be provided to the Developer in the form of a 55-year loan at 3% interest, with principal and interest repaid from residual receipts. Once completed, the development will consist of 89 units of affordable housing, common area, management offices, and parking. The development cost is estimated at $19,381,118, of which $1.3 million in HOME Program funds is requested to finance 11 affordable housing units within the Project. Approximately $475,090 in deferred developer fee, a $696,695 Land Note, and $14.8 million in Low Income Housing Tax Credits (LIHTC) will finance the balance to complete the Project. The estimated completion date is scheduled for July, 2016. The HOME Agreement is contingent upon the purchase and sale of the Project property and completion of the NEPA assessment. BACKGROUND On March 10, 2014, the Housing and Community Development Division released a HOME Notice of Funding Availability in the amount of $1.3 million. On June 16, 2014, the Cesar Chavez Foundation was selected to receive the entire $1.3 million for its proposed Kings Canyon Place project. Staff estimates project deliver costs to be $8,000 from the date of approval to completion of the Project. Kings Canyon Place will be situated on approximately 3 acres, on the south side of Kings Canyon Road between South Peach Avenue and South Adler Avenue in southeast Fresno (Exhibit "A" Project Location Map). The Developer is currently in negotiations with the City to purchase the entire 5.37-acre parcel for the appraised value of $904,000. A purchase and sale agreement and final HOME Agreement and/or Disposition and Development Agreement will be brought to Council for approval at a later date. The first phase of this two phase development will be located on the west portion of the Property. A Conditional Use Permit application (C-14-044) for the first phase of the Project was submitted to the City on June 13, 2014, and is in review process. The Project will consist of 5 one- and three-story buildings with 27 one-bedroom units, 35 two-bedroom units, and 27 three bedroom units (Exhibit "B" - Site Plan and Elevations). One two-bedroom unit will be reserved as a manager unit. The one-bedroom units will be 540 square feet, the two-bedroom units will be 775 square feet, and the three-bedroom units will 1,050 square feet. In total, there will be approximately 71,555 square feet of living space (including the community room) at a cost of $271 per square foot ($19,381,118/71,555 sq. ft.). Unit size and rents are as follows: Unit Size # Rent (less utility allowance) 1-bed/1bath 27 $260-$577 2-bed/1bath 35 $319-$689 3-bed/1bath 27 $368-$795 Qualifying tenants in the non-HOME units will have an income between 30% to 60% of area median income and qualifying tenants occupying the 11 HOME units will have an income between 50% to 80% of area median income. Site amenities will include indoor and outdoor sitting areas, a community room, laundry room, library, tot-lot, and computer center. Construction of the buildings will incorporate energy-efficient low-maintenance materials, the City's Green building standards, and Universal Design features. Community amenities include a grocery store, major department store, park, pharmacy, library, clinic, and schools. The total development cost is estimated at $19,381,118 million, of which $1.3 million in HOME Program funds is requested to finance 11 HOME-assisted units within the Project. Approximately $475,090 in deferred developer fee, a $696,695 Land Note, and $14.8 million in LIHTC will finance the balance to complete the Project (Exhibit "C" - Sources and Uses and Exhibit "D" - Finance Plan/Cash Flow Statement/Project Budget). Approval of this item will be contingent upon: 1) the completion of the NEPA assessment, 2) authorization to release grant funds from the U.S. Department of Housing and Urban Development, 3) acquisition of the Property from the City, and 4) a final HOME Program Agreement and/or Disposition and Development Agreement, approved as to form by the City Attorney. The Cesar Chavez Foundation is a national non-profit housing development corporation dedicated to providing affordable housing throughout California, Texas, Arizona, and New Mexico. The organization has over 40 years of experience with construction and rehabilitation and has over 36 projects with over 4,300 units in its portfolio of affordable housing. The Cesar Chavez Foundation recently completed the HOME-funded Plaza Mendoza rehabilitation project in west central Fresno. Completion date of this multi-family development Project is scheduled for July, 2016. Once completed, Kings Canyon Place will assist the City in meeting its affordable housing goals as identified in the Housing Element of the 2025 General Plan and 2010-2014 Consolidated Plan. The Project is also expected to make a positive impact to the neighborhood by offering quality, durable, affordable housing. This Project is estimated to create approximately 30 construction and trade-related jobs for the duration of the development. The Project also meets the HOME Program Priorities (adopted by Council on December 16, 2010), as follows: > Leverages City HOME Program funds with $14.8 million in LIHTC; > Is expected to generate additional revitalization in the area and instill community pride, and transmit positive changes in the surrounding neighborhoods; > Is an infill development that utilizes the capacity of the City's existing infrastructure; > Is located on a transportation corridor and is within one quarter mile of an existing Fresno Area Express bus stop; > Is creating approximately 30 construction and trade-related jobs; > Is in close proximity to amenities such as grocery stores, banking, and schools; > Residential square foot cost of $271 (includes the community building); and > The Developer has the capacity to complete the project on time and on budget, and is experienced with utilizing federal HOME funds. This item was placed on the June 25, 2014, Housing and Community Development Commission agenda for consideration. ENVIRONMENTAL FINDINGS This is not a project for the purposes of the California Environmental Quality Act (CEQA) under Section 15378(b)(4). The HOME Agreement will act as a governmental funding mechanism/fiscal activity which does not involve any commitment to a specific project that may result in a potentially significant impact on the environment. Furthermore, approval of this item is contingent upon the completion of a NEPA and authorization to release grant funds from the U.S. Department of Housing and Urban Development. LOCAL PREFERENCE Not applicable FISCAL IMPACT There is no impact to the Development and Resource Management Department's Fiscal Year 2014 Budget. The $1.3 million in HOME Program funds will be available in FY 2015. Attachments: Exhibit A - Project Location Map Exhibit B - Site Plan and Elevations Exhibit C - Project Sources and Uses Exhibit D - Finance Plan/Cash Flow Statement/Project Budget