REPORT TO THE CITY COUNCIL FROM: JENNIFER CLARK, Director Planning and Development Department PHIL SKEI, Assistant Director Planning and Development Department SUBJECT ..Title Actions pertaining to the land acquisition, predevelopment costs, and hard construction costs of Sarah's Court Apartments, a 120-unit affordable rental housing project, to be located at 200 N. Salma Avenue in southeast Fresno as part of the Fancher Creek Master Plan Development (District 5). 1. Authorize the City Manager to execute a Permanent Local Housing Allocation (PLHA) Agreement with FCTC Family, LP, in the amount of $530,966; and 2. Approve a Community Development Block Grant (CDBG) Agreement with FCTC Family, LP, in the amount of $2,480,000; and 3. Approve a HOME Investment Partnerships Program Agreement with FCTC Family, LP, in the amount of $3,169,034 ..Body RECOMMENDATION Staff recommends the City Council approve a $2,480,000 Community Development Block Grant (CDBG) Agreement (Exhibit "A" - CDBG Agreement) and a $3,169,034 HOME Investment Partnerships (HOME) Program Agreement (Exhibit "B" - HOME Agreement) with FCTC Family, LP, for the construction of the Sarah's Court Apartments, a 120-unit affordable rental housing project at the Fancher Creek Master Plan Development site in southeast Fresno (Exhibit "C" - Project Location Map); and authorize for the City Manager to sign all implementing documents required by the U.S. Department of Housing and Urban Development (HUD), approved as to form by the City Attorney's Office. EXECUTIVE SUMMARY If approved as recommended, FCTC Family, LP, will enter into a CDBG and HOME Agreement with the City for a total of $5,649,034 in residual receipts loans at 3% interest. The estimated project cost is $35,326,840. The CDBG and HOME-assisted units will carry a 55-year affordability covenant. BACKGROUND On June 8, 2022, the Housing and Community Development Division released a 2022-2023 Notice of Funding Availability (NOFA) for CDBG funding for acquisition of land for an affordable housing development. In response to the NOFA, the City received several applications, one of which the Sarah's Court Phase I project that was recommended to receive $2,480,000 in CDBG Program funding. In accordance with the City of Fresno Better Business Act, the proposed funding was issued through a NOFA and is therefore not subject to the Act process. After preliminary underwriting and technical assessment of the applications, the Sarah's Court Phase I Project was determined to provide the largest communal impact and was therefore recommended for funding in the amount of $2,480,000 as a residual receipts loan with a no less than a third position lien, at 3% interest, with the balance due and payable in full at a 55-year maturity date. On June 18, 2021, the Housing and Community Development Division released a 2021-2022 Notice of Funding Availability for HOME, CHDO, and PLHA funding for the development of affordable housing. In response to the NOFA, the City received several applications, one of which the Sarah's Court Phase I project that was recommended to receive $3,169,034 in HOME Program funding. In accordance with the City of Fresno Better Business Act, the proposed funding was issued through a HOME NOFA and is therefore not subject to the Act process. After preliminary underwriting and technical assessment of the applications, the Sarah's Court Phase I Project was determined to provide the greatest number of affordable housing units and was therefore recommended for funding in the amount of $3,169,034 as a residual receipts loan with a no less than a fourth position lien, at 3% interest, with the balance due and payable in full at a 55-year maturity date. The total development cost is estimated at $35,326,840 of which $2,480,000 will be CDBG funds and $3,169,034 will be HOME funds. The $2,480,000 in CDBG funds will be used for property acquisition of the project site, and the $3,169,034 in HOME Program funds will be used for eligible predevelopment soft and hard construction costs. An additional $530,966 in PLHA is being provided via Resolution 2022-028 adopted by Council on February 10, 2022. Housing Division staff will have a fully executed PLHA Agreement, approved as to form by the City Attorney's office, within the next 60 to 90 days. Sarah's Court Phase I Apartments will feature durable and environmentally friendly building materials, will incorporate the City of Fresno Green building standards and Universal Design features, on-site parking spaces, landscaping, laundry, and a 6,000 square foot community room. The estimated completion date of this affordable multi-family housing development is scheduled for March 2024. The Sarah's Court Phase I project will consists of a 120-unit mix that will range in size from 610 sq. ft. for a 1bed/1bath unit, 875 sq. ft. for a 2bed/2bath unit, and 1,140 sq. ft. for a 3bed/2bath unit. The rentable square footage of the project is approximately 97,050 sq. ft. which is a hard construction cost of approximately $236 per sq. ft. and approximately $294,390 per unit. One 1bed/1bath unit will be reserved for on-site property manager (Exhibit "D" - Site Plan and Elevations). Qualifying tenant household's income will range from 30 percent to 70 percent of area median income. Proposed project rents will range from $392 to $1,268 per unit depending on bedroom size and location. The development team has created River Park, Campus Pointe, Park View Plaza, Palm Crossing, and is currently working on a master plan development at Fancher Creek in the central southeast area of Fresno. Once Sarah's Court is complete, the 120 units will assist the City in meeting its affordable housing goals as identified in the Housing Element of the 2035 General Plan, Consolidated Plan, and HOME Program funding priorities for new housing development. In addition, the Sarah's Court Project is expected to make a positive impact to the neighborhood by offering new, quality, durable, affordable housing. Once the Fancher Creek Master Plan Development is complete, the entire plan area will consist of 90+ acres and will be home to 970,000 sq. ft. of commercial and retail businesses, a senior housing development that is currently underway, Sarah's Court - a multifamily housing development, a plaza, recreational space, and approximately 1.5 miles of trail along the creek. In the interest of time and since the final map for Sarah's Court Phase I has not been recorded, the above-mentioned funding agreements reference Parcel Map 2007-41. After the final map for Phase I is recorded and prior to recordation of the funding agreements, Parcel Map 2007-41 will be replaced with the newly issued legal description and assessor's parcel number. ENVIRONMENTAL FINDINGS Environmental Impact Report No. 10133, prepared for the Fancher Creek Project (EIR No. 10133) was certified by the Council of the City of Fresno on May 17, 2005, by Resolution No. 2005-183. EIR No. 10133 evaluated the construction of over 2300 residential units in the entire 475-acre area for the Fancher Creek development, including 240 residential units in a mixed-use portion of the Town Center. On March 25, 2010, the Council adopted an Addendum to EIR No. 10133, dated June 29, 2009, which addressed a total of 740 residential units in the Town Center, which is an increase of 500 units. After adoption of the Addendum to EIR No. 10133, the Council approved a Development Agreement by and between the City of Fresno and Fancher Creek Properties LLC which set forth the rights and responsibilities for development of the Fancher Creek Town Center, including the residential units within the Town Center Area. This approval is for a portion of the development of the Town Center as contemplated by the Development Agreement, EIR No. 10133, and the Addendum to EIR No. 10133. An analysis has been performed pursuant to California Environmental Quality Act (CEQA) Guidelines � 15162 to determine whether subsequent environmental review is required for this approval. Based upon this analysis the following findings are made to support the determination that no subsequent environmental review is required: 1. No substantial changes are proposed in the project which will require major revisions to EIR No. 10133 or the Addendum to EIR No. 10133 due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects. 2. No substantial changes occurred with respect to the circumstances under which the Fancher Creek Project or the Development Agreement for the Fancher Creek Town Center were undertaken which will require major revisions to the EIR No. 10133 or the Addendum to EIR No. 10133 due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects. 3. There is no new information, which was not known and could not have been known with the exercise of reasonable diligence at the time EIR No. 10133 was certified or the Addendum to EIR No. 10133 was adopted that shows any of the following: a. The project will have one or more significant effects not discussed in EIR No. 10133 or the Addendum to EIR No. 10133; b. Significant effects previously examined will be substantially more severe than shown in EIR No. 10133 or the Addendum to EIR No. 10133; c. Mitigation measures or alternatives previously found not to be feasible would in fact be feasible, and would substantially reduce one or more significant effects of the project, but the project proponents decline to adopt the mitigation measure or alternative; or d. Mitigation measures or alternatives which are considerably different from those analyzed in the EIR No. 10133 or the Addendum to EIR No. 10133 would substantially reduce one or more significant effects on the environment, but the project proponents decline to adopt the mitigation measure or alternative. Based upon these findings, it has been determined that no further CEQA environmental documentation is required for this project. Furthermore, an environmental review of the Sarah's Court Housing Project activities was reviewed pursuant to the National Environmental Policy Act (NEPA) guidelines on February 7, 2022, and resulted in a Finding of No Significant Impact. On March 17, 2022, the developer received authorization to use grant funds from HUD. LOCAL PREFERENCE Local preference is not applicable because of the use of federal funding. FISCAL IMPACT The CDBG, and HOME Program funds for the proposed Sarah's Court Housing project were appropriated to the Planning and Development Department as part of its fiscal year 2023 Budget. Attachments: Exhibit A - CDBG Agreement Exhibit B - HOME Agreement Exhibit C - Project Location Map Exhibit D - Site Plan and Elevations