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F IHOUSINGI ISTAFFRPT/MERLSTAF RPT Santa Monica, California
Council Meetmg February 25, 1997 FES 2 5 1991
To Mayor and City CounCIl
From City Staff
Subject RecommendatIon to Approve One-Time WaIver of Multifamily Earthquake
Repair Loan Program (MERL) GUidelines to Approve Constructlonl
Permanent Fmanclng for the 1438-1444 16th Street Housmg Development
INTRODUCTION
ThiS report recommends a one-time waiver of the MERL per Unit funding cap for the 1438-
1444 16th Street new construction housing development MERL GUidelines cap the City's
loan at S 1,944,000 for th IS 17 umt , 100% affordable housing loan under Program III of
MERL GUldelmes The City has committed $1,851,874 of MERL Community Development
Block Grant (CDBG) funds to thIS housIng development and staff recommends IncreasIng
that commitment In an amount not to exceed $535,000 In MERL CDBG funds to a total
amount not to exceed $2,386,874 In addItIon, approval of the staff recommendatron
satIsfies the provIsion of the MERL GUidelines that requires CounCil approval of any MERL
loan which exceeds $2,000,000
BACKGROUND
Subsequent to the 1994 Northndge Earthquake, the City received three grants from the
Department of HOUSing and Urban Development for multifamily hOUSing earthquake
recovery to repair and replace units damaged and destroyed The establishment of the
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FED 2 5 1997
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MERL program for the administration of these funds has provided an Important financial
resource to allow the City to rebuild its multifamily housing stock Earthquake grant funds
designated for loans to multifamily property owners total $30,046,500
As of February 7,1997,30 housmg loans have closed or received City commitments, and
20 more are In revIew and expected to receive commItments Excludmg the 16th Street
loan recommended In thIS staff report, staff expects that loan commItments totaling up to
$29,548,030, dependent on actual commitments. Will have been made by the time the
CounCil meets on February 25. 1997 ThiS would leave a balance of $498,470 to $535,000
uncommitted
DISCUSSION
ThiS hOUSing development, sponsored by the Commumty Corporation of Santa Monica
(CCSM), WIll proVIde 17 units of affordable hOUSIng for famIlIes at 1438-1444 16th Street
The total development cost for the hOUSing development IS estimated to be $3,388,837
To date, the City has committed $1,851,874 of MERL funds to thiS hOUSing development
The gap In financmg of $1.536,963 IS expected to be filled, on a permanent baSIS, through
a loan from the Affordable HOUSing Program (Federal Reserve Bank program) of $76,211,
a conventional bank loan of $100,000, and proceeds from the sale of lOW-income hOUSing
tax credits of $1,360,752 The tax credIt proceeds are dependent on an allocation of tax
credits to CCSM based on Its upcoming application to the Tax Credit Allocation Committee
administered by the State of California If the application IS successful, the additional
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$535,000 wIll be used as a short term constructIon loan to be repaId when the tax credit
syndIcation proceeds are realized The loan repayment will be received by the City as
COBG program Income, and Its reuse will be governed by the same rules as other COBG
program Income Because the competItIon for tax credits IS Intense, an allocatIon IS In no
way guaranteed If the tax credit application IS dented then the permanent financing gap
would be closed With a MERL Loan up to 5535,000 and flnancmg from the CitYWide
Housing Trust Fund
By adopting the recommendation In thiS report It IS anticipated that the City will have
committed all MERL loan funds before the Federal deadline of February 28, 1997 Failure
to commit by that date would result In the return of uncommitted funds to the Department
of HOUSing and Urban Development
FINANCIAL/BUDGETARY IMPACT
The additional commitment of MERL CDBG funds In an amount not to exceed $535,000,
In the form of a construction/permanent loan, will be for a term of 55 years at 0% Interest
The term and Interest rate conform to MERL GUldelmes In the event tax credits are
received for thiS hOUSing development. the City loan will be repaid Within 2 years from
disbursement of City funds
The eXlstrng loan, under account #19-000-000-00000-9545-04861 In the amount of
$1.851.874, will be Increased to an amount not to exceed $2,386,874
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RECOMMENDATION
It IS recommended that the City Council approve a one-time waiver of the MERL per-umt
loan amount gUIdelines for the affordable housing development to be located at 1438-4444
16th Street to allow an Increase of MERL CDBG funds to this housing development, In an
amount not to exceed the $535,000, from the City'S current commitment of $1 ,851,874 to
a maximum of $2,386,874
Prepared by Jeff Mathieu, Director Resource Management Dept
Bob Moncrief, HOUSing Manager
Tina Rodriguez, MERL Program Coordinator
Ellen Alderman Comls, Senior Admin Analyst
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