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F \HOUSING\SHARE\WPFILES\STAFFRPnCBDG 1 wpd MAY 2 6 1998
Council Meeting May 26, 1998 Santa Monica, California
To Mayor and City Council
From City Staff
Subject Recommendation to Increase Construction/Permanent Financing forthe 708
PICO Project and Authonze the One-TIme Modification of Various Housing
Trust Fund GUidelines
INTRODUCTION
ThiS report recommends an Increase m City financing for the 708 PICO Boulevard housing
development The City has previously committed $1,999,000 to thiS MERL new
construction project Staff recommends Increasmg the commitment by $1,300,000 for a
total City subSidy of $3,299,000 Multiple City funding sources Will be used together
through the modificatIon of various housing trust fund gUldelmes
The proposed $1,300,000 Increase consIsts of $500,000 from MERL, $579,000 from
PNHTF, and $221,000 from TORCA Construction Fund In the event suffiCient CDBG
funds are allocated to the City-Wide Fund In the FY 98-99 budget allocation, staff
recommends that the TORCA funds be replaced WIth the City-Wide CDBG funds
BACKGROUND
The shortage of affordable housing has become Increasingly cntlcalln Santa MOnica Not
only have thousands of Units been lost as a result of the January 1994 Northndge
earthquake, but hundreds of units have been Withdrawn from the rental housing market by
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landlords In accordance with the Ellis Act Currently, It IS estimated that 9,633 (or 29 per-
cent) of the City's total renter-households are paYing more than they can afford for housing
per the City's FY 1995 - 2000 Consolidated Plan Availability of units continues to be a
problem with over 2,400 overcrowded households reported In the Consolidated Plan
Waiting lists maintained by the City's Housing Authority and Commumty Corporatron of
Santa MOnica (CCSM) further reflect tremendous demand for housing In Santa MOnica
As of December, 1997 the Housmg Authority listed more than 900 applicants for Section
8 assistance CCSM currently maintains a waiting list of about 1,000 indiVIduals
Development of the proposed project Will add to the City's affordable hOUSing stock at a
time of slgmflcant need
Project Description
The subject property IS a 20-unlt, large family, new construction project which IS located
at 708 PICO Boulevard The vacant project site IS currently owned by Commumty
Corporation of Santa MOnica (CCSM) which Intends to both develop and manage the
proposed project
The project Will conSist of a 4-story, 19,600 square foot structure contalmng 20 rental
apartments The bUlldmg Will be Type V wood frame construction, over a concrete
subterranean parking garage There Will be 34 parkmg spaces A combmatlon of wood
trellises and stepped back third and fourth floors Will prOVide architectural articulation The
bUilding Will Include ten two-bedroom Units and ten three-bedroom Units All Units are
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accessible to disabled tenants A community room Will be located at the front of the
bUilding and a tot lot on the west Side of the bUilding
The project compiles with all applicable zomng reqUirements Two public meetmgs were
held In June 1996 DesIgn changes were subsequently made to accommodate
recommendations made by neIghbors to the south of the site such as 1) stepping back the
fourth floor by about 5 feet, 2) setting back the bUlldmg footprint by about 2 feet, 3) adding
mature trees as a privacy buffer between the project and neighbor's pool/tenms areas, and
4) fencing west Side of the property to limIt access onto Side street Architectural Review
Board approval was received m October 1996 and Coastal CommIssion approval was
received In December 1996
The City made a loan to CCSM In January 1997 to acqUire the site and commence
predeveloment activIties ($812,012) and committed additional proceeds toward
construction (aggregate commitment of$1 ,999,000 for both acqulsltron and construction)
However, CCSM has been unable to raise outSIde funding to fIll the $1,300,000 finanCing
gap With Increasing competition for tax credits, allocations are far more difficult to obtain
Applications submitted dUring the last two tax credit rounds (March 1997, February 1998)
have been unsuccessful In the meantime, CCSM development approvals Will expire Within
the next SIX months unless additIonal finanCing IS secured
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DISCUSSION
Fundmg of the financing gap of $1,300,000, with the City's regular and earthquake
emergency Commumty Development Slock Grant (CDBG), will promote timely project
development, wIll minimize costs, and will help the City achIeve Its CDBG disbursement
objectives Fortunately, moving forward to 'fully fund' the project now does not dlsquahfy
CCSM from applYing for and receiving a tax credit allocation In future competitive rounds
Should CCSM receive an allocation, approXimately $1,900,000 In City funds will be
returned to the City as program Income to be reused
The $1 ,300,000 flnancmg gap will be funded as follows (1) MERL Emergency Earthquake
Supplemental COSG - $500,000, (2) Regular CDBG - $579,000 (PNHTF), and (3) TORCA
Construction Fund - $221,000 WIth regard to earthquake funds, thiS commitment and
expenditure will assist the City to meet ItS federal expenditure deadhne of February 28,
2000 Earthquake funds Will be drawn from MERL projects that have receIved
commitments but have now opted out of the MERL program With reg a rd to reg u la r
CDBG, the City IS In the process of accelerating ItS commitment and expenditure of
available funds to conform to Department of HOUSing and Urban Development (HUD)
regulations In the event suffiCIent City-Wide CDBG funds are available, the TORCA
Construction funds Will be replaced
To allow the above funding sources to be used together, various trust fund modifications
are requested These modifIcations are summarized below
- One-time waiver of the MERL per project funding cap of $2 million dollars;
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- One -time waiver of the PNHTF geographic restriction whIch limits projects to within
the PIca neighborhood,
- One-tIme waiver of PNHTF loan terms to bnng this funding source Into conformity
with the MERL Column J II GUidelines,
- Approval to use TORCA Construction Funds under the MERL Column III
GUidelines, and
- Approval to use City-Wide COBG Funds under the MERL Column III GUidelines
PROJECT FUNDING
Use of Funds Estimated development costs and per unit cost information IS summarized
below In the event CCSM IS successful In obtaining tax credits, the tax credit Investor Will
reduce the City subSidy from approximately $165,OOO/umt to about $70,OOO/umt
Total Estimated Development Costs Cost/Umt
Land $ 517,362 $ 25,868
Construction $2,472,500 $ 123,625
Soft Costs $ 618,218 $ 30,911
Total $3,608,080 $ 180,404
Aggregate CIty CommItment (Current and Proposed) $3,299,000
SubSidy/Unit $ 165,000
Estimated City Commitment (After Tax Credit Pay m) $1,400,000
SubSidy/Unit $ 70,000
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Source of Funds Financing sources are summarized for both a non-tax credit and tax
credit transactIon In the event tax credits are obtained, the Investor eqUity pay In IS
estimated at approximately $2,000,000 Nearly all these proceeds Will be used to pay
down the City loan to about $1,400,000
Sources Without Tax Credit AllocatIon
Construction Period Permanent
Bank $0 $228,080
AHP (A) $0 $81,000
City $3,299,000 $3,299,000
Deferred Costs $3,299,000 $3,608,080
Sources With Tax Credit Allocation
Construction Period Permanent
Bank $0 $187,000
AHP (A) $0 $81,000
City $3,299,000 $1,400,000
Tax Credit Equity $2.000,000
Total $3,299,000 $3,668,000
(A) Affordable Housing Program (AHP) forgivable grant awarded by the Federal Home
Loan Bank February 1997
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BUDGET/FINANCIAL IMPACT
SufficIent funds are available to fund the $1,300,000 Increase as follows, $500,000 from
MERL COSG Emergency Earthquake Recovery funds from Account Number 19-700-695-
00000-4481-00000, $579,000 from the PNHTF which consists of $227,089 from Account
Number 19-720-264-20094-8905-99047 and $351,911 from Account Number 19-720-264-
20095-8905-99047, and $221,000 from the TORCAAccount Number 14-720-264-20096-
8905-99377 In the event suffiCient COSG funds are allocated to the City-Wide COSG
Fund In the FY 98-99 budget, TORCA funds Will be replaced Therefore, there Will be no
financial or budgetary impacts
RECOMMENDA liONS
It IS recommended that the City Council Increase construction financing by $1 ,300,000 for
the 708 PICO Boulevard housmg development through
(1) Approval of a one-time waIver of the MERL per project funding cap of $2 million dollars
such that an additional $500,000 can be allocated to the proJect,
(2) Approval of a one-time waiver of the PNHTF geographic restnctlon such that an
additional $800,000 can be allocated to the proJect,
(3) Approval of a one-time waiver of PNHTF loan terms to bnng thiS funding source Into
conformity With the MERL Column III GUidelines, key loan terms to be waived Include
Interest rate, loan term, and payment deferral penod,
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(4) Approval to use Tenant Ownership Rights Charter Amendment (TORCA) Construction
Funds under the MERL Column III GUidelines such that an additional $221,000 can be
allocated to the proJect, and
(5) Approval to use City-Wide COSG Funds under the MERL Column III GUidelines such
that the $221,000 of TORCA ConstructIon Funds can be replaced (In the event COSG
funds are allocated In the FY 98-99 budget allocation)
Prepared by Jeff Mathieu, Director of Resource Management
Bob Moncrief, Housing Manager
Tina Rodriguez, MERL Program Coordinator
Ellen Alderman Com IS, Senior Administrative Analyst
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