City Council
MEETING DATE: 9/26/2018
TITLE:
Title
Owner Participation Agreement with National Community Renaissance
End
FROM:
Tami Scott, Administrative Services Director
RECOMMENDATION:
Recommendation
Staff recommends the City Council authorize an Owner Participation Agreement with National Community Renaissance to provide assistance in the way of a $765,165 grant and the forgiveness of an outstanding residual receipts loan in the amount of $1 million dollars for the renovation and rehabilitation of a 231-unit low income senior complex at Cathedral Palms located at 31750 Landau Boulevard.
Body
BACKGROUND:
Cathedral Palms is an existing 231-unit affordable senior project located at 31750 Landau Boulevard that needs substantial rehabilitation. The project is owned and managed by National Community Renaissance (“CORE”). This project has had prior assistance from the former Redevelopment Agency but continues to age and deteriorate. In 1996, the former Redevelopment Agency issued $3,600,000 in Housing Bonds to assist CORE with the acquisition and rehabilitation of what was then already an older, troubled existing project and in 2003 the Redevelopment Agency provided an additional zero interest residual receipts loan of $1,000,000 to connect Cathedral Palms to the sewer system. There have been no payments made towards retiring this loan which becomes due and payable on August 11, 2035. On July 25, 2018, Council directed staff to move forward with negotiations with CORE for Phase 1 rehabilitation to include a financial contribution from the Housing Successor Agency in the amount of $765,120. Phase 1 was to consist of substantial rehabilitation of the first 32 units of the project. CORE anticipated subdividing the project into as many as six separate parcels to allow for different financing scenarios for each parcel. Phase 1 rehabilitation alone was anticipated to be a $2.2 million-dollar project. In addition, Council authorized staff to begin discussions with CORE about the possibility of forgiving our existing $1,000,000 residual receipts note to make future financing scenarios more feasible.
DISCUSSION:
In the interim, CORE advised staff that they have made headway in their effort to execute a single refinancing of the entire 231-units which would allow them to accomplish a “rolling rehabilitation” of the entire project wherein larger number of units would be rehabilitated at one time, allowing for existing residents to be only temporarily out of their units for a short period of time. The ability to tackle the entire project through a single financing has come about through a proposed collaboration between the Riverside County Housing Authority and the Riverside University Health System-Behavioral Health (RUHS-BH) department. RUHS-BH has given preliminary approval to infuse $3.6 million in capital into the project from their existing resources in exchange for the commitment of 36 of the studio units for their use for a period of 20 years.
Attached is a summary of the deal points previously discussed that would be incorporated into an Owner Participation Agreement with the City (as Housing Successor). CORE is requesting the same level of financial assistance as was previously authorized by Council ($765,120 from Successor Agency Housing funds) along with the forgiveness of the $1,000,000 existing residual receipts loan, should it be beneficial to the project.
In short, the difference from this revised request compared to the request previously approved by Council is that the entire project could be refinanced in one financial scenario to provide funding for phased rehabilitation of all 231 units. The layered financing sources would be different than those previously anticipated and would include the infusion in capital from RUHS-BH, low income housing 4% tax-credits, a new private placement tax-exempt construction loan, the $765,120 in assistance from our Successor Agency housing fund and various other sources of soft debt, grants and philanthropic giving.
The target population for this project would also change in that 30% (68) of the units would be set aside for Homeless and Special Needs populations (as defined by CTCAC and/or the County of Riverside). CORE suggests that 182 of the units be restricted to 50% of County median income and 46 of the units restricted to 40% of County median income with 3 units reserved for management and staff. In terms of redevelopment law, this would give the City credit for 238 units restricted to very-low income residents. The project would, however, continue to serve the Senior population.
The possible funding sources required the City to adopt an Emergency Shelter Crisis resolution to be able to qualify for Homeless Emergency Aid Program (HEAP) funds if appropriate. The Council adopted said resolution at its September 11, 2018 council meeting. The City will also have to declare this project as “a Qualified Affordable Housing Preservation Project” to provide flexibility in relocating tenants back into the project as units are rehabilitation. Additionally, CORE suggests three possible issuers of tax-exempt housing bonds, either the California Municipal Finance Agency, the California Statewide Communities Development Authority or the City. Due to staffing limitations and potential risk exposure, staff recommends that the City not be the issuer, but instead direct CORE to seek one of the other potential issuers. The City, would however, then be required to issue a TEFRA hearing that supports such an action.
Pursuant to preparation and incorporation of the proposed deal points in an Owner Participation Agreement by our City Attorney’s office, CORE is simply asking whether the Council will be willing to continue to commit its $765,120 in financial assistance to the rehabilitation of this property and if needed the forgiveness of the outstanding $1 million dollars in a residual receipts loan.
FISCAL IMPACT:
The Housing Successor Agency has adequate funds to provide the $765,120 requested by CORE for Cathedral Palms and can forgive our existing $1,000,000 residual receipts note (currently due and payable on August 11, 2035), especially given that CORE is unlikely to be able to repay the note at that time, especially if the project is not rehabilitated.
ATTACHMENTS:
Cathedral Palms -Term Sheet 09.26.18