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ADOPT A RESOLUTION TO DE-OBLIGATE HOME ENTITLEMENT FUNDS FROM THE LA PASSEGGIATA APARTMENTS PROJECT AND ALLOCATE $2.1 MILLION DOLLARS FROM THE LOW-MODERATE-INCOME HOUSING FUND BALANCE TO THE PROJECT
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Approving the de-obligation of $600,000 awarded by Council on June 22, 2021 (Attachment A- Resolution 2021-06-22-1502), of HOME Investment Partnerships Program Entitlement funds from the La Passeggiata Apartments project;
2. Approving the allocation of $2,100,000 of Low-Moderate-Income Housing (LMIHF) funds from the LMIHF fund balance to the La Passeggiata Apartments project;
3. Authorizing the City Manager, or designee, to take actions that are necessary and appropriate to carry out the purpose and intent of the resolution, including the execution of loan documents and the reallocation of funding sources.
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Summary
Staff recommends de-obligating HOME Investment Partnerships Program (HOME) Entitlement funds previously committed to La Passeggiata due to the project’s inability to meet federal environmental requirements. The La Passeggiata project is due to break ground for construction by May 23, 2025 (a required deadline for other project funding). Prior to recognizing the project’s inability to meet federal funding guidelines, Visionary Home Builders (VHB) of California, the developer, expressed to the City a need for $1.5 million in additional funding to help bridge an inflation-based funding gap. Given that La Passeggiata is weeks away from construction commencement on much needed affordable housing, staff has identified alternative low/moderate income housing funding that has less requirements in the form of Low-Moderate-Income Housing Fund (LMIHF) funding to replace the already allocated $600,000 in federal HOME funding and the additional gap funding that the project requires. The de-obligation of the $600,000 of HOME Entitlement funding will allow that funding to be re-allocated to another eligible project, yet to be determined. Staff will review the last NOFA participants and come back with a recommended use for Council review and approval at a future date.
DISCUSSION
Background
The City Council allocated $600,000 to the La Passeggiata project on June 22, 2021 following a competitive Notice of Funds Available (NOFA) process, released in December 2020.
Annually, the City of Stockton receives HOME Investment Partnerships Entitlement (HOME) allocations from the U.S. Department of Housing and Urban Development (HUD). The objectives of the HOME Program are to provide decent, affordable housing to lower-income households, and strengthen the ability of local government and nonprofit organizations to meet local housing needs.
The site of the La Passeggiata build required remediation of an old storm drain. The site is owned by the State of California (State), and VHB will hold a long-term lease for the site. VHB worked with the State to craft a remediation plan for the replacement of the storm drain. The State environmental process did not require completion of the National Environmental Policy Act (NEPA) review process prior to any land modification/disturbance. However, use of federal funding on the project does require NEPA review to be completed before disturbance occurs on the site. Since the NEPA process was not completed prior to the site undergoing remediation, the City cannot allocate federal HOME entitlement funds to the project. HUD does have a waiver for such a process infraction, but due to the immediate need to begin construction, there is not enough time to engage and complete the waiver process. The funding for La Passeggiata includes Low-Income Housing Tax Credit Equity which requires that the project be under construction no later than May 23, 2025.
La Passeggiata will consist of 94 modular, energy-efficient units with Green Point Rating Certification, through a master lease with the State of California. The multifamily housing development will be dedicated to housing families, individuals, and seniors with income levels ranging from 30 to 50 percent of the area’s medium income (AMI). The five (5) story building; four (4) stories over podium consists of two buildings. The development will house one, two, and three-bedroom apartment homes ranging from 450 to 1,200 square feet. A two-bedroom housing unit will be designed for the onsite Community Manager. All ground-floor units will be ADA-accessible, and upper-story units will be serviced by an elevator. The units will have a full kitchen with pantry cabinets, inside-unit laundry rooms with full-size washers and dryers included, and separate dining and family rooms.
The project will have a 7,353 square foot Community Center with a Computer Lab and separate space for the local El Concilio Childcare Services. The Community Center is a gathering place for the residents to attend meetings, adult education classes, and join in on the residents’ events, and help build camaraderie among tenants. Additionally, VHB will hold various classes and workshops on Homebuyer Education, Financial Literacy, and Supportive Services.
Present Situation
The purpose of this Staff Report is to obtain approval to de-obligate $600,000 previously allocated HOME entitlement funds and instead allocate $2.1 million in LMIHF funding to the La Passeggiata project. The need for affordable housing remains a critical priority within the City of Stockton, and as such, supporting this project that will add an additional 94 units to the City’s housing supply is prudent.
La Passeggiata has received the final approval and issuance for building permits and is scheduled to commence construction in May 2025. The project is expected to be complete and available for occupancy by July 2027.
FINANCIAL SUMMARY
The proposed resolution will have no financial impact on the General Fund or any other unrestricted fund. The City will incur no financial liability by de-obligating $600,000 of the HOME Entitlement funds from the project and instead allocating $2.1 million in LMIHF funding to the La Passeggiata project. A total of $2.1 million will be allocated from the LMIHF fund balance (fund 290, sub-fund 293). There are sufficient funds to support this action.
Attachment A - Resolution 2021-06-22-1502