HomeMy WebLinkAboutWITOD Background ReportATTACHMENT 1
BACKGROUND REPORT
Project Background: This project seeks to meet the objectives of the Westside
Specific Plan through developing a transit oriented affordable housing project
near the 24th Street Trolley Station.
• Goal 3.9 (page 30) of the Westside Specific Plan states "Actively pursue
partnerships to construct 200 affordable housing units throughout the plan
area and to concentrate efforts towards meeting affordable housing goals
on parcels surrounding Paradise Creek."
• Strategy 3.9 (page 31) states "Require dedication of open space
easements for parkland adjacent to Paradise Creek, including passive and
active recreation, trails and habitat restoration."
• The Land Use section of the Plan (Chapter 3, page 37) calls for Transit
Oriented Development on the larger underutilized lands north of the
Trolley Station to be developed at a maximum height of five stories and
65-feet including ground level parking. A maximum density of 60 dwelling
units per acre is specified.
• "Development of the area immediately south of Kimball School will be
primarily used for developing affordable housing and supportive services."
The Plan, on page 38, reflects an early conceptual site plan prepared by
the selected developers.
Project Description: The project is a two-phase 201 affordable housing project,
including Paradise Creek improvements, park improvements and community
facilities, on 12.75 acres owned currently by the City of National City and within
unimproved street rights of way. It will be three stories over at grade parking (a
slight excavation for parking will take place at the extreme northwest of the
project due to topography). The number of units in the project has been
determined by the developer to achieve density levels necessary to leverage
state funds for the project and still implement a development scale that is
attractive to families.
The total project cost will be $75,961,000 plus Public Works relocation and site
remediation estimated at not -to -exceed $6 million. Phase I equals $42,911,000
including $4,664,000 in California Proposition 1 C funds. Phase II equals
$33,050,000 including $3,936,000 in California Proposition 1 C funds.
Phase I: $42,911,000 including $4,664,000 in California Proposition 1 C funds,
and $20,957,000 in local public subsidy. By acting to approve this DDA the CDC
would commit to the local public subsidy as follows:
Phase I
• $14,957,000 in 2011 Tax Allocation Bond funds,
• $5,404,508 in local low moderate housing fund reserve funds,
Background report for WITOD DDA 6-21-11
• $500,000 in California Prop 1 C Catalyst Projects for California Funds,
• $95,492 in locally issued HOME federal funds. The local low moderate
housing fund reserve subsidy could be reduced by $756,000 if Project
Based Section 8 Vouchers can be successful won for this phase*,
• Phase I also includes relocation of Public Works and site remediation to
be paid for from low moderate housing funds for Fiscal Year 2011-12.
Phase II
• $14,909,000 in Tax Allocation Bond funding. This subsidy could be
reduced by $644,000 if Project Based Section 8 Vouchers can be
successfully won for this phase*.
Scope of Development: Phase I consists of 109-units primarily located on the
current site of the National City Public Works Center. Phase II consists of 92-
units primarily on the Illes Family Trust site and the west side of Paradise Creek.
A concept plan is included as Exhibit B of the Disposition and Development
Agreement ("DDA").
The expansion and improvement of Paradise Creek Education Park will be fully
constructed as part of Phase I of the project. When completed, Paradise Creek
Education Park will be fully accessible to the general public and not restricted to
project residents. Common facilities anticipated include laundry facilities, a
community room, office space, a swimming pool, barbeque area and tot lot. A
community garden is also being considered. The project will also include an
enhanced streetscape along 22nd Street to the 24th Street Trolley Station.
Project Timing: The project benefits from an award of $8.6 in California
Proposition 1 C bond funds which must be expended by March, 2016.
Accordingly, the Schedule of Performance provides certain generous time frames
in the hopes of avoiding DDA amendments for schedule but require project
completion by March, 2016.
For the first 120 days, the developer will conduct due diligence activities such as
geotechnical studies and the CDC will complete and seek approval of a Property
Mitigation Plan ("PMP") for remediation of hazardous materials from the
California Department of Toxic Substances Control.
Following due diligence and approval of the PMP, the developer will prepare
application and submit for land use entitlements for the project. During this
phase the public will be included in final site design, aesthetic considerations and
park and open space planning. At latest, the entitlements will be achieved for the
project 13 months after execution of the DDA. Following entitlements and the
completion of the CDC's portion of activities under the PMP, construction
documents will be prepared, the project will be competitively bid and construction
will commence.
Background report for WITOD DDA 6-21-11
Paradise Creek: In response to requests from Paradise Creek Educational Park
Incorporated, the current concept plan shows the project set back from Paradise
Creek farther than was shown in the concept plan included in the Westside
Specific Plan. Detailed planning for the open space around Paradise Creek, in
conjunction with community, stakeholder and potential funder participation, will
be completed as part of design development following the due diligence period in
the DDA. As stated earlier in this report, although the open space expansion will
be developed by the project, the improvements will be open to the public.
Affordability and Unit Sizes: In order to achieve maximum affordability for this
project staff and the developer intend to seek Project Based Section 8 Vouchers
for 25-percent of the units. These Vouchers, which cannot be pre -committed in
the DDA and which will be subject to an open competitive process, would reduce
rents in 25-percent of the project to 30-percent of the residents income, with the
balance being paid by the federal government. (Note — 25-percent is the
maximum amount of Project Based Section 8 Vouchers allowed by HUD.)
The rents currently shown in the project pro forma are set at levels required by
California Redevelopment Law and the Low Income Housing Tax Credit
("TCAC") program. Forty-nine (49) percent of the units will be restricted by
"redevelopment rents" and 51-percent by TCAC.
The unit mix and affordability is as follows (AMI means "Area Median Income" — a
formula for establishing affordable rents):
Phase I
Phase II
TOTAL
Units at 30% AMI
12
11
23
Units at 40% AMI
23
21
44
Units at 50% AMI
73
59
132
Manager Unit
1
1
2
TOTAL
109
92
201
The proposed unit sizes are as follows:
Phase I
Phase II
TOTAL
Studio
0
6
6
One bedroom
24
21
45
Two bedroom
49
36
85
Three bedroom
36
29
65
TOTAL
109
92
201
Basic Deal Terms: The Summary (or "33433") Report that is a companion item
to the DDA explains the deal terms for the disposition of the Public Works Center
Background report for WITOD DDA 6-21-11
and Illes Family Trust site for the project. A basic summary of those terms is as
follows:
• Once construction is complete and the project is occupied by tenants, the
developer will lease the site for 99 years;
• The project will remain affordable for at least 55 years;
• Rents will be paid to the City of National City General Fund of $75,000
(plus escalation for Years 31 — 55) for 55 years, thereafter either
negotiation or an appraisal will be used to establish rents for years 56 —
99*;
• The lease -hold will exclude Paradise Creek open space and park; the
parcel for this space will be defined during the entitlement process and the
City will maintain this space consistent with its maintenance of other City
parks;
• There is no developer profit in the project. The developer will be paid the
fee allowed by TCAC: $2.5 million for each phase or $5 million total;
• $6 million in CDC low moderate housing funds reserves and non -local
funds will be loaned to the developers for use in the project;
• Tax exempt CDC bond funds will be granted to non-profit Community
Housing Works, which will loan the funds to the for -profit developer.
These funds amount to $14,957,000 for Phase I and $14,909,000 for
Phase II (the grant agreement, including uses of repaid grant funds, is a
companion item to the DDA on this evening's agenda);
• The CDC will relocate the Public Works Center and remediate the site
using funds additional to the subsidy. These funds — estimated at $4 — 6
million — are available in the existing Capital Improvement Budget and
2011-12 Low Mod Housing funds;
• The developer will apply for 4-percent low income housing tax credits and
Project Based Section 8 Vouchers for both phases; and
• The final, actual project subsidy will only be the total necessary for the
project. The amounts shown in this staff report are the highest amounts
and can be reduced by grants and Project Based Section 8 Vouchers.
Service Programming: Community Housing Works will provide bilingual, age
appropriate services to residents of the project. Services will include:
• After school computer access, tutoring;
• Family education on sustainable ("green") practices, work readiness and
vocational and leadership training;
• Financial fitness training focused on sustainable financial goals; and
• Homebuyer education — an incubator to provide education and counseling
to assist residents in realizing the dream of home ownership. Residents
will also have access to first-time homebuyer loans after completion of the
educational program.
Leveraging of Local Funds: City staff and the developers have been actively
pursuing non -local funds to assist funding this project. Certain non -local funds
Background report for WITOD DDA 6-21-11
secured to date are included in the subsidy amount and future non -local funds
secured may help to reduce the subsidy amount.
Non -local funding secured to date:
• $8.6 million — Prop 1C Infill Infrastructure funding;
• $500,000 Proposition 1 C Catalyst Projects for California Funding;
• $95,492 in City -issued HOME federal funds;
• $330,000 in pre-DDA environmental studies and technical support has
been provided by the US Environmental Protection Agency that is not
included in the financial documents for the project; and
• $130,000 in pre-DDA due diligence environmental studies has been
provided by the California Department of Toxic Substances Control.
Non -local funding to be pursued in the future:
• 27 Project Based Section 8 Vouchers for Phase 1 and 23 Project Based
Section 8 Vouchers for Phase II. Each Section 8 Voucher has a value of
$28,000 and could reduce the CDC subsidy*;
• Potential EPA site clean-up funds for the Illes Trust site (value to be
determined) which would reduce the CDC's remediation costs;
• Other funding from the Department of Housing and Urban Development;
• Potential state funding from the California Coastal Conservancy to assist
with development of Paradise Creek Education Park valued at up to $1.6
million which would reduce the CDC subsidy; and
• 4-percent low income housing tax credits already presumed in the
subsidy.
*Note: as stated in the DDA, should Project Based Section 8 Vouchers be
awarded to the project the rents paid to the City's General Fund will be increased
on a pro rata basis. Should all desired Vouchers be obtained for the project the
annual rent will increase from $75,000 to $131,000 per year.
Security of Funds: Although all real estate projects involve risk, the CDC has
attempted to secure its funds in the event of a project failure.
A pre -development loan, within the total amount of the subsidy, of not to exceed
$3,741,600, will be made to cover the costs of developer due diligence and pre -
development expenses. These funds are subject to a guaranty from the
developer, which would pay the CDC back in the event of a default of the DDA or
provide the CDC with the drawings and land use entitlements necessary to
complete the project with an alternate developer. Should circumstances other
than a default and beyond the control of the CDC and/or developer occur, the
DDA could be terminated. The land for the project will be secure as it will not be
subordinated to the loans for the project.
Background report for WITOD DDA 6-21-11