A: CDBG, HOME and Sunnyvale Housing funds for the acquisition of a 24-unit rental housing complex at 183 Acalanes Drive, Sunnyvale

B: Budget Modification No. 7 to allocate $915,000 in Housing Funds

Emergency Housing Consortium (EHC), a non-profit agency, has recently requested $1,500,000 of Community Development Block Grant (CDBG), HOME and Sunnyvale Housing Funds to finance the purchase of 183 Acalanes Drive, Sunnyvale, a 24-unit rental housing complex. The project will provide permanent affordable rental housing for the next forty years. The apartments will be affordable to very low-income families whose annual gross incomes are at or below 30 percent of median income for Santa Clara County.

EHC is planning to use up to $3,000,000 of 501(c)(3) tax exempt bond to finance the balance of the purchase, and has requested that the City be the issuer of the bond. The City must hold a Tax Equity And Financial Responsibility Act (TEFRA) hearing for this development and pass a resolution approving the proposed financing. This indicates the City of Sunnyvale’s willingness to issue bonds for the purchase of 183 Acalanes Drive. The City will have no financial liability for the issuance of the bonds.

Each year the City receives Community Development Block Grant (CDBG) and HOME funds from the federal government for the purpose of increasing and maintaining the affordable housing stock as well as for providing related services. The Consolidated Plan and the Housing and Revitalization Sub-Element place a priority on maintaining and increasing the stock of affordable rental housing for families. The City’s CDBG and HOME funds are budgeted for specific uses. Currently there is $400,000 of CDBG funds budgeted for housing acquisition, which has not been committed to a specific project. HOME regulations require that 15% of these funds are set aside to assist Community Housing Development Organizations (CHDO) with costs associated with pre-development. Currently, there is $352,350 of HOME funds available for allocation to designated CHDO agencies.

Emergency Housing Consortium (EHC) has been providing supportive housing services to homeless families for the past twenty years. EHC has acquired, rehabilitated and operated shelters, transitional housing and permanent housing for homeless and formerly homeless people throughout Santa Clara County. In recent years countywide, the agency has successfully completed a 95-unit Single Room Occupancy project, a 250-bed Shelter, and a 26-family Transitional Housing Program. Currently, the agency owns 6 apartment buildings, 4 houses, a 95-unit SRO, a 26-family apartment complex, and a 250-bed shelter facility. In addition, the agency leases and manages two National Guard Armory seasonal shelters. Services include: shelter, case management, goal assessment, life skill development, job skill development, clothing and other basic needs supplies, workshops and access to medical care.

The Consolidated Plan places a priority on maintaining and increasing the stock of affordable rental housing for families. The City’s Housing and Community Revitalization Sub-Element contains a number of goals and policies related to affordable housing in the community.

Goal E: Maintain and increase housing units affordable to households of all income levels and ages.

E.2.d Participate with the County to encourage the use of Mortgage Revenue Bonds to develop new low-income rental units and to preserve low-income units through refinancing.

E.2.g Acquire land and assist in development/redevelopment of housing through partnerships with regional agencies, nonprofit housing developers and private sector developers.

Goal F: Improve Housing conditions for people with special needs.

The proposed project is the acquisition of a 24-unit rental housing complex at 183 Acalanes Drive. EHC will provide affordable housing to families at or below 30% of median income.

This project is innovative in that it is affordable housing tied to support services in a non-shelter setting. Support services are provided on-site, thereby increasing the effectiveness and reducing the delivery time associated with skill development. The integrated service model stems from EHC’s experience that some of the most effective tools in creating change in formerly homeless families are interactions with other families. By being able to see the change in other family participants at various program stages, it is believed that families living in adjacent units will begin to realize that change is also possible for them.

The proposed financing of the acquisition of the property includes the issuance of a bond by the City to lend money for the purchase of 183 Acalanes Drive. The bond will be exchanged for a note from EHC. EHC will then deliver the bond to the existing owner of the property. The purpose of the bond is to create tax-exempt financing on the seller’s purchase money (carryback) loan. It is anticipated that the total bond amount will not exceed $3,000,000. The proposed transaction is an adjustable rate bond, which will not be publicly offered, and is not transferable without the approval of the City. The bond will be issued with a final maturity in 2032.

In order to meet the requirements to issue revenue bonds the City must hold a public hearing and adopt the TEFRA Resolution (Attachment A) certifying that the hearing was held concerning the proposed financing to be undertaken by the City. Although the City would be approving the financing for the purposes of federal tax law and the IRS, the City would not have any financial liability for the bond.

In addition to the tax-exempt bond financing EHC has also requested City funded loans for the purchase of 183 Acalanes Drive. The loans requested are as follows:

Amortized loan to be repaid in 21 years, at 5% interest. Payments during the first year of the loan are deferred.

Deferred for the first 21 years, then fully amortized and repaid during the next 10 years at 5% interest.

Housing Fund$915,000

Bridge financing of $350,000 at no interest, to be repaid to the Housing Fund in 15 months from the close of escrow. A deferred loan for 30 years of $565,000 at 5% interest with full repayment at the end of the loan term.

The purchase price is below the appraised value. Staff reviewed the audited financial statements of the agency, a thirty-year project pro forma with projections and the property appraisal. The proposed loan terms will enhance the financial viability of the project and ensure the long-term operation of the project.

Bridge financing of the project allows this agency to expedite the process and move forward on the purchase, and then seek and obtain permanent financing from the County and other jurisdictions during traditional funding cycles.

The application and proposal requesting funds to finance the purchase of 183 Acalanes Drive was reviewed and unanimously approved by the Housing and Human Services Commission at its meeting on June 26, 2002.

The required public notices were published in the Sunnyvale Sun on August 28, 2002.

EHC sent a letter to the owners of properties on Acalanes Drive and held an informational community meeting on August 7, 2002 at Murphy Park. Two property owners attended the meeting.

The tenants of 183 Acalanes Drive have been notified of a pending sale, and an informational meeting was held on September 5, 2002 at the property.