July 27, 2004
SUBJECT: Request Approval to Award HOME Project Funds of $28,177 to Charities Housing for a Community Housing Development Organization (CHDO) Pre-Development Loan
Since 1999, Charities Housing has been actively pursuing affordable housing development opportunities in the City. In particular, Charities Housing has been working on the development of an 80 unit affordable senior rental housing project located on land owned by Santa Clara County, currently comprised of a park and a county medical clinic, at 660 Fair Oaks Avenue in Sunnyvale. As a designated CHDO (Community Housing Development Organization), Charities has requested reimbursement of incurred costs associated with the pre-development of the senior housing project. Staff is recommending Council consider approval of a pre-development loan of $28,177 to reimburse the incurred cost so that the non-profit can continue to work towards the development of the affordable housing.
Each year, the City is required to set-aside a minimum of 15 percent of its HOME allocation for housing development activities to be undertaken by a special type of nonprofit, called a Community Housing Development Organization (CHDO). Of this set-aside, ten percent may be allocated for project specific pre-development costs.
In 1999, Charities Housing began discussions with staff regarding the development of an affordable senior housing project (formerly known as Lytton Gardens) on county-owned land. Staff informed the CHDO that the City could fund such a project with HOME funds.
On May 4, 1999,) the City’s Annual Action Plan was approved by City Council (RTC 99-175). The Action Plan provided HOME funds to CHDOs to increase housing for low-income families, seniors, and the disabled through new construction and acquisition. Specifically, the Action Plan indicated that new construction of senior housing on county owned land was anticipated and that Charities Housing was named as the proposed developer using HOME funds.
Timeframes for committing and expending HOME monies are very short. Housing and Urban Development (HUD) regulations require the City to identify and designate CHDOs, and to reserve monies for the CHDOs’ use within 24 months from funding commitment. At the end of the five-year period, all HOME funds are required to be expended.
In 2001, the City reserved $281,774 in CHDO HOME funds for Charities for project-related development costs for the anticipated development of the Fair Oaks project. A maximum of $28,177 of these reserved funds may be provided to Charities for a project-specific pre-development loan. According to HUD regulations, this loan is forgivable if the project does not go forward. Eligible costs are limited to: initial feasibility studies; consulting fees; architect, legal, engineer, development team fees; and title clearance costs.
In 1991, representatives from both the City and Lytton Oaks (the previous developer) approached the County of Santa Clara to determine if a senior-housing complex could be developed on a vacant parcel located at the Fair Oaks site, at Fair Oaks and Garland near El Camino, in conjunction with an expanded County medical clinic. The clinic occupies one of the parcels and the vacant parcel is owned by the County Parks and Recreation Department. The parcel had been identified as surplus property and will follow procedures in the County’s real estate disposition process. If this process were to run its course, the property would be offered, giving purchase or lease option first to other County departments, then other government entities, then to non-profit organizations, then the public. Rather then attempting to gain site control through this competitive process, it is anticipated that the City may act as intermediary to help Charities Housing purchase (or lease) the property to develop the housing project.
The original scope of the project was to develop the site into affordable senior housing and to replace the 30-year-old clinic building with a similar sized facility more responsive to the growing needs of the County. Over the past five years, Charities Housing has focused its efforts to develop the vacant parcel, including studying various options in acquiring the rights from the County to develop housing. The County, during the last two-three years, began to place great emphasis on the development of a larger, more expansive clinic. The project remained pending until 2002. The two unresolved issues were the existing Right of Way (ROW) through the site and its impact on development and the lack of clarity by the County in assessing the size of the clinic and the disposition of County-owned land.
On September 9, 2003, the City sent a letter to the County supporting the on-going efforts by Charities Housing to develop affordable senior housing at the Fair Oaks site. The County Board of Supervisors approved a feasibility study to include housing at the site. However, the County focus has clearly shifted to the expansion of the clinic as their primary concern.
The County continues to work with City staff on these issues. Specifically, the County remains challenged with the ROW that runs through the site. Staff anticipates that the County will submit detailed information to Council with a site plan in conjunction with a request that the City vacate a portion of the ROW. This will allow the County to maximize the number of parking spaces on the site for the clinic expansion. The construction of a county building on county land severely limits the ability to regulate the project. Staff has discussed with County staff the need for the County to outreach to the community and to obtain public participation, prior to a request for approval by Council to vacate a right of way on the site. The concern is that the community may become aware of the development only when construction begins on the 41,000-sq. ft. Clinic building. Public Works Engineering expressed concerns about access and other issues related to the Clinic.
The County has not, as yet, made a formal commitment to housing at the site, and is going forward with the environmental review without including the proposed housing. The County has decided to proceed with the design of the clinic project with the intent of considering the development of the housing later.
In order for the proposed housing to be developed, the site plan of the clinic should not preclude the location of housing at the site. The current site plan proposed by the non-profit would construct housing above the ground level, so that clinic parking spaces are not impacted.
The City, Charities and the County continue to collaborate and maintain open dialogue on housing and other project site issues. County General Services staff and their architects have discussed conceptual site plans for the site and continue to meet and discuss the project with City staff from Planning, Transportation and Traffic, Fire, Housing and Engineering.
Housing and Community Revitalization Sub-Element:
POLICY E.2.g: Acquire land and assist in development/redevelopment of housing through partnerships with regional agencies, nonprofit housing developers and private sector developers.
POLICY F.4: Assist new housing development and housing support services for the elderly.
POLICY F.4.A: Provide City resources and non-general fund monetary assistance to nonprofit developers for new senior housing projects.
Charities Housing has continued to act and demonstrate to the City its commitment to pursue the development of this site for affordable senior housing.
The County required a Master Plan study of the Fair Oaks site to determine the feasibility of accommodating both replacement health center and an affordable senior housing complex. This study was jointly funded by the County and Charities Housing and completed in April of 2002. Charities contributed $10,000 to the County towards the cost of consultant services. In addition, Charities has incurred legal costs in excess of $8,400, initial traffic assessment costs of $1,000, and architectural design costs of $5,000. Charities has invested five years of staff time towards the realization of the development of this site.
Charities is requesting a pre-development loan to reimburse pre-development costs incurred and some additional anticipated costs. Staff recommends that Council consider approval of a predevelopment loan to Charities Housing of $28,177 to cover project expenses related to pre-development costs associated with the development of senior housing at the Fair Oaks site. As outlined in this report, the process for the development at this site has been, thus far, very long and complex and it is still underway. Funding of the pre-development loan will provide Charities with additional resources to continue to work with the County on the development of housing at the site. Funding of the pre-development loan for costs related to the development of housing will also demonstrate to the County the City’s continued hope that this project will include the development of affordable senior housing.
This project presents a unique opportunity to locate senior housing at a site with a health center available to serve the needs of those residents, within a reasonable proximity to services and within a half mile of the Senior Center. The creative option of utilizing County owned land to build senior housing by using the air rights above parking for the clinic would be a demonstration of the County’s effort in addressing the affordable housing issue while also collaborating with the City in meeting Sunnyvale’s affordable housing needs.
No fiscal impact will result from the approval of a pre-development loan. The loan will be funded from the HOME project funds. The interest rate will be at 3% simple interest, payment will be deferred, however repayment of the loan will be due when the permanent financing for the project is secured. The pre-development loan is unsecured.
Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.
1. Approve a pre-development loan of $28,177 to Charities Housing for incurred costs associated with the pre-development of an affordable senior housing project.
2. Do not approve a pre-development loan of $28,177 to Charities Housing.
Staff recommends Alternative 1
Prepared by:
Katrina L. Ardina
Housing Programs Analyst
Reviewed by:
Annabel Yurutucu
Housing Officer
Reviewed by:
Robert Paternoster
Director, Community Development
Approved by:
Amy Chan
City Manager
Attachments
A. Reservation of HOME and CHDO set-aside funds letter (.pdf format)
B. City of Sunnyvale support letter to the County Finance and Government Operation Committee (.pdf format)
C. Charities Housing Request for Reimbursement Letter. (.pdf format)