To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: Approval of $4,382,047 HOME-ARP, $1,421,000 Measure X Housing, and $1,000,000 PLHA Loan(s) and Related Documents for the Legacy Court Project in Richmond
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
1. APPROVE a total loan amount of $6,803,047 to Legacy Court L.P., a California Limited Partnership, for the construction of an affordable rental housing development known as Legacy Court Apartments located on scattered sites at Fred Jackson Way between Willard Avenue and Duboce Avenue in the City of Richmond, as follows:
a. HOME Investment Partnership Program-American Rescue Plan (HOME-ARP) funds in the amount of $4,382,047; and
b. Measure X Housing funds in the amount of $1,421,000; and
c. Permanent Local Housing Allocation (PLHA) funds in the amount of $1,000,000
2. AUTHORIZE the Director of Conservation and Development, or designee, to execute legal documents to affect the HOME-ARP, Measure X and PLHA loan(s);
3. FIND, as the responsible agency, that on the basis of the whole record before the County (including the California Environmental Quality Act (CEQA)) review prepared by the City of Richmond, as the lead agency, that the development is categorically exempt under CEQA Guidelines Section 15194; and DIRECT the Conservation and Development Director, or designee, to file a Notice of Exemption for Legacy Court Apartments with the County Clerk; and pay any required fee for the filing.
FISCAL IMPACT:
HOME-ARP funds were provided to the County on a formula allocation basis through the U.S. Department of Housing and Urban Development (HUD) as part of the American Rescue Plan Act of 2021 (CFDA #14.239 HOME). PLHA funds are provided to the County as a grant on a formula application basis through the State’s Department of Housing and Community Development (HCD). Measure X Housing funds are part of the County General fund and derive from a countywide, 20-year, ½ cent sales tax approved by Contra Costa County voters on November 3, 2020.
BACKGROUND:
Project Description
The Legacy Court Apartments development site is a scattered site project situated across multiple vacant sites, all of which are located within one block from each other on Fred Jackson Way between Willard Avenue and Duboce Avenue in the incorporated portion of North Richmond. The development will create more affordable housing with 43 new rental units planned. The proposed development will serve 42 low-income households earning 30-60 percent of the area’s median income.
The project will set aside thirteen units to support residents who are experiencing homelessness, at risk of experiencing homelessness and residents in need of mental health services. Contra Costa Behavioral Health Services will provide additional support services for these units, including case management, peer support, mental health care, substance use services, and benefits counseling and advocacy.
Of the 42 total units, there are 16 units designated as County-assisted units as follows:
|
|
Homeless Units |
Extremely Low Income Units |
Very Low Income Units |
|
One Bedroom |
8 (HOME-ARP Assisted) |
3 (Measure X-Assisted) 1 (PLHA-Assisted) |
3 (PLHA-Assisted) |
|
Three Bedroom |
|
1 (PLHA-Assisted) |
|
|
Total |
8 |
5 |
3 |
The project will include a mix of one-bedroom, two-bedroom, and three-bedroom units. One of the units will be set aside for a live-in community manager. On-site project amenities for residents will include a community room, community kitchen, laundry rooms, computer lab with high-speed internet, and bike parking. The common area amenities of the development with facilitate the socialization and sense of community that is important to successful developments and will serve as spaces for resident gatherings, community meetings, social events, programming for resident services such as exercise, health and wellness programs, and art, educational, and cultural activities. Legacy Court is designed as all-electric and will incorporate solar panels, energy-efficient appliances, and green elements maximized to reduce the carbon footprint of the project.
Funding Sources
HOME-ARP
The American Rescue Plan Act of 2021 appropriated $5 billion to assist individuals or households who are homeless, at risk of homelessness, and other vulnerable populations, by providing rental housing, rental assistance, supportive services, and non-congregate shelter, to reduce homelessness and increase housing stability. The funds were allocated by formula to jurisdictions that qualified for funding through the HOME Investment Partnership Program (HOME Program) from HUD. On May 9, 2023, the Board of Supervisors (Board) approved an award of $4,382,047 in HOME-ARP funds to Community Housing Development Corporation of North Richmond (CHDC) and Eden Development, Inc. (Eden) for the Legacy Court Apartments project.
Measure X Housing
Measure X is a countywide 20-year 1/2 cent sales tax approved by Contra Costa voters on November 3, 2020. The ballot measure language stated the intent of Measure X is "to keep Contra Costa's regional hospital open and staffed; fund community health centers, provide timely fire and emergency response; support crucial safety-net services; invest in early childhood services; protect vulnerable populations; and for other essential County services."
On November 16, 2021, the County Board of Supervisors approved the allocation of Measure X funding to establish a new funding source for housing-related activities, now termed the Measure X Housing Fund (MX Housing Fund). The Board of Supervisors approved and committed $10 million of Measure X funds for Year One and $12 million on an annual basis thereafter for the MX Housing Fund. On May 9, 2023, the Board approved an award of $1,421,000 in Measure X Housing funds to CHDC and Eden for the construction of the Legacy Court Apartments project.
PLHA
PLHA is a State HCD program with entitlement and competitive components intended to fund more affordable housing. The State designated Contra Costa County as the administrator of the entitlement grant award for the Contra Costa "Urban County," which includes the unincorporated communities and all the cities except for Antioch, Pittsburg, Walnut Creek, and Concord, which have their own entitlements. On June 7, 2022, the Board approved an award of $1,000,000 in PLHA funds to CHDC and Eden for the Legacy Court project.
Loan Documents and Ownership Structure
CHDC and Eden have formed a limited partnership, Legacy Court L.P., to develop and own this project. The HOME-ARP/Measure X/PLHA funds will be provided by the County in the form of a 55-year residual receipts loan. The County loan will bear a three percent simple interest rate. There may be some loan repayments if the project has a surplus cash flow (surplus cash is also known as "residual receipts") during the operation of the development. Affordability and use restrictions are incorporated into the attached County loan documents. The County will have a HOME-ARP/Measure X/PLHA Regulatory Agreement with a 20-year HOME-ARP term of affordability, as well as a County Regulatory Agreement that will maintain affordability of the units following the expiration of the HOME-ARP term for a total term of 55 years. Additional non-County financing for the development includes a City of Richmond loan, a No Place Like Home loan, a sponsor loan/deferred developer fee, a private construction loan, and 9% tax credits.
Through this action, the Director of Conservation and Development, or designee, is authorized to execute subordination agreements and estoppels that are consistent with the subordination terms in the Loan Agreement. Due to the high construction costs and limited revenue from the restricted rents, the total amount of the financing provided to the project will likely exceed the value of the completed project. Even though the proposed equity investment from low-income housing tax credits is substantial compared to the amount of long-term debt, the partnership agreement will have numerous safeguards of the investor's equity. These safeguards essentially subordinate the County’s debt to the investor’s equity. Therefore, the County HOME-ARP, Measure X, and PLHA funds may not be fully secured through the value of the property. However, the HOME-ARP, Measure X, and PLHA program funds are granted, not loaned, to the County, so the County general fund will not have any exposure as a result of this loan. The County funds are dedicated to providing affordable housing options for low-income households and the same risk would be present in any comparable project. The County structures its investments as loans rather than grants to maintain involvement in the financial team in the event the project experiences any serious issues over the 55-year term.
Environmental Review
National Environmental Policy Act (NEPA): HOME-ARP projects are subject to NEPA and 24 CFR Part 58 environmental regulations. The NEPA review for this project is complete and the required mitigation actions are included in the loan agreement. The County, as a responsible agency under CEQA, concurs with the City of Richmond’s CEQA determination and will file the appropriate notice with the Recorder's Office.
CONSEQUENCE OF NEGATIVE ACTION:
Without the approval and execution of the HOME-ARP, Measure X, and PLHA County loan documents, the project will not be constructed. Legacy Court must close the transaction and begin construction by November 2024 or forgo the 9% tax credits upon which the project's financing depends.