To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: APPROVE Modifications to Contingencies related to an award of HOME Funds for the 699 YVR Housing Project in Walnut Creek
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
APPROVE modifications to contingencies related to an award of FY 2022/23 HOME Investment Partnerships Program funds for the 699 YVR Housing Project located at 699 Ygnacio Valley Road, Walnut Creek, as recommended by the Conservation and Development Director.
FISCAL IMPACT:
No General Fund impact. HOME funds are provided to the County on a formula allocation basis through the U.S. Department of Housing and Urban Development. CFDA #14.239.
BACKGROUND:
699 YVR Housing
On June 21, 2022, the Board of Supervisors awarded Resources for Community Development (RCD) $1,870,000 in Fiscal Year 2022/2023 HOME funds for the 699 YVR Housing project located in Walnut Creek, CA. The property will have 92 low-income apartments including 30 units set aside for people experiencing homelessness and severe mental illness with onsite and offsite supportive services.
The allocation of HOME funds was originally contingent upon the following:
1. All other financing commitments secured by December 31, 2023.
2. HOME funds committed, as evidenced by an executed loan, by August 31, 2024. HOME funds will be recaptured by January 2024 if significant progress is not being made to meet the August 31, 2024, HOME commitment deadline.
3. Confirmation that the project's financials are in compliance with the County's Affordable Housing Program Guidelines.
In total, RCD has submitted eight State of California funding applications. Due to limited funding available compared to the large number of projects in the pipeline in the Bay Area region and statewide, 699 YVR has had limited success in securing enough financing commitments to meet the approved funding contingencies above.
The HOME program's federal regulations require that annual HOME grants to localities are committed within two years, construction begins within three years, and HOME funds are fully expended within five years. Therefore, timeliness is a critical consideration for an award of HOME funds. HOME Federal Regulations include a definition of commitment (24 CFR 92.2):
“Commitment means: (1) The participating jurisdiction has executed a legally binding written agreement (that includes the date of the signature of each person signing the agreement) with a … contractor to use a specific amount of HOME funds to produce affordable housing … (2) Commit to a specific local project means: (i) If the project consists of construction … the participating jurisdiction … and project owner have executed a written legally binding agreement under which HOME assistance will be provided to the owner for an identifiable project for which all necessary financing has been secured, a budget and schedule have been established, and underwriting has been completed and under which construction is scheduled to start within 12 months of the agreement date…”
The 2022 project contingency recommendations were prepared to align with the above requirements. During the COVID-19 pandemic HUD waived the 24-month commitment deadline through December 31, 2023, for all HOME funds allocated from FY 2018 through FY 2022.
Modified Contingencies
RCD has requested modifications to the HOME contingencies as additional financing commitments are sought to fill the financing gap and be eligible for an award of tax credits in 2024. Staff recommends the following revised contingencies which are consistent with the timeline waiver approved by HUD:
1. All other financing commitments are secured by December 31, 2024.
2. HOME funds committed, as evidenced by an executed loan, by August 31, 2025. HOME funds will be recaptured by January 1, 2025, if significant progress is not being made to meet the August 31, 2025, HOME commitment deadline.
3. Confirmation that the project's financials are in compliance with the County's Affordable Housing Program Guidelines.
Recommendations related to the HOME program funds are typically made by the Affordable Housing Finance Committee (AHFC) and forwarded to the Board for approval. The AHFC usually meets once or twice each year and as needed to review other off-cycle items. A meeting was attempted to be held in February 2024 to consider the modifications to the respective project contingencies. Unfortunately, due to lack of quorum, the meeting was unable to be held. Due to the timing needs of the proposed projects as well as the expenditure timelines associated with the CDBG program, staff is bringing its recommendation directly to the Board.
CONSEQUENCE OF NEGATIVE ACTION:
If the modifications to the contingencies are not approved, it would jeopardize the award of HOME funds to the 699 YVR project and possibly delay or prevent the development of the project. Furthermore, staff would need to find an additional viable affordable housing project to award the HOME funds that could meet the same contingencies.