To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: Approval of $704,554 CDBG Loan and $567,412 HOPWA Loan for Alvarez Court Apartments, Pinole
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
APPROVE a loan of (i) Community Development Block Grant (CDBG) funds in the amount of $704,554, and (ii) and a loan of Housing Opportunities for Persons with HIV/AIDS (HOPWA) funds in the amount of $567,412 to Alvarez Court, Inc., a California nonprofit public benefit corporation (Developer), for use in the rehabilitation of the Alvarez Court Apartments Project located at 760 Alvarez Court in the City of Pinole.
AUTHORIZE the Conservation and Development Director, or designee, to execute loan documents between the County and Developer to evidence the $704,554 loan of CDBG funds and the loan of $567,412 of HOPWA funds into an existing loan agreement between the County and Developer, including a loan agreement, deed of trust, and regulatory agreement, all subject to approval by the County Administrator and approval as to form by County Counsel.
FISCAL IMPACT:
No General Fund Impact. CDBG funds are provided to the County on a formula allocation basis through the U.S Department of Housing and Urban Development (HUD). CDBG CFDA # 14-218. HOPWA funds are provided on a formula allocation basis through the City of Oakland, as HOPWA Grantee. HOPWA CFDA #14.241.
BACKGROUND:
On May 9, 2023, the Board of Supervisors approved an allocation of $704,554 in CDBG funds and $567,412 in HOPWA funds to Resources for Community Development (RCD) for the rehabilitation of Alvarez Court Apartments, a 19-unit affordable housing rental property located at 760 Alvarez Court in the City of Pinole. The project was initially financed as a small HUD Section 811 Supportive Housing for Persons with Disabilities project to subsidize rental housing with the availability of supportive services for very low- and extremely low-income adults with disabilities.
The CDBG/HOPWA loan is being made to finance the predevelopment and construction costs associated with the rehabilitation activities for Alvarez Court Apartments and is intended to maintain the supply of affordable rental housing in the County. With this CDBG/HOPWA loan, the County will designate 18 units as CDBG-assisted and 10 as HOPWA-assisted for a total of 18 County-assisted units for an additional 55-year term.
The CDBG/HOPWA funds will be provided by the County in the form of a 55-year loan. The Program Guidelines for Affordable Housing detail CDBG rates accrue 3% simple interest with annual payments due from surplus cash or residual receipts, while HOPWA has different program requirements, and that loan will bear no interest with payments fully deferred for 55 years. Affordability and use restrictions are incorporated into the CDBG/HOPWA loan documents.
The building was constructed 20 years ago and has capital needs that cannot be addressed with available resources. The scope of the approved rehabilitation includes repairs to the existing walkways, balconies, and decks, dry rot repair and water-proofing, roof replacement, exterior painting, security camera upgrades, accessibility upgrades to ensure public areas are accessible, and unit upgrades to kitchen cabinets, counters, appliances, flooring/carpet, and bathroom vanities.
The recommended action includes authorization for the Director of the Department of Conservation and Development, or designee, to execute any and all documents and to take any and all actions necessary to implement the activities authorized under the Loan Documents, including execution of loan amendments or modifications for the purposes of agreeing to reasonable extensions of time deadlines.
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 CDBG/HOPWA funds may not be fully secured through the value of the property. However, the CDBG/HOPWA 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 structures its investments as loans rather than grants in order to maintain involvement in the financial team in the event the project experiences any serious issues over the 55-year term.
National Environmental Policy Act (NEPA): HOPWA projects are subject to NEPA and 24 CFR Part 58 review. The NEPA review for this project has been completed and the project is exempt.
CONSEQUENCE OF NEGATIVE ACTION:
HUD requires timely expenditure of CDBG funds, precipitating this request. If the recommendation is not approved, the much-needed rehabilitation to the residential building will be delayed or will not occur, which would severely impact the preservation and habitability of affordable housing units.