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Report regarding adoption of a resolution conditionally committing $2,366,828 from the Commercial Linkage Fee Fund in support of the proposed Rotary Gardens affordable housing development project, located at 500 and 522 Linden and authorizing staff to negotiate a loan effectuating the commitment. (Mike Noce, Housing Manager)
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RECOMMENDATION
Recommendation
Staff recommends that the City Council receive a report regarding a request from Rotary Plaza, Inc. for a proposed affordable housing development at 500 and 522 Linden and consider adoption of a resolution conditionally committing $2,366,828 from the Commercial Linkage Fee Fund to bring the total funding support to $4,000,000, directing staff to negotiate loan agreements effectuating this commitment, and return to City Council for final budgetary appropriations and loan approval.
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BACKGROUND
In Summer 2023, the Rotary Club informed the City of a potential affordable housing project at the Liberty Bank site located at 500 and 522 Linden. The Rotary Club and its development partner, Beacon Development, have collaborated closely with the City to advance a two-phase development project, known as Rotary Gardens. The first phase includes an 80-unit senior affordable housing building, and the second phase consists of a 64-unit family building. Both buildings are part of the same entitlement process to ensure a cohesive vision and management approach. Each building is 6 stories and approximately 75 feet in height. 52 parking spaces are proposed at 500 Linden Avenue, and 61 parking spaces are proposed at 522 Linden Avenue.
On December 13, 2023, the City committed $1,633,172 to the design and pre-entitlement preparations of Rotary Gardens. There were two sources used by the City to provide the funding. A portion of the funding, $556,789, came from the City’s allocation of the State-funded Permanent Local Housing Allocation (PLHA) fund. The majority of funding, $1,076,383, was approved from the City’s Fund 241, which holds developer in-lieu fees that must be spent down within four years of receipt when the City holds a surplus of over $1 million. Providing funding to affordable housing projects early in their predevelopment journey shows that the City is committed to the success of the project and provides early low-cost capital that the development team can leverage to secure additional funding for the project.
The project is subject to a streamlined ministerial review process under State Assembly Bill AB 2011 and is eligible for concessions and waivers to the City’s development standards through State Density Bonus law. Ministerial review means that it is not subject to discretionary review and thus may not be reviewed and approved by the Planning Commission and/or City Council, but rather must be reviewed and approved at the staff level. According to State Law, 100% affordable housing development projects must meet all requirements under Government Code Sections 65912.111, 65912.112, 65912.113, and the labor standards under Sections 65912.130 - 65912.131, in order to be eligible for ministerial approval under AB 2011. The City has determined that the Project complies with all such criteria and is eligible for AB 2011 ministerial review. Planning Division staff are in the process of issuing a ministerial approval and compliance letter with conditions of approval. Staff anticipate issuing the compliance letter in July 2025.
Available Affordable Housing Funding
The City has three main affordable housing funds: the Housing Trust Fund (Fund 205), the Low/Mod-Income Housing Asset Fund also known as the Housing Successor Fund (Fund 241), and the Commercial Linkage Fee (Fund 823). The City also receives a formula entitlement grant from the State known as the Permanent Local Housing Allocation or PLHA, which has already been earmarked and is not listed below. The unencumbered balances of these funds, as of June 2025, are listed in Table 1.
Table 1: Affordable Housing Funds
|
Fund |
Balance |
|
Housing Trust Fund (Fund 205) |
$200,000 |
|
Low/Mod-Income Housing Asset Fund (Fund 241) |
$1,000,000 |
|
Commercial Linkage Fee Fund (Fund 823) |
$14,000,000 |
|
TOTAL HOUSING FUNDS |
$15,200,000 |
DISCUSSION
Rotary and Beacon are preparing to apply for additional funding through a Notice of Funding Availability (NOFA) for the Affordable Housing Fund (AHF) from the San Mateo County Department of Housing in early July 2025, which is typically a competitive funding source. A strong contribution of local City funds allows the project team to better compete against other projects that might be in a similar phase of development. Affordable housing developers are often layering their financing proforma with funding from various sources, and securing local funds is an expected first step that allows the developer to leverage County and State dollars.
The roughly $1.6 million in funding already committed by the City has benefited the Rotary Gardens project by allowing the project team to draw funds and accelerate the design and requirements for entitlement of the project. Rotary and Beacon have continued to act in good faith and are expected to complete entitlements in July 2025. The project’s location in downtown will support future residents with proximity to public transit and resources, such as schools, grocery stores, etc. The inclusion of family and senior housing will provide much-needed affordable units to a range of households throughout the South San Francisco community.
Rotary Gardens will target households in extremely low and very low income categories, up to 60% of the Area Median Income for San Mateo County. With the addition of the City’s Municipal Code Chapter 8.100 Local Preferences and Requirements passed in March 2025, there is a clear goal to deliver priority preference to households that live or work within the City. The local preference helps mitigate the potential displacement impacts being faced by many community members and provides an opportunity for people working within the city to live near their workplaces, mitigating the negative environmental and traffic impacts of long commutes.
A total City commitment of $4 million will show considerable local support for the project, which is a requested amount that Rotary and Beacon shared early on in discussions with the City to improve their competitiveness for additional funding. The City expects to receive a minimum of roughly $4.5 million into the Commercial Linkage Fee Fund (Fund 823) within Fiscal Years 25-26 and 26-27, which would more than offset the current increase in funding to the Rotary Gardens project. As stated previously, there is existing funding committed by the City. $556,789 is from the City’s Permanent Local Housing Allocation (PLHA) fund, and $1,076,383 is from the City’s Fund 241 for predevelopment. With City Council approval, the remaining commitment of $2,366,828 towards the project will be made once the following conditions have been fulfilled:
1. Local land use and entitlement approvals;
2. Documentation and award of County AHF Funding; and
3. City of South San Francisco’s receipt of City linkage fees.
The actions associated with this staff report would commit funds, but staff would still need to negotiate loan agreements with Rotary and Beacon and return to Council for final approval and formal appropriation of the funds. The above-listed conditions align with the development timeline for the project and allow City Council to confirm the City is well-positioned to provide this support. Today’s actions are the first in a two-step process to make the City's commitment effective.
FISCAL IMPACT
There is no fiscal impact to the City’s General Fund associated with approving the proposed resolutions. Approval of the resolutions will serve to conditionally approve unencumbered affordable housing funds from the Commercial Linkage Fee Fund (Fund 823), not to exceed $2,366,828.
CONCLUSION
Staff recommends that the City Council receive a report regarding a request from Rotary Plaza, Inc. for a proposed affordable housing development at 500 and 522 Linden and consider adoption of a resolution conditionally committing $2,366,828 from the Commercial Linkage Fee Fund to bring the total funding support to $4,000,000, directing staff to negotiate loan agreements effectuating this commitment, and return to Council for final budgetary appropriations and loan approval.