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Report regarding a resolution authorizing the City of South San Francisco’s application for $5,000,000 from the State of California’s Local Housing Trust Fund Program and a resolution approving funding commitment letters for Rotary Gardens and 1051 Mission Road. (Nell Selander, Economic & Community Development Director)
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RECOMMENDATION
Recommendation
Staff recommends City Council adopt a resolution authorizing the City of South San Francisco’s application for $5,000,000 from the State of California’s Local Housing Trust Fund Program and a resolution approving funding commitment letters for Rotary Gardens and 1051 Mission Road.
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BACKGROUND/DISCUSSION
The Local Housing Trust Fund (LHTF) Program is a dollar-for-dollar matching program administered by the State of California’s Department of Housing and Community Development (HCD) dedicated to funding affordable rental housing development and preservation. It is funded by the Veterans and Affordable Housing Bond Act (Proposition 1), a $4 billion bond approved by voters in 2018. The 2024 Notice of Funding Availability (NOFA) for the LHTF Program makes available $53 million for this statewide, competitive grant program. The maximum possible award is $5 million.
As a dollar-for-dollar matching grant, the LHTF Program requires the applicant, in this case the City, commit local housing trust fund dollars in advance of its application for a specific purpose. The purpose can be something as broad as the construction of new affordable rental housing serving predominantly households earning less than 30% of the area median income (see Attachment 1 for income limits). However, the City receives additional tie breaker points for pre-committing these matching funds to a specific project, not just a broad category of projects.
Additionally, the matching funds (or assets, such as land) must be held by the City’s housing trust fund, with revenue generated from non-residential sources. In this case, the City would be dedicating its Commercial Linkage Fee-funded housing trust fund, or Fund 823. Additionally, the LHTF Program allows the City to apply to match its Permanent Local Housing Allocation (PLHA) Program funds, also administered by the State HCD.
Previous Awards
The City received an award of $2.4 million in LHTF funds in the 2021 NOFA cycle. These funds were pre-committed to Eden Housing’s 201 Baden project, which has submitted an entitlement application for 68 senior, affordable units that is currently in review. The City is in compliance with the administration of these 2021 LHTF funds, having had its most recent annual report accepted by State HCD.
2024 NOFA Potential Projects
To best leverage the grant and be as competitive as possible, the City should apply for matching funds for projects that have already received a commitment of funding from either Fund 823 or PLHA. In this case, that would make the following projects potentially eligible for matching through the LHTF Program.
1051 Mission Road, BRIDGE Housing
1051 Mission Road is the 158-unit affordable housing component of the larger PUC Site development project located just north of the City’s new Library | Parks & Recreation Center. The City committed $2 million to the project for predevelopment, which has been spent down on entitlements, preparation of a building permit application, and applications for myriad funding sources. BRIDGE Housing has pursued the following funding sources to mixed success: County funds ($9.5 million awarded), State Infill Infrastructure Grant funds ($29 million awarded), and State Affordable Housing Sustainable Communities funds (not awarded in 2023 and appealing 2024 decision). To complete the funding stack for this project, BRIDGE will need to apply for federal low-income housing tax credits and potentially State tax credits.
While the project was approved in 2019 and the land transferred to BRIDGE in 2022, the project area has transitioned from a low-resource area as defined by the State to a high-resource area making it more difficult to secure scarce funding resources. Additionally, the project has substantial infrastructure design and construction expenses, far in excess of smaller infill projects, that continue to require funding to advance. While the project received an Infill Infrastructure Grant award, those funds cannot be drawn upon until the financing has been completed for the affordable project. For these reasons, this project is in need of additional pre-development funds and matching the City’s previous $2 million commitment with these LHTF funds could help advance the project’s infrastructure design and construction so that when the project is fully financed it is not further delayed by outstanding infrastructure work.
Rotary Gardens Senior Project, Rotary Club & Beacon Development
In April 2024 City Council approved a $556,789 loan to the Rotary Club and Beacon Development for the predevelopment and/or construction of the Rotary Gardens Senior Project proposed at 500 Linden Avenue. The 2024 LHTF NOFA allows for matching a local jurisdiction’s PLHA award. Since the City has programmed the first two years of its five-year PLHA award, the City should seek matching of these funds through LHTF. Rotary and Beacon have applied for approval of this project and are in the process of seeking their financing.
Grand Avenue Properties Acquisition
In April 2024, the City acquired three properties on Grand Avenue for $6,850,000 using Fund 823 - the City’s housing trust fund funded by Commercial Linkage Fees. While no decision has been made regarding the properties’ reuse or redevelopment, funding could be used to help rehabilitate some of the residential units into affordable rental housing. This acquisition would be considered the match to the LHTF funds being sought. Staff would recommend not pre-committing this portion of the LHTF award to this project in case Council chooses a new approach for the Grand Avenue properties, such as reimbursing Fund 823 and instead using the properties for a purpose other than affordable housing. While this may reduce the number of tie breaker points the City might earn, it provides flexibility in programming the LHTF funds, if awarded.
Administrative Allowance
The LHTF Program allows for 5% of awarded (LHTF) and matching (City) funds to be used for administrative expenses. Staff recommends seeking this $250,000 in funding to offset staff and City Attorney costs in administering the grants and the subawards to BRIDGE Housing and the Rotary/Beacon team.
FISCAL IMPACT
The City intends to apply for $5,000,000 from the State’s competitive LHTF Program. This includes 5% in administrative costs to offset staff and City Attorney costs for funded projects. The City is required to provide matching funds for the application and is using PLHA funds from the State, a $2 million loan already provided to and spent by BRIDGE Housing, and the $6,850,000 recently spent from Fund 823 to acquire 226-246 Grand Avenue. Therefore there is no new impact to the City’s General Fund or Housing Funds associated with adopting the proposed resolutions.
CONCLUSION
Staff recommends City Council adopt a resolution authorizing the City of South San Francisco’s application for $5,000,000 from the State’s LHTF Program and a resolution approving funding commitment letters for Rotary Gardens and 1051 Mission Road.
Attachments:
1. 2024 San Mateo County Income Limits