Report Prepared by: Leah Brown, Management Analyst, Development Services
Title
SUBJECT: Approval of Funds of $200,000 from Fund 2513 - Low Moderate-Income Housing to Complete the 73 South R Street - CC915 Merced, Inc. Affordable Container Home Project
REPORT IN BRIEF
Considers approving funds of $200,000 from Fund 2513 - Low Moderate-Income Housing to complete the 73 South R Street - CC915 Merced, Inc. affordable container home project.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving funds of $200,000 from Fund 2513-Low Moderate-Income Housing, to CC915 Merced, Inc. towards a 100% affordable housing project at 73 South R Street and issuing them a letter of commitment; and,
B. Authorizing the drafting of funding contribution agreements and covenants for Council approval at a later meeting.
Body
ALTERNATIVES
1. Approve, as recommended by Staff; or,
2. Approve, subject to conditions other than recommended by Staff (identify specific findings and/or conditions amended to be addressed in the motion); or,
3. Deny; or,
4. Continue to a future meeting (date and time to be specified in the motion).
AUTHORITY
Charter of the City of Merced, Section 200.
CITY COUNCIL PRIORITIES
Fiscal Year 2024-2025 Adopted Goals and Priorities, Housing & Homelessness.
DISCUSSION
In April 2021, the City of Merced issued a Request for Proposals (RFP) to solicit interest from perspective affordable housing development partners for several properties held by the City of Merced as the Housing Successor Agency. CC915 Merced, Inc., then Custom Containers 915, responded to the proposal for the location at 73 S. R St. with the intent of utilizing container units to create permanent supportive housing units. The proposal also included a partnership with the Merced Rescue Mission, a local nonprofit service provider, that will assist in site management and other services.
The City Council supported the project and provided authority to enter into an Exclusive Negotiation Agreement (ENA).
On January 18, 2022, City Council approved a joint Homekey grant application between CC915 Merced, Inc. and the City of Merced. This included the adoption of Resolution 2022-03 approving the execution of a standard agreement with the State Department of Housing and Community Development (HCD) if selected for the Homekey grant.
The project consists of container units, each are 40 feet by 8 feet, which are split to allow for two studio units in each container. The Homekey grant funds projects based on doors, each unit has multiple doors. They are clustered into multiple units similar in scale to a house but will accommodate four to six residents in each cluster. The site will provide room for approximately 20 doors. Additionally, one unit will provide for onsite management and other common facilities to provide services and support other community activities. It will open ready for permanent supportive services. The project is deed restricted to residents that are at 30% or below the average median income (AMI); it will serve homeless veterans, and those chronically homeless. See attached photos.
In addition to the physical development, Homekey also supports the operations of the facility and requires a service plan as part of the application. The co-applicant, CC915 Merced, Inc. has been working with other partners to provide services under the plan. Those include Merced County Rescue Mission, as well as the Veteran’s Administration, with several units reserved with VASH Vouchers for veterans.
Although the Council provided project support through the ENA it had not considered other financial support for the project. The land itself was considered in kind support and had a vacant appraised value of $110,000. The Homekey funding is the only financial support to date for this project.
In March 2022, HCD announced that the City of Merced and CC915 Merced, Inc. was awarded $4,420,000 of Homekey Program grant money. The HCD Standard Agreement was fully executed on April 21, 2022.
The City executed the Disposition and Development agreements for the transfer of the property to CC915 Merced, Inc. on August 18, 2022. Site work began in order to prepare the land and underground utilities. The containers were acquired, and preparations began in Texas at the offsite affiliated company operated by Mr. John Glavin of CC915 Merced, Inc.
Various milestones required of the Homekey grant were reached and submitted to HCD, including their Nondiscrimination policy and Supportive Services Plan submitted in October 2022.
In January 2023, the City experienced an exceptionally wet winter, significant flooding occurred, and a State of Emergency was declared. This caused a significant pause in site work until the ground could dry out enough to continue. HCD allowed grant deadline extensions to accommodate the effects of the flooding.
On July 28, 2023, the founder and President of CC915, Merced Inc., Mr. John Glavin, passed away unexpectedly. This led to a temporary pause in the project’s leadership and decision-making process. Mr. Glavin was instrumental in championing the project and leading his team, his presence was missed. Within months, the project was resumed with board member and now-President, Christine Ettore, as lead. Ms. Ettore was the initial grant writer and had been a key, behind-the-scenes, lead in the project.
Some issues were discovered that caused further delay and increased expenses, such as lack of response from their architectural partners, which lead to various iterations of plans that had to go through repeated approval processes. The final plan set was completed by the architect in October 2023. The containers were not able to start being manufactured for living units until then; however, during this time, site work continued.
ICC-NTA is the company, a member of the International Code Council, that offers off-site construction services including plan review, inspection, and certification of modular home systems. This is the certifying company that needed to approve the containers in Texas before they could be completed and shipped. The project experienced delays due to ICC-NTA’s lack of communication, ability to schedule inspections, and timely approval of the plans and containers in Texas. ICC-NTA inspected and gave its stamp of approval in April 2024. Once all containers were approved, shipping was scheduled, the earliest this could be arranged was late summer, 2024. The containers arrived in partial shipments at two-week intervals to accommodate the necessary site work and limited space on the parcel. All containers were on site and in place by September 2024.
Once on site, there have been a few change orders from the general contractor needed to complete the construction of the exterior and interior finishes. Some containers were damaged during the shipment from Texas, that added to the cost. These repairs, change orders, and delays have led to additional costs.
To complete the project, the developer has requested $200,000 contribution from the City, in addition to some outside financing that they are pursuing. Currently the project is over 90% complete and they have an expected completion of early Spring 2025.
IMPACT ON CITY RESOURCES
The $200,000 requested is proposed to come from Fund 2513 - Low Moderate-Income Housing. This fund has a balance of approximately $1.8 Million after direct and indirect administration for the Housing Division. Expenditures from this fund include grounds upkeep and maintenance of Housing Successor owned parcels, the approved contract expenses for RSG, Inc. and Self-Help Enterprises, as well as indirect administrative service charges.
Appropriation of the $200,000 will be needed and will come back to Council with the Contribution Agreement.
ATTACHMENTS
1. Project Photos