Report Prepared by: Leah Brown, Management Analyst, Development Services
Title
SUBJECT: Adoption of a Resolution Approving a Grant Agreement in the Amount of $1,690,462 From Coronavirus Local Fiscal Recovery Funds as Established Under the American Rescue Plan Act, a Regulatory Agreement and Declaration of Restrictive Covenants, Notice of Affordability Restrictions and Agreement Containing Covenants with TwelveThirteen Homekey LP
REPORT IN BRIEF
Considers adopting a Resolution approving a Grant Agreement in the amount of $1,690,462 from Coronavirus Local Fiscal Recovery Funds as established under the American Rescue Plan Act, a Regulatory Agreement and Declaration of Restrictive Covenants, Notice of Affordability Restrictions and Agreement Containing Covenants with TwelveThirteen Homekey LP and setting terms of affordability.
RECOMMENDATION
City Council - Adopt a motion:
A. Adopting Resolution 2022-60, a Resolution of the City Council of the City of Merced, California, approving a Deed Restriction Covenant and Grant Agreement in the amount of $1,690,462 from the Coronavirus Local Fiscal Recovery Funds as established under the American Rescue Plan Act, approving a Regulatory Agreement and Declaration of Restrictive Covenants, dated to match the date of property acquisition, Notice of Affordability Restrictions on Transfer of Property, and Agreement Containing Covenants Affecting Real Property with TwelveThirteen Homekey LP; and,
B. Authorizing the City Manager or Deputy City Manager to execute any and all agreements and documents to fulfill the terms and conditions of these grant agreements, and any future documents that may be necessary for the project, subject to the agreements and/or documents being approved as to form by the City Attorney.
Body
ALTERNATIVES
1. Approve as recommended by staff; or,
2. Deny; or,
3. Refer to City Staff for reconsideration of specific items to be addressed in City Council motion; or,
4. Continue to a future City Council meeting (date and time to be specified in City Council motion).
AUTHORITY
Charter of the City of Merced, Section 200, et seq., California Government Code
CITY COUNCIL PRIORITIES
This action is consistent with the adopted FY 2022-2023 Goals and Priorities, and Pro-Housing Policies of the City of Merced.
DISCUSSION
Background
In September 2021, the California Department of Housing and Community Development (HCD) issued a Notice of Funding for projects under the Homekey Program. Homekey has provided opportunities for development of a broad range of housing types including, but not limited to, hotels, motels, single family homes, multifamily apartments, and manufactured housing and to convert commercial properties to Permanent or Interim Housing for the Target Population. The Target Population are individuals and families experiencing homelessness or who are At Risk of Homelessness and who are inherently impacted by or at increased risk for medical diseases or conditions due to the COVID-19 pandemic or other communicable diseases.
In December, the City Council approved Resolution 2021-109, authorizing the City to jointly apply for the Homekey grant with Up Holdings California, LLC. Up Holdings had previously responded to the City’s open Housing Partners Request for Qualifications (RFQ). The project proposed is for a motel conversion to permanent supportive housing. Up Holdings has partnered with RH Community Builders as the developer, operator, and services provider of supportive housing, they are now called TwelveThirteen Homekey LP (TwelveThirteen).
In March 2022, HCD announced that the City of Merced and TwelveThirteen were awarded $24,024,054.00 of Homekey Program grant money. The project aims to convert the motel at 1213 V Street to approximately 95 studio apartments. The studio units are reserved for homeless and chronically homeless with incomes at or below 30% of the Area Median Income (AMI) for Merced County. The reconfiguration will allow for the creation of office space for case management and other services, it also provides room for education, training, and recreation activities. The rehabbed building will also feature units for live-in staff to allow for around-the-clock support for residents.
In April 2022, Council agreed to accept and appropriate the Homekey funds. The City has begun to advance funds to TwelveThirteen, to purchase, develop, and remodel the hotel property. Escrow closed on the property June 3, 2022.
The City initially provided support though a conditional commitment of HOME and HOME ARP funding of $1,690,462 but later changed the source to ARPA funds. Use of the HOME-ARP funds would require approval of a HOME-ARP Plan by the City Council and subject to HUD review and final approval. HUD requires that the plan be implemented through a Substantial Amendment to the 2021 Annual Action Plan. To ensure the project stays on target with the Homekey award timeline, on June 21, 2022, the Council agreed to swap the funding to ARPA funds. The local commitment helped to leverage the additional HCD resources under the program.
Current Status and Action
The property has been purchased by TwelveThirteen and planning is underway. The Homekey Standard agreement requires the adoption of a Regulatory Agreement (RA) and the commitment of City funds needs to be formalized in the Grant Deeds attached pursuant to the Resolution.
TwelveThirteen will enter into a RA specifying the length of time the units will be kept affordable and the specific affordability level. The provisions of the Grant Agreement shall constitute covenants which shall run with the land for a period of fifty-five (55) years. The affordability level is for those at or below 30% AMI. This agreement will be recorded on the title and will remain in effect until released at the end of the 55-year affordability term. TwelveThirteen requests that we back date the RA to match the date of the acquisition, June 3, 2022, which will be used in their application for Welfare Tax Exemption, as the date of when their exemption starts.
IMPACT ON CITY RESOURCES
The City committed to provide a grant of $1,690,462 in City funds; the funding source being the ARPA funds. The City’s HCD Homekey award in partnership with TwelveThirteen Homekey LP is $24,024,054 specifically for this long-term affordable housing project. $950,000 is reserved as a bonus should they complete the project in 8 months as is detailed in the Executed Homekey Standard Agreement (Attachment 3).
ATTACHMENTS
1. Resolution 2022-60
2. Regulatory Agreement and Declaration of Restrictive Covenants
3. Executed Homekey Standard Agreement
4. Agreement Containing Covenants Affecting Real Property
5. Deed Restriction Covenant and Grant Agreement
6. Notice of Affordability Restrictions on Transfer of Property