Report Prepared by: Kimberly Nutt, Housing Program Supervisor/Housing Division, and Scott McBride, Development Services Director/Development Services Department
Title
SUBJECT: Adoption of a Resolution Authorizing the Submittal of a Joint Application and Participation in the State of California Housing and Community Development (HCD) Homekey Program: Authorizing the Finance Officer to Make Necessary Budget Amendments to Implement the Homekey Program; and Authorizing the Finance Officer to use Pooled Cash if Necessary Pending Reimbursements from the Homekey Program
REPORT IN BRIEF
Authorizes the submittal of a Joint Application and Participation in the State of California Department of Housing and Community Development Department (HCD) Homekey; authorizing the City Manager or Deputy City Manager to execute the Standard Agreement if selected for such funding any amendments thereto, and any related documents to participate in the Homekey Program; authorizing the Finance Officer to make any Budget Amendments necessary for the implementation of the use of the Homekey Program Funds; and authorizing the Finance Officer to use Pooled Cash if necessary, pending reimbursements from the Homekey Program.
RECOMMENDATION
City Council - Adopt a motion:
A. Adopting Resolution 2021-109, a Resolution of the City Council of the City of Merced, California, authorizing a joint application and participation in the Homekey Program; the execution of a standard agreement if selected for such funding and any amendments thereto; and any related documents necessary to participate in the Homekey Program; and,
B. Authorizing the City Manager or Deputy City Manager to execute the Standard Agreement if selected for such funding and any amendments thereto, and any related documents necessary to participate in the Homekey Program; and,
C. Authorizing the Finance Officer to make any Budget Amendments necessary for the implementation of the use of the Homekey Program; and,
D. Authorizing the use of pooled cash until reimbursement if grant is awarded from the Homekey Program.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, with modifications; or,
3. Deny the request completely; or,
4. Refer to staff for reconsideration of specific items as requested by Council; or,
5. Continue to a future City Council meeting (date and time to be specified in the motion).
AUTHORITY
Charter of the City of Merced, Section 200.
CITY COUNCIL PRIORITIES
Fiscal Year 2021/22 Adopted Goals and Priorities, 4. Housing and Homelessness, ii.
DISCUSSION
The State of California HCD has issued a NOFA for funding under the Homekey Program. A copy of the NOFA is attached. This funding program is highly competitive, and awards are awarded based on a first come basis using a geographic basis.
Administered by the California Department of Housing and Community Development (HCD), approximately $1.4 billion (FY 2021-22) in grant funding will be made available to local public entities, including cities, counties, or other local public entities, such as housing authorities or Tribal Entities within California.
Homekey is an opportunity for state, regional, and local public entities to develop a broad range of housing types including, but not limited to, hotels, motels, hostels, single-family homes and multifamily apartments, adult residential facilities, and manufactured housing, and to convert commercial properties and other existing buildings to Permanent or Interim Housing for the Target Population.
Eligible Applicants - Homekey requires lead applicants to be cities, counties, cities and counties, and all other state, regional, and local public entities, including councils of government, metropolitan planning organizations, and regional transportation planning agencies designated in Section 29532.1 of the Government Code; or Tribal Entities. Each of the foregoing entities may apply independently, or each entity may apply jointly with a nonprofit or for-profit corporation as a Co-Applicant.
Geographic Distribution - Because COVID-19 impacts people experiencing or at risk of homelessness throughout California, HCD is working to ensure jurisdictions throughout the state have an equitable opportunity to apply for Homekey funds.
Eligible Uses / Projects - Awarded funds must be used to provide housing for individuals and families experiencing homelessness or who are at risk of homelessness.
The list of eligible Homekey uses is as follows:
1. Acquisition or rehabilitation, or acquisition and rehabilitation, of motels, hotels, hostels, or other sites and assets, including apartments or homes, adult residential facilities, residential care facilities for the elderly, manufactured housing, commercial properties, and other buildings with existing uses that could be converted to permanent or interim housing.
2. Master leasing of properties for non-congregate housing.
3. Conversion of units from nonresidential to residential.
4. New construction of dwelling units.
5. The purchase of affordability covenants and restrictions for units.
6. Relocation costs for individuals who are being displaced as a result of the Homekey Project.
7. Capitalized operating subsidies for units purchased, converted, constructed, or altered with funds awarded under the Homekey Round 2 NOFA for FY 2021-22.
Eligible Housing Types - Under Homekey, local entities will acquire and rehabilitate a variety of housing types including, but not limited to, hotels, motels, hostels, single-family homes and multifamily apartments, adult residential facilities, and manufactured housing, and to convert commercial properties and other existing buildings to Permanent or Interim Housing for the Target Population.
Homekey Grant funds: $1.45 billion (FY 2021-22)
• Of the $1.45 billion in Homekey funding, $1.2 billion is derived from the Coronavirus State Fiscal Recovery Fund (CSFRF) established by the federal American Rescue Plan Act of 2021 (ARPA) (Public Law 117-2) and $250 million in state General Funds.
• Capital funds must be expended within eight months of the date of award, as required by statute. For Projects that involve acquisition and are receiving capital awards, Grantees must expend the funds by the expenditure deadline and the project escrow must be closed by the expenditure deadline. To meet this requirement, the Department (HCD) will provide ongoing support to assist Grantees and has developed an accelerated award and disbursement process.
• All operating funds must be fully expended by the recipient by no later than June 30, 2026.
Homekey Round 2 Key Items
• Capital Award Per Door - $150,000 - $200,000. Higher level of support for Homeless Youth or Youth At Risk of Homelessness, Chronically Homeless, and Family Units. Award level must be justified by appraisal and other documentation.
• Capital Match - 1:1 up to an additional $100,000 per door.
• Operating Award per Unit - $1,000 -$1,400 per Assisted Unit per month. Higher level of support for Homeless Youth or Youth At Risk of Homelessness and Chronically Homeless. Award level must be justified by appraisal and other documentation.
• Operating Match - Two (2) years if Applicant commits three (3) years of operating funding; Three (3) years if Applicant commits four (4) years of operating funding.
• Capital Expenditure Deadline - Eight (8) months from the date of the award, per statute.
• Operating Expenditure Deadline - June 30, 2026
• Occupancy Deadline - Within 90 days of construction or rehab completion.
• Bonus Awards - For applications submitted by January 31, 2022; for expedited occupancy within eight (8) months of award.
Proposed Project
A development partnership between UPholdings and RH Community Builders has site control for an existing motel located at 1213 V Street, Studio 6 Merced. UPholdings responded to the City’s open Housing Partners Request for Qualifications. UPholdings is currently also working to complete a rental multi-family apartment project. RH Community Builders is a developer, operator, and services provider of supportive housing. UPholdings and RH Community Builders successfully partnered on two Homekey 1.0 developments that are currently operating in Visalia and Fresno.
The project location has served as a Project Roomkey location during the COVID-19 pandemic. Under this program the motel was used on an emergency basis to accommodate those experiencing homelessness. Prior to this use it was operated as a motel with extended stay options. The motel currently accommodates both uses.
The proposed project would convert the current 95 rooms to approximately 80 studio apartments. The reconfiguration will allow for the creation of office space for case management and other services, it also provides room for education, training, and recreational activities. The rehabbed building will also feature units for live-in staff to allow for around-the-clock support for residents. Although Homekey provides a funding path to allow for a motel conversation from “transitional support” to “permanent support” the intent is to have interior improvements in place prior to occupancy. It would open ready for permanent supportive services.
In addition to the physical upgrades to accommodate residents, a full range of services are necessary for this clientele and income group. Those would be provided in combination by UPholdings, RH Community Builders, as well as several Merced County service providers. The team is working closely with the County of Merced around the services and operation of the development.
The overall project budget is still being finalized. It currently estimates costs for the acquisition of the motel and rehabilitation work is around $20,000,000. The proposed resolution has a not to exceed amount of $30,000,000.
The project is seeking approximately $19,000,000 in Homekey Funds. It should be noted that the City Council previously provided support through a conditional commitment of HOME and HOME ARP funding, $1,690,462. Local commitment helps to leverage additional state resources under the program.
Timing to complete the project is as follows:
Funding Award - Commitment in Spring 2022
Acquisition - Spring/Summer 2022
Design and Permitting - Spring/Summer 2022
Construction - Summer/Fall 2022
Occupancy - Winter 2022/2023
IMPACT ON CITY RESOURCES
Homekey funding is currently not included in the Fiscal Year 2021-22 adopted City Budget. The approval actions by the City Council provides authorization to the Finance Officer to make any Budget Amendments Necessary for the implementation of the use of the Homekey Program Funds including the use of pooled cash if necessary.
ATTACHMENTS
1. City Council Resolution 2021-109 Authorizing a Joint Application to the State of California HCD Homekey Program
2. Homekey Notice of Funding Availability (NOFA)