San Francisco Redevelopment Agency


2009 2008 2007 2006 2005 2004 



118-19309-002                                                                                                                   Agenda Item No. 4 ( b )

                                                                                                               Meeting of March 17, 2009

 

MEMORANDUM

 

TO:                 Agency Commissioners

 

FROM:           Fred Blackwell

Executive Director

 

SUBJECT:     Authorizing a First Amendment to the Personal Services Contract with the Corporation for Supportive Housing, a Delaware-based nonprofit corporation, for $35,100, for a total aggregate amount not to exceed $335,100, through the contract term ending March 31, 2009, for as-needed technical assistance services to supportive housing developers and operators; Citywide Tax Increment Housing Program

 

EXECUTIVE SUMMARY

In conformance with the Agency’s Purchasing and Procedures Policy, the Agency issued a Technical Assistance Services Request for Qualifications (“RFQ”) in January 2009.  Proposals were submitted on February 20, 2009.  Review of the proposals is in process.  Staff will return to Commission on April 7, 2009 to recommend a contractor.

The Corporation for Supportive Housing (“CSH”), a Delaware-based nonprofit corporation, is the current technical assistance contractor.  The personal services contract was awarded to CSH in March 2006 for an initial one-year term, renewable for a total of three years, subject to annual appropriations. The current contract ends on March 31, 2009.

Due to the large number of technical assistance requests, including some that exceeded original scope expectations, additional funds are needed to enable CSH to complete the contract scope of work.  Agency staff is recommending a First Amendment to the Personal Services Contract with CSH to add $35,100, for a total aggregate amount not to exceed $335,100. No extension of the contract term is necessary.

Staff recommends authorization of a First Amendment to the Personal Services Contract with the Corporation for Supportive Housing.

DISCUSSION

In response to a RFQ issued on December 30, 2005, the Agency awarded CSH, a Delaware-based nonprofit corporation, a personal services contract funded by Citywide Tax Increment Housing funds to provide technical assistance services as needed to operators and developers of all types of supportive housing including those serving persons with HIV/AIDS.  The Agency Commission authorized a contract on March 21, 2006 with CSH, in an amount not to exceed $100,000 for an initial one-year term renewable for a total of three years, subject to annual appropriations, and ending on March 31, 2009. 

During the past three years, CSH has effectively provided a broad range of technical services for over 20 technical assistance requests from citywide developers/service providers. This technical assistance has included financial feasibility analysis for several developers working with specific special needs populations, such as emancipated youth, and homeless seniors; training and support to strengthen property management at supportive housing projects funded by the Agency and MOH; and rehabilitation work at several older Housing Opportunities for Persons with AIDS (“HOPWA”) funded projects. CSH provided this assistance through its own staff and outside consultants.

There is an on-going need for technical assistance for all types of supportive housing projects funded through the Mayor’s Office of Housing or the Agency. The Agency staff recommends the approval of a First Amendment to the Personal Service Contract (the “First Amendment”) with CSH to add $35,100 to the existing contract.  No time extension is required for CSH to complete its work for the contract ending March 31, 2009. This Amendment will provide sufficient funds to enable CSH to complete all current technical assistance requests and continue services during the time required for Agency staff to complete the current RFQ process, per the Agency’s Purchasing and Procedures Policy.  On April 7, 2009, Housing staff will return to Commission with a recommendation for a new Personal Services Contract.

The Corporation for Supportive Housing First Amendment is not a CEQA project pursuant to the California Environmental Quality Act ("CEQA") definition of a project contained in Section 15378, subdivision (b)(4), of the State CEQA Guidelines.

 

                                    (Originated by:  Chris Harris, Senior Development Specialist)

 

Fred Blackwell

Executive Director

 

Attachments:

  1. Attachment A, Scope of Services
  2. Attachment B, Revised Budget

 

 

 


 

Attachment A:  Scope of Services

 

 

  1. Program Objectives

 

  • Build organizational capacity of non-profit housing developers, housing sponsors, and service agencies through the provision of the one-on-one technical assistance.
  • ·         Enhance the ability of housing and services organizations to implement their programs and projects through knowledge exchange, response to questions, trouble-shooting and referrals to other relevant resources in the community.
  • ·         Increase awareness of best practices, funding opportunities and other available resources among the housing developers, housing sponsors and service agencies in San Francisco.
  • ·         Increase the quantity and improve the quality of affordable and supportive housing in San Francisco.

 

2)         Implementation

 

                 CSH will provide the following technical assistance (“TA”):

 

  1. Fulfill TA requests from affordable housing project developers and supportive service providers funded through San Francisco Redevelopment Agency (the “Agency”) or the Mayor’s Office of Housing (“MOH”).  Assistance may include staff training, service planning and delivery, assistance to create capital needs assessments, financial analysis including review of pro-formas, and capital development.
  2. Preservation Project Tenant Leadership Training. Provide training to tenant councils based on assessment of needs in each building.
  3. Residential Care Facilities for the Chronically Ill: Address licensing and service related issues.
  4. Evaluations:  As requested by the Agency or MOH, provide evaluation of implementation and operational issues of affordable housing projects 1-2 years post lease up.
  5. Trainings:  As requested by the Agency or MOH, present trainings, e.g., roles of property management versus service providers, to supportive housing providers.

 

 


 

 

 

Attachment B: Revised Budget

Contractor: Corporation for Supportive Housing

 

Founding Source: San Francisco Redevelopment Agency

 

Contract Number: 118-67406-014

 

Contract Term: April 1, 2006 through March 31, 2009

 

 

Projections for 2009 First Quarter

 

 

 

 

 

 YTD

 1QT 2009

 

 

Expenses

 Projections

 

 

Hours

Rate

 04/01/06 -12/31/2008

01/01/09 - 03/31/09

 

Personnel Costs - Hourly Rate =

 

 

 

 

 

Technical Assistance and Training

975

 $                      70,335

 

 

     Steven Shum   

185

 $  52

 $                  9,600

 

     Irma Poe

35

 $  61

 $                  2,152

 

     Anne Cory

15

 $  64

 $                     958

 

Technical Assistance and Training (HSA)

 $                       9,686

 

 

     Steven Shum

0

 $  52

 $                         -

 

     Anne Cory

0

 $  64

 $                         -

 

Contract Oversight, Reporting, Billing

100

 $                      11,908

 

 

    Marcelo Leon

86

 $  44

 

 $                  3,774

 

Sub-total Personnel Costs

 $                      91,929

 $                16,485

 

 

 

 

Consultant/Subcontractor

 

 

 

 

 

Financial Analysis

varied

 $                     124,469

 $                         -

 

Service Planning and Implementation

varied

 $                        2,652

 $                         -

 

Additional Pending Project Assistance

varied

 $                      50,911

 $                         -

 

Other Consulting Services

 

varied

 $                      10,650

 $                         -

 

Sub-total Consultant Costs

 $                     188,683

 $                         -

 

 

 

 

Administrative Costs

 

 

 

 

 

Direct Administrative Costs

 

 

Travel/Reimbursable

 $                        1,025

 $                     100

 

Training/TA Materials

 $                            98

 $                     250

Property Management Trainings

Supplies

 $                          125

 $                  2,000

Materials for Property Management trainings

Phone

 $                          160

 $                       25

Postage/Messengers

 $                          341

 $                       80

Duplicating/Printing

 

 

 $                            92

 $                  2,500

Materials for Property Management trainings

Sub-total Direct Administrative Costs

 $                        1,840

 $                 4,955

 

 $                               -

 

Indirect Administrative Costs @ 10%

 $                      28,245

 $                  2,144

 

 $                                 -

 

Total Costs

 

 

 $                    311,517

 $                23,584

Original Budget contract 118-674006-014

 

 

 $              300,000

 

 

Actual Expenses to 12/31/08

 $              311,517

1QT 2009 Projections

 $                23,584

 

 

 

 

 

Projected Total Cost as 03/31/2009

 $               335,100

 

 

CSH Total Amendment

 

 

 $             (35,100)

Requested Amount of Amendment

 

 

 $              35,100

 

 


 

 

RESOLUTION NO. 28-2009

 

 

 

AUTHORIZING A FIRST AMENDMENT TO THE PERSONAL SERVICES CONTRACT WITH THE CORPORATION FOR SUPPORTIVE HOUSING,

A DELAWARE-BASED NONPROFIT CORPORATION, FOR $35,100, FOR

A TOTAL AGGREGATE AMOUNT NOT TO EXCEED $335,100,

THROUGH THE CONTRACT TERM ENDING MARCH 31, 2009, FOR

AS-NEEDED TECHNICAL ASSISTANCE SERVICES TO SUPPORTIVE HOUSING DEVELOPERS AND OPERATORS;

CITYWIDE TAX INCREMENT HOUSING PROGRAM

 

 

BASIS FOR RESOLUTION

 

1.         The Redevelopment Agency of the City and County of San Francisco (“Agency”) is authorized, pursuant to the California Community Redevelopment Law (Health and Safety Code, Section 33000, et seq.) and desires to distribute money from its Low and Moderate Income Housing Fund for the specific and special purpose of increasing and maintaining the housing stock in the City and County of San Francisco as affordable to very low, low, and moderate income households. 

 

2.         Technical assistance to affordable housing projects is an eligible use of tax increment funds.

 

 

 

  1. Per the Agency’s Purchasing Policy and Procedures, a new RFQ for technical assistance was issued through the Citywide Tax Increment Housing Program on January 14, 2009.  Review of proposals submitted by February 20, 2009 is currently in process.

 


 

  1. Agency staff has determined that a First Amendment to the Contract to provide additional funds, in an amount not to exceed $35,100 is needed for CSH to complete current technical assistance requests by the end of the Contract term, March 31, 2009, and to ensure on-going provision of technical assistance services while Agency staff completes the current RFQ review process.  No Contract term extension is required.

 

  1. The First Amendment to the Contract is not a CEQA project pursuant to the California Environmental Quality Act ("CEQA") definition of a project contained in Section 15378, subdivision (b)(4), of the State CEQA Guidelines.

 

 

RESOLUTION

 

ACCORDINGLY, IT IS RESOLVED by the Redevelopment Agency of the City and County of San Francisco that the Executive Director is authorized to execute a First Amendment to the Personal Services Contract with the Corporation for Supportive Housing, Inc., a Delaware-based nonprofit corporation, for  $35,100, for a total aggregate amount not to exceed $335,100, through the Contract term ending March 31, 2009, for as-needed technical assistance services to supportive housing developers and operators, substantially in the form lodged with the Agency General Counsel, as part of the Citywide Tax Increment Housing Program.

 

 

APPROVED AS TO FORM:

 

 

 

_________________________

James B. Morales

Agency General Counsel

 

 

107-031.09-002                                                                                           Agenda Item No. 4 ( c )

                                                                                                               Meeting of March 17, 2009

 

 

MEMORANDUM

 

 

TO:                  Agency Commissioners

 

FROM:            Fred Blackwell

                        Executive Director

 

SUBJECT:      Workshop on the Agency’s Fiscal Year 2009/10 Budget

 

Enclosed for your review is the Agency’s proposed budget for fiscal year 2009/10.  The budget will be presented before the Commission March 17, April 7 and April 21, 2009.  During the first budget presentations, Agency staff will present to the Commission and public, an overview of its proposed budgets with general presentations on the Housing, Community & Economic Development and Finance & Administration Programs.  A second workshop scheduled for the meeting of April 7, will present detailed budget presentations for individual project areas.  Commission approval of the Agency’s budget will be requested at the meeting of April 21st. Pursuant to the City Charter, the Agency’s budget for fiscal year 2009/10 must be submitted to the Board of Supervisors no later than May 30, 2008 although we anticipate a submission by May 1st.  The following summarizes the Agency’s budget format, budget process, and proposed budget for the next fiscal year.

 

Executive Summary:

 

The proposed 09/10 budget has been reduced by 34% from the 08/09 budget that was previously approved.  The reductions are primarily due to the expiration of the Agency’s obligation to fund infrastructure improvements in Mission Bay and a reduction in bond proceeds for citywide housing. 

 

The 09/10 budget reflects the Agency’s response to the challenging economic times that San Francisco is currently facing in addition to addressing significant changes in our project areas such as the expiration of Yuerba Buena Gardens, Bayview Hunters Point and India Basin.  These factors have required that the Agency focus more on affordable housing in particular areas as well as increasing our efforts in economic development activities.

 

Indeed, the Agency is continuing to review its operations to optimize program initiatives given the economic conditions by timing and sizing of bond issuance, managing investments and operational expenses.  The budget also incorporates an added layer of fiscal responsibility by providing for additional Educational Relief Act Fund “ERAF” payments for 09/10 as well as ongoing funding for our Other Post Employment Benefits “OPEB” liability.

 

 

Budget Format and Funding Sources

The Agency prepares its budget to conform to the requirements set forth in the Community Redevelopment Law (CRL), Health and Safety Code Section 33606.  Accordingly, the Agency prepares a budget for each of its redevelopment projects, survey areas, and programs such as Affordable Housing.  The components of each budget include a description of the project activities and/or program, a comparison of the current year’s goals and achievements, and tasks to be undertaken and goals to be achieved in the following fiscal year. Revenues and funding needs for each project/program are captured in separate worksheets and combined to form the consolidated budget for the entire Agency.  Lastly, Agency staff and administration costs (e.g., office rent, office supplies, and telephone bills) are shown for each individual project/program as well as detailed in separate sections of the Agency’s budget.

 

The Agency finances its work activities primarily with”pay as you go” tax increment and the sale of bonds secured by tax increment; a portion of the property taxes generated within project areas. The tax increment requested in any year will be used primarily to pay debt service on outstanding debt.  A smaller portion of the tax increment will fund Agency personnel and administration costs, also referred to as operating costs.  Pursuant to the CRL, tax increment generated in a redevelopment project area can only be spent for program and operating costs for that project area, except for tax increment expended for affordable housing, which can be spent citywide.   Under the CRL, availability of tax increment is limited by either the expiration of a redevelopment plan or the statutory limit on the receipt of tax increment, whichever occurs first.

 

The only exception to this limitation is the statutory authority under Senate Bill 2113 (“SB 2113”) and related provisions of the CRL that authorize the Agency to amend older redevelopment plans to continue to collect tax increment solely for the purpose of funding low-and moderate-income housing to replace an estimated 7,000 units lost during the Agency’s urban renewal efforts prior to 1976.  Such plan amendments were approved by the Commission and adopted by the Board of Supervisors in calendar year 2005 for the Golden Gateway, Hunters Point, and India Basin project areas.  A related amendment for the Rincon Point-South Beach Project Area was approved by the Board of Supervisors in May 2007.  The most recent amendment for the Western Addition has also been completed and will be effective in April 2008.  A future SB2113 plan amendment will be proposed for Yerba Buena Center as the plan expiration date approaches. 

 

Non-tax increment revenue is a small portion of the Agency’s revenue and include the intermittent sale of Agency-owned property, rents/lease income, interest earnings, loan repayments, and bond fees.  A portion of the Agency’s staff and administration costs are funded by developers working in Agency project areas.    The Agency uses a combination of “pay as you go” tax increment and other revenues to fund operating expenses.

 

Overview 

 

The Agency’s primary focus for fiscal year 2009/10 is (1) the creation of housing for low-and moderate-income households, (2) the implementation of the new Transbay and Bayview Hunters Point project areas, (3) the on-going revitalization of the South of Market Project Area through beautification efforts and business development, (4) the continued funding of infrastructure and public improvements in Mission Bay, and (5) the development of market-rate and affordable housing units as part of the Hunters Point Shipyard’s Phase I redevelopment plan and the continued negotiation of the Phase II integrated development of the Shipyard and the Candlestick Point area.  In addition, the Agency will continue its support of revitalization efforts that are ongoing, including a priority for job training and support of small businesses.

 

The Agency’s total budget for fiscal year 2009/10 totals $ 227.6 million, of which nearly $ 63.2 million is supported by non-tax increment revenue sources (land sale proceeds, leases, grants, developer contributions).  The Agency proposes funding the difference between the work program and the non-tax increment revenue with $94.9 million in tax increment and borrowing about $ 69.0 million through the sale of tax allocation bonds, i.e. bonds repaid with tax increment. 

 

The Agency funds its budget primarily with tax increment and proceeds from the sale of bonds secured with tax increment. Tax increment is merely a portion of property taxes generated within redevelopment project areas. By law, tax increment must be spent within the redevelopment project area from which it is derived, except for affordable housing.  In fiscal year 2009/10, the Agency is requesting tax increment in the aggregate amount of $94.9 million. Of that total, the largest portion in the amount of $62.3 million is required to pay debt service on outstanding debt, $25.0 million for required pass through payments, and the remaining is needed to pay for operations (personnel and administration costs), and to fund portions of non-capital work programs expenditures in Bayview Hunters Point Area B, South of Market and Transbay.  The balance of tax increment is requested to make “pass-through” payments mandated by the state of required pursuant to developer agreements associated with Mission Bay.

 

Major components and goals of the Agency’s proposed budget include:

 

  1. Pay for personnel and administration costs from non-borrowed funds.
  2. Pursue an aggressive affordable housing program that is consistent with the Agency’s available debt capacity and feasible under current economic conditions.
  3. With the January 1, 2010 expiration of YBC (does not include Emporium Center), priorities will focus on completing and stabilizing the cultural components in the area, transitioning jurisdiction, and establishing a plan for ongoing management of the major public assets and obligations that have been created. Thereafter, tax increment can be received solely to pay indebtedness, such as the repayment of principal and interest on borrowed funds, on debt incurred prior to the aforementioned expiration dates.
  4. Continue efforts to revitalize South of Market by funding physical improvements to, and maintenance of, streets and sidewalks, and building façades. Investment in community facilities with ongoing construction the South of Market Health Center facility and completion of construction to the Bindlestiff Theater and allowing for its operations
  5. Ongoing development in Transbay by executing a DDA for Block 8, issuing a RFP for a master developer for Block 9, and execution of a DDA for Block 11 along with the completion of design for two public open spaces pursuant to the Transbay Streetscape and Open Space Plan.
  6. Fund a variety of activities in Bayview Hunters Point, including streetscape improvements, employment and workforce development, a façade and tenant improvements program, outreach support, and low-income housing.
  7. Complete planning activities related to the Visitation Valley survey area and planning efforts to amend the Bayview Hunters Point Plan to add area “C”, ongoing work to coordinate with other Agencies on land use, transportation, infrastructure and design activities, and initiation of Owner Participation Agreement negotiations with Schlage Lock Site property owner.
  8. Oversee the completion of the first phase of infrastructure improvements (i.e., water and sewer systems, streets and sidewalks, telecommunications, etc.) of the Hunters Point Shipyard and commence development of market-rate and affordable housing units.
  9. Utilize prior year funds for ongoing infrastructure improvements in Mission Bay and maintenance of streetscapes and parks.

 

This year’s budget responds to the current economic climate and budget challenges at the state level. The proposed budget includes assumptions of higher interest rates for our bond issuance.  In the prior year, the average rate was approximately 5% to 6%.  In the proposed year, we are using an interest rate of 7% and 11% for tax-exempt and taxable bonds respectively.  As a result, the amount of proceeds that the Agency will have available for work has been significantly reduced.  Indeed, for taxable proceeds, it is estimated that it will be reduced by over 33%.

 

In addition to key assumptions around interest rates, the proposed budget also provides for payment of nearly $6.0 million to the State for the Educational Relief Act Fund (ERAF) which was requested mid-year from the State in Fiscal Year 2008-09.  It was extremely challenging for the Agency to identify sources of funds to make the mandated ERAF payment.  In order to avoid this difficulty from reoccurring, we have budgeted for the payment despite indications at the State level that the ERAF payment would not be required in FY 09-10. 

 

Following is a brief discussion of the major program activities included in the 2008/09 budget.

 

Affordable Housing. The proposed budget for fiscal year 2009/10 includes a total investment in affordable housing of $70.2 million. Of that total, $8.2 million represents the federally funded HOPWA program. A portion of the balance of the proposed housing budget of nearly $0 million would be used to continue to fund development costs underway in Bayview Hunters Point, South of Market, Western Addition, and Citywide.  The fiscal year 2009/10 housing budget would also be used to provide initial funding of predevelopment costs of the Agency’s developments in Mission Bay South, Transbay, and Hunters Point Shipyard. Lastly, a portion of the housing budget would be used to continue to fund on-going programs, such as the Certificate of Preference Program, the Single-Family Homeownership Program, and the next round of the Model Block Program. Affordable housing comprises approximately 59% percent of the Agency’s total work program budget for fiscal year 2009/10. 

 

Public Infrastructure.  The Agency is budgeting $15.8 million in fiscal year 2009/10 for public improvements.  This is significantly reduce due to the expiration of the Agency’s obligation to fund infrastructure improvements related to Mission Bay North.  Other funds budgeted for public improvements include streetscape repairs of 1.8 million in Hunters Point Shipyard, $3.5 million for the design and construction of open spaces in Transbay, and $9.5 million is requested for repairs, renovations and/or upgrades to Yerba Buena Gardens to be paid with funds earmarked for such purposes.

 

Business development (Economic & Workforce Development) funding in the amount of $3.6 million is being requested in fiscal year 2009/10, of which $2.1 is programmed for Bayview Hunters Point, Area B, and $1.5 is earmarked for Sixth Street business development and economic outreach in South of Market, a program that assists and encourages businesses to make physical improvements to their properties by providing an inexpensive source of financing.  An additional $1.5 million is also included in workforce development activities.

 

Other significant budget items for fiscal year 2009/10 include $9.4 million in HPSY Phase One and Two for non-staffing developer’s reimbursements, $3.5 million for the Yerba Buena Trust for long term management of public assets and liabilities, an additional $4.0 million for the Mexican Museum and re-appropriation of remaining Western Addition funds of approximately $178,000 to manage loans and Agency owned parcels in the A2 area.

 

Personnel and Administration

 

Given the completion of some project areas such as Western Addition, India Basin and Hunters Point, staff has been reassigned to respond to the increased workload related to Bayview Hunters Point, affordable housing and increased efforts in the area of economic and workforce development. 

 

Notwithstanding these increased staffing needs, the fiscal year 2009/10 budget proposes a decrease in total full time equivalent positions (FTE) to 110.2 from 115.2 in the prior year.  Total FTE count inclusive of limited term positions have been reduced from 117.7 in the prior year to 113.3 in the proposed budget.  Reductions were due to vacant positions, retirements expected in FY 09/10, and budgeting to better align with the hiring process.

 

The personnel budget assumes no salary increases as labor negotiations have yet to begin.  Any changes resulting from the labor agreements will be incorporated into the budget should the information be available prior to May 30, 2009.  Notwithstanding, although reductions were made in personnel count, funding for our OPEB liability and retirement payouts, the Agency’s overall personnel related expenses have increased slightly from $17.4 million in the prior year to $17.7 primarily due to changes in the calculation of costs for fringe benefits.

 

The Agency is requesting approximately $3.6 million in fiscal year 2009/10, compared to $3.4 million in fiscal year 2008/09, to pay for administration expenses (e.g., office supplies, insurance, phone service, postage, office rent).

 

Conclusion

 

The proposed 09/10 budget includes funds for completing activities in older project areas that are approaching their expiration dates and implementing initiatives in new project areas as well as money for pursuing an aggressive affordable housing program.  The Agency was able to reprogram those staff previously assigned to completed project areas to respond to increased demand on economic development activities including workforce development, affordable housing and public outreach and communications.

 

The 09/10 budget also includes optimizing the timing of construction, bond issuance, project funding, and Agency operations to be responsive to the current economic climate.

 

A second workshop on the budget for fiscal year 2009/10 will be held at the Commission meeting of April 1.  Commission approval of the Agency’s fiscal year 2009/10 will be requested at the meeting of April 15th.  Pursuant to the City Charter, the Agency’s budget for fiscal year 2009/10 must be submitted to the Board of Supervisors no later than May 30, 2009.

 

 

Originated by:  Amy Lee, Deputy Executive Director, Finance and Administration

John Daigle, Senior Financial Analyst

 

 

 

 

Fred Blackwell

Executive Director

 

Attachment 1: SFRA Proposed Budget for Fiscal Year 2009/10

 

 

118-19509-002                                                                                            Agenda Item No. 4 ( d )

                                                                                                                Meeting of March 17, 2009

 

MEMORANDUM

 

TO:                 Agency Commissioners

 

FROM:           Fred Blackwell, Executive Director

 

SUBJECT:    Authorizing an Amended and Restated Loan Agreement with Martin Luther King-Marcus Garvey Square Cooperative Apartments, Incorporated, a California mutual benefit nonprofit corporation, to increase the loan amount by $4,000,000 for a total aggregate amount not to exceed $5,000,000 and to amend other terms of the loan, all related to the rehabilitation of 211 units of low-income cooperative housing; 1680 Eddy Street, within the former Western Addition Redevelopment Project Area A-2; Citywide Tax Increment Housing Program

 

EXECUTIVE SUMMARY

Martin Luther King - Marcus Garvey Square Cooperative Apartments, Inc. (“MLK-MGS” or “Project”) is a distressed 211-unit FHA 236 / HUD 221 d (3) below market rate cooperative located in the former Western Addition Project Area A-2.  Over the past 10 years, the U.S. Department of Housing and Urban Development (“HUD”) has conducted inspections and raised concerns over physical conditions, security and management.  HUD has stated that unless these concerns are addressed it will terminate the Section 8 rental assistance contract between HUD and the MLK-MGS which would lead to foreclosure and ultimately the loss of affordable housing in the City.   The Offices of the Mayor, Supervisor Ross Mirkarimi, and Congresswoman Pelosi along with various City departments have worked with MLK-MGS in averting possible HUD termination of its Section 8 rental assistance contract by developing consensus around a substantial rehabilitation plan for the site. 

Agency staff has taken the lead in sheparding this rehabilitation plan.  Staff has continued to work with the MLK/MGS Board of Directors (the “Board”) and HUD in response to the need to address deferred maintenance issues. On December 9, 2007, the Board entered into an agreement with Related MG Development Co., LLC, a California limited liability company (“Related”) (an affiliate of Related Companies of California) to work with them to meet the HUD required rehabilitation goals for MLK-MGS.  On April 1, 2008 the Agency Commission authorized a $1,000,000 predevelopment loan to permit assessment of the project’s existing conditions, prioritize needed capital improvements, prepare an accurate rehabilitation budget, and secure needed construction and permanent financing.

This request for a $5,000,000 development loan includes the previously approved $1,000,000 predevelopment loan and will be used by the co-op to pay professional fees and financing costs associated with the rehabilitation of the Project.  The loan will be repaid out of residual receipts.


Staff recommends authorization of an Amended and Restated Loan Agreement with Martin Luther King - Marcus Garvey Square Cooperative Apartments, Incorporated, a California mutual benefit nonprofit corporation to increase the loan amount by $4,000,000 for a total aggregate amount not to exceed $5,000,000 and to amend other terms of the loan, all related to the rehabilitation of 211 units of low-income housing; 1680 Eddy Street, within the former Western Addition Redevelopment Project Area A-2

 

DISCUSSION

Background

 

Martin Luther King - Marcus Garvey Square Cooperative Apartments, Inc. (“MLK-MGS”) is a 211-unit below market rate cooperative (the “Project”) located in the former Western Addition A-2 Redevelopment Project Area  financed under the federal FHA 236  and FHA 221 d (3) programs and further assisted by project-based Section 8 rental assistance contracts.  The vast majority of the residents receive Section 8 rental assistance.  A few co-op members pay a carrying charge which includes the operating costs and the debt service on the property.   

The MLK-MGS and its shareholders (“Shareholders”) have been struggling in their efforts to resolve deferred maintenance issues for the past 10 years.  Due to various obstacles and challenges, the Project has come close to losing its valuable project-based Section 8 rental assistance subsidy because of inadequate funds and expertise to correct substandard housing issues cited by HUD.  Many of the Shareholders have resided at MLK-MGS for 20-40 years.  A loss of their community would have devastating impacts on numerous households.

On January 3, 2005, HUD threatened to abate the Section 8 rental subsidy due to various concerns over physical conditions, security, and the property’s failure to attain a passing score of 60 in the last 6 out of 7 Real Estate Assessment Center (“REAC”) inspections.  In anticipation of possible HUD abatement of Section 8 rental assistance, the Mayor wrote to HUD requesting that the MLK-MGS have more time to develop a plan to correct the deficiencies.  The Agency and City family did a substantial amount of work with the MLK-MGS Board of Directors (the “Board”) and the Shareholders in conjunction with the offices of Speaker Nancy Pelosi, the Mayor, and Supervisor Mirkarimi to develop a viable approach for resolving the deficiencies.

As part of developing a rehabilitation plan, Agency and City staff confirmed many of the physical findings, provided some preliminary financial assessment of the rehabilitation costs, and identified prospective financing alternatives.  The Board issued a competitive Request for Proposal (“RFP”) on September 29, 2005 for a development partner to take the lead in obtaining financing, obtaining necessary approvals, and supervising the rehabilitation.  The Board and Shareholders ultimately chose a financing structure that preserves the existing limited equity cooperative structure rather than financing the project through the use of low income housing tax credits.  Efforts to correct the physical deficiencies at MLK-MGS, identified by HUD were impaired by divisiveness that kept the Board from taking needed actions.  Change occurred on September 11, 2007 when the Shareholders elected a new Board majority committed to the rehabilitation.  Another key action occurred on November 9, 2007 when the  majority of Shareholders approved the action of the Board to select Related MG Development Co., LLC, a California limited liability company (“Related” or “Developer”) (an affiliate of Related Companies of California) to work with them to meet the HUD required rehabilitation goals for MLK-MGS. 

Related agreed to serve as developer on behalf of MLK-MGS, to establish the scope of work, to obtain necessary entitlements,  to obtain all financing required for rehabilitation of the Project, and to manage the rehabilitation process to completion.  To facilitate the predevelopment process, the Agency Commission approved a $1,000,000 predevelopment loan at its meeting on April 1, 2008.  The predevelopment loan permitted physical assessment of the project, prioritized the capital improvements to determine the scope of work, and documented the rehabilitation work needed.  Related and its team of consultants have conducted extensive studies and investigations of the Project and has held meetings to review the scope with the Board and Shareholders.

Related used the above information and prepared an accurate rehabilitation budget that was used to prepare a mark-up-to-budget request to HUD. The mark-up-to budget request was used to determine updated contract rents and the maximum supportable debt.  HUD approved a rent increase for the Project in November, 2008.  The recently HUD approved mark-up-to budget request is expected to benefit all but two households who shall remain “market-rate”.  “Market rate” residents pay their proportion of the operating costs and the debt service on the property. With HUD’s approval of a mark-up-to budget rent structure, the Project will be able to support the estimated $40,000,000 in commercial debt needed to cover the costs of the rehabilitating the 2.85 acre Project which occupies almost two square blocks.

Rehabilitation Overview

The existing site and building configuration will not change, except for the construction of up to 2 small laundry rooms. One of these laundry facilities will accommodate on-site security staff as well.  The scope of this rehabilitation project will focus on remedying life, health and safety defects within the units, throughout the building structures and across the entire site.  Work will include complete interior rehabilitation, including new appliances, fixtures, new flooring and GFI outlets.  Building improvements will include new roofs, window replacement, removal and replacement of failing exterior sheathing, evaluating and fixing mechanical, plumbing and electrical systems to the buildings, solving leaking decks and making entry stairs and railings safer.  Site work will include addressing failing perimeter retaining walls and patios, increase path of travel and pedestrian access throughout the site, installation of security gating and systems (including an entry system), and improved signage. 

Relocation

Related has met with Board and Shareholders to understand their concerns about relocation and to explain the goals of the rehabilitation activities.  Several meetings have been conducted pertaining solely to relocation which is expected to be a significant rehabilitation expense; in excess of $2,000,000.  A relocation consultant has been retained, Overland, Pacific & Cutter, and a relocation plan prepared.  The objective is to retain 50% of the residents on site during construction.  The Developer plans to begin repairing 30 onsite vacant units and then use these units to aid in the relocation effort.  There will be no permanent relocation.  The maximum term for off-site relocation is expected to be 30 days.

To date, 157 out of 180 occupied households have been interviewed at MLK-MGS.  Interviews focused on household size, bedroom needs, relocation issues and special needs (both during relocation and post rehab).  Based on this information, a review of shareholder files and discussions with the property manager, John Stewart Company (“JSCo”), a shareholder profile was prepared to understand how many households are over-housed, under-housed, and to identify special needs for ground floor units.  A schedule and plan was prepared for the relocation and rehabilitation with the following goals of: (1) getting shareholders into the appropriately sized unit, (2) only moving shareholders once, (3) enabling shareholders to move back into their current unit to the maximum degree possible and (4) enabling shareholders to move back to the MLK-MGS community.

Accessibility

The management office and community meeting room are currently located on the second floor of the community building. This space will be rehabilitated. Currently there is no elevator service to the community space, nor does the existing ramp meet code standards. The rehabilitation will improve access to this critical meeting area by providing an elevator or lift to the community room. 

The remainder of the two block residential complex was built prior to the establishment of the accessibility code and was therefore found to be exempt by the Mayor's Office on Disability.  The existing layout and topography of the residential buildings would make full accessibility very difficult to achieve. A second factor impacting full accessibility is the units themselves. None of the existing units meet accessibility standards. It is anticipated that some of the units can be upgraded to afford some aspects of accessibility. This work is all voluntary on the part of the Developer and Shareholders and will not be subject to strict accessibility code interpretations.  Best efforts will be made to improve path of travel accessibility throughout the Project including the parking lot. The addition of up to two laundry rooms is anticipated with one on each of the respective blocks. These new facilities will be accessible.

Developer Fee

The developer fee for this project is $2,500,000.  The requested developer fee is higher than the underwriting policy permits, but the amount is justifiable for the following reasons: (1) The Developer is guaranteeing completion of the project; (2) Construction management will be covered (policy maximum of $62,000 permitted); (3) Project administration and management services are included ($400,000 maximum allowed for nonprofits); (4) The Developer has absorbed the risk of working without compensation on this project since responding to the RFP in 2005; (5) Post construction risk of the project are covered by the Developer, despite the fact that it will not have any ownership interest in the Project; and (6) the size of the Project is larger than that which is typically funded by the Agency.  The Citywide Loan Committee concurred with staff that a waiver of the City’s developer fee policy is warranted.

The Funding Request

The Co-op is requesting additional funds for the project.  The Developer has proposed to use the Agency’s $5 million early in the rehabilitation process to decrease the financing costs to the project by the commercial lender.  Therefore, the Agency’s funds would be used upon close of the construction financing principally to cover early expenses associated with the commercial lender’s financing costs and legal fees and project architect/engineering/professional costs.  No funds shall be disbursed until HUD has completed its review and approval of this rehabilitation proposal. Construction is expected to begin within the next 90 days.  All residents are expected to return once rehabilitation work is complete.  However, for any vacancies, Certificate of Preference Holders would have first priority followed by the project waitlist, then San Francisco residents and members of the general public.

 

ENVIRONMENTAL REVIEW

 

Authorization of the Amended and Restated Loan Agreement will facilitate the rehabilitation and improvement of the existing building at 1680 Eddy Street.  This activity is categorically exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15301(a) and 15301(d).   Other implementation activities include construction management and administrative oversight of the project and would not have any direct physical effects and are exempt pursuant to CEQA Guidelines Section 15061(b)(3).  Whether considered individually or collectively, the rehabilitation and improvement of the existing building would not independently result in a significant physical effect on the environment.

 

EQUAL OPPORTUNITY PROGRAM

 

The Related Companies complies with the Agency’s Equal Benefits, Minimum Compensation, Health Care Accountability and Small Business Enterprise policies. The Related professional services team is 43.75% SBE with 27.78% MBE and 11.81% WBE. During the construction phase, Related will continue to work with staff to make good faith efforts to comply with the SBE Agreement, Construction Workforce Program and the payment of the State of California’s prevailing wages.

 

RECOMMENDATION

 

Staff recommends authorization of an amended and restated Loan Agreement with Martin Luther King - Marcus Garvey Square Cooperative Apartments, Incorporated, a California mutual benefit nonprofit corporation to increase the loan amount by $4,000,000 for a total aggregate amount not to exceed $5,000,000 and to amend other terms of the loan, all related to the rehabilitation of 211 units of low-income housing; 1680 Eddy Street; within the former Western Addition Project Area A-2

(Originated by Michele Davis, Development Specialist)

 

 

Fred Blackwell

Executive Director

 

 

 

 

 

Attachments:

                        February 20, 2009, Citywide Affordable Housing Loan Committee Evaluation


 

 

RESOLUTION NO.  29-2009

 

 

            

AUTHORIZING AN AMENDED AND RESTATED LOAN AGREEMENT WITH MARTIN LUTHER KING – MARCUS GARVEY SQUARE COOPERATIVE APARTMENTS, INCORPORATED, A CALIFORNIA MUTUAL BENEFIT NONPROFIT CORPORATION, TO INCREASE THE LOAN AMOUNT BY $4,000,000 FOR A TOTAL AGGREGATE AMOUNT NOT TO EXCEED $5,000,000, AND TO AMEND OTHER TERMS OF THE LOAN, ALL RELATED TO THE REHABILITATION OF 211 UNITS OF LOW-INCOME COOPERATIVE HOUSING;

1680 EDDY STREET, WITHIN THE FORMER WESTERNADDITION REDEVELOPMENT PROJECT AREA A-2;

CITYWIDE TAX INCREMENT HOUSING PROGRAM

 

 

BASIS FOR RESOLUTION

In furtherance of the objectives of the California Community Redevelopment Law (Health and Safety Code Section 33000 et seq., the “Law”), the Redevelopment Agency of the City and County of San Francisco (the “Agency”) undertakes programs for the reconstruction and rehabilitation of slums and blighted areas in the City and County of San Francisco.  The Law promotes the use of redevelopment funds for limited equity co-ops whenever feasible.

 

The Martin Luther King - Marcus Garvey Square Cooperative Apartments is a California mutual benefit nonprofit corporation established by the residents (the “Borrower”).  Borrower was established in August 1975 with the purpose of “providing housing on a mutual non-profit basis in the manner and for the purpose provided in Section 221 of Title II of the National Housing Act, as amended, for families displaced from urban renewal areas or as a result of governmental action, and to assist further the providing of housing for low, moderate and middle income families.”

 

On April 1, 2008, the Agency Commission approved the Borrower’s request for a $1,000,000 predevelopment loan from the Agency’s Citywide Tax Increment Housing Program Funds to enable it to proceed with essential predevelopment activities for the rehabilitation of the 211-unit limited equity cooperative apartments with parking and commercial space (the “Project”).  The Project is owned by the Borrower and is located on Assessor’s Block 0730, Lot 044, and Assessor’s Block 0751, Lot 001, commonly known as 1680 Eddy Street, San Francisco, California (the “Site” or “Project”), in the former Western Addition Redevelopment Project Area A-2.

 


 

The predevelopment loan permitted the assessment of the Project’s existing conditions, prioritize needed capital improvements, prepare an accurate rehabilitation budget, and secure needed financing for the rehabilitation of 211 units of low-income cooperative housing.

 

The Project is a U.S. Department of Housing and Urban Development (“HUD”) Section 221 d (3) / FHA 236 development with approximately 166 of its 211 units occupied by Section 8 eligible low-income households developed in partnership with the Agency in 1969.

 

The predevelopment loan request was reviewed and approved by the Western Addition Citizens Advisory Committee at its February 21, 2008 meeting. 

 

The Citywide Affordable Housing Loan Committee supported the $1,000,000 predevelopment loan request by the Borrower on March 21, 2008.

 

The predevelopment loan will be amended to become a permanent loan and increased by the Borrower’s request for an additional four million dollars ($4,000,000) for a revised total loan amount of five million dollars ($5,000,000) in order to fill the gap for financing the rehabilitation.

 

The $1,000,000 predevelopment note will be cancelled and a new promissory note and deed of trust for $5,000,000 will be executed by the Borrower.

 

The Borrower accepts the fact that the loan requires its acceptance of the forty-five (45) year long-term affordability restrictions which will be subordinate to the existing HUD Flex Subsidy loan on the Project.

 

The Citywide Affordable Housing Loan Committee reviewed the request for the additional loan funds on February 20, 2009 and recommended that the Agency Commission approve the request for an additional $4,000,000 for a total aggregate amount not to exceed $5,000,000.

 

The loan will have a 3% simple rate of interest and will be secured by a deed of trust on fee title to the Site.  This residual receipts loan will be repaid to the Agency out of the Project’s surplus cash.

 

The funds provided for this loan are Citywide Housing Funds which may include tax increment, taxable or other permitted funds.

 

Pursuant to the California Environmental Quality Act (“CEQA”) Guidelines Section 15262 (planning and feasibility studies), authorization of the loan agreement to pay for the physical assessment of the building, identifying needed improvements, and developing a rehabilitation program and budget is exempt from CEQA review.

 

RESOLUTION

 

ACCORDINGLY, IT IS RESOLVED by the Redevelopment Agency of the City and County of San Francisco that the Executive Director is authorized to execute an Amended and Restated Loan Agreement with Martin Luther King - Marcus Garvey Square Cooperative Apartments, Incorporated, a California mutual benefit nonprofit corporation, to increase the loan amount by $4,000,000 for a total aggregate amount not to exceed $5,000,000, and to amend other terms of the loan, all related to the rehabilitation of 211 units of low-income cooperative housing at 1680 Eddy Street, substantially in the form lodged with the Agency General Counsel.

 

 

APPROVED AS TO FORM:

 

 

 

_________________________

James B. Morales

Agency General Counsel