08
Office of the City Manager
CONSENT CALENDAR
July 8, 2014
To:
Honorable Mayor and Members of the City Council
From:
Christine Daniel, City Manager
Submitted by: Jane Micallef, Director, Health, Housing and Community Services
Subject:
William Byron Rumford Senior Plaza - Housing Trust Fund Reservation
RECOMMENDATION
Adopt a Resolution 1) approving an additional funding reservation of $740,000 of
Community Development Block Grant and local funds from the Housing Trust Fund
(HTF), for needed rehabilitation improvements at William Byron Rumford Senior Plaza
property site; 2) forgiving the simple accrued interest and the compounded accrued
interest amounts owing on two existing City loans in the original principal amounts of
$500,000 and $804,154 made on September 20, 1990 to develop and construct the
project; and 3) approving the refinancing of the original principal amounts of the two
existing loans and the principal amount of a City $50,000 operating reserve loan with
the HTF funding reservation of HOME, CDBG, and local funds into a new loan with an
annual interest rate of 3% and a 55-year repayment term.
SUMMARY
Resources for Community Development (RCD) is the limited partner of the William
Byron Rumford Sr. Plaza Associates, Limited Partnership (WBRLP). On May 1, 2012,
the City Council approved a funding reservation of $1.1 million dollars of HOME funds
for the project. The WBRLP is requesting an additional $740,000 of HTF funds, to start
a two-phased renovation of the William Byron Rumford Senior Plaza (WBR) property
site. The phased renovation will consist of completing needed exterior and common
area property improvements.
The WBR project was originally structured and financed as a Low-Income Housing Tax
Credit (LIHTC) mixed-income development. However, RCD determined that the project
would not qualify for Low-Income Housing Tax Credits (LIHTC) because too many of
the current residents have incomes over 60% of Area Median Income (AMI) and no
Project-Based Section 8 vouchers were allocated to the project. The current project
proposal has been restructured to better position the property to secure additional funds
needed for the exterior and common area improvements, to increase the number of
affordable restricted units serving low income, and to enable the project to replenish its
operating and replacement reserve accounts for future interior improvements.
2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7000 ● TDD: (510) 981-6903 ● Fax: (510) 981-7099
E-Mail: manager@CityofBerkeley.info Website: http://www.CityofBerkeley.info/Manager
William Byron Rumford Senior Plaza - Housing Trust Fund Reservation
CONSENT CALENDAR
July 8, 2014
FISCAL IMPACTS OF RECOMMENDATION
WBRLP is requesting an additional $740,000 of CDBG and local funds from the City’s
HTF to start a two-phased exterior renovation at the William Byron Rumford Senior
Plaza (WBR) residential site. The additional CDBG and local funds are needed to
complete Phase I of a proposed two-phased rehabilitation which includes needed
exterior and common area property improvements identified in a recently updated
physical needs assessment (PNA) of the property.
To complete Phase I improvements, RCD will use previously reserved HOME funds in
the amount of $1.1 million in addition to the requested $740,000 of CDBG and local
funds and $209,000 from the WBR property reserve account. The $740,000
recommended allocation includes unallocated CDBG funds and local funds currently in
the HTF as well as CDBG funds which will accrue to the HTF in July 2014.
To assist the project to compete for necessary funding for Phase II improvements, staff
recommends adjusting the interest rates on the existing loans and re-setting the loan
balance to the original principal amounts of $804,154 and $500,000. The interest on
the original $500,000 loan compounded at a rate of 8.74% causing the debt to grow
significantly over the years. This coupled with the accrued simple interest on the
$804,154 loan amounts to $1,592,094. The large total amount owed of accruing debt
shows up as a liability on the owner’s financial statements dissuades potential private
lenders from considering making loans to the mixed-income property site. Both of these
loans are due in September 2030. The City made another $50,000 loan to the project
on July 21, 1995 as a result of an Operating Deficit Guaranty Agreement executed in
1991 with the William Byron Rumford Sr. Plaza Associates, Limited Partnership
(WBRLP). The $50,000 loan is an unsecured non-interest bearing loan, which is due in
2025. If Council approves this additional HTF allocation, the original principal amount
from the three existing loans will be added to the City’s funding reservations of
$1,840,000 for a HTF total loan of approximately $3,194,154. Staff will execute a new
HTF Development Loan Agreement with WBRLP with an interest rate of 3% and a 55year term where repayments to the City are based upon the project’s remaining cash
flow after annual operating costs and private loan debt and annual reserve payments
have been made.
CURRENT SITUATION AND ITS EFFECTS
For the last several years, staff of the Health, Housing and Community Services
Department (HHCS) has worked with the RCD’s staff and the South Berkeley
Community Housing Development Corporation (SBCHDC) board of directors on the
proposed renovation of the WBR site. Since 1990, the WBR building site has been
owned by WBRLP with SBCHDC as its managing general partner. Over the last two
years, the SBCHDC board of directors was reorganized to include a majority of RCD
board members. Additionally, the two limited members of the WBRLP have exited from
the partnership and have assigned their interests to RCD, the limited partner. The
SBCHDC will remain as the general partner of the WBRLP. The land is owned by the
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William Byron Rumford Senior Plaza - Housing Trust Fund Reservation
CONSENT CALENDAR
July 8, 2014
City and the current ground lease agreement with WBRLP includes a lease term of 75
years which terminates in 2064.
The WBR site was originally developed as a 43-unit mixed-income residential
development with City of Berkeley financial assistance. At completion in 1991, 40% of
the total units (18 units) were income and rent-restricted at 60% of Area Median Income
(AMI), and the remaining 24 units were designated as unrestricted market rate units.
This property currently meets the HTF affordability and occupancy program guidelines
which require rent restrictions for 60% of the total units. Seventeen of the units are
currently affordable to households at or below 60% of AMI and nine are affordable at or
below 30% of AMI. Sixteen of the remaining total units will remain unrestricted and one
unit is the property manager’s unit. The new occupancy and rental requirements also
meet HUD’s HOME and CDBG rental and occupancy guidelines.
RCD and staff originally planned to use the $1,100,000 reservation of federal HOME
funds Council allocated in 2012 to complete a comprehensive rehabilitation of the WBR
site. The HOME funds along with equity provided through the 4% LIHTC Program
would have funded the multi-million dollar renovation project. The RCD tax credit
proposal assumed a project in which the unrestricted units would gradually convert to
restricted rents so that the entire project would become affordable to households with
incomes of 60% and below. As part of the proposed LIHTC application, RCD also
projected receiving an allocation of 14 Project-Based Section 8 (PBS8) vouchers from
the Berkeley Housing Authority. Unfortunately, the Berkeley Housing Authority was
unable to make a PBS8 allocation to this project.
Another funding challenge RCD has confronted is that there are too many current WBR
households who earn over 60% of Area Median Income (AMI) to qualify for LIHTCs.
Since the use of LIHTC equity funds are restricted to those units where residents are
earning at or less than 60% of AMI, the proposed $4 million rehabilitation was no longer
feasible. Therefore, it is necessary to change the scope of the renovation project to
address the most immediate physical needs while financially positioning the WBR
property for future years of sustainable operation as an affordable and mixed-income
housing site.
The current plan is a two-phased renovation to address the most immediately needed
exterior and common area improvements with the of $1.1 million of HOME funds
already allocated plus an additional $740,000 of CDBG and local funds to complete
Phase I activities. RCD would also use $209,000 of the WBR’s reserve funds for Phase
I activities. The first phase improvements include the repair of the exterior stairs and
stair railings, balcony railings, patio surrounds, roof systems, gutters, downspouts, and
courtyard improvements. Phase II will require an additional $1,631,000 to address the
remaining immediate needs. The phased improvements will not require the temporary
relocation of residents.
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William Byron Rumford Senior Plaza - Housing Trust Fund Reservation
CONSENT CALENDAR
July 8, 2014
BACKGROUND
WBR is located at 3017 Stanton Avenue and is a 43 unit residential apartment complex
consisting of 11one-bedroom, 17 two-bedroom, and 15 three-bedroom apartments. All
of the residential buildings are clustered on a rectangular parcel located along Ashby
Avenue, Sacramento, and Stanton Streets. Fifty parking spaces are available and
include five guest parking spaces.
The land is currently owned by the City of Berkeley and the building improvements are
owned by WBRLP and are ground leased to WBRLP. SBCHDC and City staff worked
to assemble the property and to construct the building and site improvements in 1991,
with financing provided from the Low Income Housing Tax Credit Program, Citibank
(formally California Federal Bank), the California Rental Housing Construction Program,
and several General Fund loans made by the City of Berkeley. Property management
is currently provided by the John Stewart Company. The property includes seven
buildings, containing townhouses and stacked flats, which are two and three stories.
When SBCHDC applied for HTF funding in 2010, it was apparent that it needed a
capacity partner to complete the needed improvements for both interior and exterior
renovation. The SBCHDC approached RCD in 2011 to work jointly on the renovation
project. City staff has continued to work with the SBCHDC Board of Directors and RCD
on both the project’s rehabilitation needs and the Board’s desire to preserve the
development as a permanently affordable housing project.
In April 2012, the Housing Advisory Commission recommended the City approve a $1.1
million reservation for the WBR project as part of the HTF pipeline of affordable housing
projects. In May 2012, the City Council approved a funding reservation for $1.1 million.
The PNA identifies immediate needs including replacing exterior siding and stairs and
railings that have suffered from dry rot, revitalizing the landscaping and other common
site amenities, and replacing major systems such as roofs, site lighting and water
heaters. These large capital items are at the end of their useful life and will lead to
greater building deterioration if not addressed immediately.
ENVIRONMENTAL SUSTAINABILITY
The Project’s rehabilitation will achieve an improvement in energy efficiency through
such measures as new and improved insulation; new roofs and exterior siding and
improved exterior lighting features.
RATIONALE FOR RECOMMENDATION
A phased approach to the renovations is necessary given the current funding
environment and the income levels of the residents. Refinancing the two existing loans
and the City’s funding of the Phase I improvements should improve the financial
position of the WBR site to secure funds for the Phase II improvements. At its regularly
scheduled meeting of June 5, 2014, the Housing Advisory Commission passed a motion
recommending Council’s approval of the additional HTF funds, forgiving both the simple
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William Byron Rumford Senior Plaza - Housing Trust Fund Reservation
CONSENT CALENDAR
July 8, 2014
and accrued interest on the City’s outstanding loans, and the refinancing of the three
existing City loans. M/S/C: Darrow/Drake. Ayes: Chang, Darrow, Droste, Drake,
Magofna, Skjerping, and Tregub. Noes: None. Abstentions: Casalaina. Recused:
Wolfe.
ALTERNATIVE ACTIONS CONSIDERED
None.
CONTACT PERSON
Drew King, Manager of Housing & Community Services, HH&CS, (510) 981-5410
Attachment:
1: Resolution
Page 5
RESOLUTION NO. ##,###-N.S.
HOUSING TRUST FUND RESERVATION: WILLIAM BYRON RUMFORD SENIOR
PLAZA
WHEREAS, on September 20, 1990, as part of its financial assistance for the
development and construction of the buildings at the William Byron Rumford Senior
Plaza (WBR), the City closed on two loans in the amount of $804,154 and $500,000
which remain unpaid; and
WHEREAS, on July 21, 1995, the City advanced $50,000 as a loan to the WBR project; and
WHEREAS, the City Council established a Housing Trust Fund Program (HTF) to assist
in the development and expansion of housing affordable to low and moderate income
persons who either work or reside within the City of Berkeley, and authorized the City
Manager to implement the HTF Program; and
WHEREAS, there is a great need for affordable and special needs housing in the City of
Berkeley as stated in the General Plan Housing Element and the City of Berkeley’s
Consolidated Plan; and
WHEREAS, the Health, Housing & Community Services Department and the Housing
Advisory Committee wished to set up an expedited review process for awarding fund
reservations from the 2010-2011 Housing Trust Fund; and
WHEREAS, on May 1, 2012, the City Council approved a funding reservation in the
amount of $1.1 million to an HTF application made by Resources for Community
Development (RCD) for the renovation of the WBR Project; and
WHEREAS, the number of unrestricted units and moderate income units on the site
make Low Income Housing Tax Credit funding infeasible for completion of a
comprehensive renovation of the WBR site, and RCD has found it necessary to
complete critically needed exterior property improvements by requesting additional local
funding and to refinance the existing City debt in order to improve the financial position
of the property owner; and
WHEREAS, forgiveness of the accrued interest amounts accrued to date is necessary
to refinance the original loan balances for two City loans with the Housing Trust Fund
amounts terms of 55 years and an interest rate of (3%), will assist property’s financial
standing and enhance ability of the Borrower to attract additional funding for Phase II of
future property improvements and, given the City’s ownership of the land, not diminish
the City’s security in the site; and
WHEREAS, the Housing Advisory Commission held a meeting on June 5, 2014 and
recommended approval of an additional $740,000 in CDBG and local funding to
SBCHDC for the phased rehabilitation of exterior and common area improvements and
the refinance of the two existing City loans owed by the William Byron Rumford Sr.
Plaza Associates, L.P.; and
NOW THEREFORE, BE IT RESOLVED by the Council of the City of Berkeley that an
additional funding reservation of $740,000 of CDBG and local funds for the proposed
rehabilitation of the exterior and common area improvements at the WBR property site
is approved.
BE IT FURTHER RESOLVED that the HTF loan will be made to the William Byron
Rumford Sr. Plaza Associates, Limited Partnership.
BE IT FURTHER RESOLVED that the Council forgives the accrued interest and all
accrued amounts owing on two loans originally made in the amount of $500,000 and
$804,154 and approved for the William Byron Rumford Sr. Plaza project (City Loan
Numbers 5510 and 5511) based upon the Effective Date of the Development Loan
Agreement to be executed.
BE IT FURTHER RESOLVED that the original principal balances of three existing City
loans, approved for the William Byron Rumford Sr. Plaza project, be added to the City’s
HTF loan amount for a new loan with an annual interest rate of 3% and a 55-year
repayment term.
BE IT FURTHER RESOLVED all funding reservations are conditioned upon the
completion of the environmental review process, except as authorized by 24 CFR, Part
58, and that should HOME and/or CDBG funds constitute a portion of the funding for
any project, a final commitment of HOME and/or CDBG funds shall occur only upon the
satisfactory completion of the appropriate level of environmental review and also upon
the receipt of approval of the request for release of funds and related certification from
the U.S. Department of Housing and Urban Development, when applicable. The
funding reservation for any of the HOME and/or CDBG funded projects is conditioned
upon the City of Berkeley’s determination to proceed with, modify, or cancel the project
based on the results of subsequent environmental review under the National
Environmental Policy Act.
BE IT FURTHER RESOLVED the City Manager, or her designee, is hereby authorized
to execute all original or amended documents or agreements to effectuate this action; a
signed copy of said documents, agreements and any amendments will be kept on file in
the Office of City Clerk.
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