Senior Group Homes Transfer and Rehabilitation LoanstoWh uF MEETING DATE: 12/16/14
ITEM NO. ,
Vi U.
1ps. G -�SpS
COUNCIL AGENDA REPORT
DATE: DECEMBER 5, 2014
TO: MAYOR AND TOWN COUNCIL
FROM: GREG LARSON, TOWN MANAGER ,
SUBJECT: SENIOR GROUP HOMES TRANSFER AND REHABILITATION LOANS
ADOPT A RESOLUTION AUTHORIZING THE TOWN MANAGER TO
EXECUTE:
A. AGREEMENTS FACILITATING THE TRANSFER OF 185 ANNE WAY
(APN 527 -48 -020) AND 14390 BLOSSOM HILL ROAD (APN 527 -31 -013)
SENIOR GROUP HOMES FROM SENIOR HOUSING SOLUTIONS
(FORMERLY PROJECT MATCH) TO CHARITIES HOUSING
DEVELOPMENT CORPORATION (LOS GATOS SENIOR HOMES LLC)
B. NEW REHABILITATION LOAN AGREEMENTS ADDRESSING
NECESSARY REPAIRS AND IMPROVEMENTS TO PRESERVE THE
LONG -TERM AFFORDABILITY AND MAINTENANCE OF THE HOMES IN
THE TOWN'S AFFORDABLE HOUSING STOCK.
RECOMMENDATION:
Adopt a resolution authorizing the Town Manager to execute: (a) agreements facilitating the transfer
of 185 Anne Way (APN 527 -48 -020) and 14390 Blossom Hill Road (APN 527 -31 -013) senior group
homes from Senior Housing Solutions (formerly Project Match) to Charities Housing Development
Corporation (Los Gatos Senior Homes LLC) and (b) new rehabilitation loan agreements addressing
necessary repairs and improvements required to preserve the long -term affordability and maintenance
of the homes in the Town's affordable housing stock.
BACKGROUND:
The Town and former Los Gatos Redevelopment Agency (RDA) approved financing agreements
with Project Match (now Senior Housing Solutions) for the acquision of 14390 Blossom Hill Road
PREPARED BY: LAUREL R. PREVETTI � Assistant Town Manager / Direo of COe
p ment
i
Reviewed by: N/A Assistant Town Manager ALJown Attorney � Finance
N:\DEV\TC REPORTS\2014 \Senior Group Homes Agmts.l2- 16 -14.dm Refom tted: 5/30/02
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: SENIOR GROUP HOMES TRANSFER
DECEMBER 5, 2014
and 185 Anne Way senior group homes in 2003 and 2008, respectively. These homes provide
affordable living to ten seniors with very low incomes. The former RDA approved a $388,801 loan
for the Blossom Hill Road house and a revocable grant of $832,700 for the Anne Way house. The
RDA loan was from the Low Moderate Income Housing Fund (i.e. RDA Affordable Housing Fund).
The County of Santa Clara and Housing Trust also provided additional gap financing for the two
homes totalling approximately $830,000.
In 2013, the Town was informed that the Senior Housing Solutions (SHS) Board of Directors
intended to dissolve the non -profit benefit corporation because it was no longer finanacially stable.
The Board intended to transfer the two Los Gatos houses and another twelve senior group homes in
Santa Clara County to Charities Development Corporation in order to preserve the homes as
affordable housing resources for the respective communities within which they are located.
The agreements attached to this report (see Attachments 5 and 6) would facilitate the transfer of the
Los Gatos properties to Charities Housing Development, a financially stable non -profit with a well
established operating history in Santa Clara County (see Attachments 2 through 4). Additionally,
two new rehabilation loans totaling $159,000 ($105,000 Blossom Hill Road house and $54,000 Anne
Way house) are requested from the Town by the Charities Housing to address necessary repairs and
improvements.
DISCUSSION:
In early 2011, the local jurisdictions who funded SHS group homes (Campbell, Cupertino, Los
Gatos, Milpitas, Mountain View, Santa Clara and the County of Santa Clara) were alerted by the City
of Santa Clara housing staff of concerns regarding the financial status and operating structure of the
non - profit. The agencies formed a working group to collectively monitor SHS operations and
provide feedback to the non -profit to ensure compliance with their collective financial agreements
and affordable housing commitments.
In response to the working group's efforts, SHS started discussions in 2012 with Charities Housing
Development Corporation regarding potential transfer of their assets should SHS cease operation as a
non -profit public benefit corporation. Charities Housing Development, an affiliate of Catholic
Chanties, is a highly regarded non -profit developer and operator of affordable housing, and currently
manages properties throughout Santa Clara County.
Dissolution of Senior Housing Solutions
In May 2013, representatives of SHS and Charities Housing Development started a process,
facilitated by the County of Santa Clara Office of Affordable Housing, to meet with affected
jurisdictions to discuss the necessary local approval process for Charities Housing Development to
assume the SHS group home assets and loan obligations in each community. The goal of the effort
was to ensure the long term viability of the houses as affordable housing resources and avoid
displacement of the very low income senior residents of the group homes. If this approach was not
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MAYOR AND TOWN COUNCIL
SUBJECT: SENIOR GROUP HOMES TRANSFER
DECEMBER 5, 2014
successful, SHS would likely default on all its agreements, followed by legal foreclosure/bankruptcy
proceedings by individual lenders, and the possible eviction of the lower income senior residents.
In Fall 2013, SHS and Charities Housing Development entered into interim agreements for Charities
staff to take over the temporary property management of the fourteen (14) group homes while the
affected jurisdictions determined common approaches to preserve the homes and establish transfer
protocols and agreements with applicable lenders.
Currently, of the fourteen (14) SHS group homes, six (6) have new agreements to transfer ownership
and new loans approved to preserve the homes in the affordable housing stock of their respective
communities. The City of Cupertino approved agreements for one group home on April 15, 2014.
Agreements for two homes were approved by the City of Milpitas on October 21, 2014. The Cities
of Sunnyvale and Mountain View approved new agreements for three shared homes on November
11, 2014.
The City of Santa Clara, County of Santa Clara, and the Town are scheduled to review the required
agreements for approval on December 16, 2014 for five homes.
Due to staffing challenges, the City of Campbell is anticipated to review agreements for the
remaining three homes in January 2015. Once the last home is transferred, SHS will complete is
dissolution process with the State Department of Corporations.
Preservation of Los Gatos Group Homes
In June 2014, Town staff conducted site visits with representatives of Charities Housing and the
County of Santa Clara Office of Affordable Housing to review inspection reports and the current
condition of the Blossom Hill Road and Anne Way properties. This review determined that repairs
and improvements are required for each property (see Attachment 2).
The Blossom Hill Road home requires repairs for termite damage, a new solar photovoltaic system,
and additional improvements to address deferred maintenance. The requested loan for this property
is $105,000 and would also cover the costs of the property transfer.
The Anne Way home already has a functioning solar photovoltaic systems but has termite damage,
deferred maintenance, and accessibility issues. The requested loan for this property is $54,000,
including property transfer costs.
Funding for the requested rehabilitation loans is available from the Town's Below Market Price
Housing Program In -Lieu Fee Fund. The new loan funds are being used to "supplement funding for
projects supported by the Los Gatos Redevelopment Agency" which is one of the listed eligible uses
for BMP In -Lieu funds.
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MAYOR AND TOWN COUNCIL
SUBJECT: SENIOR GROUP HOMES TRANSFER
DECEMBER 5, 2014
The original financial assistance from the Town and other agencies allowed Senior Housing
Solutions (SHS) to acquire the single - family homes for use as shared group homes to benefit lower
income seniors 62 years of age and older. Each home has five bedrooms which qualify as Single
Room Occupancy (SRO) "units" under the Federal Housing and Urban Development (HUD)
definitions. However, each of the houses is only considered as one housing unit under the State
Housing Element definitions. Conformance with the HUD definition has allowed both properties to
obtain Project Place Based Section 8 vouchers from the Housing Authority of Santa Clara County.
The ten project -based vouchers stay with the property when tenants leave and provide another level
of financial subsidy to help ensure that rents continue to be affordable for lower income seniors until
at least 2036.
The requested supplemental funding would ensure that the necessary upgrades are completed to meet
current housing and building codes, and ensure the long term sustainability of the properties. As a
condition of the new rehabilitation loans, the affordability requirement for the homes will be
extended another 55 years until 2069.
A=eements and Loan Documents
The prepared resolution authorizes the Town Manager to execute the following sets of documents for
each property (See Attachment 5a -f and 6a -f):
a) Assignment and Assumption Agreement and Modification Agreement
Allows Senior Housing Solutions to transfer the two properties to a new entity created by
Charities Housing Development (Los Gatos Senior Homes LLC.); modifies the terms ofthe
prior loan agreements to align the requirements of all lenders; extends the terms of
affordability for 55 years; and requires the new Charities Housing Development entity to
assume the obligations of the loan agreements. The existing loans and grants encumbering
the two properties are noted below:
$832,700.00 RDA Revocable Grant 55 yrs /99 yrs
$455,000.00 Housing Trust Loan 55 yrs
$150.000.00 County CDBG Loan 30 yrs
$1,437,700.00
14390 Blossom Hill Road
$388,801.00
$ 60,000.00
$169,150.00
$ 90,493.00
$ 72,359.00
$780,803.00
RDA Loan
Housingt Trust Loan
County Rehab Loan
County HOME Loan
County CDBG Loan
99 yrs
30 yrs
15 yrs
30 yrs
30 yrs
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MAYOR AND TOWN COUNCIL
SUBJECT: SENIOR GROUP HOMES TRANSFER
DECEMBER 5, 2014
b) Affordable Housing Loan Agreement
Provides a new rehabilitation loan for each property and details the terms. The loans for the
Anne Way and Blossom Hill Road homes are $54,000 and $105,000, respectively.
c) Subordination and Intercreditor Agreement
Establishes the Town as the Senior Priority Lien and set the lien position and cure rights of
the other existing lenders as Junior Liens. The Town is requiring this of the other lenders in
recognition of the new loans being provided to maintain the properties and to clarify the
Senior Lien position of the Town given the existing loans. These prior financing agreements
include a revocable grant that could have resulted in a lower lien position for the Town
without this agreement.
d) Promissory Note (Actual Note executed by borrower)
Documents the Charities Housing Development entity's financial obligation under the new
loan agreement.
e) Deed of Trust
Is the security instrument for the new loan that is recorded with the County Recorder.
f) Regulatory Agreement and Declaration of Restrictive Covenants
Is the Affordability Covenant that is recorded on Title that specifies the term and
affordability conditions to be maintained for the group homes.
ALTERNATIVES:
If the Town Council does not approve the resolution authorizing the execution of the recommended
documents and loan agreements, Council should provide additional direction to staff on potential
revisions to the documents and /or more appropriate terms.
As an alternative to the requested loan amount, Council could choose not to fund the solar
photovoltaic system proposed for the Blossom Hill Road house and reduce the overall loan amount.
This would reduce the amount of the loan for the Blossom Hill Road property by approximately
$25,000 (i.e. $80,000 total project cost) and would reduced the requested loan amount for both
properties to $134,000. This would however, result in unequal on -going maintenance and
operational cost for the two Los Gatos homes and the tenants of the Blossom Hill Road house would
have a higher utility cost burden than the Anne Way residents. This would also reduce the incentive
for Chanties to assume the financial and long -term obligations of the SHS non -profit.
A Town subsidy is required to facilitate the transfer of the two homes to Catholic Charities and
address the disability access and deferred maintenance issues. Additionally, without the additional
infusion of Town funds, there is no incentive for the other lenders to accept the Town's request for
the Senior Lender status and for the other lenders to accept a lower lien position.
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MAYOR AND TOWN COUNCIL
SUBJECT: SENIOR GROUP HOMES TRANSFER
DECEMBER 5, 2014
Rather than the Town utilizing its Below Market Price (BMP) In -Lieu Fee Fund as the only explored
source of financing for the transfer and improvements, Council could also make its financing
approval contingent on the new owner providing documentation that no other reasonable funding
sources could be obtained to facilitate the repairs prior to the Manager's execution of the loan
documents.
The new property owner has the ability to apply for new rehabilitation loans through Santa Clara
County's annual Community Development Block Grant (CDBG) application process but the
likelihood of obtaining additional financing from the County is very low given that both homes
already have County loans and one home (Blossom Hill Road) has three County loans recorded on
title.
The Town could also explore the possibility of using its annual CDBG capital project allocation from
the County (i.e. $60,000) to fund a grant for the repairs and reduce the requested loan amount to
$74,000 but this would result in delaying or forgoing another identified Capital Improvement
Program (CIP) project (i.e. potential Town facility or public facility ADA upgrades). The infusion
of Federal funds would also increase the new property owner's overall project costs due to the
Federal regulations regarding prevailing wage, bids process, labor standards, and reporting.
FISCAL IMPACT:
Two new loans totalling $159,000 are proposed to be funded by the Town's Below Market Price
(BMP) Housing Program In -Lieu Fee Fund. The proposed expenditures are eligible expenses based
on the criteria noted in the BMP Housing Program Guidelines. The BMP In -Lieu Fee Fund has a
balance of $2.6 million which currently includes the proceeds from the recent resale of BMP units
that were previously acquired by the Town to prevent loss through foreclosure.
The fund balance in the BMP Housing Program In -lieu Fee Fund is highly dependent on
development since BMP hi -lieu Fees are only paid at the discretion of the Town Council at project
approval and only projects with five or more units are required to provide BMP units or pay the
optional In -lieu fee.
The Draft Housing Element currently proposed to include programs to subsidize the cost of second
unit application fees ($114,000) to create incentives for the production of low and moderate income
housing units in Town and to prioritze funding to help facilate the production of Extremely Low
Income (ELI) housing development that could be proposed during the next 8 years (up to $1
million).
The Town currently uses BMP In -lieu Fee Funds to pay for the following housing related items:
• The annual cost of the Town's BMP Contract Administrator, Neighborhood Housing
Services of Silicon Valley (NHSSV)
• The Town'costs of participating in the Bi- annual Homeless Census
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MAYOR AND TOWN COUNCIL
SUBJECT: SENIOR GROUP HOMES TRANSFER
DECEMBER 5, 2014
• The cost of the Town's annual housing service grant for West Valley Community Serives
(W VCS) Comprehensive Emergency Assistance Program (CEAP) to prevent homelessness,
evictions, utility shut -off, and rental deposit assistance
• The Town's BMP acquisitions to prevent foreclosure
• The Town's cost to rehabilitate acquired BMP units for resale
• Housing Element Update preparation
• Housing staff costs
BMP Housing In -Lieu Fee Funds are differentiated from the former Los Gatos Redevelopment
Agency (RDA) Low - Moderate Income Housing or "Affordable Housing" Fund which were
generated from the 20 percent share of the annual property tax increment revenues in the Town's
former RDA Project Area. Although the Town of Los Gatos elected to become the successor to the
former RDA housing obligations in January 2012, the Town does not currently have any fund
balance in the former RDA "Affordable Housing" Fund because the Town was legally required by
the State RDA Dissolution Law to transfer its remaining $6.5 million balance to the County of Santa
Clara in November 2012 for distribution to other taxing agencies.
The Town currently retains two properties previously acquired with former RDA Affordable
Housing Funds, Dittos lane and the West Main Street Parking Lot. Combined these two properties
could generate $2 to $4 million in affordable housing funds if the properties are not developed as
affordable housing projects. No funds are currently available in the Affordable Housing fund to
assist with funding the requested loans.
CONCLUSION:
Staff recommends that the Town Council adopt the resolution and authorize the the Town Manager
to execute: (a) agreements facilitating the transfer of 185 Anne Way (APN 527 -48 -020) and 14390
Blossom Hill Road (APN 527 -31 -013) senior group homes from Senior Housing Solutions (formerly
Project Match) to Chanties Housing Development Corporation (Los Gatos Senior Homes LLC) and
(b) new rehabilitation loan agreements addressing necessary repairs and improvements required to
preserve the long -term affordability and maintenance of the homes in the Town's affordable housing
stock.
Attachments:
1. Draft Resolution
2. Chanties Housing Letter
3. Chanties Housing Development Corporation Audited Financials FY 2012 -2013
4. Charities Housing Board of Directors Roster
5. 14390 Blossom Hill Road Documents:
a) Assignment and Assumption Agreement and Modification Agreement
b) Affordable Housing Loan Agreement
c) Subordination and Intercreditor Agreement
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MAYOR AND TOWN COUNCIL
SUBJECT: SENIOR GROUP HOMES TRANSFER
DECEMBER 5, 2014
d) Promissory Note
e) Deed of Trust, Assignment of Rents Security Agreement and Fixture Filing
f) Regulatory Agreement and Declaration Of Restrictive Covenants
6. 185 Anne Way Documents:
a) Assignment and Assumption Agreement and Modification Agreement
b) Affordable Housing Loan Agreement
c) Subordination and Intercreditor Agreement
d) Promissory Note
e) Deed of Trust, Assignment of Rents Security Agreement and Fixture Filing
f) Regulatory Agreement and Declaration Of Restrictive Covenants
Distribution:
Kathy Robinson, Charities Housing Development, 1400 Parkmoor Avenue, Suite 190, San Jose, CA
95126
Senior Housing Solutions (Project Match), 512 Valley Way, Milpitas, CA 95035
Rebecca Garcia, County of Santa Clara, 3180 Newberry Drive, Suite 150, San Jose, CA 95118
Kevin Zwick, Housing Trust Silicon Valley, 95 S. Market Street, Suite 610, San Jose, CA 95113
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