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Attachment 15 - Report to Board of Supervisors of the County of Santa ClaraCounty of Santa Clara Santa Clara Valley Health & Hospital System Mental Health Services 74292 DATE: February 24, 2015 TO: Board of Supervisors FROM: Toni Tullys, Director, Department of Behavioral Health Services SUBJECT: Loan Agreements for four Senior Housing Solutions Properties RECOMMENDED ACTION Consider recommendations relating to Senior Housing Solutions' (SHS) affordable senior housing properties. Possible action: a. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's Consent and Subordination Agreement for the County Community Development Block Grant (CDBG) Loan No. 100270, in the amount of $150,000, from SHS to Los Gatos Senior Homes, LLC, for property located at 185 Anne Way, Los Gatos. b. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's Consent and Subordination Agreement for the County Housing Rehabilitation Loan No. 100004, in the amount of $169,150, from SHS to Los Gatos Senior Homes, LLC, for property located at 14390 Blossom Hill Road, Los Gatos. c. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's Consent and Subordination Agreement for the County Home Investment Partnership Program (HOME) Loan No. 100155, in the amount of $90,493, from SHS to Los Gatos Senior Homes, LLC, for property located at 14390 Blossom Hill Road, Los Gatos. d. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's Consent and Subordination Agreement for the County CDBG Loan No. 100065, in the amount of $72,359, from SHS to Los Gatos Senior Homes, LLC, for property located at 14390 Blossom Hill Road, Los Gatos. e. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's Consent and Subordination Agreement for the County Affordable Housing Fund (AHF) Loan No. 100167 in the amount of $250,000 from SHS to Milpitas Senior Homes, LLC, for property located at 751 Vasona Street, Milpitas. ATTACHMENT 1 5 Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 1 of 6 County Executive: Jeffrey V. Smith f. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's Consent and Subordination Agreement for the County CDBG Loan No. 100219 in the amount of $91,196 from SHS to Milpitas Senior Homes, LLC, for property located at 751 Vasona Street, Milpitas. g. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's Consent and Subordination Agreement for the County Housing Rehabilitation Loan No. 100001 in the amount of $68,500 from SHS to Milpitas Senior Homes, LLC, for property located at 751 Vasona Street, Milpitas. h. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's Consent and Subordination Agreement for the County Housing Rehabilitation Loan No. 100302 in the amount of $40,000 from SHS to Milpitas Senior Homes, LLC, for property located at 1170 North Park Victoria Drive, Milpitas. i. Approve a one -time $15,000 payment to Charities Housing Development Corporation Charities Housing Development Corporation (CHDC), reimbursing CHDC for expenses it incurred while working with the County, various cities, and SHS to preserve affordable housing for low income seniors. FISCAL IMPLICATIONS Modifying the County's eight loan agreements would help SHS and CHDC preserve 20 units of affordable housing for low income seniors and would have limited fiscal impacts on the County. The loans were funded with funds from three Federal programs: Home Investment Partnership Program (HOME), Community Development Block Grant (CDBG) and Rental Rehabilitation Program (RRP) funds. Three of the County's eight loans would have their interest rates reduced from 6% to 3 %. This would reduce the amount of money that the County could potentially receive if the properties were sold or if the owner stopped using the properties for affordable senior housing. In practice, the County does not receive any payment from the owner and the intention is not to recoup the initial principal, but rather to maintain these assets in the community by restricting the use of the properties. The loan agreements are structured as recoverable grants, all payments are deferred for as long as the properties remain affordable and available to low income seniors. The County does not receive any annual payments because the properties do not cash -flow. Their revenues are just enough to cover expenses. Also, the County would not likely get paid back on the loans' maturity dates because, over time, the properties need to be rehabilitated using new funds and existing loans must be modified and/or subordinated. In addition, the $15,000 reimbursement to CHDC would not negatively impact the County General Fund. The reimbursement would be paid from the Affordable Housing Fund (AHF), and the revenues and expenditures would be incorporated into the FY2015 mid -year budget adjustment. CONTRACT HISTORY Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian County Executive: Jeffrey V. Smith Agenda Date: February 24, 2015 Page 2 of 6 Eight of SHS's 14 properties were acquired with the assistance of County loans. For these eight properties, the County provided SHS with 15 separate loans totaling $1,965,300. In addition, two loans from the City of Campbell were transferred to the County. The 15 County loans and the two Campbell loans on the eight properties total $2,090,300. One of the eight properties with a County interest was located at 455 Cypress Avenue in Santa Clara. In August 2012, the Board of Supervisors approved actions that transferred the property from SHS to Mas Milagros, LLC. The receiving organization was in a better financial position and was able to preserve the property and its five units of affordable housing for low income seniors. The transfer of 455 Cypress Avenue to Mas Milagros, LLC, left seven SHS properties with a County interest. Three of the seven properties are in Campbell. The County, CHDC, the City of Campbell and other lenders will continue working to preserve the properties. We anticipate bringing recommendations to the Board related to the three Campbell properties by May 2015. Recommended actions a. through h. pertain to four remaining SHS properties that have a County interest. Two of the properties are in Los Gatos and two properties in Milpitas. Between 2003 and 2011, the Board approved eight loans to SHS for these four properties. These loans total $931,698, and were used by SHS to provide 20 units of affordable housing to low income seniors. REASONS FOR RECOMMENDATION In September 2011, SHS determined that it could no longer operate and maintain the properties due to ongoing operating losses. Over the last three years, SHS, the County, the Housing Authority of the County of Santa Clara (Housing Authority), and the various lenders have been working to modify the properties' operations and ownership structure so that the assets would remain primarily available to extremely low income seniors. At one point, SHS's 14 properties had a total of 66 residents. Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 3 of 6 County Executive: Jeffrey V. Smith Agenda Date: February 24, 2015 Pro a L13! Loan Type /Source Loan Number Original an Beds Start Date final Maturity Date Amount 1 185 Anm Wy. to$ Gatos CDBG 1m270 $ S5x,Ox0 5 7/6J2009 7 2 143900lossom HRI Rd. Los Gatos Housing Rehab 1 $ 169,150 S 8%4J2005 14390 Blossom Hill Rd. Los Gatos HOME 100155 $ 90,493 12/17/2003 12/17/2033 14390 Blossom Hill Rd. Los Gatos CDBG 100065 $ 72,359 12/17/2003 12/17/2033 3 7$1 Vasona St M Itas AHF 100167 $ 250 6J35/2�6 6 , 4Jm35' 751 Vasona St. Imilicinas CDBG 1 100219 $ 91,196 12/11/2006 12/10/2036 751 Vasona St. Milpitas Housing Rehab 100001 $ 68,500 11112007 12/1/2027 orth Park Victoria Dr. Housing Rehab 3tb302 $ 40,000 5 5%5/2011 5 /5(2041 alrlands Ct ll HOME 100154 $ 50 5 7({s(1993 11/16/2022: airlands Ct. l Housing Rehab 500005 $ 137,702 1/1/2003 12/31/2033 airla nds Ct. l Housing Rehab RLF transfer 25,000 4/1/2008 4/1/2063 e n Ave. WPollardRd. l VCmbllDBG HOME 100217 $ 400,000 5 12/20/2007 12/19/2x62 ellyn Ave. l Housing Rehab 100006 $ 85,000 10/1/2007 9/1/2027 ellyn Ave. Housing Rehab RLF transfer 100,000 4/1/2008 4/1/2063 llard R0. Hcusm Rehab 100002 $ 57,0 5 11129/2001 1211/2016 ollard Rd. CDBG 300080 $ 123,900 6/8/2001 6/8/2031 8 4 55 C r4ss SaOta Clara HOME 200268 $ 170,000 1 5 7/281A0101 7/3 2x65 $ 2,090,300 1 40 One of the eight properties with a County interest was located at 455 Cypress Avenue in Santa Clara. In August 2012, the Board of Supervisors approved actions that transferred the property from SHS to Mas Milagros, LLC. The receiving organization was in a better financial position and was able to preserve the property and its five units of affordable housing for low income seniors. The transfer of 455 Cypress Avenue to Mas Milagros, LLC, left seven SHS properties with a County interest. Three of the seven properties are in Campbell. The County, CHDC, the City of Campbell and other lenders will continue working to preserve the properties. We anticipate bringing recommendations to the Board related to the three Campbell properties by May 2015. Recommended actions a. through h. pertain to four remaining SHS properties that have a County interest. Two of the properties are in Los Gatos and two properties in Milpitas. Between 2003 and 2011, the Board approved eight loans to SHS for these four properties. These loans total $931,698, and were used by SHS to provide 20 units of affordable housing to low income seniors. REASONS FOR RECOMMENDATION In September 2011, SHS determined that it could no longer operate and maintain the properties due to ongoing operating losses. Over the last three years, SHS, the County, the Housing Authority of the County of Santa Clara (Housing Authority), and the various lenders have been working to modify the properties' operations and ownership structure so that the assets would remain primarily available to extremely low income seniors. At one point, SHS's 14 properties had a total of 66 residents. Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 3 of 6 County Executive: Jeffrey V. Smith Agenda Date: February 24, 2015 The first eight recommended actions modify the eight County loan agreements that are associated with the two properties in Los Gatos and the two properties in Milpitas. The properties would be transferred to Los Gatos Senior Homes, LLC, and Milpitas Senior Homes, LLC, respectively. Both LLCs have CHDC as the sole member /manager. By approving the agreements, the Board would transfer the four properties from SHS to the LLCs and would preserve 20 units of affordable housing for low income seniors in Santa Clara County. In addition, the agreements would: 1) Set the minimum age of tenants to 62; 2) Reduce the interest rate from 6% to 3% on the County's residual receipt loans in order to improve the financial viability of the properties; 3) Extend the use restrictions on the Milpitas properties by 30 years (ending in 2044); 4) Extend the use restriction on the Los Gatos properties by 55 years (ending in 2069); and, 5) Restrict the properties to serving seniors who have incomes that are 50% or lower of the area median income (AMI), including properties with Section 8 Project Based Vouchers. The intent of the SHS Board of Directors is to dissolve the organization once all properties have been transferred to organizations that are able to maintain the affordable housing opportunities for low income seniors. Since September 2011, CHDC has provided technical assistance to SHS and to the various lenders. Currently, SHS does not have any paid staff members and has been reliant on CHDC to help wind down the organization and to preserve the affordable housing. CHDC has been providing property and asset management since July 2013. CHDC has provided $105,000 in unreimbursed personnel expenses to help the County and the six cities preserve 14 properties that provide affordable housing to 40 low income seniors in Santa Clara County. CHDC has requested the County's support in recouping some of these expenses. The properties are located in six cities. CHDC has requested that the County and the six cities each pay one - seventh of CHDC's unreimbursed personnel expenses. While CHDC still negotiating with the cities regarding the personnel expenses, Cupertino, Los Gatos, Milpitas and Sunnyvale have already provided a total of $1,132,035 for rehabilitation, physical needs assessments, property reports, legal fees, security deposits and operating subsidies to support the long -term financial stability of the properties. Approval of the one -time payment to CHDC would enable the organization to recoup some of the expenses it incurred while assisting SHS, the County and the six cities that had a financial interest in SHS properties. The recommended actions support the SCVHHS goal of "Better Health for All" by preserving affordable housing for primarily extremely low income seniors, especially those with chronic health conditions. Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 4 of 6 County Executive: Jeffrey V. Smith Agenda Date: February 24, 2015 CHILD IMPACT The recommended action will have no /neutral impact on children and youth. SENIOR IMPACT The recommended actions will have a positive impact on seniors. Upon completion of all property transfers 40 units of affordable housing for low income seniors will be preserved and made available for at least 30 years. SUSTAINABILITY IMPLICATIONS The recommended actions balance public policy and program interests, and enhance the Board of Supervisors' sustainability goal of social equity by improving low- income seniors' access to permanent affordable housing. BACKGROUND SHS is a non - profit corporation that provides affordable housing for low- income seniors in Santa Clara County. Between 1992 and 2011, SHS acquired 13 properties and leased one property (mainly single family homes). The properties are located in six jurisdictions throughout the county. The properties were acquired with various loans and grants from the County, the cities and the Housing Trust Silicon Valley (Housing Trust). All of the public funding came with use restrictions, the durations of which are generally tied to the loan terms. The key restrictions are related to minimum age, maximum income of each household, and maximum rent allowed for each unit. The 14 properties provided a total of 66 units of affordable housing for low income seniors in Santa Clara County. CONSEQUENCES OF NEGATIVE ACTION If the agreements are not approved, Los Gatos Senior Homes, LLC and Milpitas Senior Homes, LLC will be unable to assume the loans. This could jeopardize the availability of the 20 affordable housing units that are located at the four properties. SHS is no longer in a position to operate and manage the properties. STEPS FOLLOWING APPROVAL Upon approval, the Clerk of the Board is requested to send an e -mail notification to: Don Casillas Qon.Casillas( hhs.scc ov.org) and Rebecca Garcia (RebeccaLGarcia(2hhs scef ov org) in the Mental Health Department. LINKS: • Linked To: 63188: Approve Consent to Assign, Assume, and Modify Agreement and Assignment, Assumption and Modification Agreement for County HOME Loan Contract No. HO- 10 -03, from Senior Housing Solutions to Mas Milagros, LLC for the Cypress Group Residence. Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 5 of 6 County Executive: Jeffrey V. Smith A¢enda Date: February 24, 2015 ATTACHMENTS: • Agreements for 185 Anne Way, Los Gatos, CA (PDF) • Agreements for 14390 Blossom Hill Rd., Los Gatos, CA (PDF) • Agreements for 751 Vasona St., Milpitas, CA (PDF) • Agreements for 1170 North Park Victoria Dr., Milpitas, CA (PDF) Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 6 of 6 County Executive: Jeffrey V. Smith Agenda Date: February 24, 2015