AddendumWx uF MEETING DATE: 02/03/15
ITEM NO. 4
cos �aSOS ADDENDUM
COUNCIL AGENDA REPORT
DATE: FEBRUARY 2, 2015
TO: MAYOR AND TOWN COUNCIL
FROM: GREG LARSON, TOWN MANAGER r'L,
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.
REMARKS:
Staff recently received a Council question regarding its review of Charities Housing financial
statements. Staff has reviewed the financial statements presented for calendar year 2012 and 2013.
Charities Housing presents operating losses of approximately $4.3 and $4.9 million, respectively,
for each year. However, these net losses appear to be largely the result of the annual depreciation
costs charged to the Rental Operations program expense category. Depreciation expense for calendar
year 2013 was $5.1 million. Depreciation expense for calendar year 2012 was $4.6 million. Based
on this information it is reasonable to assume that excluding depreciation, Charities Housing
financial statements would indicate near break -even financial results for the years reviewed.
PREPARED BY: STEP ONWAY
Director of Fi ante and Administrative Services
Reviewed by: Assistant Town Managers Town Attorney Finance
N:AMGR \AdminWorkFiles\2015 Council Reports \Feb3 \Senior Group Homes Agmts- 2 -3 -15 Addendum.doc Reformatted: 5/30/02
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: SENIOR GROUP HOMES TRANSFER
FEBRUARY 2, 2015
REMARKS (cont'd):
Depreciation expense is not a financial drain on the company per se, because it is a "valuation
expense" allocating the cost of an investment to financial period, not an outlay of cash. Since
Charities Housing is a nonprofit it would appear reasonable that the housing program is not
reflecting significant excess revenues above expenditures for the calendar years reviewed.
Charities Housing appears to have fairly strong reserves of cash available to meet operating
contingencies. Cash held in reserves increased from $6.8 million in 2012 to $8.4 million in 2013. In
2013 the cash held in reserve approximates 70% of the annual operating expenses (not including
depreciation expense) of approximately $10.8 million.
Financial statements for 2014 calendar year were not available for staff review at the time of
preparation of the staff report. However, based upon the results for 2012 and 2013 it appears that
Charities Housing is in a fairly strong financial position on a cash basis.
When looking at the municipal risk spectrum for housing projects (i.e. from very low risk where
housing project costs are paid soley by dedicated housing program revenues - meaning no Town
financial pledge or backing, to high risk where housing program liabiliies are backed by the full faith
and credit of the Town), staff believes the financial risk assumed in extending the recommended
loans and facilitating the transfering of assets to Charities Housing to be on the lower end of the risk
spectrum.
Distribution:
Kathy Robinson, Charities Housing Development, 1400 Parkmoor Ave., #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
LRP:cg