COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Human Services Agency

Office of Housing

DATE:

January 30, 2003

BOARD MEETING DATE:

February 25, 2003

TO:

Honorable Board of Supervisors

FROM:

Maureen Borland, Director, Human Services Agency

Steve Cervantes, Director, Office of Housing

SUBJECT:

Resolution authorizing execution of a Second Amendment to the Agreement with the City of San Mateo , its Redevelopment Agency, and Mid-Peninsula Coalition Belle Haven and an Agreement with Shelter Network, the City of San Mateo and Mid-Peninsula Coalition Belle Haven

Recommendation

Adopt a Resolution authorizing:

1.

Execution of a Second Amendment to the Agreement with the City of San Mateo, its Redevelopment Agency, and Mid-Peninsula Coalition Belle Haven, for the acquisition and operation of a transitional housing facility;

2.

Execution of an Agreement with Shelter Network, the City of San Mateo, and Mid-Peninsula Coalition Belle Haven, to assist in reconstruction of First Step for Families Emergency Shelter and Transitional Housing; and

3.

The Director of the Human Services Agency to execute subsequent amendments and minor modifications not to exceed $25,000 per funding source.

Background

In 1988, Mid-Peninsula Coalition Belle Haven, a nonprofit affiliate of Mid-Peninsula Housing Coalition (MPHC), purchased property at 319-325 Villa Terrace, San Mateo, for the express purpose of operating a homeless emergency shelter. The County, the City of San Mateo and the City of San Mateo Redevelopment Agency, provided a combined $805,000 toward the purchase and rehabilitation of the property, which included the two existing buildings. Another $69,292 was provided in 1989 by the original three funders to MPHC for a total of $874,292 to complete the renovation work. Around the same time, MPHC formed another new nonprofit, Shelter Network, to actually operate the shelter by leasing the property from MPHC.

By 2000, Shelter Network saw a great need to upgrade the subject shelter, known as First Step for Families. Over the years, the facility has evolved from a facility for 19 single persons to one that serves families. In evaluating the physical condition of the property, Shelter Network has decided to demolish the existing structures, replacing them with a new facility. Construction cost of this new facility is estimated at $6 million. The proposed facility, to consist of 24 emergency shelter units, 15 transitional units, and licensed child care space, will serve 39 families simultaneously.

In 2001, the County committed $1 million of a combination of Human Services Agency and General Funds toward the capital needs of the project. This amount is already under contract with Shelter Network and therefore not part of either of the current agreements for Board consideration.

Discussion

The County and the City of San Mateo have agreed to jointly provide another $1,751,800 of HOME and CDBG funds for the project development. The County's CDBG/HOME portion is $1,251,800 and the City's CDBG/HOME portion is $500,000.

In order for Shelter Network to secure other financing to redevelop the new facility, the following was agreed upon by the various parties:

·

MPHC, through Mid-Peninsula Coalition Belle Haven, would execute a new 30-year ground lease with Shelter Network; this was effective April 1, 2002;

·

As described in the subject Second Amendment, the County/City/Redevelopment Agency funding of $874,292 provided to MPHC in 1988 and 1989 would be restructured to allow MPHC to accrue benefits of ownership. (The original Agreement provided no financial benefit to MPHC - repayment terms were based on an equity shared arrangement; since MPHC had provided no initial dollar investment, it would not accrue any equity share upon loan repayment.) The restructured loan would have a new principal amount of $1,202,700 (equal to the original loan amount plus an imputed 3% simple interest calculated from the date of the original funding); and a 45-year term with the same start date as the 30-year ground lease; and

·

As provided in the subject Agreement, the County/City of San Mateo joint loan of $1,751,800 to Shelter Network would have a 30-year term with the same start date as the ground lease. This loan would be forgivable on a pro-rated basis for each year the facility operates as shelter/transitional housing. The rationale for this was based on the fact that such a use does not generate rental revenues and hence no cash flow for debt service. Should the property cease its use as shelter/transitional housing, the balance of the loan would not be forgiven, and loan repayment would be triggered based on 3% simple interest. MPHC has further agreed to assume the balance of the loan liability should the lease be terminated early

·

The City of San Mateo has already approved both the joint funding Agreement and Second Amendment at its City Council and Redevelopment Agency meetings on January 6, 2003.

Vision Alignment

These actions keep the commitments to: Offer a full range of housing choices, and responsive, effective and collaborative government; and goals number 9 and 22: Housing exists for people at all income levels and for all generations of families: County and local governments effectively communicate, collaborate and develop strategic approaches to issues affecting the entire County. The actions contribute to these commitments and goals through the cooperative efforts of public and private parties to advance the mutual goal of providing a continuum of housing opportunities for homeless families.

Fiscal Impact

The County's total obligation is $1,251,800, of which $751,800 is from CDBG funds including a pre-commitment of $400,000 for FY 2003-04, and $500,000 is from HOME funds. There is no Net County Cost.