COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Office of Housing

DATE:

3/3/2005

BOARD MEETING DATE:

3/8/2005

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Maureen Borland, Director, Human Services Agency

Steve Cervantes, Director, Office of Housing

SUBJECT:

Second Amendment to the Agreement between the County of San Mateo and the Mental Health Association of San Mateo County (MHA), to provide additional funds to assist with the development of Affordable Housing

RECOMMENDATION:

Adopt a Resolution Authorizing the Execution of a Second Amendment to the Agreement with MHA, to provide additional funds in the amount of $227,500, for a total of $1,538,250, to assist with the development of affordable housing. The term of the Agreement remains the same, 9/1/2002 to 6/30/2006.

VISION ALIGNMENT:

Commitment: Offer a full range of housing choices

Goal(s): Housing exists for all people at all income levels and for all generations of families.

This Agreement contributes to this goal by assisting with the development of 24 units for extremely low-income individuals with special needs.

Performance Measure(s):

Measure

FY 2004-05
Actual

FY 2005-06
Projected

Number of County affordable housing units developed and occupied each FY and cumulative number of County funded affordable housing units developed and occupied.

53/836

559/1,395

BACKGROUND:

On October 22, 2002, the County entered into an Agreement to provide $700,000 of CDBG and HOME funding to the MHA, to assist with the development of a 24 unit apartment complex located on F Street, in Belmont near the San Carlos/Belmont border. When completed, the complex will provide permanent independent living for adults with mental illness. MHA will provide on-site supportive services including occupational therapy assessment and training, independent living skills training and group activities.

In June, 2004 the Agreement was amended to provide $313,750 additional HOME funds and $297,000 HOPWA funds from the Heath Services Department.

DISCUSSION:

MHA has faced a total shortfall in the amount of $627,500 for this project. This shortfall has been due in part to the volatility of current construction prices, as construction bids have exceeded initial estimates by $427,500. In addition, the Federal Home Loan Bank (FHLB), in its final review of the project budget, determined that rental income designed to fund support services, which has always been an integral part of this development, had to be counted as net income to the project, resulting in a determination that the project could and should support a commercial loan rather than to receive the originally approved grant of $200,000 from FHLB. This increase in construction bids and the determination by FHLB have resulted in a funding gap of $627,500. While MHA has been able to knock down the final construction contract through value engineering and additional negotiation, there is currently a $427,500 gap for the project.

Instead of taking the chance that construction costs would continue to escalate, MHA proceeded with the construction contract, although they were aware of this funding shortfall as early as June of 2004. MHA notified the Office of Housing at the time, but did not apply for funding until they had a chance to discuss the situation with the City of Belmont. MHA then applied for and was awarded $200,000 from the City of Belmont to help fill the $427,500 gap, leaving them with a shortfall of $227,500, which would be funded by this Second Amendment. The project construction is currently well underway with much of the foundation and framing completed.

This Second Amendment will fund the remaining $227,500 needed for the project, which is extremely well leveraged with funding from at least 6 other sources. These proposed units target the hardest population to serve with 13 units reserved for individuals earning less than 15% of Area Median Income (AMI), 9 for individuals less than 20% AMI, and 2 for individuals earning less than 40% AMI.

FISCAL IMPACT:

The term of this Agreement remains the same, 9/1/2002 to 6/30/2006. The total obligation under this Agreement if this Second Amendment is approved is $1,538,250. The additional funds in the amount of $227,500 are $150,633 from HOME and $76,867 from the CDBG program. Funding for this project is included in the Office of Housing budget for FY 2004-05. There is no Net County Cost.