COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Housing

DATE:

January 25, 2007

BOARD MEETING DATE:

February 6, 2007

SPECIAL NOTICE/HEARING

None

VOTE REQUIRED

Majority

TO:

Honorable Board of Supervisors

FROM:

Duane Bay, Director, Department of Housing

SUBJECT:

Executive Summary – Approval of Agreement with Northpoint Housing, Inc. for CDBG Section 108 Funding for the Development of Trestle Glen at El Camino Transit Village

Recommendation

Adopt a Resolution:

1.

Authorizing the execution of an agreement with Northpoint Housing, Inc. to provide Section 108 loan funds of $10,745,000 for the development of Trestle Glen at El Camino Transit Village for the term of 55 years; and

2.

Authorizing the Director of the Department of Housing or the Director's designee to execute contract amendments which modify the County's maximum fiscal obligation by no more than $25,000 (in aggregate), and/or modify the contract term and/or services so long as the modified term or services is/are within the current or revised fiscal provisions.

Background/ Discussion

In May 2006 the Board approved the submittal to HUD of a Section 108 loan application by the Housing Department. The Housing Department applied for this loan to help finance the BRIDGE Housing Corporation (“BRIDGE”) project known as Trestle Glen at El Camino Transit Village (“Project”). The Project consists of 123 affordable units and a child care center to be developed on 1.7 acres of a 2.7 acre site located next to the Colma BART Station; the remaining acre will be sold for use as a private market-rate housing development, with the proceeds from that sale to be funneled back to the Project (in the form of paying down the County’s Section 108 loan to the Project). As is typical for a nonprofit developer wishing to take advantage of low income housing tax credits which provide equity financing to a project, BRIDGE has set up an ownership structure which includes Northpoint Housing, Inc., a nonprofit corporation wholly-owned by BRIDGE (“Northpoint Housing”). Northpoint Housing has an active role in the general partner entity of the limited partnership, Trestle Glen Associates, which will be the ultimate legal owner and developer of the Project.

Originally the County was going to borrow and re-lend to BRIDGE $7.145 million in Section 108 funds, but HUD has suggested borrowing $10.745 million and having the market-rate sale payment reduce the outstanding loan amount down to $7.145 million.

The Project was the subject of an appeal by the Town of Colma to the Planning Commission’s actions approving the Project. At its January 23^rd meeting, the Board denied the appeal.

The final consummation of the loan is contingent upon successful conclusion of the HUD approval process. To date HUD has completed review of the County’s Section 108 request, with HUD approval in progress. Once HUD completes the approval process, and the loan documents between HUD and the County are approved by County Counsel, the Director of Housing will execute the Section 108 loan documents with HUD. Because of timing issues related to BRIDGE needing the Section 108 funds as soon as practicable, the agreement and loan from the County to Northpoint Housing is made contingent upon successful conclusion of the HUD approval process and County Counsel approval of the HUD loan documents.

There are two repayment streams for the Section 108 funds: (1) County repayment to HUD over 20 years with payments guaranteed out of future annual CDBG entitlement grants and project operating surplus cash; and (2) Project repayment to the County over 55 years structured on a residual receipts basis – that is, only project operating surplus cash will be diverted for repayment during the life of the loan; and at the end of the 55-year term, a balloon payment will be due to the County on any unpaid balances. Accordingly, the monies necessary to repay the Section 108 loan will be kept in existing identified accounts and no County general funds will be at risk.

Fiscal Impact

This project is included in the Department of Housing Budget for FY 2006-07. The County’s total additional obligation under the subject agreement is $10,745,000. There is no Net County Cost.