Inter-Departmental Correspondence

Department of Housing



February 19, 2009


March 3, 2009







Honorable Board of Supervisors


Duane Bay, Director, Department of Housing


Authorizing execution of a Takeout Loan Commitment with MP San Mateo Transit Associates, L.P. in the amount of $1 Million for the Peninsula Station affordable housing development in San Mateo



Adopt a Resolution:


Authorizing execution of a Takeout Loan Commitment with MP San Mateo Transit Associates, L.P. in the amount of $1 Million for the Peninsula Station affordable housing development in San Mateo



Authorizing the Director of the Department of Housing or the Director’s designee to execute a Tri-Party Agreement; and any other contract documents necessary to implement the Takeout Loan Commitment.


Vision Alignment

Commitment: Offer a full range of housing choices.
Goal 9:
Housing exists for people at all income levels and for all generations of families.
Redesign our urban environment to increase vitality, expand variety and reduce congestion.
Goal 11
: New housing is clustered with jobs and commercial services along transportation corridors.


The action contributes to these commitments and goals by: providing assistance to Mid-Peninsula Housing Coalition, a nonprofit developer, in order to facilitate timely construction of Peninsula Station, a 68-unit affordable transit-oriented rental housing development located on El Camino Real in the City of San Mateo. Peninsula Station has already received predevelopment funding from the County.


Performance Measure


FY 2008-09

FY 2009-10

Number of County-supported affordable housing units completed and occupied





The County has allocated a total of $2,929,023 in County CDBG and HOME funds to assist with development of the project. In addition, the City of San Mateo assisted with acquisition of the project site. The project has also secured a commitment for tax credit financing and has been awarded a commitment of $3.8 million in State Proposition 1C infill housing bond funds. Start of construction is slated for March 2009.


However, start of construction is in jeopardy because the State has delayed release of funding for bond-awarded projects, and this delay threatens to trigger a cascade of unfavorable consequences. The construction lender is unwilling to close the construction loan without assurance that it will be paid back in full, and that assurance relies on the now-frozen State bond funding and on tax credit investments. Delay of construction would put the project at risk, because the tax credit investor’s commitment to provide equity financing would then expire. If the tax credits commitment expires, a new commitment would have to be negotiated and, given the currently unfavorable tax credit environment, it is unlikely the project would be able to secure the amount of tax credit funding needed to build the project. Thus, the immediate objective is to provide an alternate source of assurance—other than the State Proposition 1C bond funding—to the construction lender that construction loans will be repaid, so the project may proceed.


The recommended County Takeout Loan Commitment will accomplish this objective in conjunction with coordinated actions by City of San Mateo, HEART and the developer, Mid-Peninsula Housing Coalition. In mid-February the City of San Mateo will consider a staff recommendation to provide a similar back-up takeout loan commitment to the project in the amount of $1.5 million. In addition, the project is applying for a $1 million construction loan from HEART, which will help to reduce the total cost of construction period financing and thus benefit overall project financing.



Because any funds from the takeout loan would not be needed until the end of the construction period (anticipated to be October 2010), the source of the County’s back-up takeout loan commitment would be anticipated future allocations of federal (HUD) HOME housing funds in the FY 2009-10 and FY 2010-11 funding cycles. While the exact amounts of such allocations are not known at this time, based on recent HOME allocations to the county it can be conservatively estimated that the County will receive at least $1.5 million in HOME funds annually over the next two funding cycles. This would allow the Department of Housing to reserve sufficient funds over this time period to fund the Takeout Loan Commitment in the unlikely event that the state is unable to meet its obligations to fund bond-awarded projects.


County Counsel has reviewed and approved the Resolution and Agreement as to form. Risk Management has reviewed and determined that their approval is not needed as no goods will be supplied or work performed as a result of the Loan Commitment.


A complete electronic copy of this report and all referenced resolutions and agreements are available online and a complete paper version is available for review in the Clerk of the Board’s office.


Fiscal Impact

A reserve sufficient to fund this back-up takeout loan commitment will be set aside from HUD HOME allocations to the County. The County’s total obligation under this Agreement is $1 Million. There is no Net County Cost.