CC - Item 4E - Approval of Partnership with East Los Angeles Community Corporation for Use of Home CHDO FundsTO: HONORABLE MAYOR
AND MEMBERS OF THE
ROSEME ~CCIITY COUNCIL
FROM: BILL CRO~E, CITY MANAGER
DATE: July 21, 2004
SUBJECT: APPROVAL OF PARTNERSHIP WITH THE EAST LOS ANGELES
COMMUNITY CORPORATION FOR USE OF HOME CHDO FUNDS
In Fiscal Year 1996, the City of Rosemead became an entitlement jurisdiction for HOME
funds. HOME funds are federal funds restricted to,the creation of affordable housing.
Under this program, the City is entitled to a formula share of HOME funds. The City's
annual allocation is a little over $500,000 per year. Of the total amount, 15% must be
set aside for Community. Development Housing Organizations (CHDO's). Since 1996,
the City was successful in using HOME funds in the acquisition and construction of the
Garvey senior housing development. However, beginning in 1999, the City has had
difficulty in finding eligible projects in which to expend the funds. HOME funds are highly
restrictive and must be obligated for expenditure within twenty-four (24) months of
receipt of funds or they are subject to recapture by the federal government. CHDO
funds are the most restrictive of HOME funds, since these funds can only be committed
to designated organizations that meet the' federal requirements. The City has
uncommitted CHDO funds. Of those funds, $8,100 are subject to federal recapture if
they are not committed by July 31, 2004.
COUNCIL AGENDA
JUL 2 7 2004
rrEM No. -a__0&r'
Background and Discussion
The City has created the Mortgage Assistance Program (MAP) using HOME funds. That
program began in FY 2001-2002. Because of the steep increase in housing prices in the
City of Rosemead, the City has had difficulty in expending the amount of HOME funds
available. In addition, the City has had difficulty in finding an eligible designated
Community Housing Development Organization (CHDO) that will operate in its
jurisdiction.
In 2002, staff met with representatives of the U.S. Department of Housing and Urban
Development (HUD) in order to discuss fund obligation and expenditure. In that
meeting, HUD staff stated that there was no statutory requirement that HOME funds be
spent within the jurisdiction and further stated that the City had the opportunity to
partner with other communities in order to use these funds. HUD further stated that the
City could partner for both entitlement funds, as well as CHDO set-aside funds. The City
entered into discussions with the Los Angeles Community Development Commission
(LACDC) regarding regional solutions to housing issues in the County. As a result, in
June 2002, the City designated ELACC as a CHDO and partnered with the LACDC and
ELACC for the use of HOME funds in the construction of affordable rental housing in the
East Los Angeles area. Units were marketed to Rosemead residents, as well as to other
County residents.
The City has been in discussions with ELACC regarding future potential developments.
ELACC is proposing to construct new affordable rental units in the East Los Angeles
area, within the City's supervisorial district. Staff is recommending that the City enter
into a commitment agreement to provide $160,000 in HOME-funded CHDO financing
for the project. In return, ELACC must market the units and make applications available
to Rosemead residents. The agreement will provide that the units:
1. Be available to HOME-qualified low-to-moderate income residents
2. Be for a project that is mutually agreeable to ELACC and to the City
3. Be marketed and available to Rosemead residents
4. That the loan will be forgiven after twenty (20) years of successful performance by
ELACC
The proposed Commitment Agreement is attached for your review.
RECOMMENDATION:
1. That the City Council approve the partnership with the East Los Angeles Community
Corporation;
2. Authorize the City Attorney to finalize the commitment agreement and related
documents: and
3. Authorize the City Manager or designee to execute all agreements.
HOME Partnership, 2
CITY OF ROSEMEAD
HOME Program
Commitment Agreement
THIS AGREEMENT made and entered into this July 27, 2004, by and between East Los
Angeles Community Corporation, (hereinafter "AGENCY") and the City of Rosemead, a
municipal corporation (hereinafter "CITY").
WITNESSETH
WHEREAS, AGENCY is developer of affordable housing in the East Los Angeles
community and is a designated Community Housing Development Organization (CHDO).
WHEREAS, AGENCY is in the process of procuring entitlements for development of
properties for affordable housing.
WHEREAS, CITY is the administrator of federal funds which may be used to provide
assistance to non-profit organizations that will benefit low-to-moderate income residents.
WHEREAS, AGENCY desires to develop affordable housing with the assistance of the
financial incentives offered by CITY.
NOW, THEREFORE, for and in consideration of their mutual promises, the AGENCY and
the CITY hereby agree as follows:
LOAN AMOUNT: CITY shall lend AGENCY the amount of ONE HUNDRED SIXTY
THOUSAND DOLLARS ($160,000) for construction of affordable rental housing
units at a project to be mutually determined by AGENCY and CITY. Loan shall be
evidenced by a note secured by a deed of trust on the PROPERTY, which said
documents shall be in a form approved by CITY's attorney. Said loan shall be for a
term of twenty (20) years at six percent (6%) interest. Payments of principal and
interest shall be payable on each anniversary of the date of execution of the note
(Anniversary Date). Payment and any accrued and unpaid interest shall be payable
in ten equal installments upon each Anniversary Date, provided that payment of the
amount of principal and any interest shall be forgiven on an annual basis as long as
AGENCY operates the project in accordance with the City's agreement and
applicable federal, state and local requirements.
2. The loan documentation shall be in a form approved by the CITY, including, without
limitation, the subordination agreement, the Note and Deed of Trust, including
provisions regarding assignment of rents and profits and assignment of AGENCY'S
interest in all governmental permits and construction contracts obtained for
development of the improvements.
CITY'S commitment to make the loan is subject satisfaction, prior to disbursement,
of the conditions outlined in Sections 2 a through j. If said conditions are not
satisfied within 12 months of the Commitment Agreement, CITY'S obligation to
make the AGENCY loan pursuant to this Agreement shall expire without further
notice to AGENCY.
3. FINANCING: AGENCY agrees to use the loan proceeds only for paying the cost of
construction and to finance any additional costs and expenses using other funds.
CITY will enter into financing agreement including Note and Deed of Trust with
AGENCY. CITY's obligation to provide the loan is conditioned upon the following:
a. AGENCY securing all land use entitlements, environmental clearances and
permits necessary for development of the PROPERTY for affordable rental
development.
b. AGENCY demonstrating to CITY that it has secured all financing
commitments necessary for the development of the PROPERTY for
affordable rental development. CITY review and approval shall be limited to
assurance that there is adequate security for the CITY loan, that the
necessary financing commitments for development of the PROPERTY and
sale of the units are firm and in sufficient amounts necessary to finance
development costs and land costs in excess of the proceeds of CITY loan.
Such evidence of financing shall include:
i. A construction budget and schedule, current as of closing date of the
Loan and Deed of Trust, demonstrating to the satisfaction of CITY the
availability of sufficient funds to construct the improvements.
ii. Copies of the construction loan documents. resale financing
commitments and demonstration of AGENCY'S satisfaction of, or firm
and binding commitment to meet, all preconditions thereof. AGENCY
shall provide written certification to CITY that such loan documents
are copies"or draft copies of the action loan documents executed or to
be executed by AGENCY on or before closing date of CITY loan.
iii. A copy of the construction contract, if any, between the AGENCY and
a licensed general contractor covering all construction required by this
Agreement and providing for the withholding from each progress
payment a retention, as is customary in the Southern California home
building industry, to assure completion of the improvements.
iv. Evidence that adequate equity funds are available to fund any portion
of the development costs that are not funded by the CITY loan.
ELACC commitment Agreement, page 2
c. AGENCY demonstrating to CITY that it has stable qualified and experienced
staffing to undertake and manage the project.
d. AGENCY having provided CITY with the names and qualifications of the
architect, contractor, construction supervisor responsible for construction of
project and CITY having approved said responsible parties, which approval
shall not be unreasonably withheld.
e. CITY being provided with a commitment from a title company acceptable to
CITY to issue a lender's title insurance policy in the amount of $160,000.00
showing CITY's note senior to all encumbrances other than encumbrances
approved by the CITY that are necessary to the development of the
PROPERTY for affordable rental development.
f. AGENCY'S ability to provide CITY with written representations and
warranties, in a form acceptable to the CITY that (i) the AGENCY'S
execution and performance of this Agreement and the loan documents were
duly authorized and are legally binding on AGENCY, and (ii) that there is no
litigation or other proceeding, either pending or threatened, which could have
a material adverse effect on the proposed development, the PROPERTY, the
financial condition of the AGENCY or the ability of AGENCY to perform
pursuant to the Agreement.
g. An environmental assessment prepared by a qualified agent relating to the
presence of hazardous materials or toxic substances on or around the
PROPERTY and confirming that any such materials or substances described
in such assessment have been removed or mitigated in accordance with law
and that the condition of the PROPERTY will not result in liability for cleanup
of the PROPERTY by AGENCY or CITY under applicable law.
h. A soils report, including a statement of whether or not the PROPERTY is in
an earthquake hazard area and an engineering study regarding earthquake
design and the qualifications and experience of the soils engineer preparing
the report.
i. Final construction drawings for the improvement to be constructed on the
PROPERTY shall be consistent with the Conditions for Approval from the
City of Rosemead. AGENCY shall submit to CITY certification that AGENCY
has received all entitlements and approvals for PROPERTY. The parties
acknowledge that it is common practice in the construction industry to make
changes during the course of construction or projects such as this and
ELACC commitment Agreement, page 3
consent to requested changes will not be unreasonably withheld by CITY so
long as changes do not substantially alter plans and required plan changes
approvals have been given by the City of Rosemead.
j. In the performance of this Agreement, the AGENCY shall cause CITY to be
named as an additional insured under any and all liability policies secured with
respect to the Project. AGENCY shall provide CITY with evidence of insurance
to the satisfaction of CITY.
4. TIME OF PERFORMANCE: AGENCY agrees to obtain all necessary entitlements
within twelve (12) months from commitment agreement.
5. HOME REQUIREMENTS: The provisions of the HOME regulations are
incorporated into this Agreement by reference and AGENCY agrees to comply with
all such terms. ,
The CITY and AGENCY in the performance of this Agreement shall take all actions
necessary to assure compliance with the provisions of the National Environmental
Policy Act of 1969, Title VI of the Civil Rights Act of 1964, Title VII of Civil Rights Act
of 1968, Section 3 of the Housing and Urban Development Act of 1968, as amended,
The Fair Housing Act, the Act, and all other applicable laws and regulations.
5. MARKETING: AGENCY shall ensure that the project is open to applicants from the
CITY of Rosemead jurisdiction. CITY shall be responsible for disseminating marketing
materials for the project within its own jurisdiction. AGENCY shall ensure that, in
accordance with HOME requirements, that AGENCY has an affirmative marketing
plan that meets federal requirements.
6. INDEMNIFICATION: AGENCY shall indemnify, defend and hold harmless, the
CITY its officers, agents, or employees from and against any loss, liability, or
expense from defense costs, legal fees, and claims for damages that may arise or
result from the wrongful acts or omissions or the allegedly wrongful or negligent acts
or omissions of the AGENCY, its officers, agents or employees.
7. FAIR HOUSING: The CITY and AGENCY agree that HOME Program funding for any
activities in or in support of any cooperating CITY that does not affirmatively further
fair housing within its own jurisdiction, or that impedes CITY action to comply with its
fair housing certification, is prohibited.
8. EMPLOYMENT DISCRIMINATION: AGENCY shall not discriminate against any
employee or application for employment because of race, color, religion, sex,
national origin, age, familial status or handicap. AGENCY shall take affirmative
action to ensure that applicants are employed, and that employees are treated
during employment, without regard to their race, color religion, sex, national origin,
ELACC commitment Agreement, page 4
age, familial status or handicap. Such action shall include, but not be limited to, the
following: employment, upgrading, demotion or transfer, recruitment or recruitment
advertising, layoff or termination, rate of pay or other forms of compensation and
selection for training including apprenticeship. . ,
AGENCY agrees to post in conspicuous place available to employees and applicants
for employment, notices setting forth the provisions of this non-discrimination clause.
AGENCY shall, in all solicitations or advertisements for employees placed by or on
behalf of AGENCY, state that all qualified applicants will receive consideration for
employment without regard to race, color, religion, sex, national origin, age, familial
status or handicap
10. INSPECTION OF RECORDS: CITY and the United States Government and/or their
representatives shall have access for purpose of monitoring, auditing, and
examining AGENCY'S activities and performance, to books, documents and papers,
and the right to examine records of AGENCY'S sub-contractors, bookkeepers and
accountants, employees `in regard to said loan. CITY and the United States
Government and/or their representative shall also schedule on-site monitoring at
their discretion. Monitoring activities may also include, but are not limited to,
questioning employees and entering any premises or any site in which any activity
funded hereunder are conducted or in which any of the records of AGENCY are
kept. Nothing herein shall be construed to require access to any privileged or
confidential information as set forth in Federal or State law.
In the event AGENCY does not make the above-referenced documents available to
the City of Rosemead, California, AGENCY agrees to pay all necessary and
reasonable expenses incurred by CITY in conducting any audit at the location
where said records and books of account are maintained.
11. ASSIGNABILITY. AGENCY shall not assign or transfer any interest in this
AGREEMENT, whether by assignment, delegation or novation, without the prior
written consent of CITY..
12. AGREEMENT: This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto and contains all the covenants and
agreements between the parties with respect to the conditions of said services and
funding in any manner whatsoever. Each party to this Agreement acknowledges
that no representations, inducements, promises or agreements, orally or otherwise,
have been made by any party, or anyone acting on behalf of any party, which are
not embodied herein, and that no other agreement or amendment hereto shall be
effective unless executed in writing and signed by both CITY and AGENCY.
ELACC commitment Agreement, page 5
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day
and year first set forth hereinabove.
BY:
CITY OF ROSEMEAD EAST LOS ANGELES COMMUNITY
CORPORATION
APPROVED BY CITY ATTORNEY:
ELACC commitment Agreement, page 6