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AGENDA REPORT
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| | | | | | | | DATE:
| September 21, 2021
| TO:
| Mayor and City Council
| FROM:
| Stefan T. Chatwin, City Manager
| | SUBJECT: | Resolution HA2021-11 of the Fairfield Housing Authority Approving the First Amendment to the Disposition, Development, and Loan Agreement With MP 1700 Santa Monica Associates, L.P. to Allow a Two-Part Closing, and Authorizing Certain Related Actions |
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| | | | | | | | | RECOMMENDED ACTION | | Adopt resolution. |
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| | | | | | | | | STATEMENT OF ISSUE | | Staff recommends the Commission of the Fairfield Housing Authority (FHA) to adopt a resolution authorizing the First Amendment to the Disposition, Development, and Loan Agreement (DDLA) with MP 1700 Santa Monica Associates, L.P. (an affiliate formed by MidPen Housing Corporation) to provide for a two-part closing involving the transfer of the land to MidPen Housing and subsequent closing of the Construction Loan. The two-part closing addresses the tax credit investors’ concern about the donated land minimizing its tax credit benefits and the FHA’s concern about transferring the land before it can ensure the project completes its construction loan closing which is a primary milestone prior to starting construction. |
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| | | | | | | | | DISCUSSION | The FHA owns four parcels of land in the City of Fairfield totaling approximately 3.5 acres in size and collectively known as “1700 Santa Monica” now identified as the “Fair Haven Commons Apartments” at 1695 Sunset Avenue, Fairfield. These properties are further identified by Assessor’s Parcel Numbers 0037340010, 0037340190, 0037053700, and 0037053560.
On February 4, 2020, the FHA Commission adopted Resolution HA2020-03 approving the execution of a DDLA with MP 1700 Santa Monica Associates, L. P., and the council approved Resolution 2020-18 to assist in the development of new affordable housing on property owned by the FHA. The FHA and the City of Fairfield assistance included the donation of the land valued at $2.97 M, a $2.2 M loan from the Low Mod Fund, $1 M fee credits from the Fee Credit Bank, up to $1.5 M of fee deferrals and 51 Project Based Vouchers.
FHA staff has been working with MidPen Housing Corporation (“MidPen”) to pursue development of the Fair Haven Commons Apartments for affordable housing. On June 16, 2021, MidPen was awarded an allocation of 9% tax credits that will allow them to move forward with the construction of 72 affordable multifamily development units. MidPen has been diligently working to line up their construction and permanent loan financing along with the tax credits to fund the cost of construction for this development. A key portion of the financing is the sale of the tax credits to an investor that generates a portion of the construction funds.
Recent increased scrutiny by the IRS is causing tax credit investors to be more focused on the transactions that involve land transfers from public entities for below market rate prices. Fair Haven Commons fit that description and therefore drew investor concern about reduced tax credit benefits related to land. If the land transfer took place at the same time as the construction finance closing, the investor’s benefit would be reduced and subject to the appraised value of the land. The proposed solution is a two-part closing; close on the transfer of the land and then two weeks later close on the construction loan. This process would allow the donated land to MidPen to be seasoned, thereby minimizing the negative impact to the tax credit investor.
The DDLA did not contemplate this issue and consequently requires an amendment to allow the two-part closing. The amendment would provide greater assurance that title to the property would revert to the FHA should the construction loan not close.
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| | | | | | | | | FINANCIAL IMPACT | | Approval of the First Amendment to the DDLA does not have any financial impact beyond what has previously been approved by the council and the FHA Commission. The First Amendment will facilitate the two-part closing of the transactions between the City/FHA and MidPen Housing for the land transfer, and the construction loan closing between Wells Fargo, the tax credit investor, and other entities providing funding and MidPen Housing. |
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| | | | | | | | | PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION | N/A
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| | | | | | | | | ALTERNATIVE ACTION | | The FHA could choose not to approve the Amendment to the DDLA for this development. This decision would reduce the near-term opportunity to establish 71 units of affordable housing at 1695 Sunset Avenue. That would include housing targeted for the homeless and it would endanger tax credits and other funding commitments that has been allocated to build the development. This decision would also result in the FHA restarting the development process for the site and lose one to two years for another development opportunity. |
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| | | | | | | | | STAFF CONTACT | Jesus M. Morales, Senior Housing Project Manager
(707) 428-7426
jmorales@fairfiled.ca.gov
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| | | | | | | | | COORDINATED WITH | City Attorney's Office
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| REVIEWERS: | | Reviewer | Action | Date | | Jones, LaTanna | Approved | 9/13/2021 - 6:37 PM | | Alexander, Amber | Approved | 9/13/2021 - 6:59 PM | | Alexander, Amber | Approved | 9/13/2021 - 6:59 PM |
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