City, Nonprofit Make Affordable Housing Deal
Jul 17, 2024 12:11PM ● By Angela UnderwoodYUBA CITY, CA (MPG) - An affordable housing partnership with Habitat for Humanity sparked a lengthy financial discussion with city officials on July 2.
Public Works and Development Service director Ben Moody detailed the background of Homekey 3.0, which dates back to 2022 when the California Department of Housing and Community Development (HCD) certified the city's 2021-2029 Housing Element, which promotes various housing types.
The housing type of discussion was phase one of Merriment Village apartments and the construction of 79 units.
"The big news came in February of this year when the state issued an award letter for $24.6 million," Moody said of the Homekey Standard Agreement that requires a 30-day deadline of receipt.
While there are options going forward, Moody said, “a few things were highlighted” that gave city staff reservations. One is uncertainty about funding sources.
"There was understanding that there were state funds but they might be using federal ARPA (American Rescue Plan Act) funds, which causes concerns with some of the bids, procurement process and environmental processes," Moody said.
Bids have been submitted for the project, which requires gap funding, according to Moody.
"That is where, to my understanding, we are going to have some potential discussion on that and how to secure that (gap funding)," Moody said.
The federal program's scheduling is "blatantly unrealistic," according to the public works director.
"It definitely puts into question what the ultimate timeline is," Moody said, adding flexibility is in question as well.
"How do you construct a project when they tell you it has to be built and occupied in a timeframe that is just not realistic with construction?"
Moody handed over the discussion to city attorney Shannon Chaffin, who explained part of the standard agreement for the nearly quarter-million includes a theory that the "state gives the money to the city and the city gives the money to Habitat."
"The city acts as a flow-through," Chaffin said, adding, "It means the city is assuming the obligation that those funds are spent properly."
After much discussion, Councilmember Dave Shaw asked, "How can we sign a contract knowing there is not a snowball chance … that we are going to make it?"
Shaw said if Housing and Community Development holds "hard and fast" after the city goes on a "wing and prayer" with Habitat, Yuba City is on the hook for $24.6 million.
"Our cash reserves as a city isn't much more than $30 million," Shaw said.
Councilmember Marc Boomgaarden asked Chaffin what "stake" the City of Yuba has in any assets regarding the project.
"We could (have a stake) if we had a security interest in the property," Chaffin answered.
Boomgaarden said before walking away $26.4 million worth of housing costs, the council should weigh the "responsible amount of risk" it provides as "a benefit in our community."
After more than an hour of discussion, Chaffin took votes on specific security types, including bond coverage for any gap funding of at least $7 million. Other security types included non-gap bonding of construction of nearly $22 million.
Additionally, council members asked for "a security interest lean on the property for the remaining portion with authorization to the city manager to release the lean once construction is completed and funds are expended."
Councilmember Boomgaarden said that though the city has a working relationship with Habitat, a future change of guard could be an issue.
"You can put a performance thing in there but without any teeth; it is just ink on paper," Boomgaarden said.
The discussion ended with Chaffin noting all the agreement clauses with Habitat that detail "no release of funds until performance bonds are met."
"The mayor has requested that we hold off signing until we can get the agreement met in place with Habitat and the signing agreement with HCD," Chaffin said that includes $15 million of insurance.
Calling the terms "the basket," Chaffin received a unanimous vote from the council to proceed with the long-awaited affordable housing complex.