FROM:
Development Services
SUBJECT:
Title
Public Hearing and consideration of a Disposition and Development Agreement (“DDA”) between the City of Fontana, the Fontana Housing Authority and Fontana Courtplace I Housing Partners, L.P., for development of 1.94 acres of unimproved land located on Sierra Avenue, between Santa Ana Avenue to the north and Jurupa Avenue to the south (a portion of assessor parcel numbers 0255-101-22-0-000 and 0255-101-23-0-000)(“Property”) pursuant to California Environmental Quality Act findings concerning the adequacy of the previously adopted Mitigated Negative Declaration, and Mitigation, Monitoring, and Reporting Program.
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RECOMMENDATION:
Recommendation
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COUNCIL GOALS:
• To promote affordable housing by construction of high-quality multi-family housing which also serves to address the affordability needs of this community.
DISCUSSION:
The City has been in negotiations with Fontana Courtplace I Housing Partners, L.P., a California limited partnership (the “Developer”), regarding the development of a 50-unit affordable family-apartment housing project (“Project”) on the City-owned Property. Negotiations have included the sale and purchase of the Property to permit the Developer to -commence with the project. In order to complete the sale and purchase of the Property, the City is required to declare the Property as exempt surplus land pursuant to the Surplus Land Act, Government Code Section 54221(f)(1)(A). As such, it is required that the City conduct a public hearing to consider protests regarding the property conveyance. Additionally, the City and Developer have negotiated a DDA for the project, which includes the terms of the Property sale and purchase.
Surplus Land Act
California Government Code Section 54220 et seq. (the “Surplus Land Act”) was amended in 2019 by Assembly Bill 1486 (“AB 1486”) and requires, among other things, that prior to the disposal of any surplus land, a local agency must provide notice to, among others, affordable housing developers, and thereafter negotiate in good faith for ninety (90) days with any parties who submit a notice of interest, unless an exemption applies. Under the Surplus Land Act, as amended by AB 1486, a property is considered exempt surplus land if it is being transferred to a developer for developing housing where at least 40% of the total developed units are to be affordable to households whose incomes are less than or equal to 75% of the maximum income for lower income households (80% of Area Median Income (“AMI”), and at least half of the affordable units are set aside for very low income households (50% of AMI).
The Project to be developed on the Property will consist of 50 affordable family-apartment units, all but the manager unit, will be low, to very low or extremely low-income units. The affordability level of the units is as follows: five (5) of the units will be leased to extremely low-income households (i.e., 30% of the AMI), 25 of the units shall be leased to households that are very low income (i.e., 40%-50% AMI), and 19 units shall be leased to lower income households (i.e., 60% AMI); and there is one manager unit. The affordability levels as detailed above satisfy the requirements set forth in Government Code Section 37364, and therefore the transfer of the Property is exempt from the Surplus Land Act.
Pursuant to Government Code Section 37422 et seq., the Council adopted Resolution No. 2023-102 on October 24, 2023, declaring the property exempt from the Surplus Land Act and fixing the time for hearing protests to the property conveyance and taking final action regarding the conveyance (providing for publication of notice of the hearing and an accurate description of the property)., The Resolution has submitted to the California Department of Housing and Community Development to determine if the transaction is exempt from the Surplus Land Act, and in the event that determination is not confirmed the transaction will be terminated to comply with the Act.
In accordance with California Government Code Section 37420 et seq., the City must hold a public hearing to accept any written protests received from interested parties and, if no protests are received or if the city council votes to overrule a protest by a 4/5 majority, the City Council may adopt a resolution finding that the public interest and convenience require the sale of the Property and proceed with the sale of the Property.
Disposition and Development Agreement
The DDA stipulates the following:
• Project details to include the construction of a 50-unit affordable family-apartment housing project as detailed above;
• Terms of the Property sale and purchase including that upon receipt of a Tax Credit allocation by the Developer, the City would convey the Property to the Developer;
• Provision allowing the City to terminate the DDA if a final exempt determination is not received from the California Department of Housing and Community Development; and
• The Project has a 99-year affordability covenant commencing from recordation of the Grant Deed.
• The Project would commence within 10 days after close of escrow and the construction must be completed within 24 months from close of escrow.
Financing
The total Project cost is estimated at $34.2 million, and the financing of the Project will come from multiple sources. The Developer will be seeking both a Federal and State Tax Credits as well as a Senior Loan from a reputable institutional lender. Pursuant to the DDA the City would provide funding and financing in the amount of $14.1 million as detailed below:
Regulatory Agreement
The Project will be subject to Regulatory Agreement (attached to the DDA as Exhibit L) The Regulatory Agreement requires the Project comply with the following affordability thresholds:
• Five (5) of the units will be leased to extremely low-income households (i.e., 30% of the AMI) consisting of 3 two-bedroom units, and 2 three-bedroom units.
• Ten (10) of the units shall be leased to households that are very low income (i.e. 40% of the AMI) consisting of 2 one-bedroom units, 6 two-bedroom units, and 2 three-bedroom units.
• Fifteen (15) of the units shall be leased to households that are very low income (i.e., 50% AMI) consisting of 3 one-bedroom units, 10 two-bedroom units, and 2 three-bedroom units.
• Nineteen (19) units shall be leased to lower income households (i.e., 60% AMI) consisting of 2 one-bedroom units, 10 two-bedroom units, and 7 three-bedroom units.
• One (1) manager unit containing two-bedrooms.
Eligible persons and families on the City’s waiting list and eligible persons and families displaced by Authority will be given priority in the selection of the tenants of the Project.
CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)
Pursuant to the California Environmental Quality Act (Pub. Res. Code §§ 21000 et seq.) (“CEQA”), and the State CEQA Guidelines (14 Cal. Code Regs. §§ 15000 et seq.) the City determined that a Mitigated Negative Declaration (MND) would be prepared in order to analyze all potential adverse environmental impacts of a proposed multi-level residential affordable apartment buildings with associated green space, community gathering areas, vehicle parking, landscaping, and security fencing on the approximately 4.8-acres of land (“Courtplace Project”). The City prepared and adopted the Courtplace Project MND on November 1, 2022 for the Courtplace Project.
Pursuant to CEQA, when taking subsequent discretionary actions in furtherance of a project for which an MND has been adopted, the lead agency is required to review any changed circumstances to determine whether any of the circumstances under Public Resources Code section 21166 and State CEQA Guidelines Section 15162 require additional environmental review. Staff evaluated the proposed Resolution approving the DDA and Regulatory Agreement for the Property in light of the standards for subsequent environmental review outlined in Public Resources Code section 21166, State CEQA Guidelines section 15162 and City of Fontana’s 2019 Local Guidelines for Implementing CEQA; and,
In connection with the Resolution approving the DDA and Regulatory Agreement for the Property and the City Council’s review of the Courtplace Project MND, staff recommends that the City Council independently review all the prior environmental documentation prepared for the Courtplace Project, and exercise its independent judgment in making the determination that the Courtplace Project MND fully analyzed and mitigated, all potentially significant environmental impacts, if any, that would result from adoption of Resolution approving the DDA and Regulatory Agreement for the Property, and therefore, no subsequent EIR or mitigated negative declaration is required.
FISCAL IMPACT:
The fiscal impact associated with the approval of this item is $11,300,000 for the project for which the City will provide to the Developer for project financing and will only be realized upon an award of construction financing. In addition, the City will record a receivable in the form of a $2.8 million loan in lieu of direct and immediate payment for the land. The loan repayment is a term of 58 years. The required appropriation was not included in the 2023-24 Revised Budget. The required budget adjustments will be submitted in the next quarterly budget report as follows:
MOTION:
If received, City Council overrule any protests to the conveyance of 1.94 acres of unimproved land located on Sierra Avenue, between Santa Ana Avenue to the north and Jurupa Avenue to the south (a portion of assessor parcel numbers 0255-101-22-0-000 and 0255-101-23-0-000)(“Property”) and determine the public interest and convenience require the sale of the Property;
City Council and Housing Authority adopt the Joint Resolution Approving the Disposition and Development Agreement among the Fontana Housing Authority, City of Fontana and Fontana Courtplace I Housing Partners, L.P. for the sale of Property for the construction of a 50 unit affordable family-apartment housing project and adopt California Environmental Quality Act findings concerning the adequacy of the previously adopted Mitigated Negative Declaration, and Mitigation, Monitoring, and Reporting Program and direct staff to file a Notice of Determination.
1A Four-Fifths vote is required to overrule any protests to the Property Conveyance