FROM:
Housing
SUBJECT:
Consideration of an amendment to the disposition and development agreement 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
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RECOMMENDATION:
Recommendation
Acting as the City Council and the Housing Authority Board of Directors, jointly adopt the attached Resolution No. 2025-016 and Resolution No. HA 2025-001 entitled: “A JOINT RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FONTANA, CALIFORNIA, AND THE HOUSING AUTHORITY OF THE CITY OF FONTANA, APPROVING, PURSUANT TO A PREVIOUSLY ADOPTED MITIGATED NEGATIVE DECLARATION AND MITIGATION, MONITORING, AND REPORTING PROGRAM, AN AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT BETWEEN THE FONTANA HOUSING AUTHORITY, CITY OF FONTANA, AND FONTANA COURTPLACE I HOUSING PARTNERS, L.P.; AND DIRECTING STAFF TO FILE A NOTICE OF DETERMINATION”.
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COUNCIL GOALS:
• Provide a diverse range of housing types and levels of affordability while addressing homelessness in the community by construction of affordable high-quality multi-family housing.
DISCUSSION:
Background
The City owns certain real property consisting 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”). Fontana Courtplace I Housing Partners, L.P., a California limited partnership (“Developer”) desires to acquire and develop the Property with a 50 unit affordable family-apartment housing project (“Project”).
Prior Approvals and Actions
In 2023, the Developer, the City, and the Fontana Housing Authority (“Authority”) negotiated a disposition and development agreement (“DDA”) under which the City agreed, subject to the terms and conditions provided therein, to convey the Property to Developer for the construction of the Project.
On October 24, 2023, the City Council: (1) determined that the Property qualified as “exempt surplus land” under the Surplus Land Act pursuant to Government Code section 54221(f)(1)(A); (2) declared the City’s intent to sell the Property to Developer in accordance with the DDA; and (3) set a public hearing for November 14, 2023, to consider any protests to the City’s conveyance of the Property. Following the November 14th public hearing, the City Council and the Authority’s Board of Directors (“Authority Board”) approved the DDA and authorized the City Manager and the Authority’s Executive Director to execute the same.
Collectively, the foregoing satisfied the City’s Surplus Land Act and Government Code section 37420 et seq. obligations in connection with its disposition of the Property for the Project. Refer to Attachments 1 and 2 for additional information on the October 24, 2023, and November 14, 2023, actions.
Project Funding under the DDA
The DDA contemplates that the Project’s financing will come from multiple funding sources, including equity raised by the sale of federal (and, if applicable, state) low income tax credits (“Tax Credits”), a senior loan issued from a reputable intuitional lender, a loan from the City to Partnership consisting of $6,037,692.16 in gap financing and $2,800,000.00 in acquisition financing (“City Subordinate Loan”), and a loan from the Authority to Partnership consisting of $5,262,307.84 in gap financing (“Authority Subordinate Loan”).
Under the DDA, the City’s obligations to convey the Property to Developer and fund the City Subordinate Loan, and the Authority’s obligation to fund the Authority Subordinate Loan, are subject to numerous conditions precedent, including the Project receiving a Tax Credit allocation from the California Tax Credit Allocation Committee (“CTCAC”).
Necessity for DDA Amendment
Affordable housing projects throughout California compete for a limited amount of Tax Credits. Obtaining a Tax Credit allocation from CTCAC is competitive and projects are often unsuccessful. When the DDA was approved, the Developer maintains that the Project was competitive based on previous projects that received Tax Credit allocations from CTCAC. Competition has since increased, and the Project did not receive a Tax Credit allocation in CTCAC’s most recent funding round (2024 Round 2).
Providing additional financial support to the Project will increase its competitiveness for a Tax Credit allocation from CTCAC. As such, staff is recommending that the DDA be amended to increase the amount of the Authority Subordinate Loan as set forth below.
The DDA Amendment
Currently under DDA, the Authority Subordinate Loan is for a total of $5,262,307.84 (with $1,678,959.21 coming from Low/Mod Asset Funds and $3,583,348.63 coming from AB 1486 [Surplus Land] Funds). For the reasons provided above, staff is recommending that the amount of the Authority Subordinate Loan be increased by $2,000,000.00 (coming from General Funds). Approving the DDA amendment (“First DDA Amendment”) will do so and increase the amount of the Authority Subordinate Loan to a new loan amount of $7,262,307.84. The First DDA Amendment also specifies that the Developer has the right to apply for two rounds of Tax Credits in 2025. If these applications for Tax Credits are successful, the Authority Subordinate Loan will be brought back to the City Council for consideration. If the applications are unsuccessful, the City and the Authority can terminate the DDA by providing 30 days written notice to the Developer as provided therein.
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”) be prepared in order to analyze all potential adverse environmental impacts of 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 for the Courtplace Project on November 1, 2022 (SCH #: 2022100111) and approved a Mitigation Monitoring and Reporting Program for the Project. Under the MND, the Property and the Project are Phase I of 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 this Resolution approving the First DDA Amendment 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.
In connection with this Resolution approving the First DDA Amendment and the City Council’s and the Authority Board’s review of the Courtplace Project MND, staff recommends that the City Council and the Authority Board independently review all the prior environmental documentation prepared for the Courtplace Project, exercise their independent judgment, and make the determination that the Courtplace Project MND fully analyzed and with the adoption of the Mitigation and Monitoring Reporting Program, mitigated all potentially significant environmental impacts, if any, that would result from the Resolution approving the First DDA Amendment, and therefore, no subsequent EIR or mitigated negative declaration is required
FISCAL IMPACT:
The fiscal impact associated with the approval of this item is $2,000,000 for the project for which the City will provide to the Developer for project financing from the General Fund (Project String 37600063-601). If the Developer is successful in securing the Tax Credits, the Authority Subordinate Loan will be brought back to Council for consideration with a loan repayment term of 58 years. If the Developer is unsuccessful, the City and the Authority can terminate the DDA by providing 30 days written notice to the Developer as provided therein. The required appropriation was included in the 2024-25 Midyear Budget request.
MOTION:
City Council and Housing Authority Board of Directors jointly adopt the attached Resolution No. 2025-016 and Resolution No. HA 2025-001 entitled: “A JOINT RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FONTANA, CALIFORNIA, AND THE HOUSING AUTHORITY OF THE CITY OF FONTANA, APPROVING, PURSUANT TO A PREVIOUSLY ADOPTED MITIGATED NEGATIVE DECLARATION AND MITIGATION, MONITORING, AND REPORTING PROGRAM, AN AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT BETWEEN THE FONTANA HOUSING AUTHORITY, CITY OF FONTANA, AND FONTANA COURTPLACE I HOUSING PARTNERS, L.P.; AND DIRECTING STAFF TO FILE A NOTICE OF DETERMINATION”.