CC 2024-10-22_09g Grant Authorization to HASLO for Additional Funding_700 Oak Park BlvdItem 9.g.
MEMORANDUM
TO: City Council
FROM: Matthew Downing, City Manager
BY: Brian Pedrotti, Community Development Director
SUBJECT: Consider Commitment of Grant Authorization to Housing Authority of
San Luis Obispo, for Additional Funding of a 63-Unit Affordable
Housing Project at 700 Oak Park Blvd
DATE: October 22, 2024
RECOMMENDATION:
Adopt a Resolution to:
1) Provide a commitment by the City of Arroyo Grande for a grant from the City’s
Affordable Housing Trust Fund, to the Housing Authority of San Luis Obispo (HASLO) for
the design, funding, construction and management of a 100% affordable housing project
in the City of Arroyo Grande;
2) Authorize a budget adjustment request in a not-to-exceed amount of $630,000 from
the Affordable Housing Trust Fund; and
3) Authorize the City Manager to negotiate a grant agreement and any other associated
documents, between the City and HASLO, establishing the terms of the grant for a total
commitment and not-to-exceed amount of $630,000.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The fiscal impact of approving the attached Resolution and contemplated, corresponding
documents, for a grant amount of $630,000 in FY 2024-2025, will be 100% funded from
the City’s Affordable Housing Trust Fund. The current balance of the City’s Affordable
Housing Trust Fund is approximately 858,600.
BACKGROUND:
On May 18, 20211, the Planning Commission approved an application from the Housing
Authority of San Luis Obispo (HASLO) for Conditional Use Permit 21-001 and Lot Merger
21-001 for a mixed-use development consisting of 63 multi-family residential units, a
1,342 square-foot community room, and 1,178 square feet of commercial space. All of
the units would be reserved for lower-income households in perpetuity. The project also
1 https://www.arroyogrande.org/AgendaCenter/ViewFile/Item/11035?fileID=17216
Page 124 of 135
Item 9.g.
City Council
Consider Commitment of Grant Authorization to Housing Authority of San Luis
Obispo, for Additional Funding of a 63-Unit Affordable Housing Project at 700
Oak Park Blvd
October 22, 2024
Page 2
includes outdoor recreational space with a barbeque area and children’s playground near
the remaining grove of oak trees near the eastern portion of the project site for the
residents of the development. The 63 dwelling units are proposed in three (3) sep arate,
three-story buildings. Two (2) of the buildings would be located along the El Camino Real
frontage and one (1) along the Chilton Street frontage. Construction documents have
been submitted and are currently in the review process. During the plan review process,
HASLO submitted a request for a contribution from the City’s Affordable Housing Trust
Fund to assist with defraying construction costs. Arroyo Grande Municipal Code (AGMC)
Section 16.80 implements the City’s Inclusionary Housing Ordinance and establishes the
regulations and administration of the Affordable Housing Trust Fund. Affordable housing
requirements apply to residential projects proposing two or more housing units, not
including the projects consisting of a single-family residence and an accessory dwelling
unit. Projects subject to the inclusionary housing ordinance have the option of reserving
a percentage of the proposed units for lower income households or paying the affordable
housing in-lieu fee. The in-lieu fee is equal to five percent (5%) of the construction
valuation. All affordable housing in-lieu fees are deposited into the Affordable Housing
Trust Fund – Fund 232 for Budgetary purposes. The Municipal Code states the purpose
of the Affordable Housing Fund is “solely to increase the supply of affordable housing
units. Funds in the affordable housing trust fund may be used to better facilitate the
improvement of the city's affordable housing stock as well as the provision of new
affordable units.”
On July 25, 20232, Council approved a Development Review and Impact Fee Grant
allocation from the Affordable Housing Trust Fund in a not-to-exceed amount of
$448,370.37 to support the development of HASLO’s affordable housing project
consisting of 63 affordable multi-family units located at 700 Oak Park Blvd. A breakdown
of the permit fees for this project that City Council approved on July 25, 2023, is provided
in Table 1 below:
Table 1: Breakdown of Permit Costs
Plan Review $33,620.92
Inspection $39,744.22
Utilities $261,070
Development Impact Fees $110,927.23
State Mandated Fees $3,008
Total $448,370.37
ANALYSIS OF ISSUES:
Due to rising interest rates and inflationary increases that have occurred since the project
was approved in 2021, HASLO continues to face a funding gap of approximately $1
million to construct this project. See Attachment 2 for the funding request letter from
2 https://pub-arroyogrande.escribemeetings.com/filestream.ashx?DocumentId=7973
Page 125 of 135
Item 9.g.
City Council
Consider Commitment of Grant Authorization to Housing Authority of San Luis
Obispo, for Additional Funding of a 63-Unit Affordable Housing Project at 700
Oak Park Blvd
October 22, 2024
Page 3
HASLO. The request from the Affordable Housing Trust Fund would cover a significant
portion of the funding gap to allow construction of the project, and ultimately, get local
residents into affordable units. HASLO will also be applying for Low Income Housing Tax
Credit funding from the State for this project. The tax credit funding is highly competitive
and projects that are able to secure and leverage the most local funding tend to be
awarded State funding. HASLO has informed the City that to secure additional tax
funding, they need to close on the property no later than November 20th of this year, and
are seeking additional funds before that time to increase the likelihood they make up the
remaining budget shortfall with additional tax credit funding.
Process
HASLO submitted a letter formally requesting a contribution from the Affordable Housing
Trust Fund to cover the funding gap in order to begin construction on this project
(Attachment 2). A contribution from the Affordable Housing Trust Fund will not only
directly benefit the project by reducing the financial burden to construct the project, it may
also prove to be critical to secure additional State funding. The Community Development
Director is responsible for the general administration of the Affordable Housing Fund, and
pursuant to the regulations adopted by City Council. Formal procedures and policies for
the disbursement of funds from the Affordable Housing Trust Fund have not been
established, so for the purposes of this project, staff is requesting that Council provide
direction authorizing the City Manager, in consultation with the City Attorney, to develop
a grant agreement and any related documents in a not-too-exceed amount of $630,000,
with required conditions and consistent with applicable law.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Adopt a Resolution to: 1) Provide a commitment by the City Council of Arroyo
Grande for a grant from the City’s Affordable Housing Trust Fund, to the Housing
Authority of San Luis Obispo (HASLO) for the design, funding, construction and
management of a 100% affordable housing project in the City of Arroyo Grande;
2) Authorize a budget adjustment request in a not-to-exceed amount of $630,000
from the Affordable Housing Trust Fund; and 3) Authorize the City Manager to
negotiate a grant agreement and any other associated documents, between the
City and HASLO, establishing the terms of the grant for a total commitment and
not-to-exceed amount of $630,000;
2. Do not adopt the Resolution; or
3. Provide other direction to staff.
ADVANTAGES:
A loan from the Affordable Housing Trust Fund will support the construction of a 63 -unit
housing development for lower income households and help the City meet its RHNA
target for new affordable units.
Page 126 of 135
Item 9.g.
City Council
Consider Commitment of Grant Authorization to Housing Authority of San Luis
Obispo, for Additional Funding of a 63-Unit Affordable Housing Project at 700
Oak Park Blvd
October 22, 2024
Page 4
DISADVANTAGES:
The allocation of funding to this project will reduce the balance of the Affordable Housing
Trust Fund, making those funds unavailable to other projects. However, the City has no
current requests from this fund, has only received one recent request from this fund in
2017, and staff is unaware of any other current projects that are eligible to receive an
allocation from this fund.
ENVIRONMENTAL REVIEW:
In compliance with the California Environmental Quality Act (CEQA), the proposed grant
agreement of funds from the Affordable Housing Fund does not qualify as a “project”
under CEQA because the action will not result in a direct or reasonably foreseeable
indirect physical change in the environment. (State CEQA Guidelines section 15060,
subd. (c)(2), (3).) Section 15378 of the State CEQA Guidelines defines a project as the
whole of an action, which could potentially result in either a direct physical change, or
reasonably foreseeable indirect physical change, in the environment. Here, the action of
disbursing the funding will not in itself result in any construction or development, and it
will not have any other effect that would physically change the environment. The action
therefore does not qualify as a project subject to CEQA. The project itself was granted a
categorical exemption when it was approved in 2021. This disbursement of funds will not
affect this prior determination.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
ATTACHMENTS:
1. Proposed Resolution
2. HASLO Letter
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ATTACHMENT 1
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF ARROYO GRANDE COMMITTING A NOT-TOO-
EXCEED AMOUNT OF $630,000, AUTHORIZING A
BUDGET ADJUSTMENT FROM THE AFFORDABLE
HOUSING TRUST FUND IN THAT AMOUNT, AND
AUTHORIZING THE CITY MANAGER TO DEVELOP A
GRANT AGREEMENT AND ANY ASSOCIATED
DOCUMENTS, WITH THE HOUSING AUTHORITY OF SAN
LUIS OBISPO FOR DESIGN, FUNDING, CONSTRUCTION,
AND MANAGEMENT OF A 63-UNIT AFFORDABLE
HOUSING PROJECT AT 700 OAK PARK BLVD, ARROYO
GRANDE
WHEREAS, the Planning Commission of the City of Arroyo Grande approved
application Lot Merger 21-001 and Conditional Use Permit 21-001 to merge four parcels
and construct sixty-three (63) multi-family residential units that will be affordable for low
income households at 700 Oak Park Blvd (“project”); and
WHEREAS, the Affordable Housing Trust Fund is administered under the general
supervision of the Community Development Director and pursuant to the regulations
established by City Council, as established by Arroyo Grande Municipal Code Se ction
16.80.080; and
WHEREAS, on July 18, 2023, the Housing Authority of San Luis Obispo submitted a
letter requesting a contribution from the City’s Affordable Housing Trust Fund to aid in
the costs in constructing the project; and
WHEREAS, on July 25, 2023, Council approved a Development Review and Impact
Fee Grant allocation from the Affordable Housing Trust Fund to support the
development of the Housing Authority of San Luis Obispo (“HASLO”) affordable housing
project at 700 Oak Park Blvd. in a not-to-exceed amount of $448,370.37; and
WHEREAS, the City committed to including that allocated $448,370.37 within the
required Regulatory Agreement for the project, a document that is recorded against the
property to ensure that all project units will remain affordable for at least 55 years from
the date of occupancy; and
WHEREAS, the City’s previously approved $448,370.37 is to cover costs associated
with the project’s building permit, including plan review and inspections, development
impact fees, utility connections, and State mandated fees for the project; and
Page 128 of 135
RESOLUTION NO.
PAGE 2
WHEREAS, on October 15, 2024, HASLO submitted a funding request for an additional
$630,000 from the City’s Affordable Housing Fund to reduce its existing funding gap
and maintain its planned closing and construction date for the project; and
WHEREAS, there is currently a statewide shortage in affordable housing options and
rent prices continue to increase, the public has an interest in an increased supply of
affordable housing, and the City may allocate these funds to facilitate the improvement
of the City's affordable housing stock to provide new affordable units to the public; and
WHEREAS, rising rates and inflation continue to impact costs and the financial burdens
of this project, and there is a public need for City’s continued assistance for this project;
and
WHEREAS, the proposed grant agreement of funds from the Affordable Housing Fund
does not qualify as a “project” under CEQA because the action will not result in a direct
or reasonably foreseeable indirect physical change in the environment. (State CEQA
Guidelines section 15060, subd. (c)(2), (3).) Section 15378 of the State CEQA
Guidelines defines a project as the whole of an action, which could potentially result in
either a direct physical change, or reasonably foreseeable indirect physical change, in
the environment. Here, the action of disbursing the funding will not in itself result in any
construction or development, and it will not have any other effect that would physically
change the environment. The action therefore does not qualify as a project subject to
CEQA. The project itself was granted a categorical exemption when it was approved in
2021. This disbursement of funds will not affect this prior determination.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo
Grande, as follows:
1. The foregoing recitals are true and correct and are incorporated herein.
2. That the City Council authorizes and approves the following:
a. A commitment by the City Council to offer and provide a grant from the
City’s Affordable Housing Trust Fund to HASLO for the design, funding,
construction and management of the affordable housing project, located at
700 Oak Park Blvd. in a not-to-exceed amount of $630,000.
b. A budget adjustment in a not-to-exceed amount of $630,000 from the
Affordable Housing Trust Fund, as a grant from the City to HASLO for the
project.
c. Authorize the City Manager, in consultation with the City Attorney, to
develop a grant agreement and any assoicated documents, in a not-too-
Page 129 of 135
RESOLUTION NO.
PAGE 3
exceed amount of $630,000, that is consistent with applicable law.
On motion of Council Member___________, seconded by Council Member
________, and by the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 22nd day of October, 2024.
Page 130 of 135
RESOLUTION NO.
PAGE 4
CAREN RAY RUSSOM, MAYOR
ATTEST:
JESSICA MATSON, CITY CLERK
APPROVED AS TO CONTENT:
MATTHEW DOWNING, CITY MANAGER
APPROVED AS TO FORM:
ISAAC ROSEN, CITY ATTORNEY
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ATTACHMENT 2
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