City Council Agenda Report Meeting Date: February 3, 2015

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1 - CITYotCHICO ~ I...C\811 TO: FROM: RE: City Council Agenda Report Meeting Date: February 3, 2015 City Council Marie Demers, Housing Manager Authorization of a City HOME Loan, CDBG Grant and Conveyance of City-Owned Property to Habitat for Humanity to Build Self-Help Homes at 18 and 178 E. 11th Street REPORT IN BRIEF In May 2010 and 2011, the Chico Redevelopment Agency purchased single-family properties at 18 and 178 E. 11th Street, as part of the formerly proposed Park Avenue and 11 1 h Street Low and Moderate Income Housing Redevelopment Project. Due to the dissolution of the Redevelopment Agency, the project did not proceed. The properties are recognized by the State Department of Finance as "Housing Assets of the City of Chico". It is proposed that the City convey the properties to Habitat for Humanity of Butte County (Habitat) to build two selfhelp homes for low-income home buyers. A $35,000 City CDBG grant and a $120,000 City HOME loan would fund lead and asbestos abatement, demolition of the existing structures and construction of two homes. The homes will be built on raised foundations in a traditional neighborhood cottage style in keeping with the neighborhood. Habitat's home buyers will contribute "sweat equity" toward their homes by participating in the building process. Habitat partners with local organizations and businesses that contribute volunteer labor and donated materials to build homes. Recommendation: The Finance Committee recommends (3-0) that the City Council adopt the following resolutions: RESOLUTION OF THE CITY OF CHICO AUTHORIZING AN AFFORDABLE HOUSING FUND LOAN AGREEMENT BETWEEN THE CITY OF CHICO AND HABITAT FOR PROPERTY LOCATED AT 18 AND 178 EAST 11TH STREET FOR THE DEVELOPMENT OF LOW INCOME AFFORDABLE HOMES RESOLUTION OF THE CITY OF CHICO AUTHORIZING EXECUTION OF A HOME LOAN AND A COMMUNITY DEVELOPMENT BLOCK GRANT TO HABITAT FOR HUMANITY OF BUTTE COUNTY FOR THE DEVELOPMENT OF A LOW INCOME AFFORDABLE HOUSING PROJECT LOCATED AT 18 AND 178 EAST 11TH STREET FISCAL IMPACT An allocation of $10,000 in HOME funds was approved for this project in the HUD Annual Action Plan and in the adopted City Budget in June For the CDBG grant, $35,000 may be reprogrammed from unused funds previously allocated to the Torres Shelter Expansion project. The $78,100 City loan will be the appraised lot value of the City-owned properties to be conveyed to Habitat, and will not involve cash disbursements. There is no fiscal impact to the General Fund. COUNCIL COMMIITEE RECOMMENDATION The Finance Committee recommended (3-0) that the City Council approve the resolutions described above. BACKGROUND Property Description: The properties are located on E. 11th Street, east of Park Avenue and adjacent to Little Chico Creek. The property at 18 East 11th Street is 0.21 acres (9, 147 sq. ft.), with net usable acreage of A 1,390 square foot house originally built around 1900, with subsequent modifications and additions, occupies the property. The house has been vacant since purchased in 2010 and is currently boarded up. The property at 178

2 RE: Habitat 11 1 h Street Meeting Date: February 3, 2015 Page 2 E. 11th Street is 0.24 acres (1 0,454 sq. ft.), with net usable acreage of Two dwelling units occupy the property; the original 1,202 square foot house built around 1920, and a 924 square foot converted garage, built around These buildings have been vacant since purchase in 2011 and are currently boarded up. Several of the building systems, including the foundations were found to be in a state of failure and, along with the fact that the houses are located in the 1 DO-year flood plain, it was determined that the best course of action would be to demolish and replace the houses. Each property is served by City sewer, are in the Flood Zone AO, and are zoned R1. Property Acquisition: In May 2010, the Chico Redevelopment Agency purchased the property at 18 E. 11th Street for $270,000, and in June 2011, the Agency purchased the property at 178 E. 11th Street for $270,000. It was intended that these parcels, together with 174 E. 11th Street and the adjacent parcels that front Park Avenue, would be acquired, cleared and redeveloped with ground floor commercial uses and affordable housing above. Due to the dissolution of redevelopment agencies state-wide, the acquisition of the adjacent properties was not completed. Builder: Habitat is an independent local affiliate of the International Habitat for Humanity. They are dedicated to eliminating substandard housing and providing simple, decent affordable housing for all people. Within the past month, Habitat completed the last of the 13-home subdivision called "Habitat Greens", situated at D Street between 1th and 19th Streets in the Chapman Neighborhood. The City provided land, HOME, Federal Home Loan Bank -AHEAD and CDBG funding for the completion of this project. Construction of homes at 18 and 178 E. 11th Street would allow Habitat to continue its building program in Chico over the next year, and will further donor and volunteer partnerships forged in developing the Habitat Greens subdivision. Habitat home buyers contribute "sweat equity" toward their homes, participating in the building process. Most recently, Habitat has partnered with Ch ico Unified School District and Youth Build, a program funded through the U. S. Department of Labor, which provides a training and mentorship program for at-risk youth aged 1-24 who are concurrently working toward obtaining their GED or high school diplomas. Property Description: The properties are located on E. 11th Street, east of Park Avenue and adjacent to Little Chico Creek. The property at 18 East 11th Street is 0.21 acres (9, 147 sq. ft.), with net usable acreage of A 1,390 square foot house originally built around 1900, with subsequent modifications and additions, occupies the property. The house has been vacant since purchased in 2010 and is currently boarded up. The property at 178 E. 11th Street is 0.24 acres (10,454 sq.ft.), with net usable acreage of Two dwelling un its occupy the property; the original 1,202 square foot house built around 1920, and a 924 square foot converted garage, built around These buildings have been vacant since purchase in 2011 and are currently boarded up. Several of the building systems, including the foundations were found to be in a state of failure and, along with the fact that the houses are located in the 1 DO-year flood plain, it was determined that the best course of action would be to demolish and replace the houses. Each property is served by City sewer, are in the Flood Zone AO, and are zoned R1. Project Description: The existing buildings contain lead and asbestos and abatement will be required. Once the abatement is complete, the buildings will be demolished and replaced with a three-bedroom, one-bath home on each parcel. The homes will be similar in design to those of Habitat Greens, but will be on raised foundations to comply with flood zone building requirements. Additionally, Habitat is working to incorporate architectural features in keeping with the neighborhood style. Habitat intends to sell these homes to families with incomes under 50% of the area median income and the projected completion date for the homes is December Currently, a family of three with $24,50 annual income would qualify. Financing: The City HOME and CDBG funds will enable the abatement, demolition and construction of the two new homes over the next year. The financing structure consists of City Affordable Housing Fund (AHF) and HOME fund loans to Habitat which will then be assumed as forgivable loans by each of the home buyers. This is a similar loan structure used for other "sweat equity" affordable homeownership projects including the Habitat Greens, CHIP Manzanita Pointe and Martha's Vineyard subdivisions. The City will convey the two parcels to Habitat, and concurrently, enter into a loan agreement with Habitat for the $78,100 lot value of the properties; $38,700 for 18 E. 11th Street and $39,400 for 178 E.11 th Street. When construction is completed, each homebuyer will assume a forgivable loan for the respective land value. The City will also enter into a $120,000 City HOME loan with Habitat, which will be assumed as a forgivable loan by each home buyer at $0,000 each. Finally, the City will provide a $35,000 CDBG grant to the project to fund abatement

3 RE: Habitat 11 1 h Street Meeting Date: February 3, 2015 Page3 and demolition. The CDBG grant will be forgiven when Habitat completes construction of the homes and sells them to qualified low-income home buyers. A summary of the project financing follows. Sources City Property City HOME Forgivable Loan City CDBG Grant Private Grants Total *Average of 2 lots Property Acquisition Design/Engineering/Fees Demo/ AbatemenVT est Construction Total Per Unit $ 39,050* $ 0,000 $ 17,500 $ 93,450 $210,000 Per Unit $ 39,050 $ 17,250 $ 17,500 $ $210,000 $ 78,100 $ 120,000 $ 35,000 $ 18,900 $420,000 $ 78,100 $ 34,500 $ 35,000 $ $420,000 Per Habitat's procedures, a qualified buyer is identified prior to construction start and once the construction is complete, the home is legally transferred to the home buyer. Covenants are recorded on the property requiring that the property remain affordable for specified periods of time. The term of the affordability covenant will be 45 years for the Affordable Housing Fund loan, and 30 years for the City HOME loan. Habitat provides a first mortgage with payments amortized over a year term with no interest. The City deferred payment loans will require repayment with 2% interest if the home is re-sold to a buyer that does not qualify as a low income household during the affordability period. Once the respective affordability periods expire, the loans become grants. Below is a summary of the individual home financing. Home Buyer Financing Habitat Mortgage City LMIHF Loan City HOME Loan Various Grants Total 18 E. 11th $ 73,200 $ 38,700 $ 0,000 $ 38,100 $210, E. 11th $ 73,200 $ 39,400 $ 0,000 $ $210,000 Total $14,400 $ 78,100 $120,000 $ $420,000 DISCUSSION On January 17, 2012, the City Council adopted a resolution electing that the City of Chico become the Successor Housing Agency to the Chico Redevelopment Agency, once the dissolution of the agency became effective February 1, 2012, pursuant to State AB 2. Housing assets transferred to the City of Chico include the properties on E. 11th Street that were acquired by the Chico Redevelopment Agency with Low and Moderate Income Housing Funds. Section 3417(c) of AB 2 authorizes the Successor Housing Agency to perform activities applicable to Community Redevelopment Law (Health & Safety Code, Section et. al. ), with regard to its assets, including conveyance of land for the development of affordable housing on property purchased with Low and Moderate Income Housing Funds (Health & Safety Code, Section (e)). Property Conveyance: It is proposed that the City enter into a loan agreement with Habitat and concurrently convey the properties at 18 and 178 E. 11th Street, valued at $78,100. In exchange, Habitat will agree to construct two homes on the properties and sell them to low-income home buyers. The loan will be secured by a deed of trust and an affordability covenant recorded on the properties. The property disposition must comply with Health & Safety Code Section requiring a publicly noticed hearing prior to City authorization. The conveyance is considered a sale of a "small housing project", as defined at Section Environmental Review: City staff conducted an environmental review prior to acquisition of the properties and a Mitigated Negative Declaration was adopted January 18, Per the State California Environmental Quality Act (CEQA) Guidelines Section 1512, a subsequent negative declaration is not required. Because federal HOME and

4 RE: Habitat 11 1 h Street Meeting Date: February 3, 2015 Page 4 CDBG funds will be used to finance the project, City staff has conducted an environmental review and found the project conforms with the National Environmental Policy Act (NEPA) as a categorically excluded project per 24 CFR Section 58.35(a)(4)(i), and subject to 24 CFR Section A Notice of Intent and Request for Release of Grant Funds will be submitted to HUD and no funds will be disbursed until HUD issues an Authority to Use Grant Funds. PUBLIC CONTACT The Chico Heritage Association has been consulted and Habitat has been in communication with neighbors in the vicinity of the project. Public notices were printed in the local Enterprise-Record newspaper on December 8, 2014, January 1 and 23, The project was presented at the December 23, 2014 Finance Committee meeting. PROPOSED TIMELINE Construction Start Construction Completion March 2015 December 2015 Reviewed by: Approved by: Mark Wolfe, Community Director Mark Orme, City Manager DISTRIBUTION City Clerk (3) Nicole Bateman, Habitat for Humanity ATTACHMENTS Attachment A-Location Map Attachment 8-Property Disposition and Loan Agreement Resolution Attachment C-HOME Loan and CDBG Grant Agreement Resolution FILE: MSP Subdivisions-Habitat for Humanity h Street-20 HOME/ 201 CDBG/ 392 LMIHF

5 RESOLUTION NO. 2 (Uncodified) 3 RESOLUTION OF THE CITY OF CHICO AUTHORIZING AN AFFORDABLE HOUSING 4 FUND LOAN AGREEMENT BETWEEN THE CITY OF CHICO AND HABITAT FOR HUMANITY OF BUTTE COUNTY AGREEING TO THE DISPOSITION OF CITY 5 PROPERTY LOCATED AT 18 AND 178 EAST 11TH STREET FOR THE DEVELOPMENT OF LOW fncome AFFORDABLE HOMES 7 WHEREAS, on March 2, 2010 and on January 18,2011, the Chico Redevelopment Agency 8 authorized the acquisition of parcels at 18 and 178 East 11th Street (the "Properties"), further 9 described in Exhibit "A", with Low and Moderate Income Housing Funds for the purpose of 1 0 building affordable housing; and 11 WHEREAS, on January 17,2012, the City of Chico (the "City") elected to retain the housing I 2 functions of the Chico Redevelopment Agency, thereby becoming the Housing Successor, in 13 accordance with Health & Safety Code Section 34 I 7; and 14 WHEREAS, the City, acting in the role of Housing Successor, retains the housing assets of 15 the former Chico Redevelopment Agency, including property purchased with Low and Moderate 1 Income Housing Funds, and administers those assets in accordance with Health & Safety Code et. al., as required by Health & Safety Code Section 3417(c); and 18 WHEREAS, the City desires to support the development ofhomes affordable to low-income 19 households, furthering goals of the Housing Element adopted June 17, 2014; and 20 WHEREAS, Habitat for Humanity of Butte County ("Habitat") has requested conveyance 21 of City-owned property in order to build two self-help homes (the "Project") that are affordable to 22 lower-income households with incomes not more than 80% of area median income ("Home 23 Buyers"); and 24 WHEREAS, the Project is a "Small Housing Project", as defined in Health & Safety Code 25 Section NOW THEREFORE, BE IT RESOLVED, by the City of Chico, as follows: Conveyance of the Property from the City to Habitat. The City hereby authorizes the 28 conveyance of the Property from the City to Habitat, contingent on the concurrent execution ATTACHMENT 8 Page 1 of 4

6 by Habitat of a Loan Agreement, Affordability Covenant and Deed of Trust, as described below. The City Manager shall be and is hereby authorized to execute Grant Deeds to Habitat for the Property. Loan from the City to Habitat. The City hereby approves a loan of Affordable Housing Funds to Habitat in the amount of Seventy-Eight Thousand One Hundred Dollars ($78, 100), which is the current value of the Property purchased with Low and Moderate Income Housing Funds, for the development of the Project (the "Loan Agreement"). The loan shall be subject to the following terms and conditions: a. The term of the Loan Agreement shall be forty-five (45) years from the date of execution. The interest rate shall be two percent (2%) per annum. The Home Buyers will assume the loan in correspondence with the appraised lot values as follows: Thirty-Eight Thousand Seven Hundred Dollars ($38, 700) for 18 East 11th Street and Thirty-Nine Thousand Four Hundred Dollars ($39,400) for 178 East 11th Street, at the time Home Buyers purchase the homes, and will enter into a separate loan agreement with the City. The loan agreement between the City and each Home Buyer will have a forty-five year term and an interest rate of two percent (2%) per annum. Once the loans are assumed by each Home Buyer, any interest accrued on the Habitat loan shall be forgiven. b. Habitat shall complete and sell the two homes in the Project to Home Buyers by December 31, 201. c. In the event that Habitat does not proceed with the Project or does not cure default within the time proscribed in the Loan Agreement, Habitat shall reconvey the Property to the City. d. The loan shall be made by the City to Habitat in accordance with the terms and conditions of the Loan Agreement between the City and Habitat. Such agreement shall set forth the terms and conditions under which the Property provided for herein will be used by Habitat, shall contain such provisions as may be required to ensure that the City' s loan is being made in compliance with the California Health and S:\0_HOME_HUD\Habitat Projects\ l i th St. Habitat\Propeny Conveyance Reso.wpd Page 2 of4

7 Safety Code, and shall be in a fonn and content satisfactory to the City Attorney f. g. Upon concurrence with the tenns and conditions of such Loan Agreement by Habitat, the City Manager shall be and is hereby authorized to execute such Loan Agreement on behalfofthe City. As a condition of the Loan Agreement, Habitat shall execute an affordability covenant governing the use of the Project as affordable to Home Buyers (the "Covenant"), which shall be recorded. Such Covenant shall require, for a period of forty-five ( 45) years from the date ofthe issuance of the final certificate of occupancy for the Project, that all homes within the Project be sold at affordable housing costs to Home Buyers in accordance with Health & Safety Code Section The Covenant shall require each Project Home Buyer enter into a new Covenant for a period of forty-five (45) years. In the event the Home Buyer sells a house to a household that is not a Lower Income Household during the term of the Covenant, the Home Buyer that had assumed the Covenant shall repay to the City the amount of the loan attributed to the house within the Project, plus outstanding interest at two percent (2%) per annum. If the house continues to be occupied by a Home Buyer through the end of the loan tenn, the loan, including all accrued interest, shall be forgiven. The Covenant shall contain such other provisions as the City Manager shall determine are necessary to comply with the Affordable Housing Provisions of the Community Redevelopment Law, shall otherwise be in a form and content satisfactory to the City Attorney. Upon execution of the Covenant by Habitat, the City Manager shall be and is hereby authorized to execute such Covenant on behalf ofthe City. As a further condition of the Loan Agreement provided for herein, Habitat shall execute a Deed of Trust in favor of the City which shall be recorded and which shall secure the obligations to repay the loan in the event it is determined that there has been a breach of Habitat's duties and obligations under the Covenant or Loan Agreement. The Deed of Trust shall contain such other provisions as may be S:\0_ HOME_HUD\Habitat Projects\l lth St. Habitat\Property Conveyance Reso.wpd Page 3 of 4

8 required to insure that the City's loan is made in compliance with the Affordable h. Housing Provisions of the Community Redevelopment Law, shall be in a form and content satisfactory to the City Attorney. Each Home Buyer that purchases a house in the Project shall execute a Deed oft rust in favor of the City which shall be recorded and which shall secure the obligations to repay the loan in the event it is determined that there has been a breach of the Covenant. The Deed oftrust shall contain such other provisions as may be required to insure that the City's loan is made in compliance with the Affordable Housing Provisions of the Community Redevelopment Law, shall be in a form and content satisfactory to the City Attorney The City authorizes the Covenant and Deed oftrust to be subordinate to deeds of trust and 12 related security agreements in favor of institutional lenders providing construction and 13 permanent financing An environmental review was completed prior to acquisition of the properties and a 15 Mitigated Negative Declaration was adopted January 18, Per the State California 1 Environmental Quality Act (CEQA) Guidelines Section 1512, a subsequent negative 17 declaration is not required. 18 THE FOREGOING RESOLUTION was adopted by the City of Chico at its meeting held on 19 by the following vote: 20 AYES: 21 NOES: 22 ABSENT: 23 ABSTAIN: 24 DISQUALIFIED: 25 2 ATTEST: Deborah R. Presson, City Clerk S:\0_HOME_HUO\Habitat Projects\ l lth St. Hab1tat\Propeny Conveyance Reso.wpd Page 4 of4

9 EXHIBIT II A II LEGAL PROPERTY DESCRIPTION THE LAND REFERRED TO HEREIN BELOW IS SITU A TED TN THE CITY OF CHICO, COUNTY OF BUTTE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS: THE WESTERLY 44 FEET OF LOT, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "OFFICIAL MAP OF CHAPMAN' S NORTH ADDITION TO CHICO, BUTTE COUNTY, CALIFORNIA", WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, ON MARCH 4, 1901, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT A POINT OF CHAPMAN'S STREET, SAID ADDITION, BEING A CORNER COMMON TO LOTS 5 AND ; THENCE EASTERLY 44 FEET; THENCE AT A RIGHT ANGLE NORTHERLY TO LITTLE CHICO CREEK; THENCE FOLLOWING DOWN LITTLE CHICO CREEK TO THE LINE BETWEEN SAID LOTS 5 AND ; THENCE AT A RIGHT ANGLE SOUTHERLY ON LINE BETWEEN SAID LOTS 5 AND TO CHAPMAN STREET AND THE PLACE OF BEGINNING. APN: EAST lith STREET THE LAND REFERRED TO HEREIN BELOW IS SITU A TED IN THE CITY OF CHICO, COUNTY OF BUTTE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS: PARCEL I: BEING A PART OF LOT 8, AS SHOWN ON THAT CERTAIN MAP ENTITLED "OFFICIAL MAP OF CHAPMAN' S NORTH ADDITION TO CHICO, BUTTE COUNTY, CALIFORNIA", WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, MARCH 4, 1901 IN BOOK 5 OF MAPS, AT PAGE 9, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT A POINT ON THE NORTH SIDE OF CHAPMAN STREET (NOW KNOWN AS ELEVENTH STREET) THE SAME BEING THE COMMON CORNER OF LOTS 7 AND 8 OF SAID CHAPMAN' S ADDITION; THENCE EASTERLY ALONG SAID NORTH LINEN 54 FEET TO A POINT; THENCE AT RIGHT ANGLES NORTH 100 FEET TO THE NORTHEAST CORNER OF THAT CERTAIN PARCEL DEEDED TO DELBERT J. LEE ET UX RECORDED JUNE 2, 191 IN BOOK 1119 OF OFFICIAL RECORDS, AT PAGE 238, SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE CONTINUING NORTH ALONG THE NORTHERLY EXTENSION OF THE EASTERLY

10 LINE OF SAID LEE PARCEL TO THE SOUTHERLY LINE OF LITTLE CHICO CREEK; THENCE MEANDERING UP SAID CREEK TO THE NORTHWEST CORNER OF LOT 8; THENCE SOUTH ALONG THE WEST LINE OF SAID LEE PARCEL; THENCE AT RIGHT ANGLES EASTERLY ALONG THE NORTHERLY LINE OF SAID LEE PARCEL 54 FEET TO THE POINT OF BEGINNING. PARCEL II: BEING A PART OF LOT 8, AS SHOWN ON THAT CERTAIN MAP ENTITLED "OFFICIAL MAP OF CHAPMAN'S NORTH ADDITION TO CHICO, BUTTE COUNTY, CALIFORNIA", WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, MARCH 4, 1901 IN BOOK 5 OF MAPS, AT PAGE 9, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT A POINT ON THE NORTH SIDE OF CHAPMAN STREET (NOW KNOWN AS ELEVENTH STREET) THE SAME BEING THE COMMON CORNER OF LOTS 7 AND 8 OF SAID CHAPMAN'S NORTH ADDITION, AND RUNNING THENCE NORTHERLY ALONG THE LINE DIVIDING SAID LOTS 7 AND 8, A DISTANCE OF I 00 FEET TO A POINT; THENCE AT A RIGHT ANGLE EASTERLY 54 FEET TO A POINT; THENCE AT A RIGHT ANGEL SOUTHERLY 100 FEET TO THE NORTH LINE OF CHAPMAN STREET (NOW ELEVENTH STREET); THENCE WESTERLY ALONG THE NORTH LINE OF SAID CHAPMAN STREET (NOW ELEVENTH STREET) A DISTANCE OF 54 FEET TO THE POINT OF COMMENCEMENT. APN: EAST 11TH STREET

11 RESOLUTION NO RESOLUTION OF THE CITY OF CHICO AUTHORIZING EXECUTION OF A HOME LOAN AND A COMMUNITY DEVELOPMENT BLOCK GRANT TO HABITAT FOR 3 HUMANITY OF BUTTE COUNTY FOR THE DEVELOPMENT OF A LOW INCOME AFFORDABLE HOUSING PROJECT LOCATED AT 4 18 AND 178 EAST 11TH STREET WHEREAS, Habitat for Humanity of Butte County (the "Borrower") is proposing to develop two homes affordable to low-income households (the "Project"), to be located at 18 and 178 East 11th Street, APNs and (the "Property''); and WHEREAS, the Project will be affordable to households earning less than eighty percent (80%) of the Area Median Income ("Low Income Households"); and WHEREAS, the Project will further the purposes of, and will be consistent with, the policies of the Federal HOME and Community Development Block Grant Programs; and WHEREAS, the Borrower and the City will enter into an agreement regarding a loan of HOME funds in the amount of One Hundred Twenty Thousand Dollars ($120,000) from the City to the Borrower (the "Loan Agreement") that establishes the specific terms and conditions for the disbursement of the loan funds as well as the Borrower's performance requirements; and be demolished. WHEREAS, the existing buildings on the Property contain lead and asbestos and are to NOW THEREFORE, BE IT RESOLVED by the City of Chico, as follows: 1. The City finds that the development of the Project on the Property is consistent with the goals of the City to provide affordable housing, as documented in the City's adopted Consolidated Plan. 2. The City hereby approves a grant of Community Development Block Grant funds in the amount of Thirty-Five Thousand Dollars ($35,000) for the purpose of abating hazardous materials and demolition of the existing buildings on the Property. Disbursement of City Loan Funds shall be contingent on execution of a Grant Agreement for the Project. The Grant Agreement terms will be subject to Community Development Block Grant regulations. 3. The City hereby approves a loan to the Borrower in the amount of One Hundred Twenty ATIACHMENTC S:\0_HOME_HUD\Habitat Projects\ lith St. Habitat\HOME Loan Reso.wpd Page 1 of 5

12 Thousand Dollars ($120,000) in HOME funds for development of the Project (the "Loan Funds"). Disbursement of City Loan Funds shall be contingent on execution of the Loan Agreement, Affordability Covenant (the "Covenant") and Deed of Trust for the Project. The Borrower and the City shall enter into a Loan Agreement governing the use of Loan Funds subject to the following terms and conditions: a. Disbursement of the Loan Funds shall be pursuant to the following terms: 1) the Loan Funds shall be used by Borrower only for the purposes which are set forth in Exhibit "A" attached hereto; and 2) disbursements of Loan Funds shall be made no more often than monthly, upon submittal of a payment request form and supporting invoices. b. The Borrower shall obtain an unconditional Certificate of Occupancy for both houses in the Project, from the City of Chico Building Division, by December 31, 201. d. In the event that the Borrower does not proceed with the Project or does not cure default within the time proscribed in the Loan Agreement, the Borrower shall give to the City all architectural and engineering documents, environmental studies and other documents prepared with the Loan Funds. e. The term of the Loan Agreement shall be thirty (30) years from the date of the issuance of the final certificate of occupancy for the Project, and the annual interest rate shall be two percent (2%). f. The Loan shall be made by the City in accordance with the terms and conditions of a Loan Agreement which sets forth the terms and conditions under which the funds provided for herein will be disbursed to and used by, contains such provisions as may be required to ensure that the City's loan is being made in compliance with all federal HOME Program Regulations (24 CFR, Part 92), shall be in a form and content satisfactory to the City Attorney. Upon concurrence with the terms and conditions of such Loan Agreement by the Borrower, the City Manager shall be and is hereby authorized to execute such Loan Agreement on S:\0_HOME_HUD\Habitat Projects\llth St. Habitat\1-!0ME Loan Reso.wpd Page 2 of 5

13 g. h. 1. behalf of the City. As consideration for the Loan, the Borrower shall enter into a Covenant governing the use of the Project. Such Covenant shall require, for a period of thirty (30) years from the date of the issuance of the final certificate of occupancy for the Project, that each home within the Project be sold at affordable housing costs to a Low Income Household (the "Home Buyer"). At such time as each house is sold to a Home Buyer, the Borrower will require each Home Buyer to assume the Borrower' s obligations under this agreement and the City will consent to that assumption. That assumption shall be evidenced by each Home Buyer's execution of a new Covenant and Deed oftrust as described below, both ofwhich shall be recorded against the property purchased by that Home Buyer. Each Home Buyer shall enter into a new Covenant governing use of the Project. Such Covenant shall require, for a period of thirty (30) years from the date of the Home Buyer's purchase of a home within the Project, that the home within the Project be sold at affordable housing costs to Low Income Households. In the event an income eligible home owner sells a house within the Project to a household that is not a Low Income Household during the term of the Covenant, the income-eligible home owner that had assumed the Covenant shall repay to the City an amount representing the proportional share of the Loan Funds attributed to the house within the Project, plus outstanding interest at 2% per annum. The proportional share shall be calculated by dividing One Hundred Twenty Thousand ($120,000) by the number ofhomes within the Project. The Covenant shall contain such other provisions as the City Manager shall determine are necessary to comply with federal HOME Program Regulations (24 CFR, Part 92), shall otherwise be in a form and content satisfactory to the City Attorney. As a further condition of the Loan Funds provided for herein, the Borrower shall execute a Deed of Trust in favor of the City which shall be recorded and which shall secure the obligations to repay the Loan in the event it is determined that S:\0_ HOME_HUD\Habitat Projects\llth St. Habitat\HOME Loan Reso.wpd Page 3 of 5

14 there has been a breach of Borrower's duties and obligations under the Covenant or Loan Agreement. The Deed of Trust shall contain such other provisions as may be required to insure that the City's Loan is made in compliance with federal HOME Program Regulations (24 CFR, Part 92), shall otherwise be in a form and content satisfactory to the City Attorney. The Borrower's Deed of Trust shall be reconveyed by the City after all homes within the Project have been sold to Home Buyers. Any accrued interest shall be forgiven once the Project homes are sold to Home Buyers. J. Each Home Buyer shall execute a Deed of Trust in favor of the City which shall be recorded and which shall secure the obligations to repay the Loan in the event it is determined that there has been a breach of the Covenant. The Deed oftrust shall contain such other provisions as may be required to insure that the City's Loan is made in compliance with federal HOME Program Regulations (24 CFR, Part 92), shall otherwise be in a form and content satisfactory to the City Attorney. The City authorizes the Covenant and Deed oftrust to be subordinate to deeds of trust and related security agreements in favor of institutional lenders providing property acquisition, construction and permanent financing. An environmental review was completed prior to acquisition of the properties and a Mitigated Negative Declaration was adopted January 18, Per the State California Environmental Quality Act (CEQA) Guidelines Section 1512, a subsequent negative declaration is not required. Because federal HOME and CDBG funds will be used to finance the project, City staffhas conducted an environmental review and found the project conforms with the National Environmental Policy Act (NEP A) as a categorically excluded project per 24 CFR Section 58.35(a)(4)(i), and subject to 24 CFR Section A Notice of Intent and Request for Release of Grant Funds will be submitted to HUD and no funds will be disbursed until HUD issues an Authority to Use Grant Funds. S:\0_HOME_HUD\Habitat Projects\llth St. HabiiAt\HOME Loan Reso.wpd Page 4 of 5

15 THE FOREGOING RESOLUTION was adopted by the City of Chico at its meeting held 2 on by the following vote: AYES: NOES: ABSENT: ABSTAIN: DISQUALIFIED: 9 10 ATTEST: Deborah R. Presson, City Clerk S:\0_HOME_HUD\Habitat Projects\ l lth St. Habitat\HOME Loan Reso.wpd Page 5 of 5

16 EXHIBIT "A" PERMITTED HOME LOAN EXPENSES Architecture and Engineering Developer Administrative Costs Environmental Assessment Geotechnical Engineering Home Construction Legal Local Permits and Fees Site Improvements Utilities Fees