Revision No. 20170501-1 County of Sonoma Agenda Item Summary Report Agenda Item Number: 33 (This Section for use by Clerk of the Board Only.) Clerk of the Board 575 Administration Drive Santa Rosa, CA 95403 To: Board of Supervisors and Board of Commissioners Board Agenda Date: March 20, 2018 Vote Requirement: 4/5 Department or Agency Name(s): Sonoma County Community Development Commission; Sonoma County Board of Supervisors Staff Name and Phone Number: Benjamin Wickham, (707) 565-7542 Title: Supervisorial District(s): Supervisor Hopkins Approval of Developer Selection Recommendation for West College Property Recommended Actions: 1. Board of Commissioners: Authorize the Community Development Commission (Commission) to enter into a Purchase and Sale Agreement for $4.2 million which will include escrow instructions for 2150 West College ( Property ) with USA Properties Fund, Inc., (USA Properties) under the following terms: a. An initial non-refundable deposit of $150,000 will be made into escrow at the time of execution of a Purchase and Sale Agreement. b. An additional non-refundable deposit of $150,000 will be made into escrow at the completion of a 60- to 90-day due diligence period. c. Close of Escrow will occur within 10 days following the completion of the entitlement process and expiration of associated appeal periods. 2. Board of Supervisors: Approve continued maintenance of the County s $4.2 million Treasury note originally used to purchase the West College parcel and direct that all sale proceeds resulting from this agreement be utilized by the Commission to create additional affordable housing units. Executive Summary: This Board item requests approval of staff s recommendation for the developer for the West College property and facilitates an experienced private-sector firm to build a mixed-income housing community on an accelerated timeline. The Commission engaged in a comprehensive and competitive process, which resulted in a group of well-designed and thoughtful development proposals. The Commission recommends the USA Properties proposal, as it best meets the Commission s stated goals for this project. The Commission issued a Notice of Intent to Award on February 20, 2018 indicating its intent to recommend USA Properties as the developer for this project. A protest to this Notice of Intent to Award was received and has been handled according to the protocols established by the Commission.
Revision No. 20170501-1 Discussion: Background: The property located at 2150 West College Ave in Santa Rosa has long been earmarked for development of rental housing, and the October 2017 firestorms added new urgency to the housing production agenda. Having completed the acquisition of the site from the Water Agency in 2017 with the approval of the Board of Supervisors and Commissioners, the Commission issued a Request for Proposals (RFP) on November 14, 2017 seeking housing development proposals that could be executed relatively quickly, and generate some homes affordable to low-and moderate-income households. Nine development proposals were received by the closing date of the RFP, and a selection committee (comprised of a representative from the City of Santa Rosa, a community member, and key employees of the County and the Commission) reviewed and scored the nine proposals. All proposals suggested rental housing, with various approaches to affordability, timing, construction techniques, design, etc. The Committee unanimously approved the top three finalists, which were then interviewed by a smaller panel. The proposers are listed below in the order they were ranked by the RFP committee. 1. EAH Housing 2. USA Properties Fund, Inc. 3. OSL Properties, LLC 4. Danco Communities 5. Reliant Group Management, LLC 6. Mid Pen Housing / Urban Mix Development 7. Capital Valley Investments 8. DM Development 9. Bay Area Home Options The RFP selection committee unanimously agreed on the three finalists (see table below for West College RFP Finalist Comparison); subsequently, a smaller interview panel selected the most qualified partner, with proven organizational and financial capacity to undertake the accelerated development of the 2150 West College Avenue site: USA Properties. Developer EAH USA OSL Total Proposed Units 170 144 120 Total Per Unit Development Cost Cost to CDC per affordable (50%-60%) unit $287,000 $277,000 $400,000 $123,529 $0 $0 Return to CDC 0 $4.2 M $4.5 M Affordable Units (50-60%) 34 29 24
Revision No. 20170501-1 Key Considerations in recommendation: The West College RFP emphasized developer qualifications above any other factor. The number of affordable units, level of affordability, cost per unit, and cash return to the Commission were also considered. The RFP Committee and the Interview Panel weighed all of these factors in reaching a conclusion. USA Properties has constructed and developed five projects for a total of 414 units in the City of Santa Rosa and has a solid track record that demonstrates its commitment to high-quality sustainable design and management. USA Properties has a particular strength in seamlessly integrating market-rate housing with affordable housing. Key factors from the RFP in choosing to recommend USA Properties include: 1. Higher number of proposed total units (144), based on specific design features included in its proposal. 2. Higher number of affordable units (29 units targeted for households earning 50% of AMI or below. 3. A relatively low per-unit development cost ($277,000), indicating an efficient, streamlined approach. This per-unit cost that is below other proposers will naturally allow rents on the unrestricted market-rate apartments to remain lower than the other proposals reviewed. 4. The depth of development experience in California, including multiple successful projects in Sonoma County, presented by the USA team during the proposal and interview period established a high level of confidence on the part of the RFP panel that USA Properties has the capacity to deliver a high quality outcome. 5. The depth of in-house property management experience, provided by USA Property Management, a division of USA Properties, also instilled confidence that the property will be sustainably managed and well maintained for years to come. 6. USA Properties provided sufficiently detailed financial information and banking references to demonstrate a strong financial and organizational capacity which puts this firm in an excellent position to complete the project as envisioned. 7. USA Properties proposes to finance the project with conventional debt and equity, and does not intend to seek low-income housing tax credits or local or competitive funding that might delay the development timeline. 8. USA Properties shared the results of an extensive preliminary due diligence process as part of its proposal and interview. 9. The firm clearly demonstrated understanding and support of the County s commitment to an open public engagement process during design and planning, and is fully prepared to hold community meetings in collaboration with the Commission. 10. USA Properties will compensate the Commission $4.2 million. And while this was not sought explicitly in the RFP issued by the Commission, the ability to recapture and recycle highly scarce development funds was attractive. The two other finalist firms were EAH Housing and OSL Properties. While both of these proposals were attractive, they were judged inferior to the proposal submitted by USA Properties.
Revision No. 20170501-1 EAH Housing is a high-quality non-profit developer with an excellent track record throughout the Bay Area, including in Sonoma County. EAH proposed using modular construction and delivering greater levels of affordability, primarily by assuming that the value of the land would effectively be contributed to the project by the Commission. [170 total units proposed, 20% affordable to low- and very-low income households] This firm did not propose seeking other competitive resources, such as tax credits. OSL Properties is a well-known local development firm, responsible for the high-quality Oakmont Senior Living properties. OSL is also the firm selected by the Board in 2017 for the development of the Chanate property, and thus its capacity is well-established. And while OSL does demonstrate strong knowledge of local development processes and a long-standing a commitment to Sonoma County, its proposal included only cursory due diligence about the particular property and few specifics about team members that would be dedicated to the project, or about property management and community engagement. Burbank Housing was presented as a team member to assist with the affordable aspects, but without detail about roles and responsibilities. Importantly, OSL did propose to fully compensate the Commission, and further augmented its offer for any additional units that could be achieved were the City of Santa Rosa to provide a variance for a creek set-back that would facilitate the building of additional units. That contingency, while attractive, is speculative. County and Commission Financing The Commission purchased the property from the Water Agency in 2017 utilizing a County-Treasurerfacilitated financing arrangement. The purchase price of $4.2 million was financed by the County, which sold the underlying promissory note to the Treasury pool. Debt service on the note will be derived from five annual payments of $900,000, sourced from the County Fund for Housing. As authorized in the 2017 Board Action, the County and the Treasurer will annually review the note beginning in June, 2018, and the County will seek approval from the Board of Supervisors to issue a new note, subject to the consent of the Treasurer, at the then-reduced principal until the amount borrowed is fully paid off. If the County is unwilling or unable to issue new debt, or if the Treasury is unwilling to purchase the re-issued debt, the County will nonetheless be responsible repayment of the note, and the Commission will remain obligated to repay the County for said payment. With the current Board item, the Commission requests maintenance of that debt service arrangement, and requests that the County continue to facilitate this arrangement for the original five years, which will enable the Commission to re-program funds derived from the sale of the Property into another development project. And such re-programming would naturally require normal due diligence by the Commission, and authorization by the Board of Supervisors/Commissioners. Action Requested: The Commission seeks Board authorization to execute a Purchase and Sale Agreement with USA Properties for development of the 2150 West College property, according to the terms outlined above. Following a standard due diligence period, USA Properties will work to complete the entitlement process promptly. After the project is entitled by the City of Santa Rosa, escrow will close and the Commission will transfer ownership to USA Properties for the total purchase price of $4.2 million.
Revision No. 20170501-1 Prior Board Actions: 06/20/2017: Authorize a resolution approving the issuance of a one-year note for $4.2 million to purchase the 2150 West College Avenue property; authorize the Executive Director of the Development Commission to issue a Request for Proposal for the development of mixed-income rental housing on the property once purchased. 5/23/17: Approval of County Fund for Housing policy change. 2/9/16: Reject All Bids for Purchase of 2150 West College Avenue 11/17/15: 15-0469 Resolution rescinding December 4 bid date and setting January 26, 2016 for receipt of bids for public sale. 10/20/15: 15-0423 Resolution rescinding October 27 bid date and setting December 4, 2015 for receipt of bids for public sale. 07/28/15: 15-0307 Resolution rescinding August 11 bid date and setting October 27, 2015 for receipt of bids for public sale. 06/09/15: 15-0231 Resolution setting August 11, 2015 for receipt of bids for public sale. 03/18/14: 14-0093 Resolution declaring the 2150 West College Avenue property as surplus. Strategic Plan Alignment Goal 1: Safe, Healthy, and Caring Community The project supports a safe and healthy community by creating the opportunity for the development of housing for various income levels. It also supports economic stewardship and investment in the future by facilitating the creation of new housing units for our workforce and for vulnerable populations after the devastation of 5000 housing units throughout the County.
Revision No. 20170501-1 Fiscal Summary Expenditures Funding Sources FY 17-18 Adopted FY 18-19 Projected Budgeted Expenses 4,200,000 Additional Appropriation Requested Total Expenditures 4,200,000 General Fund/WA GF State/Federal Fees/Other 4,200,000 Use of Fund Balance Contingencies Total Sources 4,200,000 FY 19-20 Projected Narrative Explanation of Fiscal Impacts: No fiscal impacts are expected for FY 17-18. The total purchase price of $4.2 million from the sale of the 2150 West College parcel will be received and title will convey to the developer in FY 18-19 at the close of escrow. The CDC will include the fiscal impact of this transaction in its FY18-19 Requested Budget. The County will continue to hold the $4.2 million note, and the Commission will continue to service that debt to the County with an annual payment of approximately $900,000 from the County Fund for Housing. Position Title (Payroll Classification) Staffing Impacts Monthly Salary Range (A I Step) Additions (Number) Deletions (Number) Narrative Explanation of Staffing Impacts (If Required): There are no staff impacts due to this board item. Attachments: 1. PowerPoint presentation of USA Properties Fund proposal Related Items On File with the Clerk of the Board:
Sonoma County Community Development Commission Making Housing For All A Reality March 20, 2018 Sonoma County of County Sonoma Community Development Commission
2150 West College Avenue 7.46 acres total 1.67 acres permanently protected for access to College Creek walking path 5.79 acres available for development Sonoma County of County Sonoma Community Development Commission
Community Engagement Sonoma County of County Sonoma Community Development Commission
Planning The Commission worked with the City of Santa Rosa and the community to develop an RFP to create a vibrant, mixed-income community while preserving open space. Sonoma County of County Sonoma Community Development Commission
USA Properties Answers Proposal includes a blend of USA s resources and reputation in collaboration with local and regional experience, in a creative housing concept that includes 144 apartment homes. 29 apartment homes will be affordable to families earning no more than $52,000 a year. Sonoma County Community Development Commission
USA Proposal Stands Out Efficient per-unit development cost High number of proposed total units & affordable units Performed extensive preliminary due diligence Support for an open public engagement process & collaboration with the County Sonoma County Community Development Commission
USA Meets Objectives Demonstrated Financial Capacity Strong Development Experience In-house Property Management Affordability with no outside subsidy Consistency with General Plan and Development Code Efficiency of Project Timeline Sonoma County Community Development Commission
USA Development Experience USA Multifamily Development, Inc. Entitled five projects in Santa Rosa totaling 414 units Entitled seven projects in Sonoma County totaling 722 units USA Construction Management, Inc. General Contractor on USA projects Completed construction or rehabilitation on +12,000 units Established relationships with local subcontractors Sonoma County Community Development Commission
USA Locally USA has been a long term trusted community partner in Santa Rosa since 1998 with 446 units in six communities USA was here to help the community Partnered with Life STEPS to deliver supplies Partnered with Lombardi Electric to provide temporary power that enabled placement of recreation vehicles for displaced residents Sonoma County Community Development Commission
Design Vision Sonoma County of County Sonoma Community Development Commission
Site Plan Sonoma County of County Sonoma Community Development Commission
College Creek walking path preserved Sonoma County of County Sonoma Community Development Commission
Current View of Property Sonoma County Community Development Commission
Questions Sonoma County of County Sonoma Community Development Commission