PREPARED BY: ELIZABETH LOPEZ DATE OF MEETING: 11/18/2024
SUBJECT:
TITLE
CONSIDER ADOPTING RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN PABLO APPROVING THE ADDITION OF A RESIDENTIAL REHABILITATION LOAN COMPONENT TO THE SAN PABLO LOAN ASSISTANCE FOR SUSTAINABLE HOUSING (“SPLASH”) PROGRAM, AMENDING CREDIT QUALIFICATIONS FOR THE SPLASH PROGRAM, AND AUTHORIZING THE CITY MANAGER TO EXECUTE A NEW ADMINISTRATIVE SERVICES AGREEMENT WITH THE SAN PABLO ECONOMIC DEVELOPMENT CORPORATION (SPEDC) THAT (1) EXTENDS THE CURRENT SPLASH PROGRAM ADMINISTRATION SERVICES PROVIDED BY SPEDC THROUGH JUNE 30, 2025, (2) AMENDS THE CURRENT SCOPE OF WORK TO INCLUDE ADMINISTRATION OF A NEW SPLASH RESIDENTIAL REHABILITATION PROGRAM, AND (3) PROVIDES FOR TWO ONE-YEAR AUTOMATIC RENEWALS SHOULD SUFFICIENT LOW AND MODERATE INCOME HOUSING FUNDS REMAIN
CEQA: This proposed action is not a project as defined by CEQA.
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolution
Body
council priority workplan statement
Major Policy Goal: Expand Housing Options is a top Council Priority under the FY 2023-25 City Council Priority Workplan, effective May 1, 2023.
BACKGROUND
The City Council adopted the SPLASH program on November 16, 2020, and then approved revisions to the program guidelines on February 22, 2022. The SPLASH program provides down payment assistance in the form of deferred payment loans with a thirty-year term to income-qualified, first-time homebuyers who choose to purchase a home in the incorporated City of San Pablo. The City Council allocated $1,000,000 to this program from the San Pablo Housing Successor Agency (“HSA”) Low and Moderate Income Housing Asset Fund (“LMIHAF”) to serve low-income households, defined as households earning 80% or less of area median income. The funds are offered though shared appreciation loans of up to $100,000 and no more than 20% of the purchase price. Veterans, seniors, first-responders and teachers are prioritized.
The City Council approved a contract with the San Pablo Economic Development Corporation (“SPEDC”) via Resolution 2020-149, to serve as the program administrator. SPEDC is responsible for program marketing, application review, underwriting, compliance and settlement. SPEDC developed program materials and launched the program in January 2021. SPEDC holds numerous educational webinars about the program and conducts extensive outreach to residents and community partners to advertise this program in Spanish and English.
The City Council approved the current administrative services agreement via Resolution 2023-056. This current agreement is effective until November 17, 2024.
To align with the fiscal year, a new administrative services agreement with SPEDC will extend its services to the City through June 30, 2025. This agreement will also include two updates. First, there will be two (2) automatic one-year renewals effective July 1, 2025 and July 1, 2026, each of which shall reserve $1,050,000 in LMIHAF funds per fiscal year provided sufficient LMIHAF funds are available. Second, the new agreement would add the administration of a Residential Rehabilitation Program.
The Residential Rehabilitation Program Loan (also called "Refresh Loans") is intended to assist existing homeowners in San Pablo to improve living conditions for residents by addressing deferred maintenance and improving residents’ ability to age in place through Americans with Disabilities Act (ADA) renovations. The Refresh Loans would be offered as 30-year, simple-interest loans up to $40,000. The rehabilitation loan program eligibility criteria and general terms are described in Attachment “C” attached to this staff report, which will be incorporated into the SPLASH Program Guidelines.
As the Council is aware, LMIHAF funds are restrictive funding. These funds may only be used to serve qualified applicants whose area median income (AMI) is 80.0% or lower; AMI is defined by the US Department of Urban Development (HUD). Each fiscal year, of the funding made available, according to the Health and Safety Code Section 34176.1:
• Administrative expenditure may not exceed $200,000
o It is budgeted at an estimated $50,000 per year
• Not more than 20 percent may be used to serve low income (LI) applicants (between 60%-80% AMI)
• 50 percent may be used to serve very low income (VLI) applicants (60% AMI or less)
• Not less than 30 percent is to be used to serve extremely low income (ELI) applicants (30% AMI or less) for rental housing
If a budget of $1,050,000 is considered, this would mean the following for availability under SPLASH for a SAL or Refresh Loan:
• $50,000 Administrative Expense
• $200,000 LI funding
• $500,000 VLI funding
• $300,000 ELI funding (reserved for rental housing and not available under SPLASH)
This means that in any given fiscal year, if a $1,050,000 budget is considered, funding maxes by AMI qualification may not be exceeded. For example, $200,000 is the maximum the HSA could approve for LI applicants for SPLASH SALs and Refresh Loans. Taking $80,000 as the average SPLASH loan, this means that no more than two (2) SALs could be made and one to two Refresh Loans, depending on the approved amounts.
For purposes of both first-time homebuyer loans and residential rehabilitation loans under the SPLASH Program, a change to the credit qualifications in Section 4.1 of the SPLASH Guidelines that reduces the waiting period from a bankruptcy discharge from seven years to four years as follows: "Credit: Eligible Applicants must have a minimum FICO credit score of 620 (see Section 4.2.2) and shall have a minimum of seven four years since Chapter 7 or Chapter 13 bankruptcy discharge."
All LMIHAF funds remain with, and are loaned from, the HSA. Fees for the SPLASH program administrator will remain unchanged. SPEDC will be compensated $2,500 for each funded loan, and in 30 years or upon any action which triggers a pay-off event, $1,000 for every loan that is paid off. SPEDC will also be compensated for reimbursable expenses such as advertising costs associated with marketing activities or attorney’s fees associated with collection activities.
The proposed new administrative services agreement with San Pablo Economic Development Corporation is attached to this staff report.
ED, Housing and Program Management Standing Committee
Typically, the EDHPM Standing Committee (Cruz; Ponce) would review and provide a formal recommendation to the City Council for housing-related services noted under this agreement between the City and SPEDC. Unfortunately, Mayor Ponce has a conflict of interest as a current member of the SPEDC Board of Directors. Therefore, there is no formal recommendation from the EDHPM Standing Committee to the City Council. Additionally, Mayor Ponce will also need to address her conflict of interest by recusing herself prior to formal consideration of this agenda item by the City Council.
FISCAL IMPACT
For Fiscal Year 2024-2025, the City appropriated $755,000 from the San Pablo Housing Successor Agency Fund 251, which has a remaining balance of $666,113. The City will appropriate an additional $383,887 from the Low and Mod Income Housing Fund 250 totaling $1,050,000. All accounting transactions and activities related to the SPLASH loan program will be accounted for in Fund 251, including but not limited to, loan balances and payments, administrative fees and all other program costs. Note: Low and Mod Income Housing Funds (Fund 250) are restricted funding for this purpose subject to State of CA Health and Safety Code requirements.
SPEDC is entitled to the administration fees described in the SPLASH program guidelines (Exhibit A). From the $1,050,000 that will be appropriated to fund the program, SPEDC shall receive the sum of $2,500 for each funded loan. SPEDC will also receive $1,000 for every loan that is paid off from the loan repayment.
ATTACHMENTS
Att A - Resolution
Att B - Proposed SPLASH Agreement
Att C - Residential Rehabilitation Loan Program Criteria and General Terms