PREPARED BY: Charles Ching, A2CM DATE OF MEETING: 12/18/17
SUBJECT:
TITLE
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN PABLO APPROVING THE PARTIAL TERMINATION OF A WAIVER AND INDEMNIFICATION AGREEMENT BETWEEN THE CITY AND SAN PABLO PRESERVATION, L.P. CONCERNING THE ORIGINAL CONSTRUCTION OF THE CHURCH LANE APARTMENTS LOCATED AT 2555 CHURCH LANE AND APPROVING THE SUBORDINATION OF THAT AGREEMENT IN CONNECTION WITH NEW FUNDING FOR THE RENOVATION OF THE CHURCH LANE APARTMENTS
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolution
Body
Compliance statements
Affordable Higher Quality & Market Rate Rental Housing Projects is a Strategic Policy Initiative under the FY 2018-21 City Council Priority Workplan, effective November 1, 2017.
CEQA Compliance Statement
This is not a project as defined by CEQA.
BACKGROUND
On April 26, 1996, the City entered into a Waiver and Indemnification Agreement with Church Lane-Rubicon Partners, a California limited partnership, providing certain terms and conditions related to the construction of the buildings now known as the Church Lane Apartments, located at 2555 Church Lane. The Waiver and Indemnification Agreement was recorded in the Official Records of Contra Costa County on May 14, 1996, as Instrument No. 96-89049. It was amended by an Addendum to Waiver and Indemnification Agreement, dated August 26, 1996, which was recorded on September 19, 1996, as Instrument No. 96-175890. Both the Waiver and Indemnification Agreement and the Addendum thereto (together, the “1996 Indemnification Agreement”) were re-recorded on February 25, 1997, as Instrument Nos. 97-030693 and 97-030692, respectively, for the sole purpose of correcting the address of the Property. These documents are attached to the staff report for reference.
Under the 1996 Indemnification Agreement, Church Lane-Rubicon Partners (the “Partnership”) was allowed to proceed with construction of the apartment complex prior to completion of certain work needed to stabilize the creek bank. The Partnership agreed to assume responsibility for the maintenance of an existing storm drain pipe on the property and to defend, indemnify and hold the City harmless from any damage to or failure of the storm drain pipe and from any building or property damage related to slope or foundation failures.
The successor-in-interest of the Partnership, San Pablo Preservation, L.P., a California limited partnership (“Project Owner”), is now in the process of undertaking the renovation of the Church Lane Apartments utilizing various funding sources, including Rental Assistance Demonstration (“RAD”) program funding available through the U. S. Department of Housing and Urban Development (“HUD”). The Church Lane Apartments currently provide twenty-one (21) units of affordable housing restricted to low income households. In the attached letter from the Project Owner detailing the proposed renovation of the Church Lane Apartments, the Project Owner has stated that the RAD program funding would provide five (5) new project-based vouchers for residents of the Church Lane Apartments, and that the new vouchers and HUD approval leverage millions of additional dollars for the renovation of the apartment complex along with new financing with deed-restricted affordable rents. The City has already sent a letter regarding the current status of redevelopment law and activities in California to assist with this effort.
Because many of the terms and conditions of the 1996 Indemnification Agreement are no longer applicable, the Project Owner has also requested that the City consent to the partial termination and release of the 1996 Indemnification Agreement. The Project Owner has also stated that HUD approval requires that the Indemnification Agreement be subordinate to the new funding. The proposed resolution would authorize those actions.
Staff is recommending subordination of the 1996 Indemnification Agreement in order to enable the renovation of the Church Lane Apartments to proceed, ensuring that this important affordable housing asset will remain available to residents of the City. The shortage of affordable homes in California cannot be reversed by new construction alone; thus, it is imperative that existing affordable homes remain affordable to those who need them most. As many of the Bay Area’s low income families are pushed to margins, where reliable transit, social services, and daily amenities are poorly suited to their needs, it is particularly important to preserve existing housing affordability in communities closer to needed services. Delivering affordable housing to the families at Church Lane Apartments eliminates a major financial stressor, enabling families to contribute more of their income to childcare programs, healthcare, and recreation. Furthermore, the stability of secure affordable housing promotes mental wellbeing.
FISCAL IMPACT
None associated with this report. The City is not asked to contribute financially to the preservation of affordable housing at the Church Lane Apartments. However, the City of San Pablo’s consent to release the Waiver and Indemnification Agreement and to sign and subordinate a new Indemnification Agreement with the owner of the Church Lane Apartments is required to refinance and renovate the property. Subordination allows the Department of Housing and Urban Development to approve five (5) new project-based vouchers for residents of this affordable complex. These vouchers and HUD approval leverage millions of additional dollars for the substantial renovation of the apartment complex and new financing with deed-restricted affordable rents.