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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 06/15/2021 - RESOLUTION 2021-069 AUTHORIZING THE EXECUTION OF A Agenda Item 11 Item # 11 Page 1 AGENDA ITEM SUMMARY June 15, 2021 City Council STAFF Meaghan Overton, Housing Manager Jackie Kozak-Thiel, Chief Sustainability Officer Ingrid Decker, Legal SUBJECT Resolution 2021-069 Authorizing the Execution of a Funding Agreement Between the City and Housing Catalyst for a Loan of Funds from the Affordable Housing Capital Fund for the Oak 140 Development. EXECUTIVE SUMMARY The purpose of this item is to consider a Resolution authorizing the execution of a funding agreement between the City of Fort Collins and Fort Collins Housing Authority (Housing Catalyst) for a $610,000 loan of funds from the Affordable Housing Capital Fund for the construction of the Oak 140 development project. STAFF RECOMMENDATION Staff recommends adoption of the Resolution. BACKGROUND / DISCUSSION The City has established community-wide affordable housing goals to have 10% of the City’s housing stock deed-restricted and affordable by 2040. This goal has been reaffirmed through the adoption of the Housing Strategic Plan, which sets a clear vision that Fort Collins will be a community where everyone has stable, healthy housing they can afford. To reach our 10% goal, the city needs to develop at least 282 affordable homes each year. If the Oak 140 project is built, it will represent 28% of the city’s annual affordable housing production goal. Project Background Housing Catalyst’s (HC) Oak 140 project is a partnership between HC and the Downtown Development Authority (DDA) to finance and construct a 4-story, mixed-use building at the intersection of Oak and Remington Streets. The project will create 79 affordable rental homes in the Downtown area serving residents who make between 30-80% of Area Median Income (AMI). The financing for the project includes contributions from DDA and HC, State and Federal tax credits, Private Activity Bond (PAB) allocations from the City and County, and HC bonds. Housing Catalyst is requesting $610,000 in City funding from the Affordable Housing Capital Fund (AHCF) to help close a financing gap created by escalating commodities pricing, especially lumber. This request is aligned with guidance in the Housing Strategic Plan and with the City’s criteria for funding affordable housing projects. Though City Plan, the City Strategic Plan, and the Housing Strategic Plan all encourage production of affordable housing, the realities of financing and constructing deed-restricted affordable housing are very challenging. Project feasibility can be significantly impacted by changes to the costs of materials and labor. To break ground as scheduled in summer 2021 and to avoid even greater cost escalations, the Oak 140 project requires additional subsidy. Currently the only direct City subsidy allocated to this project is $98,000 in fee credits for 7 units that will serve residents making 30% AMI or below. Agenda Item 11 Item # 11 Page 2 The Oak 140 project will create 79 affordable rental homes in a desirable Downtown location. The breakdown of unit types and the income levels served is outlined below: 30% AMI 7 units 40% AMI 6 units 50% AMI 29 units 70% AMI 29 units 80% AMI 8 units Average AMI 57.85% Project Financing and Funding Request Oak 140 is being financed through contributions from DDA and HC, State and Federal tax credits, Private Activity Bond (PAB) allocations from the City and County, and HC bonds. To date, the City has committed $98,000 to the project through fee credits for 7 qualifying units that will serve residents making 30% AMI or below. No additional City subsidy has been committed to this project. HC hoped to avoid using Competitive Process funding; however, the cost of materials has skyrocketed since the project began the development review process in May 2020. HC approached the City to discuss the possible use of the AHCF to help close a financing gap in Oak 140 created by escalating commodities pricing, especially lumber. HC is requesting $610,000 from the AHCF to successfully close on the project and lock in pricing for construction. Though the total gap is projected to be larger than the amount requested, HC will reduce costs on the project through value engineering and will use a range of other strategies to close the remainder of the financing gap. The financing sources and amounts for the Oak 140 project are as follows: Source Amount Federal LIHTC Equity $11.6 million State LIHTC Equity $1.7 million First Mortgage (bonds) $7 million Second Mortgage (bonds) $1 million Fort Collins DDA Equity $5,175,370* City AHCF (current request) $610,000 Deferred Developer Fee $576,298** TOTAL $27,689,041 *DDA Equity amount does not account for the land contribution; estimated value is $2.3 million ** Does not reflect HC $1.3 million for 143 Remington acquisition This request is well-aligned with previous Council direction and with the recently adopted Housing Strategic Plan. Providing final funding to projects that are “shovel ready” but facing a funding gap is a use of AHCF resources that has strong policy support. The AHCF was also used in this way to finalize funding for Mason Place in 2019. In addition, the current request is substantially lower than the City’s typical subsidy of affordable housing projects. Between 2015 and 2020, the median average subsidy the City contributed per affordable housing unit was $38,970. The current request for $610,000 and the $98,000 in fee credits represents a per- unit subsidy of just under $9,000 per unit. For a relatively low per-unit subsidy, the City can support the construction of 79 affordable homes in an area of the community with high access to jobs, transit, and other amenities. Staff is aware of other affordable housing projects in the development pipeline; however, it does not appear that there are any other affordable housing funding needs that cannot wait for the 2022 Spring Competitive Process. Agenda Item 11 Item # 11 Page 3 A detailed memorandum outlining Housing Catalyst’s request for funding is included. (Attachment 1) City Funding Sources for Affordable Housing There are several funding sources available to support the development of affordable housing (CDBG, HOME, AH Fund, AHCF). The City allocates between $2 million - $3 million to affordable housing in a typical calendar year. It is important to note that although the City has been notified by HUD of an additional HOME allocation of $2.6 million in recovery funding through the American Rescue Plan Act (ARPA), guidance related to the application process and eligible uses won’t be available until the fall. With the addition of these funds, staff estimates that approximately $5 million will be available through City and Federal sources for the 2022 Competitive Process. $500,000 will be added to the AHCF in January 2022 as well. CDBG, HOME, and AH Fund (Competitive Process): Social Sustainability completed the 2021 Spring Competitive Process in April and the funding recommendation from the Human Services and Housing Funding Board was considered by Council on June 1, 2021. Four housing proposals were received, which are being recommended for a total of $2,700,000 in funding. There is an unallocated balance of $486,394 in Affordable Housing funds which will be reappropriated for use for affordable housing projects in 2022. To initiate a Fall Competitive Process, the unallocated balance must exceed $500,000; otherwise, the unallocated funding is carried into the Spring Competitive Process. There is an unallocated balance of less than $500,000 in Affordable Housing funds and no federal funds. Because this threshold has not been met, next year’s Spring Competitive Process is when these remaining funds from 2021 and the new allocation of federal funds for 2022 will be available to housing projects. Affordable Housing Capital Fund: The 2015 voter-approved Community Capital Improvement Program includes the AHCF, which will accrue a total of $4 million over ten years through 2025. The ballot language states it will fund capital costs of development or rehabilitation of one or more public or private housing projects designated specifically for low-income individuals or families. Previous Council direction has supported use of this fund for fee credits and direct subsidy for qualifying projects. This request would be a direct subsidy. Previous Council Actions Council has taken three previous actions related to the Oak 140 project. Two actions (July 2020 and November 2020 were related to determining fair market value for leases between the Downtown Development Authority (DDA) and Housing Catalyst. At the May 18, 2021 hearing, Council considered a request for $350,000 in fee credits for qualifying units in two affordable housing projects - Oak 140 (Housing Catalyst) and Cadence (Volunteers of America). Of that amount, $98,000 was for Oak 140’s 7 qualifying units. This request was unanimously approved on Second Reading. Next Steps This resolution authorizes the City Manager to enter into a funding agreement between the City and Housing Catalyst that would provide $610,000 to Housing Catalyst from the Affordable Housing Capital Fund. A draft funding contract is included. (Attachment 2) This funding contract will: • Provide funds as a “due-on-sale” loan to ensure the project remains as affordable housing. This loan will only need to be repaid if/when the development is sold. • Require a restrictive covenant to guarantee affordability for a 40-year term; the length of the affordability term will match the requirements in the Land Use Restriction Agreement (LURA) from the Colorado Housing and Finance Authority (CHFA). CITY FINANCIAL IMPACTS The current balance of the AHCF is roughly $610,000, which is available for the capital needs of one or more affordable housing projects. The AHCF will be replenished with $500,000 in January 2022. If this request from Agenda Item 11 Item # 11 Page 4 Housing Catalyst is approved, the balance of the AHCF will be approximately $300 until January 2022. Staff does not expect any additional requests for fee credits in 2021. BOARD / COMMISSION RECOMMENDATION This funding request was considered by the Council Finance Committee on May 24, 2021. Members of the CFC supported the use of the AHCF for the Oak 140 project. Members discussed whether the affordabil ity term in the contract could be longer than 20 years. The draft contract has since been amended to extend the affordability term to 40 years. (Attachment 3) At its June 3, 2021, meeting, the Affordable Housing Board supported the staff recommendation to provide funding from the AHCF to the Oak 140 development. Minutes from the meeting are attached. (Attachment 4) PUBLIC OUTREACH The Affordable Housing Board and Council Finance Committee meetings were noticed and open to the public. No additional specific outreach was conducted on these requests. ATTACHMENTS 1. Housing Catalyst Request for Funding (PDF) 2. Funding Contract (draft) (PDF) 3. Council Finance Committee Minutes (draft) (PDF) 4. Affordable Housing Board Minutes (draft) (PDF) 5. Staff Presentation (PDF) May 19, 2021 City Council Finance Committee Request for Gap Funding Due to Construction Material Escalation As you know, Housing Catalyst and the Downtown Development Authority (DDA) have been working on Oak 140, a much-needed mixed-use affordable housing development, and it is close to the finish line. The two agencies had been committed to completing this project without the need for deep city subsidy such as CDBG, HOME or the Affordable Housing Fund. Housing Catalyst, the developer, has been able to overcome many unforeseen hurdles in bringing this project to fruition. Unfortunately, despite all our best efforts to maximize resources and utilize creative financing solutions, the extreme rise in lumber and other construction material prices has created a funding shortfall. We now come to you for help. To minimize the risk of rapidly escalating construction costs, Housing Catalyst is respectfully requesting funding to be able to close the partnership and all financing at the end of June in order to lock in construction pricing and minimize further risk to the development. Housing Catalyst is requesting $610,000 from the 2021 City Affordable Housing Capital Fund to help complete the financing for Oak 140, a mixed-use development that will bring 79 affordable apartments and two ground-floor commercial spaces to the site of the former Elks Lodge at Oak and Remington Streets in downtown Fort Collins. With the commitment of these funds from the City of Fort Collins, Oak 140 will be able to move forward to close financing on the Low Income Housing Tax Credit (LIHTC) project and start construction in July 2021. Project Overview and Funding Sources 100% of the 79 studio, one-bedroom, and two-bedroom apartments will be affordable for those earning between 30% and 80% of the Area Median Income (AMI), with an average resident income of 60% of the AMI. Below is the detailed AMI breakdown and unit mix: 30% AMI Units - 7 40% AMI Units - 6 50% AMI Units - 29 70% AMI Units - 29 80% AMI Units – 8 79 Units ATTACHMENT 1 The Total Development Cost for the housing portion of Oak 140 is $27.689 million. Source Amount Fort Collins DDA Equity $5,175,370* Federal LIHTC Equity $11.6 million State LIHTC Equity $1.7 million First Mortgage (bonds) $7 million Second Mortgage (bonds) $1 million Deferred Developer Fee $576,298** City AHCF $610,000 TOTAL $27,689,041 *DDA Equity amount does not account for the land contribution, which estimated value is $2.3 million ** Does not reflect the Housing Catalyst $1.3 million for 143 Remington acquisition City of Fort Collins Contribution to Oak 140 This $610,000 AHCF request would bring the total subsidy from the City to $708,000 (including fee credits), which is less than $9,000/unit. The Affordable Housing Strategic Plan indicates that the typical City subsidy in affordable housing is $40,000 per unit. This less than average investment is being leveraged with numerous other funding sources. The City AHCF dollars would constitute 2% of the total funding sources. In return for this investment, the City of Fort Collins will see the rare opportunity of affordable housing being implemented in a prime downtown location with local trusted partners. The City of Fort Collins also contributed $9.2 million of 2019 and 2020 Private Activity Bond cap. Bond cap is not considered a subsidy to the project, but it is an important and necessary commitment. In total, the project is utilizing $14.2 million in bond cap. The remainder of the PAB was committed from Larimer County and Colorado Housing and Finance Authority (CHFA). In Alignment with City Goals and Policies The project is also in alignment with the strategies in the newly adopted City Affordable Housing Strategic Plan and the City Council’s priority to improve access to a broad range of quality housing that is safe, accessible,  and affordable. With 79 affordable units, this project will make a significant impact in helping the City achieve its goal of having 10% of the City’s housing stock be affordable by 2040. Oak 140 is also a strategy to implement the identified goal of increasing the supply of affordable rental units in Fort Collins. The project will serve a healthy mix of income levels, including 13 units at the very hard to reach 30% and 40% AMI levels. Oak 140 creates living options for downtown employees that currently find it financially challenging to live and work in Fort Collins because of rising housing costs. The DDA’s contribution of the land at the former Elks building site provides a rare opportunity to make building affordable housing in a highly desirable downtown location financially feasible. Housing Catalyst and the DDA are proud to have developed an architectural design that respects the rich history and essence of Downtown Fort Collins, while also reflecting the evolving needs and character of the community. Since identifying the significant need and desire for affordable housing for people working in and around downtown, the DDA and Housing Catalyst have worked to create a development that honors the vision to address this unique community demand. Oak 140 is ideally located for public transit use and easy access to job centers across the City. The site is within a quarter-mile of multiple bus stops with daily service to most areas of Fort Collins and adjacent cities, along a bike route and adjacent to a bike sharing program, and provides next-door access to hospitality and retail jobs. Why Now? Oak 140 is the culmination of many years of vision, commitment and partnership that has resulted in something that we hope Fort Collins can be extremely proud of. In this case, the project is ready to move forward upon the commitment of these funds. The project is unable to wait for the Federal Competitive Funding Process next spring. We are facing an unprecedented commodities pricing escalation crisis, and the safest way to stabilize the costs is to close financing and issue contracts as quickly as possible. In the current climate, additional time would compound the issue, adding costs and creating the need for even more resources. It is for this reason, that we are requesting the specific type of funds to be used at this time. We recognize that during the typical competitive process, there is strong consideration given to whether the project is sure to move forward and if it can do so in a timely manner. In this case, these funds would be used as last-in funds to get an important project across the finish line that is ready to proceed within 60 days. Housing Catalyst and the DDA were both committed to bringing the project forward without the use of limited competitive resources, including the City of Fort Collins Competitive Funds. This shared commitment to allow for the greatest reach of our local resources was unique to Oak 140. Housing Catalyst has not yet developed a new construction LIHTC project without significant local subsidy. It was believed that the benefit from the land contribution and significant DDA equity would negate the need for local subsidy. However, the recent combination of market disruption and commodity escalation pressurized the deal to a tipping point. Housing Catalyst has been working aggressively to maximize resources and utilize creative financing solutions. All these tools combined are still not enough, and we come to you to request access the Affordable Housing Capital Funds for Oak 140. Federal LIHTC Market Disruption - 4% Lock and Income Averaging Guidance The following issues have caused direct impact to the financial feasibility of the project over the last ten months. Following Oak 140’s successful award of Federal 4% and State Low Income Housing Tax Credits (LIHTC) in November 2020, a market disruption occurred based on two primary issues. At the time of application submittal, the project was modeling $0.91 Federal LIHTC pricing, which was in line with the market at the time. First, a provision to lock the 4% Federal LIHTC rate was included in the Covid Relief Bill passed in late December 2020. The 4% rate was previously floating and based on a published monthly rate (July 2020 = 3.07%, lowest in history). The 4% lock, while providing more credits, resulted in lower pricing because the investors yields drop at the same price per credit. In the case of Oak 140, this caused a drop in equity pricing down to $0.87. Although the lock was intended to benefit projects by generating more equity, the reduction in pricing and the CHFA requirement for Oak 140 to also return $358,853 in annual State Credit, only pressurized the project further. Following the 4% Lock, the IRS published new guidance for projects utilizing Income Averaging. This tool was a perfect fit for the Oak 140 project that was looking to provide affordable housing targeted at the downtown workforce that includes a broad range of income levels, up to 80% AMI. This guidance put onerous risk on the occupancy compliance which could put the tax credits for the entire project at risk (if a single unit was out of income compliance, the tax credits for all of the units would be at risk, instead of just being limited to a single unit). This issue essentially caused the majority of tax credit investors to pull out of the market until new guidance would be issued. Only one investor included a proposal that would allow the project to move forward with Income Averaging. This resulted in another drop in equity pricing down to $0.855. Overall, the drop from $0.91 in July 2020 to $0.855 in Feb 2021 caused an $745,000 amount of reduction in federal credit equity pricing, in addition to the return of $358,853 in State Credits back to CHFA per their requirements. Housing Catalyst has been diligently working to utilize every possible tool to overcome these impacts, but the pending commodity price escalation proved to be a new challenge. Commodity Price Escalation Among the biggest impacts to the project have been the dramatic increase in construction commodity pricing over the last 10 months. Since Housing Catalyst first priced the project in July 2020, the total construction cost has increased 10% from $17.7 million to $19.6 million ($1.95 million increase). The cost of lumber alone has increased 42% for the project from $1.5 million to $2.6 million. Across the industry, lumber composites (the composite price of all types of dimensional lumber and sheet lumber) is up 463% since the beginning of 2020. Steel is also up significantly. Prior to this commodity escalation crisis, the typical construction cost escalation rate was 5% annually, which we have historically been able to plan for and absorb. Projects are generally seeing a 2% monthly increase currently. In the case of Oak 140, a 60-day delay could cost nearly $700,000 in construction escalation. The addition of a substantial construction cost increase after overcoming the gap due to equity pricing proved to be difficult to overcome. Housing Catalyst was able to reduce the construction budget down through value engineering and is also securing a second mortgage utilizing bond proceeds. After utilizing all of these tools and resources, a gap remains that is needs to be filled to get the project to the finish line. Combination of Financing Solutions #1 - Credit Enhanced Revenue Bonds + Second Mortgage with Bond Proceeds The project is structured to utilize a credit enhancement project that will leverage Housing Catalyst’s AA- issuer credit rating to issue credit enhanced revenue bonds via the capital markets with KeyBanc Capital Markets. In this structure, Housing Catalyst will issue the bonds and lend the bond proceeds to the LIHTC partnership. By issuing revenue bonds on the public markets through a negotiated sale, Housing Catalyst can achieve the best financing available for the project. The financing results in $900,000 of benefit to the development (approximately $770,000 of additional loan proceeds due to the lower interest rate and approximately $100,000 of reduced interest expense and financing cost savings). This financing approach was necessary to allow the project to stay on track for the needed closing timeframe and overcome the various funding gaps. The general revenue pledge is a commitment that in the very unlikely situation that the project revenues could not support the bond debt service, operating reserves were depleted, and there were no funds or fix available to correct the project revenues, then Housing Catalyst would use unrestricted general revenues to make the bond debt service payments. This sophisticated tool has been utilized by very few developers in the state of Colorado. The strategy provides the opportunity to benefit from the AA-rating that Housing Catalyst has worked hard to achieve and maintain. Housing Catalyst is also pursuing a second mortgage utilizing bond proceeds to help fill the gap. #2 - $1.3 Million Acquisition by Housing Catalyst In addition to the general revenue pledge, Housing Catalyst stepped in to acquire the property at 143 Remington to ensure the project could move forward successfully. This was months into the design and outreach process. The opportunity to acquire 143 Remington had not previously been available; however, through ongoing communication and design efforts, it became clear to the seller that the inclusion of the property would make for an enhanced building design and overall better project for the community. Housing Catalyst agreed and committed to contribute $1.3 million of its own equity to complete the acquisition. Staying true to the initial commitment, no additional funding sources were sought to cover this cost. It is a direct contribution from Housing Catalyst. #3 – Value Engineering Housing Catalyst has worked with the team to reduce the construction costs as much as possible while maintaining the aesthetics and quality of building design that were approved through the involved entitlement process. #4– Gap Funding City Affordable Housing Cap Funds - $610,000 Thank you for your consideration and please let us know if you need any additional information. Sincerely, Julie J. Brewen CEO RECIPIENT CONTRACT FOR CITY OF FORT COLLINS AFFORDABLE HOUSING CAPITAL FUND MONIES THIS RECIPIENT CONTRACT (“Contract”) is entered into by and between THE CITY OF FORT COLLINS, COLORADO, a municipal corporation (hereinafter referred to as "the City") and HOUSING CATALYST, a body corporate and politic under the laws of the state of Colorado (“Recipient”), and shall be effective on the date last signed below. W I T N E S S E T H: WHEREAS, the City, through its Affordable Housing Capital Fund (“Fund”), desires to be a financial partner with developers of local affordable housing, where feasible; and WHEREAS, Recipient is proposing to construct Oak 140 Apartments, an affordable housing development (the “Project”), and has requested funding for the Project totaling $610,000 from the Fund; and WHEREAS, the City wishes to support the Project by providing funding subject to the terms and conditions herein. NOW, THEREFORE, in consideration of the mutual promises of the parties, it is agreed as follows: 1.Scope of Services/Performance Monitoring. A.The Scope of Services to be rendered by the Recipient as a condition of receivingfunds for the Project pursuant to this Contract is attached as Exhibit A heretoand made a part of this Contract. The Recipient will develop the Project on the“Project Property”, as described in Exhibit A. Recipient agrees to perform thework described in Exhibit A, Scope of Services, in compliance with allprovisions of this Contract. Recipient warrants and represents that it has therequisite authority and capacity to perform all of Recipient's obligationshereunder. B.The City will monitor the performance of the Recipient against goals andperformance standards required herein. Material substandard performance asdetermined by the City using reasonable judgment will constitute non-compliance with this Contract. If the Recipient does not take action to correctsuch substandard performance within a reasonable period of time, but in noevent less than thirty days, after being notified by the City, the City mayinitiate contract suspension or termination procedures. 2.Time of Performance/Term of Contract. The Project shall commence upon the full and proper execution of this Contract andshall be completed on or before December 31, 2023 (the “Completion Date”). However, the Project time of Performance may be extended by letter, subject to mutual agreement of the ATTACHMENT 2 Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 2 City and the Recipient. To initiate this process, the Recipient shall submit a written request to the City at least sixty (60) days prior to the Completion Date and shall include a full justification for the extension request. Except as provided in Section 22 below or until the Recipient has repaid to the City the Fund monies provided to the Recipient under this Contract, this Contract shall be in effect as long as the Recipient retains control over properties which utilize Fund monies provided pursuant to this Contract for acquisition, construction or rehabilitation of affordable housing, including income generated from the funds (the “Contract Period”). The City's obligation to provide funding under this Contract shall be from July 16, 2021 to December 31, 2023 and shall be contingent upon full compliance by Recipient with all terms and conditions set forth herein. 3. Payment/Repayment of Funds. The City will reimburse the Recipient its allowable costs for the services identified in this Agreement, not to exceed Six Hundred Ten Thousand dollars ($610,000) on the following schedule: 2021: $610,000 in Fund monies appropriated and available. Payment will be made upon presentation of invoices which Recipient certifies are true and correct copies of payments due on behalf of the Recipient, for an activity covered by this Contract and made in accordance and compliance with the Scope of Services. In no event shall the City's obligation to make payment to the Recipient hereunder exceed Six Hundred Ten Thousand dollars ($610,000). Payments may be made once a month in cases covering reimbursement for operation costs, otherwise upon presentation of vouchers accompanied by invoices or receipts showing date paid. Payment may be suspended by the City as provided in Section 22.B below in the event of a default by Recipient. For certain projects funded with Fund monies, the City will withhold a retainage of 10% of the loan amount until the Recipient has successfully completed development of the Project through rental of all units and submittal to the City of all required documentation. All funds are provided as a “due-on-sale loan”, unless otherwise specified in the Scope of Services. Loans also require a one-time payment of five percent simple interest on the principal, which payment shall be made to the City at the payoff of the loan. The total amount owing is Six Hundred Forty Thousand Five Hundred dollars ($640,500). All loans are due in full upon sale or transfer of the Project Property unless such sale or transfer is an Approved Disposition (as defined herein), in the event of a default by Recipient under this Contract, or if the Recipient or a subrecipient commits fraud, deceit or misrepresentation in obtaining funding. 4. Environmental Conditions. The Recipient agrees to comply with all environmental or public health related laws or regulations, insofar as they apply to the performance of this Contract, including but not limited to:, the Clear Air Act, 42 U.S.C., 1857, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251, et seq., as amended 1318 relating to inspection, monitoring, Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 3 entry, reports and information, as well as other requirements specified in said Section 114 and Section 308, and all regulations and guidelines issued thereunder; the Environmental Protection Agency (EPA) regulations pursuant to 40 CFR, Part 50, as amended; the National Environmental Policy Act of 1969; and the Flood Disaster Protection Act of 1973. 5. Affordability/Restrictive Covenants Affordability requirements as described in the Scope of Work remain with the Project Property regardless of change of ownership during the specified period of affordability. An Agreement of Restrictive Covenants detailing affordability requirements in a form reasonably acceptable to the City will be placed on all properties funded by the City (”Restrictive Covenants”), which Restrictive Covenants will be used to enforce the long-term affordability of the Project. The Recipient shall qualify households applying for housing assistance using Section 8 income guidelines. The City hereby agrees that the Restrictive Covenants and any other right of enforcement of the City or Recipient to the Project or Project Property, or other collateral of the Owner, will be subordinate to (i) that certain Land Use Restriction Agreement, between the Owner and the Colorado Housing and Finance Authority (“CHFA”), relating to the Project (the “Land Use Restriction Agreement”); and (ii) the rights and priority of Recipient (in such capacity, the “Senior Lender”), under that certain “Loan Agreement,” dated as of the date hereof and entered into by and between Senior Lender and Owner and secured by that certain Deed of Trust with Security Agreement and Fixture Filing (together with the Loan Agreement, the “Bond Loan Documents”), dated on or around the date hereof, and granted by Owner to the [UMB Bank National Association], as Trustee, and for the benefit of Senior Lender. Upon request from Owner or Recipient, the City shall execute such instruments as Owner or Recipient may reasonably request, in a form acceptable to the City, Senior Lender and CHFA, subordinating City’s interest in the Project and Project Property, and other collateral of Owner to the interests of Senior Lender and CHFA. 6. Notices. Notices required to be given under this Contract shall be hand delivered or sent by U.S. Mail or overnight commercial courier and addressed as follows: If to the City: If to the Recipient: Affordable Housing Program Social Sustainability Department Housing Catalyst 1715 W. Mountain Ave. Fort Collins, CO 80521 City of Fort Collins P.O. Box 580 With a copy to: Gilmore & Bell, P.C. Ryan R. Warburton 15 West South Temple, Suite 1450 Salt Lake City, Utah 84101 Telephone Number: (801) 364-5080 Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 4 E-Mail Address: rwarburton@gilmorebell.com Fort Collins, CO 80522-0580 Recipient will also notify the City promptly of any change in its ownership. 7. Compliance with Laws. The Recipient, in performance of this Contract, agrees to comply with all applicable Federal, State and local laws and ordinances, and other policies, regulations and guidelines established for the City of Fort Collins. Recipient agrees to comply with all provisions of the Americans with Disabilities Act and all regulations interpreting or enforcing such act. 8. Proof of Lawful Presence Recipient acknowledges that the City’s Affordable Housing Funds are a “public benefit” within the meaning of C.R.S. § 24-76.5-102. As such, the Recipient shall ensure compliance with C.R.S. § 24-76.5-103 of State statute by performing the required verifications. Specifically, when required the Recipient shall ensure that: a. if the public benefit provided by the funds flows directly to a natural person (i.e., not a corporation, partnership, or other legally-created entity) 18 years of age or older, he/she must do the following: (i) complete the affidavit attached to this Contract as Exhibit “D”. (ii) attach a photocopy of the front and back of one of the following forms of identification: a valid Colorado driver’s license or Colorado identification card; a United States military card or military dependent’s identification card; a United States Coast Guard Merchant Mariner identification card; or a Native American tribal document. b. If an individual applying for the benefits identified herein executes the affidavit stating that he/she is an alien lawfully present in the United States, Recipient shall verify his/her lawful presence through the federal systematic alien verification or entitlement program, known as the “SAVE Program,” operated by the U.S. Department of Homeland Security or a successor program designated by said department. In the event Recipient determines through such verification process that the individual is not an alien lawfully present in the United States, the Recipient shall not provide benefits to such individual with the City’s Affordable Housing Funds. The City acknowledges that the Scope of Services provided by Recipient herein may fall within several exceptions to the verification requirements of C.R.S. § 24-76.5-103 for non-profits. For example, certain programs, services, or assistance such as, but not limited to, soup kitchens, crisis counseling and intervention, short-term shelter or prenatal care are not subject to the verification requirements of C.R.S. § 24-76.5-103. 9. Prohibition Against Employing Illegal Aliens Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 5 This paragraph applies to all recipients whose performance of work under this Contract does not involve the delivery of a specific end product other than reports that are merely incidental to the performance of said work. In compliance with C.R.S. § 8-17.5-101, Recipient represents and agrees that: (a) As of the date of this Contract, Recipient does not knowingly employ or contract with an illegal alien who will perform work under this Contract; and Recipient will participate in the electronic employment verification program created in Public Law 104-208, as amended, and expanded in Public Law 108-156, as amended, and jointly administered by the United States Department of Homeland Security and the Social Security Administration, or its successor program (the “E-Verify” Program), in order to confirm the employment eligibility of all employees who are newly hired for employment to perform work under this Contract. (b) Recipient shall not knowingly employ or contract with an illegal alien to perform work under this Contract or knowingly enter into a contract with a subcontractor that fails to certify to Recipient that the subcontractor shall not knowingly employ or contract with an illegal alien to perform work under this Contract. (c) Recipient has confirmed the employment eligibility of all employees who are newly hired for employment to perform work under this Contract through either the E-Verify Program or the employment verification program established by the State of Colorado pursuant to Section 8- 17.5-102(5)(c), C.R.S. (the “Department Program”). (d) Recipient is prohibited from using either the E-Verify Program or the Department Program procedures to undertake pre-employment screening of job applicants while this Contract is being performed. (e) If Recipient obtains actual knowledge that a subcontractor performing work under this Contract knowingly employs or contracts with an illegal alien, Recipient shall: (i) Notify such subcontractor and the City within three days that Recipient has actual knowledge that the subcontractor is employing or contracting with an illegal alien; and (ii) Terminate the subcontract with the subcontractor if within three days of receiving the notice required pursuant to this Section the subcontractor does not cease employing or contracting with the illegal alien; except that Recipient shall not terminate the contract with the subcontractor if during such three days the subcontractor provides information to establish that the subcontractor has not knowingly employed or contracted with an illegal alien. (f) Recipient shall comply with any reasonable request by the Colorado Department of Labor and Employment (the “Department”) made in the course of an investigation that the Department undertakes or is undertaking pursuant to the authority established in Subsection 8- 17.5-102 (5), C.R.S. Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 6 (g) If Recipient violates any provision of this Contract pertaining to the duties imposed by Subsection 8-17.5-102, C.R.S. the City may terminate this Contract. If this Contract is so terminated, Recipient shall be liable for actual and consequential damages to the City arising out of Contractor’s violation of Subsection 8-17.5-102, C.R.S. (h) The City will notify the Office of the Secretary of State if Recipient violates this provision of this Contract and the City terminates the Contract for such breach. 10. Independent Contractor. Nothing contained in this Contract is intended to, or shall be construed in any manner, as creating or establishing the relationship of employer/employee between the parties. The Recipient shall at all times remain an independent contractor with respect to the services to be performed under this Contract. The City shall be exempt from payment of all Unemployment Compensation, FICA, retirement, life and/or medical insurance and Workers' Compensation insurance as the Recipient is an independent contractor. 11. Liability. As to the City, Recipient agrees to assume the risk of all personal injuries, including death resulting therefrom, to persons, and damage to and destruction of property, including loss of use therefrom, caused by or sustained, in whole or in part, in connection with or arising out of the performance or nonperformance of this Contract by Recipient or by the conditions created thereby. Recipient further agrees to indemnify and save harmless the City, its officers, agents and employees, from and against any and all claims, liabilities, costs, expenses, penalties and attorney fees arising from such injuries to persons or damages to property or based upon or arising out of the performance or nonperformance of this Contract or out of any violation by Recipient of any statute, ordinance, rule or regulation. 12. Insurance and Bonding. The Recipient shall carry sufficient insurance coverage to protect Contract assets from loss due to theft, fraud and/or undue physical damage, and as a minimum, shall purchase blanket fidelity bond covering all of Recipient’s employees in an amount equal to cash advances from the City. Specifically, the Recipient will protect the City’s investment by providing Property Insurance, Workers Compensation and Employer’s Liability Insurance, if applicable, Commercial General Liability Insurance and All Risk Property Damage Insurance. 13. Grantor Recognition. The Recipient shall ensure recognition of the role of the City in providing services through this Contract. All activities, facilities and items utilized pursuant to this Contract shall be prominently labeled as to funding source. In addition, the Recipient will include a reference to the support provided herein in all publications made possible with funds made available under this Contract. Such labeling and/or reference shall generally state the following: "This project is partially supported by funding from the City of Fort Collins." Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 7 14. Documentation and Record-keeping. A. Records to be Maintained. The Recipient shall maintain all records that are pertinent to the activities to be funded under this Contract. Such records shall include but not be limited to: (i) Records providing a full description of each activity undertaken including the location of the Project, the form of assistance provided and the per-unit subsidy; (ii). Records required to determine the eligibility of activities, including minimum and maximum per-unit subsidy limits, household income, and lease requirements and tenant protections for each household; (iii). Records required to document the acquisition, improvement, use or disposition of real property acquired or improved with City Affordable Housing fund assistance; The Recipient shall use reasonable and appropriate accounting systems in maintaining the records required hereunder. B. Retention. The Recipient shall retain all records pertinent to expenditures incurred under this Contract for a period of five (5) years after the termination of all activities funded under this Contract. Records for non-expendable property acquired with funds under this Contract shall be retained for five (5) years after final disposition of such property. The Recipient shall maintain all eligibility documentation on the occupants of the Project that supports the low-income benefit criteria for such occupants throughout the period of affordability for the Project as defined in the Scope of Work. C. Client Data. The Recipient shall maintain client data demonstrating client eligibility for services provided. Such data shall include, but not be limited to: client name, address, income level or other basis for determining eligibility, and description of service provided, racial and ethnic data and single head of household data (to the extent such data is provided by the client). In addition, data will be retained for affordability and income targeting for each household. Such information shall be made available to City monitors or their designees for review upon request. D. Property Records. Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 8 The Recipient shall maintain real property inventory records which clearly identify Project properties purchased, improved or sold. Properties retained shall continue to meet eligibility criteria. E. Audits and Inspections. All records with respect to any matters covered by this Contract shall be made available to the City at any time during normal business hours, as often as the City deems necessary, to audit, examine and make excerpts or transcripts of all relevant data. Any deficiencies noted in audit reports must be fully cleared by the City within thirty (30) days after receipt by the City. Failure of the Recipient to comply with the above requirements will constitute a violation of this contract and may result in the withholding of future payments. F. Suspension and Debarment. By executing this Contract, Recipient verifies and affirms that it has not been suspended or debarred from participating in or receiving federal government contracts, subcontracts, loans, grants or other assistance programs. 15. Reporting and Payment Procedures. A. Budgets. The specific use of the funds provided to Recipient under this and other City funding programs, is included in Exhibit A (Scope of Services), and a detailed contract budget for the Project is attached as Exhibit “C” and incorporated herein by this reference. The City and the Recipient may revise the budget from time to time in accordance with existing City policies, by amendment of this Contract. B. Program Income. [Not applicable.] C. Indirect Costs. If indirect costs are charged, the Recipient will develop an indirect cost allocation plan for determining the appropriate City share of administrative costs and shall submit such plan to the City for approval prior to submission of requests for any payments for the same. D. Payment Procedures. The City will pay to the Recipient funds available under this Contract based upon information submitted by the Recipient and consistent with any approved budget and City policy concerning payments. With the exception of certain advances, payments will be made for eligible expenses actually incurred by the Recipient, and not to exceed actual cash requirements. Payments will be Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 9 adjusted by the City in accordance with advance fund and program income balances available in Recipient accounts. In addition, the City reserves the right to liquidate funds available under this Contract for costs incurred by the City on behalf of the Recipient. E. Progress Reports. The Recipient shall submit regular Progress Reports to the City on a quarterly basis until Project completion and on a yearly basis thereafter or as required by the Scope of Services. Quarterly reports shall include a narrative description of progress, percentage of work completed, funds expended, and any issues or problems. During any required period of affordability, the recipient will submit a yearly occupancy report and the City may require submission of a yearly audit. 16. Monitoring and Evaluation. The City reserves the right to monitor and evaluate the progress and performance of the Recipient to assure that the terms of this Contract are being satisfactorily met in accordance with City and other applicable monitoring and evaluating criteria and standards. Recipient shall cooperate with City relating to such monitoring and evaluation, and make available to the City any documents or other information requested by the City or relevant to the City’s monitoring and evaluation. 17. Property Acquired With Program Funds. A. Recipient agrees to use all personal assets and all real property, acquired or improved, in whole or in part, with Fund monies, as set forth in Exhibit A. In the event Recipient ceases to use a personal asset or real property acquired or improved with Fund monies in accordance with Exhibit A, the Recipient shall either repay the Loan or return the personal asset or real property to the City, or pay to the City a sum equal to its fair market value, less any portion of the value attributable to expenditures of non- Fund monies for the acquisition of, or improvement to, the asset or property. The Recipient shall transfer to the City any Fund monies on hand at the time of expiration of this Contract and any accounts receivable of Fund monies. B. Recipient agrees to promptly provide to the City, through an appropriate lien, deed of trust, or other security instrument, such security interest in any personal or real property acquired using funds provided under this Contract as the City may deem appropriate, based upon the nature of the property, the Scope of Services, the potential term of the security interest, and such other reasonable considerations as the City may deem appropriate in protecting its interest in the funds provided hereunder. Recipient further agrees that in addition to, or in lieu of the above, the City may require the execution and recordation of Restrictive Covenants on real property purchased in connection herewith, in order to protect the City’s interest in the funds provided hereunder. Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 10 18. Civil Rights. A. Compliance. The Recipient agrees to comply with Chapter 13, Article II, of the City Code and Title 24, Article 34, Parts 3 through 7, C.R.S., and with Title VI of the Civil Rights Act of 1964, as amended, Title VIII of the Civil Rights Act of 1968, as amended, Section 104(b) and Section 109 of Title 1 of the Housing and Community Development Act of 1974 as amended, Section 504 of the Rehabilitation Act of 1973, the Americans With Disabilities Act of 1990, the Age Discrimination Act of 1975, Executive Order 11063, and with Executive Order 11246, as amended by Executive Orders 11375, 11478 and 12086. B. Employment Nondiscrimination. The Recipient will not discriminate against any employee or applicant for employment because of race, color, creed, religion, ancestry, national origin, sex, sexual orientation, disability or other handicap, age, actual or perceived sexual orientation, gender identity, marital status, or status with regard to public assistance in accordance with federal, state and local laws. The Recipient will take affirmative action to ensure that all employment practices are free from such discrimination. Such employment practices include but are not limited to the following: hiring, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff, termination, rates of pay or other forms of compensation and selection for training, including apprenticeship. The Recipient agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the City setting forth the provisions of this nondiscrimination clause. The Recipient will serve all eligible beneficiaries without regard to religion and may not restrict housing to people of a particular religion or by reason of their participation (or lack thereof) in religious activities. C. Land Covenants. This Contract is subject to the requirements of Title VI of the Civil Rights Act of 1964 (P.L. 88-352) and 24 CFR 570 Part 1. In regard to the sale, lease or other transfer of land acquired, cleared or improved with assistance provided under this Contract, the Recipient shall cause or require a covenant running with the land to be inserted in the deed or lease for such transfer, prohibiting discrimination as herein defined, in the sale, lease or rental, or in the use or occupancy of such land, or in any improvements erected or to be erected thereon, providing that the Recipient is a beneficiary of and entitled to enforce such covenants. The Recipient, in undertaking its obligation to carry the program assisted hereunder, agrees to take such measures as are necessary to enforce such covenant and will not itself so discriminate. D. Fair Housing. Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 11 All housing (for sale or rent) assisted with funding through the City must be made available without discrimination based on race, color, national origin, age, sex, religion, familial status or disability according to Title VIII of the Civil Rights Act of 1968, Title VI of the Civil Rights Act of 1964, the Age Discrimination Act of 1975, Executive Orders 11063 and 12259 – Equal Opportunity in Housing, Section 504, Title II of the Americans with Disabilities Act; and without discrimination based on disability, race, creed, color, sex, sexual orientation, marital status, familial status, religion, national origin, or ancestry according to Part 5 of Article 34 of Title 24, C.R.S. 19. Prohibited Activity. The Recipient is prohibited from using funds provided herein or personnel employed in the administration of the program for political activities, lobbying, political patronage or nepotism activities. Funds provided under this Contract must not be used for religious activities, to promote religious interests, or for the benefit of a religious organization. The recipient cannot require a beneficiary to participate in inherently religious activities; however, a faith-based organization may retain its independence to carry out its mission, including allowing a Board of Directors to be selected based on religious practice. 20. Conflict of Interest. The Recipient covenants that it presently has no financial interest and shall not acquire any financial interest, direct or indirect, which would conflict in any manner or degree with the performance of services required under this Contract. The Recipient further covenants that in the performance of this Contract, no person having such a financial interest shall be employed or retained by the Recipient hereunder. These conflict of interest provisions apply to any person who is an employee, agent, consultant, officer or elected official or appointed official of the City, or of any designated public agencies or Recipients which are receiving Affordable Housing Fund monies. 21. Subcontracts. Besides the (i) Loan Agreement, Promissory Note, ,Tax Regulatory Agreement, Land Use Restriction Agreement and Deed of Trust entered into with Owner in conjunction with the loan of the Funds from Recipient to Owner, (ii) the Development Agreement (as defined in the Partnership Agreement) entered into between Owner and Housing Catalyst Development Services, a Colorado limited liability company, (iii) and the Construction Contract (as defined in the Owner’s Operating Agreement) by and between the Owner and Calcon Constructors, Inc., a Colorado corporation, as contractor, the Architect Agreement by and between Owner and ShopWorks Architecture LLC, a Colorado limited liability company, as architect, and other subcontracts of the Architect or Contractor entered into for the development of the Project, the Recipient shall not enter into any subcontracts with any agency or individual for performance of this Contract without the written consent of the City prior to the execution of such contract. The Recipient will monitor all subcontracted services on a regular basis to assure compliance with both this Contract and the applicable subcontract. Results of monitoring efforts shall be summarized in written reports and supported with documented evidence of follow-up actions taken to correct areas of Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 12 noncompliance. The Recipient shall cause all of the provisions of this Contract in its entirety to be included in and made a part of any subcontract executed in the performance of this Contract. The Recipient shall undertake to ensure that all subcontracts let in the performance of this Contract shall be awarded in a fair and open competition basis. Executed copies of all subcontracts shall be forwarded to the City, along with documentation concerning the selection process. 22. Suspension or Termination and Default. A, Recipient may terminate this Contract at any time by giving written notice to the City of such termination and specifying the effective date thereof at least thirty (30) days before the effective date of such termination. Partial terminations of the Scope of Service may only be undertaken with the prior written approval of City. If the Recipient terminates this Contract prior to completion of the Scope of Services, including any required period of affordability, all funds previously paid to Recipient by the City pursuant to this Contract must be repaid to the City upon such termination. B. The City may also suspend or terminate this Contract, in whole or in part, if Recipient materially fails to comply with any term of this Contract, or with any of the rules, regulations or provisions referred to herein; and the City may declare the Recipient ineligible for any further participation, through the Competitive Process, in City affordable housing, public facility or human services contracts, from any City funding source, in addition to other remedies as provided by law or in equity. In the event there is probable cause to believe the Recipient is in noncompliance with any applicable laws, rules, or regulations, the City may withhold up to one hundred (100) percent of said Contract funds until such time as the Recipient is found to be in compliance by the City or is otherwise adjudicated to be in compliance, or exercise the City’s rights under any security interest of the City arising hereunder; provided that City shall not take any remedial or enforcement actions, and actions or inactions of Recipient shall not constitute a default hereunder, until after Recipient has received written notice from the City and has failed to take action to cure within thirty days of receipt of such written notice. C. In the event of any termination pursuant to this section, the Recipient shall remit to the City all monies previously paid by the City to the Recipient under this Contract, and all finished or unfinished documents, data, studies, surveys, maps, models, photographs, reports or other materials prepared by Recipient under this Contract shall, at the option of the City, become the property of the City, provided, however, that Recipient shall be entitled to receive just and equitable compensation for any satisfactory work completed on such documents or materials prior to the termination. D. This Contract, and the City's obligations under it, will automatically terminate in the event of suspension or non-appropriation of funds by the City. Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 13 23. Amendments. The parties may amend this Contract at any time, provided that such amendments make specific reference to this Contract and are executed in writing, signed by a duly authorized representative of both organizations. Such amendments shall not invalidate this Contract, nor relieve or release the City or Recipient from its obligations under this Contract, except as expressly provided therein. 24. Assignability. This Contract has been awarded based on the specific qualifications and representations of the Recipient. Therefore, the Recipient shall not assign or transfer: (a) any interest in this Contract; (b) any of its rights or obligations under this Contract, or (c) its interest in any property obtained using the funds provided under this Contract (including but not limited to the Project Property as described in Exhibit A), without the prior written consent of the City; provided, however, that claims for money due or to become due to the Recipient from the City under this Contract may be assigned to a bank, trust company or other financial institution without such approval. Notice of any such assignment or transfer shall be furnished promptly to the City. For assignments and transfers requiring City consent, the Recipient must give the City no less than thirty (30) days advance notice of the proposed assignment or transfer. Notwithstanding any provision contained herein to the contrary, Oak 140 LLLP (the “Partnership”) shall be the eventual owner of the Project and shall have all the same rights and obligations as the Recipient under this Contract. Without limiting the generality of the foregoing, the parties hereby expressly agree that the Partnership has the right to receive a loan of the Affordable Housing Capital Fund monies awarded under this Contract from the Recipient. The City hereby consents to the following transfers (each an “Approved Disposition”): (i) Sale or transfer of any interest, including any interest in the Project, Project Property, this Contract, and in Recipient and Owner provided the sale or transfer is to a qualified entity approved in advance by the City, and provided this Contract is assigned to and assumed by such transferee with City prior approval of the written assignment; (ii) all of the “Permitted Encumbrances” listed on Exhibit B to the Deed of Trust recorded against the Project Property for repayment of the Loan stemming from this Contract and executed by Owner for the benefit of Recipient; (iii) the transfer of the Project or Project Property from Recipient, or its affiliate, to Owner; (iv) the addition of RBC Community Investments, LLC, as limited partner (“Limited Partner”) of Owner and any person who becomes a substituted limited partner in Owner pursuant to Sections [9.1, 9.2, 9.3 or 9.6] of the Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 14 Amended and Restated Operating Agreement of Owner dated as of the date hereof, as amended (the “Partnership Agreement”); (v) any transfer of any interest in the Project, Project Property, or Owner (or their successors or assigns) to Recipient or its subsidiary, affiliate, or instrumentality; (vi) the transfer of the obligations and duties of Recipient under this Contract to Owner; (vii) Recipient’s loan of the funds provided it under this Contract to Owner; (viii) Neither the withdrawal, substitution, and/or addition of the Limited Partner or any special limited partner of Owner or the members or partners of Limited Partner or special limited partner pursuant to the terms of the Partnership Agreement, nor the transfer of interests in the Limited Partner or Owner’s special limited partner shall constitute a default under this Contract or shall require the prior consent of the City, provided, however, that the transfer of such limited partner’s interest in Owner to any party that is not an affiliate of the Limited Partner prior to payment of all capital contributions required under the Partnership Agreement may only be made with the consent of the City, unless the limited partner agrees to remain obligated to make all remaining capital contributions; and (ix) City consent shall not be required if the Limited Partner exercises its right under the Partnership Agreement to remove the general partner and appoints an affiliate of the Limited Partner, as substitute general partner, so long as the Limited Partner gives prompt written notice to the City of such removal and appointment and so long as the City agrees to such transfer. 25. Entire Agreement/Governing Law. This Contract including all attachments; the Promissory Note(s), the Deed(s) of Trust, the Agreement of Restrictive Covenants for Real Property and any other applicable legal documents, constitute the entire agreement between the parties hereto and no statement, promise, conditions, understanding, inducement or representation, oral or written, express or implied, which is not contained herein shall be binding or valid. This Contract shall be binding upon the parties, their agents, representatives, successors and assigns. This Contract shall be governed under the laws of the State of Colorado. 26. Authority to Sign The person(s) executing this Contract on behalf of the Recipient represent that one or both of them has the authority to execute this Contract and to bind the Recipient to its terms. [The remainder of this page intentionally left blank.] Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 15 IN WITNESS WHEREOF, the parties have executed this Contract as of the date of the most recent signatory. THE CITY OF FORT COLLINS, COLORADO A Municipal Corporation By:_______________________ Date _________ Darin Atteberry, City Manager ATTEST: ____________________________ City Clerk ____________________________ (print name) APPROVED AS TO FORM: ____________________________ Sr. Assistant City Attorney ____________________________ (print name) Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 16 HOUSING CATALYST a body corporate and politic under the laws of the state of Colorado Date: By: Julie J. Brewen, Executive Director & Chief Executive Officer EXHIBIT A SCOPE OF SERVICES 1. Project Description and Objectives: The purpose of this contract is to provide $610,000 to the Housing Catalyst (Developer) to develop the Project Property (Oak 140), a multi-family apartment community, with a total of 79 affordable rental units. 2. Amount of award, source of funding: $610,000 AHCF 3. Terms of the Loan: Due on Sale loan with 5% simple interest 4. Project Property Address, number of units in the project and number of accessible units: [140 E. Oak Street], Fort Collins, CO 80524; 79 units; and 4 accessible units 5. Legal Description of Project Property: Parcel #1: Lots 23, 24, 25 26 & 29, and the Westerly 33 feet of Lot 30, all in Block 121, of the City of Fort Collins, County of Larimer, State of Colorado. And the Westerly 80 feet of Lots 27 and 28, Block 121, City of Fort Collins, County of Larimer, State of Colorado. Parcel #2: Parcel A: The East 60 feet of Lots 27 and 28, Block 121, City of Fort Collins, County of Larimer, State of Colorado. Parcel B: An Easement for use of three parking spaces now adjoining said property on the North and a non-exclusive easement to use the established driving lanes of Lot 29 and The South 10 feet of Lot 30 in said Block 121 for ingress to and egress from said parking spaces, as created in warrant Deed recorded January 9, 1997 under Reception No. 97001702. 6. Low and Moderate Income Benefit. The Recipient shall insure that 100% of the total AHCF-assisted units (79 units) will be occupied by persons whose household income is less than or equal to 80% of area median income. In accordance with the Developer’s application for funding, Developer agrees to ensure that 8 units are occupied by households with income at or below 80% area median income, 29 units are occupied by households with income at or below 70% of area median income, 29 units are occupied by households with income at or below 50% of area median income, 6 units are occupied by households with income at or below 40% of area median income, and 7 units are occupied by households with income does not exceed 30% of area median income. Income limits are attached to this document as Exhibit B-1 and may be amended as necessary. The Recipient shall determine annual income of the Project beneficiaries using Section 8 Housing Program income definitions as per 24 CFR Part 813. Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 18 7. Affordability. Rental: For all City funding, regardless of changes in fair market rents and in median incomes over time, the qualifying rents are not required to be lower than the fair market rents for the project in effect at the time of contract execution. Area median incomes and Fair Market Rents are annually adjusted by the department of Housing and Urban Development (HUD). Rent and income levels must be reviewed annually by the City for compliance with the above requirements. The Fair Market Rent schedule, as set forth in Exhibit B-2 is attached hereto and is incorporated herein by reference, or as subsequently promulgated in writing by the City. The Recipient shall ensure that all of the units in the Project continue to be used to provide housing for low and moderate income persons at affordable rents. 8. Agreement of Restrictive Covenant: The City shall prepare and Recipient shall execute an agreement of restrictive covenant that will ensure that the property will remain affordable without regard to the term of any mortgage or the transfer of ownership for not less than the appropriate term described in the previous paragraph. The period of affordability for this project is [thirty/forty] years regardless of repayment of loan and/or transfer or sale of the property.[NTD: WILL BE MATCHED TO CHFA LURA] 9. Tenant and Participants Protection: The lease between a tenant and an owner of rental housing must be for not less than one year, unless by mutual agreement between the tenant and the owner. Leases must specify that tenants must receive at least 30 days written notice prior to implementing a rent increase. The lease may not contain any of the prohibited lease terms listed in 24 CFR Part 92.253(b). In addition, all leases must comply with applicable state or local tenant-landlord laws. 10. Contract Administration. The City is responsible for providing the following information to the Recipient yearly as it becomes available: income limits, rent limits, utility allowances and any changes to requirements that may affect the management of the project. The Recipient shall be responsible for the timely completion of the Scope of Services requirements. 11. Housing Standards. These units will, at a minimum, meet HUD's Housing Quality Standards (24 CFR, Section 982.401 and 92.251, incorporated by reference), including lead-based paint requirements at 24 CFR Part 35, and all applicable local and state building codes and standards. Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 19 EXHIBIT B-1 2021 Income Limits Income Limits (effective date: 6/01/2021) 2021 Median Income: $95,900 (Fort Collins/Loveland Metropolitan Statistical Area) City of Fort Collins Household Members AMI = Area Median Income 51-80%: Low Income Limit (HOME High Income Limit) 31-50%: Very Low Income Limit (HOME Low Income Limit) 0-30%: Extremely Low Income Limit Income 1 2 3 4 5 6 100% AMI $67,200 $76,800 $86,400 $95,900 $103,600 $111,300 80% of AMI* $53,700 $61,400 $69,050 $76,700 $82,850 $89,000 60% of AMI $40,320 $46,080 $51,840 $57,540 $62,160 $66,780 50% of AMI* $33,600 $38,400 $43,200 $47,950 $51,800 $55,650 30% of AMI* $20,150 $23,000 $25,900 $28,750 $31,050 $33,350 Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 20 EXHIBIT B-2 2021 Fair Market Rents Rent 0-Bdrm 1-Bdrm 2-Bdrm 3-Bdrm 4-Bdrm Low HOME 840 900 1080 1246 1391 High HOME 1004 1096 1351 1587 1751 FAIR MARKET 1004 1096 1351 1933 2339 50% Rent Limit 840 900 1080 1246 1391 65% Rent Limit 1071 1149 1382 1587 1751 80% Rent Limit 1343 1439 1726 1995 2225 Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 21 EXHIBIT C PROJECT BUDGET Please note: The Sources and Uses statement from the application is hereby incorporated into the agreement from which the following is itemized: Funding Available: $610,000 Eligible Costs: As outlined in the project budget, the development expenses eligible for reimbursement include, but are not limited to the following items: Building Permit Fees Construction Costs Landscaping Architect Fees Engineering Fees Tap Fees Oak 140 Total Residential Development Budget SOURCES: USES: Construction to Permanent Financing $ 7,100,000.00 Land & Buildings (Demolition) $ 101,496.00 LIHTC Equity (LP) $ 11,795,707.00 Site Work $ 75,285.00 State Tax Credit Equity $ 1,692,293.00 New Construction $ 19,788,871.00 Deferred Developer Fee $ 387,972.00 Professional Fees $ 1,029,588.00 Housing Catalyst Subordinate Loan 1 (Bonds) $ 950,000.00 Construction Interim Costs $ 2,447,908.00 Housing Catalyst Subordinate Loan 2 (HC/City) $ 610,000.00 Permanent Financing $ 722,796.00 FCDDA Equity $ 5,177,108.00 Soft Costs $ 317,508.00 Syndication Costs $ 50,000.00 Developer Fees $ 2,676,628.00 Project Reserves $ 503,000.00 TOTALS: $ 27,713,080.00 $ 27,713,080.00 Housing Catalyst Oak 140 AHCF 2021 4849-3121-0988, v. 1 22 EXHIBIT D Proof of Legal Residency Pursuant to Section 24-76.5-103(4)(b), C.R.S. ONE COPY AND VERIFICATION REQUIRED FOR EACH ADULT AGE 19 AND OLDER I, _____________________________________, swear or affirm under penalty of perjury under the laws of the State of Colorado that (check one): ______ I am a United States citizen, or ______ I am a legal Permanent Resident of the United States, or ______ I am otherwise lawfully present in the United States pursuant to federal law. I understand that this sworn statement is required by law because I have applied for a public benefit, as defined by law. I understand that state law requires me to provide proof that I am lawfully present in the United States prior to receipt of this public benefit. I further acknowledge that making a false, fictitious, or fraudulent statement or representation in this sworn affidavit is punishable under the criminal laws of Colorado as perjury in the second degree under Colorado Revised Statute section 18-8-503 and it shall constitute a separate criminal offense each time a public benefit is fraudulently received. If I checked the second or third option above, I understand that my lawful presence in the United States will be verified through the federal Systematic Alien Verification of Entitlement (SAVE) Program. __________________________ ____________________ Signature Date The above affidavit must be accompanied by a copy of one of the following four types of identification. _____ A valid Colorado Driver’s License or a Colorado Identification Card, issued pursuant to Article 2 of Title 42, C.R.S.; or _____ A United States military card or a military dependent’s identification card; or _____ A United States Coast Guard Merchant Mariner card; or _____ A Native American Tribal document. Finance Administration 215 N. Mason 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6788 970.221.6782 - fax fcgov.com Finance Committee Meeting Minutes May 24, 2021 10 am - noon Zoom Meeting Council Attendees: Mayor Jeni Arndt, Julie Pignataro, Kelly Ohlson, Emily Gorgol, Susan Gutowsky Staff: Darin Atteberry, Kelly DiMartino, Kyle Stannert, Travis Storin, Teresa Roche, Carrie Daggett, John Duval, Claire Havelda, Tyler Marr, Theresa Connor, Lance Smith, Lisa Schroers, Lawrence Pollack, Cody Forst, Nina Bodenhamer, Jennifer Poznanovic, Jamie Gaskill, Brian Tholl, Meaghan Overton, Jackie Kozak-Thiel, Beth Rosen, Victoria Shaw, Sue Beck-Ferkiss, Leo Escalante, Aaron Harris, Dave Lenz, Jo Cech, Zack Mozer, Blaine Dunn, Kelley Vodden, Jordan Granath, Renee Callas, Nikki Daniels, Erik Martin, Carolyn Koontz Others: Kristin Fritz - Housing Catalyst, Matt Robenalt - Executive Director, DDA, Joe Rowan, ____________________________________________________________________________________ Meeting called to order at 10:04 am Julie Pignataro; I would like to note for the record that I have conferred with the City Manager and the City Attorney and have determined that the Committee should conduct this meeting remotely because meeting in person would not be prudent for some or all persons due to a current public health agency recommendation. Approval of Minutes from the April 19, 2021 Council Finance Committee Meeting. Emily Gorgol moved for approval of the minutes as presented. Kelly Ohlson seconded the motion. Minutes were approved unanimously via roll call by Julie Pignataro, Kelly Ohlson and Emily Gorgol. New Business Discuss and Designate New Chairperson for the Council Finance Committee Julie Pignataro offered to be the Chairperson for the Council Finance Committee. A motion to nominate Julie Pignataro as chair was made by Emily Gorgol. The motion was seconded By Kelly Ohlson. Nomination vote confirmed via roll call; Kelly Ohlson, Emily Gorgol, Julie Pignataro. Julie Pignataro requested that we consider moving the Council Finance Committee meetings to a time at or after 3 pm to accommodate the fact that Julie and Emily Gorgol both have full time jobs. The first Wednesday of the month from 3 - 5 pm was agreed to as a go forward meeting time. The remaining scheduled meetings in 2021 will be rescheduled to accommodate. We will schedule as close to the new guidelines as possible based on calendars. ATTACHMENT 3 2 A. Housing Catalyst CCIP Support Meaghan Overton, City Housing Manager Sue Beck-Ferkiss, Social Policy & Housing Program Manager Request for $610K Subsidy from Affordable Housing Capital Fund (AHCF) EXECUTIVE SUMMARY Housing Catalyst’s (HC) Oak 140 project is a partnership between HC and the Downtown Development Authority (DDA) to finance and construct a 4-story, mixed-use building at the intersection of Oak and Remington Streets. The project will create 79 affordable rental homes in the Downtown area serving residents who make between 30-80% of Area Median Income (AMI). The financing for the project includes contributions from DDA and HC, State and Federal tax credits, Private Activity Bond (PAB) allocations from the City and County, and HC bonds. Housing Catalyst is requesting $610,000 in City funding from the Affordable Housing Capital Fund (AHCF) to help close a financing gap created by escalating commodities pricing, especially lumber. This request is aligned with guidance in the Housing Strategic Plan and with the City’s criteria for funding affordable housing projects. Though City Plan, the City Strategic Plan, and the Housing Strategic Plan all encourage production of affordable housing, the realities of financing and constructing deed-restricted affordable housing are very challenging. Project feasibility can be significantly impacted by changes to the costs of materials and labor. To break ground as scheduled in summer 2021 and to avoid even greater cost escalations, the Oak 140 project requires additional subsidy. Currently the only direct City subsidy allocated to this is $98,000 in fee credits for 7 units that will serve residents making 30% AMI or below. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Is Council Finance Committee supportive of the request for $610,000 of direct subsidy from the Affordable Housing Capital Fund for the Housing Catalyst (HC) Oak 140 project? BACKGROUND/DISCUSSION The City has established community-wide affordable housing goals to have 10% of the city’s housing stock deed- restricted and affordable by 2040. This goal has been reaffirmed through the adoption of the Housing Strategic Plan, which sets a clear vision that Fort Collins will be a community where everyone has stable, healthy housing they can afford. To reach our 10% goal, the city needs to develop at least 282 affordable homes each year. If the Oak 140 project is built, it will represent 28% of the city’s annual affordable housing production goal. There are several funding sources available to support the development of affordable housing (CDBG, HOME, AH Fund, AHCF). The City allocates between $2 million - $3 million to affordable housing in a typical calendar year. It is important to note that although the City has been notified by HUD of an additional HOME allocation of $2.6 million in recovery funding through the American Rescue Plan Act (ARPA), guidance related to the application process and eligible uses will not be available until the fall. With the addition of these funds, staff estimates that approximately $5 million will be available through City and Federal sources for the 2022 Competitive Process. $500,000 will be added to the AHCF in 2022 as well. Social Sustainability completed the 2021 Spring Competitive Process in April and the funding recommendation from the Human Services and Housing Funding Board is scheduled for consideration by City Council on June 1, 2021. Four housing proposals were received, which are being recommended for a total of $2,700,000 in funding. There is an unallocated balance of $486,394 in Affordable Housing funds which will be reappropriated for use for affordable housing projects in 2022. To initiate a Fall Competitive Process, the unallocated balance must 3 exceed $500,000; otherwise, the unallocated funding is carried into the Spring Competitive Process. There is an unallocated balance of less than $500,000 in Affordable Housing funds and no federal funds. Because this threshold has not been met, next year’s Spring Competitive Process is when these and the new allocation of federal funds will be available to housing projects. Project Background and Funding Request: Oak 140 Housing Catalyst (HC) approached the City to discuss the possible use of the AHCF to help close a financing gap in Oak 140 created by escalating commodities pricing, especially lumber. HC is requesting $610,000 from the AHCF to successfully close on the project and lock in pricing for construction. Though the total gap is projected to be larger than the amount requested, HC will reduce costs on the project through value engineering and use a range of other strategies to close the remainder of the financing gap. The Oak 140 project will create 79 affordable rental homes in a desirable Downtown location. The breakdown of unit types and the income levels served is outlined below: 30% AMI 7 units 40% AMI 6 units 50% AMI 29 units 70% AMI 29 units 80% AMI 8 units Average AMI 57.85% To date, the City has committed $98,000 to the project through fee credits for 7 qualifying units that will serve residents making 30% AMI or below. No additional subsidy has been committed to this project. Oak 140 is being financed through contributions from DDA and HC, State and Federal tax credits, Private Activity Bond (PAB) allocations from the City and County, and HC bonds. HC hoped to avoid using Competitive Process funding; however, the cost of materials has skyrocketed since the project began the development review process in May 2020. The financing sources and amounts for the Oak 140 project are as follows: Source Amount Federal LIHTC Equity $11.6 million State LIHTC Equity $1.7 million First Mortgage (bonds) $7 million Second Mortgage (bonds) $1 million Fort Collins DDA Equity $5,175,370* City AHCF (current request) $610,000 Deferred Developer Fee $576,298** TOTAL $27,689,041 *DDA Equity amount does not account for the land contribution; estimated value is $2.3 million ** Does not reflect HC $1.3 million for 143 Remington acquisition A detailed memorandum outlining Housing Catalyst’s request for funding is included as Attachment 1. Affordable Housing Capital Fund Considerations 4 The 2015 voter-approved Community Capital Improvement Program includes the AHCF, which will accrue a total of $4M over ten years through 2025. The ballot language states it will fund capital costs of development or rehabilitation of one or more public or private housing projects designated specifically for low-income individuals or families. Previous Council direction has supported use of this fund for fee credits and direct subsidy for qualifying projects. This request would be a direct subsidy. The current balance of the AHCF is roughly $610,000, which is available for the capital needs of one or more affordable housing projects. The AHCF will be replenished with $500,000 in January 2022. If this request from Housing Catalyst is approved by the full Council, the balance of the AHCF will be approximately $300 until January 2022. Staff does not expect any additional requests for fee credits in 2021. This request is well-aligned with previous Council direction and with the recently adopted Housing Strategic Plan. Providing final funding to projects that are “shovel ready” but facing a funding gap is a use of AHCF resources that has strong policy support. The AHCF was also used in this way to finalize funding for Mason Place in 2019. In addition, the current request is substantially lower than the City’s typical subsidy of affordable housing projects. Between 2015 and 2020, the median average subsidy the City contributed per affordable housing unit was $38,970. The current request for $610,000 and the $98,000 in fee credits represents a per -unit subsidy of just under $9,000 per unit. For a relatively low per-unit subsidy, the City can support the construction of 79 affordable homes in an area of the community with high access to jobs, transit, and other amenities. Staff is aware of other affordable housing projects in the development pipeline; however, it does not appear that there are any other affordable housing funding needs that cannot wait for the 2022 Spring Competitive Process. Previous Council Actions Council has taken three previous actions related to the Oak 140 project. Two actions (July 2020 and November 2020) were related to determining fair market value for leases between the Downtown Development Authority (DDA) and Housing Catalyst. At the May 18, 2021 hearing, Council considered a request for $350,000 in fee credits for qualifying units in two affordable housing projects – Oak 140 (Housing Catalyst) and Cadence (Volunteers of America). Of that amount, $98,000 was for Oak 140’s 7 qualifying units. This request was unanimously approved on First Reading. NEXT STEPS If Council Finance Committee is supportive of this request, staff will prepare an ordinance for consideration by the full Council in June and will seek a recommendation from the Affordable Housing Board at their meeting on June 3, 2021. To fulfill this request, the City Council would need to authorize the City Manager to enter into a funding agreement between the City and Housing Catalyst that would provide $610,000 to Housing Catalyst from the Affordable Housing Capital Fund. This funding agreement would: • Provide funds as a “due-on-sale” loan to ensure the project remains as affordable housing. This loan would only need to be repaid if/when the development was sold • Require a minimum 20-year agreement of restrictive covenants 5 Discussion / Next Steps; $9K per unit is significantly lower than typical subsidies Kelly Ohlson; I seem very supportive – that is what the fund is for -so it makes sense to me I see on the AIS, require minimum 20 year agreement of a restricted covenant - I thought this was a Housing Catalyst and DDA project - Why would this not be a permanent or 40-year restrictive covenant - 20 years is a snap of fingers even in housing Meaghan Overton; the city’s definition of affordable housing in code requires 20-year commitment required but could be changed and that is one of the strategies of the Housing Plan to consider increasing the 20-year minimum requirement but could be more - Sue Beck-Ferkiss; this project is a tax credit project so, in fact, it will have affordability restrictions for at least 30 -40 years or more through the tax credit financing mechanism - And furthermore since this is a Housing Catalyst project their mission aligned to providing affordable housing forever - we are very confident that the affordability term will be much longer than the minimum of 20 years Darin Atteberry; is there a way to memorialize that? Asking Kristin Fritz, Housing Catalyst and Matt Robenalt, DDA what specifically can we do to ensure affordability into perpetuity? Matt Robenalt; The DDA has structured this partnership with the Housing Catalyst with a 99-year ground lease term - affordability - during the term of that ground lease remain intact Kristin Fritz; there is city policy around the 20-year affordability - as the Housing Authority for the City of Fort Collins, we always exceed this requirement and as Sue mentioned the tax credit program requires a land use restriction of a minimum of 40 years – our purpose and mission is to keep this permanently affordable. Sign up for the same term as the ground lease. Kelly Ohlson; The AMI in Fort Collins is high because we are a high tech center - I am assuming we are using 80% AMI in order to make the project viable. I am much more for supporting the 60 /50 /40% AMI group. Kristin Fritz; This project is utilizing income averaging so the average income over the project is below 60% AMI. In partnership with DDA, we wanted to make an effort to target the downtown workforce and we thought being able to serve up to 70-80% of AMI would capture 13 units at 30-40 % AMI - which is a huge achievement and win in a downtown location – that mix – we wanted to stay true to income average and achieve a healthy mix of range. Kelly Ohlson; Housing Catalyst does some incredible work. Privately funded somehow with tax credits, etc. when their 20 or 30 years ran out and they were in partnership with the Housing Authority / Catalyst who then purchased them and the renovation costs were considerable – that is an example of how fast 20-30 years go I remember when those projects started - there were 2-3 large projects that you then bought when the developer’s responsibility was over – it was sold to the private sector then there was considerable renovation Kristin Fritz; the reference point to the Village on Shields which the Housing Catalyst did acquire which is a tax credit property and was going out of compliance and needed renovation due to aging - we stepped in to preserve it as long term affordable – we stay invested in the community and not only do we use our resources to preserve or add new affordable units - we build these projects with upfront costs and over time they will require 6 additional resources to rehab them and retain another 20 years of life - the hardest piece is to build them in the first place. Village on Shields - we were not the original owner and we stepped in as there was a real risk of it being flipped to the market which would have been a loss of 285 units - the use of dollars to preserve those units and get them back into affordable with us as a partner that can maintain them as truly permanently affordable Kelly Ohlson; they had done some private investors and the tax credits ran out and they could get market rate – I am for the city moving forward with a minimum of 40 - preferably into perpetuity. Some that are privately done with tax credits can hit the private market – I think we should focus on a lot longer than 40 years. Emily Gorgol; can we update the language to reflect the 99 year instead of the 20? Darin Atteberry; We will look at this as a staff and bring it back and if there is a compelling reason not to we will communicate that as well. Emily Gorgol; can you briefly talk about ARPA fund and address if we can use them for Affordable Housing construction? Assuming the reason we are not using these funds for this project is that we don’t yet have adequate guidance and that we don’t have the funds right now. Meagan Overton; the timing of the request is such that the sping competitive process would be too late to prevent the additional cost escalation from happening. We do not have the full guidance on the recovery dollars nut we expect that in the coming months. Emily Gorgol; some concern about depleting the funds - we do not have something coming up and potentially with the ARPA funds, if something emergent did come up, we could potentially utilize those funds. Meaghan Overton; We will have significantly more dollars to disperse in the spring competitive process than we typically do and we will get the replenishment of the Affordable Housing Capital Housing fund in January. Emily Gorgol; this is a great use of the funds – it is shovel ready – the average is still under 60% AMI and I agree there is value in mixing of income levels in a property –-we need to look at the average - gets complicated with who we are serving - being able to live close to downtown and not have to commute in- great partnership and location. Looking at the size of $2.3M land donation – it is still super hard to make these projects to work – we are looking at $4.1M over ten years which seems like such a small amount of money to address such a huge need. Construction and lumber prices are not heading in a downward direction - from the pandemic we are seeing them continue to rise - lumber costs $4M is not going to get us where we need to go - Hoping that Council Finance will look at funding options that other communities are doing. For example, last year Denver did an extra tax on marijuana sales to help with their housing. Darin Atteberry; It is a great opportunity to have Matt and Kristn here – this is a great project / great location Appreciate Matt’s leadership and his role with Housing Catalyst – here is an example where there were some last minute cost inflators - our staffs were working together. Emily came to me as a board member and asked if we could have a quick conversation with Council Finance Committee to discuss timely issues. The fact that we have this housing fund is a reason to celebrate. Voters approved this – nimbleness - adaptability - leverage. Matt and Kristin, I heard that you value engineering the project - I hope that does not relate to some of the skin and some of the initial design. Can you confirm that we are not going to have a significantly changed exterior project? 7 Kristin Fritz; the big constraint for us in value engineering is that we cannot touch the building exterior once is has been entitled. We are looking at constructability, materials, parking deck, finishing - things that will not have an impact on the exterior of the building which is why we could not shave off the $1M increase – we could chip away at it but that building needs to look exactly as when it was entitled. Darin Attebery; Matt, I know you are hard committed, so I expect you are aligned. Matt Robenalt; yes - 100% aligned Kelly Ohlson; I wanted to confirm with Emily that I get the mix thing - 80%AMI is still a stretch but I get the blend and I get the average Julie Pignataro; I am supportive - you answered all my questions Meeting adjourned at 12:16 pm AFFORDABLE HOUSING BOARD REGULAR MEETING 6 /3 /20 2 1 – MINUTES Page 2 6.NEW BUSINESS A Request for Direct Subsidy from Affordable Housing Capital Fund – Sue Beck-Ferkiss (Kristin Fritz recused from discussion) Funding for affordable housing projects typically go through the competitive process. However, the Affordable Housing Capital Fund (AHCF) is a separate fund that was authorized by the voters. Currently there is approximately $610,000 in the fund ($200,000 is committed to fee credits). $2 million more is expected to come in $500,000 annual installments until 2025. This fund can be used for capital needs of one or more affordable housing projects. AHCF has been used for fee relief or direct subsidy allocation for past projects e.g., Mason Place. Hi storically, City Council has advised the best use for the Affordable Housing Capital Fund is for fee relief or direct subsidy to “shovel ready” projects with gaps in funding. •Housing Catalyst (HC) Oak 140 – 79 affordable units and retail space o HC has received $98,000 in fee relief. The escalating cost of commodities, like lumber, has created a gap in funding. o HC is intending to ask City for final funding of $610,000 to get the project fully funded. o Both Council Finance Committee and staff see it as appropriate use of funds. DISCUSSION SUMMARY: •Sue Beck -Ferkiss clarified the request of $610,000 would clean out the account for 2021. •In January of 2022, the account will be replenished. •There are currently no other projects coming up the pipeline that would need additional funding for 2021. Thus far, additional projects can wait for the Spring 2022 Competitive Process. •At the time, Housing Catalyst did not need to seek funding from the Spring 2021 Competitive Process. The need for relief came after the Spring 2021 Competitive Process had ended. •The Spring 2022 Competitive Process is anticipating an increase in funding due to an increase in federal funds. •How does the City plan to educate the community on affordable housing? o General anxiety on affordable housing projects, like Oak 140, has been expressed to board members. This question is critical but parallels this discussion. An education campaign is an important item set for future agendas. Bob Pawlikowski motioned to recommend the allocation of $610,000 from Affordable Housing Capital Fund to Housing Catalyst Oak 140 project. Jennifer Bray seconded. Motion passes 6-0-1. (Kristin Fritz recused) ATTACHMENT 4 June 15, 2021Meaghan Overton | Housing ManagerOak 140 Funding Request from Affordable Housing Capital FundATTACHMENT 5 •LIV 2: Promote infill and redevelopment•LIV 5: Create more opportunities for housing choices•LIV 6: Improve access to housing …regardless of their race, ethnicity, income, age, ability, or backgroundStrategic Alignment2• 10% affordability by 2040• Rental needs concentrated below 60% AMI• Continue to prioritize direct funding to lowest income levels • Increase inventory of affordable rental units•NLSH 1.1 Improve and increase…housing… affordable to a broad range of income levels.•ECON 3.4 Foster infill and redevelopment opportunities consistent with City Plan policies. Funding Request3ƒWhat: $610,000 in direct subsidy from the AHCF for the Oak 140 affordable housing projectƒWhy: Financing gap created by escalating commodities prices, especially for lumber.ƒThe Project: 79 affordable rental homes serving residents making between 30-80% AMIƒPartners: Housing Catalyst, Downtown Development Authority Oak 140 Timeline Oak 140 Funding5Source AmountFederal LIHTC Equity$11.6 millionState LIHTC Equity$1.7 millionFirst Mortgage (bonds)$7 millionSecond Mortgage (bonds)$1 millionFort Collins DDA Equity$5,175,370*City AHCF$610,000Deferred Developer Fee$576,298**TOTAL$27,689,041Federal LIHTC 42%State LIHTC Equity6%First Mortgage (bonds)25%Second Mortgage (bonds)4%DDA19%City AHCF2%Deferred Developer Fee2%*DDA Equity amount does not account for the land contribution, which estimated value is $2.3 million** Does not reflect the Housing Catalyst $1.3 million for 143 Remington acquisition Affordable Housing Capital Fund6• Established 2015, $4 million over 10 years through 2025• Uses:•Fee credits for qualifying units (less than 30% AMI) in AH projects•Direct subsidy for development or rehabilitation of one or more AH projects• Previous projects supported include:• Cadence (55 units, age-restricted), Oak 140 (79 units), Mason Place (60 units permanent supportive housing), Oakridge Crossing (110 units, age-restricted), Village on Horsetooth (96 units)• AHCF will be replenished with $500,000 in January 2022 Request to Authorize Funding7• $610,000 from Affordable Housing Capital Fund• Funding Contract:• For the development of the Oak 140 project• “Due-on-sale” loan; only repaid if/when the project is sold• 30-40 year affordability term; aligns with Colorado Housing and Finance Authority requirements for the project Considerations8BenefitsTrade-offs 9 2022 Housing Funding (Est.)10Source Est. AmountAffordable Housing Fund $1,000,000HOME (Federal) $725,000CDBG (Federal) $750,000HOME/HUD American Rescue Plan Act (Federal) $2,600,000TOTAL $5,075,000• Competitive Process• AHCF will also be replenished with $500,000 in January 2022 OOAK 140CCouncil Finance CommitteeMMay 24, 2021 We are the largest affordable housing developer and property management company in Fort Collins.Mission:To build public and private investment partnerships that foster economic, cultural, and social growth in the Downtown area. Mission:To create vibrant, sustainable communities throughout Fort Collins. TTHE NEED FOR AFFORDABLE HOUSINGThe 140 E Oak St Development meets our community needs and priorities.TThe City of Fort Collins believes one of the keys to a healthy community is the ability to house its residents in good quality, affordable housing.A top priority in the City’s Housing Strategic Plan is to increase housing supply and affordability.City Council has prioritized improving access to a broad range of quality housing that is safe, accessible and affordable. A top priority is to increase the supply and affordability of housing.AADOPTED BY CITY COUNCIL IN 2021Reaffirmed a goal for the City to facilitate the development of affordable housing: 10% of the City’s housing stock be affordable by 2040.Current affordable inventory is ~5%; goal requires 282+ units to be produced annually until 2040. 7730% AMI Units640% AMI Units2850% AMI UnitsThe overall income average will be 60% of the area median income (AMI). 2970% AMI Units880% AMI UnitsAFFORDABLE HOUSING DOWNTOWN CCreates affordable living in a highly desirable downtown locationUnique affordable community targeting people who work in and around downtownMixed-use project partnership between Housing Catalyst and the Downtown Development AuthorityAligns with adopted policy andpriorities for the City of Fort CollinsMixed-use concept activates street level and promotes pedestrian activityPROJECT BENEFITSSign up for updates and info: tinyurl.com/oakfc Historic ContextHHISTORY AND OUTREACHOctober 2016 CharretteIdentified significantneed and desire for affordable housingfor people working in and around downtownBroad participationfrom community members, public sector, business ownersCalled for an active ground floor, partnerships, and a designcomplementary to historic character and reflective of our time -1- RESOLUTION 2021-069 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE EXECUTION OF A FUNDING AGREEMENT BETWEEN THE CITY AND HOUSING CATALYST FOR A LOAN OF FUNDS FROM THE AFFORDABLE HOUSING CAPITAL FUND FOR THE OAK 140 DEVELOPMENT WHEREAS, Housing Catalyst, formerly known as the Housing Authority of the City of Fort Collins (“HC”), is partnering with the Downtown Development Authority (DDA) to construct the Oak 140 project, a mixed-use building at the intersection of Oak and Remington Streets that will provide 79 affordable rental homes in the Downtown area serving residents who make between 30 and 80% of Area Median Income (the “Project”); and WHEREAS, the financing for the project includes contributions from DDA and HC, state and federal tax credits, Private Activity Bond allocations from the City and Larimer County, and bonds; and WHEREAS, HC requested $610,000 in City funding from the Affordable Housing Capital Fund (AHCF) in the Community Capital Improvement Program (CCIP) to help close a financing gap created by escalating commodities pricing, especially lumber; and WHEREAS, this request is aligned with guidance in the Housing Strategic Plan and with the City’s criteria for funding affordable housing projects; and WHEREAS, the requested funds are appropriated and available in the AHCF; and WHEREAS, the voter-approved ballot language for the CCIP says the AHCF is to be used to fund the capital costs of development or rehabilitation of one or more public or private housing projects designated specifically for low-income individuals or families; and WHEREAS, if the City Council approves the request, the City would provide the funding to HC in the same way it provides most other funding for affordable housing capital projects: as a due-on-sale loan pursuant to a Recipient Contract between the City and HC (the “Contract”); and WHEREAS, the Contract would require a restrictive covenant to guarantee affordability of the Project for a 40-year term, the same as is required of the Project by a Land Use Restriction Agreement from the Colorado Housing and Finance Authority; and WHEREAS, Article II, Section 16 of the City Charter of Fort Collins empowers the City Council, by ordinance or resolution, to enter into contracts with governmental bodies to furnish governmental services and make charges for such services, or enter into cooperative or joint activities with other governmental bodies; and WHEREAS, under Section 1-22 of the City Code, intergovernmental agreements and other cooperative arrangements between the City and other governmental entities are to be -2- submitted to the City Council for review, unless they fit within one of the exceptions that permit execution by the City Manager; and WHEREAS, Section 29-1-203 of the Colorado Revised Statutes provides that governments may cooperate or contract with one another to provide certain services or facilities when such cooperation or contracts are authorized by each party thereto with the approval of its legislative body or other authority having the power to so approve; and WHEREAS, the Council Finance Committee at its meeting on May 24, 2021, and the Affordable Housing Board at its meeting on June 3, 2021, both supported the use of AHCF funds for the Project; and WHEREAS, the City Council finds that the Project meets the requirements for funding from the AHCF, and that it is in the best interests of the City to provide the requested funding to HC for the project. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That the City Manager is hereby authorized to execute a Recipient Contract with Housing Catalyst on terms consistent with this Resolution, along with such other terms and conditions as the City Manager, in consultation with the City Attorney, determines to be necessary or appropriate to protect the interests of the City or effectuate the purposes set forth herein. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 15th day of June, A.D. 2021. _________________________________ Mayor ATTEST: _____________________________ City Clerk