REPORT TO THE CITY COUNCIL
FROM: JENNIFER CLARK, Director
Planning and Development Department
THROUGH: PHIL SKEI, Assistant Director
Planning and Development Department
BY: CORRINA NUNEZ, Project Manager
Community Development Division
SUBJECT
Title
***RESOLUTION - To support FCTC Family II, LP’s, Low-Income Housing Tax Credit Application for the development of Sarah’s Court Phase II; and to provide a conditional commitment of HOME Investment Partnerships Program loan funds in an amount not to exceed $3 million to the Project (Subject to Mayor’s Veto)
Body
RECOMMENDATIONS
Staff recommends the City Council adopt the HOME Investment Partnerships (HOME) Program Resolution (Exhibit A - HOME Resolution for Sarah’s Court Phase II) for a conditional commitment in an amount not to exceed $3 million for predevelopment and construction costs of Sarah’s Court Phase II.
EXECUTIVE SUMMARY
If approved as recommended, FCTC Family II, LP (Developer), will receive a Resolution for conditional HOME funding in an amount not to exceed $3 million for predevelopment and construction costs of Sarah’s Court Phase II. Upon receipt of a Reservation Letter from the California Tax Credit Allocation Committee (CTCAC) for 4% Low-Income Housing Tax Credits (LIHTC) to the project, staff will return to Council with a regulatory agreement for HOME funding. The total cost of Sarah’s Court Phase II is estimated at $38,480,855, will consist of 120 affordable housing units, and will sit adjacent to Sarah’s Court Phase I, which is now complete, at the Fancher Creek Master Plan Development in southeast Fresno.
BACKGROUND
On May 19, 2023, the Community Development Division (Division) released a 2023-2024 Notice of Funding Availability (NOFA) for the creation of new affordable housing or substantial rehabilitation of existing housing. In response to the NOFA, the Division received several applications, one of which was for the Sarah’s Court Phase II project.
In accordance with the City of Fresno Better Business Act (Act), the proposed funding was offered through a NOFA and is therefore not subject to the Act process.
On February 1, 2024, the Council adopted Resolution No. 2024-013 for a conditional commitment of HOME funding in an amount not to exceed $3 million for predevelopment and hard construction costs of Sarah’s Court Phase II. The HOME Resolution was provided to the Developer to support its application for the first round of 2024 LIHTC 9% tax credits. However, the application did not score high enough to achieve an award of tax credits in the first round. There were seven LIHTC applications for the Central Valley Region with scores in the low seventy to eighty percent range. Sarah’s Court Phase II first round application scored in the low forties. Resolution 2024-013 expired at the end of December 2024.
On June 20, 2024, the Council adopted Resolution No. 2024-132 for a conditional commitment of HOME funding in an amount not to exceed $3 million for predevelopment and hard construction costs of Sarah’s Court Phase II. The second Resolution provided for the Developer to apply for the second round of 2024 LIHTC 9% tax credits. However, the application did not score high enough to achieve an award of 9% tax credits in the second round. There were also seven LIHTC applications for the Central Valley Region at the second round with scores in the low seventy to eighty percent range. Sarah’s Court Phase II second round application again scored in the low forties. Since the project will not commence construction by March 2025 as outlined in the Resolution, Resolution 2024-132 is void.
The attached third HOME Resolution outlines the change from a 9% tax credit application to a 4% tax credit application and the terms and conditions for securing a HOME regulatory agreement. Since it is anticipated that the 9% tax credits will remain extremely competitive, oversubscribed, require substantial subsidy, and multiple application submittals to achieve an award, the Developer has opted to apply for 4% tax credits at the next round of 2025 application submittals. This third Resolution will expire September 30, 2025.
Total development cost is estimated at $38,480,855: $2.2 million deferred developer fees; $5,453,200 investor equity; $447,116 in operating reserves; $2.4 million Community Development Block Grant loan (approved by Council on February 1, 2024); $24,980,539 construction loan, and the $3 million HOME loan upon receipt of a Reservation Letter from the CTCAC, issued on or prior to September 30, 2025, at which time the Resolution will expire.
The Sarah’s Court Phase II project will consist of four three-story structures containing 120 units with a mix of bedroom sizes ranging from 610 square feet for a 1bed/1bath, 875 square feet for a 2bed/2bath, and 1,140 square feet for a 3bed/2bath. Proposed project rents range from $392 to $1,268 per unit, per month, depending on size and location. Phase II residences will share a 6,000 square foot community room and swimming pool with Phase I, which was recently completed. Phase II also includes amenities such as on-site property management, covered podium garage parking, mail room, conference room, fitness center, lounge area, and business center.
Phase II will sit immediately north and adjacent to Sarah’s Court Phase I which is currently undergoing lease up. The Phase II site is approximately 1.91 acres and is bounded by N. Salma Avenue on the west and Terry Avenue on the north, east, and south. The site is clear, excavated, and ready for immediate development.
ENVIRONMENTAL FINDINGS
This item is not a project for the purposes of the California Environment Quality Act.
On March 17, 2022, the U.S. Department of Housing and Urban Development issued authorization to use federal HOME funds for the Sarah’s Court Phase II project.
LOCAL PREFERENCE
Local preference is not applicable due to the use of federal funding.
FISCAL IMPACT
HOME funds to support the conditional commitment were appropriated to the Planning and Development Department as part of its fiscal year 2025 Budget.
Attachment:
Exhibit A - HOME Resolution for Sarah’s Court Phase II