REPORT TO THE CITY COUNCIL
FROM: JENNIFER K. CLARK, Director
Planning and Development Department
BY: PHIL SKEI, Assistant Director
Planning and Development Department
CORRINA NUNEZ, Project Manager
Housing and Community Development Division
SUBJECT
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Actions pertaining to the conversion of the former Parkside Inn Motel into a 38-unit residential affordable housing project, located at 1415 W. Olive Avenue, Fresno 93728 (District 3):
1. Approve a Community Development Block Grant (CDBG) Loan Agreement in the amount of $3 million with Silvercrest, Inc., for property acquisition of the former Parkside Inn Motel; and
2. ***RESOLUTION - To support Silvercrest, Inc., a California Non-Profit Public Benefit Corporation’s Low-Income Housing Tax Credit Application for the substantial rehabilitation of the form Parkside Inn; and to provide a conditional commitment of HOME American Rescue Plan (HOME-ARP) Program loan funds in an amount not to exceed $858,000 to the Project (Subject to Mayor’s Veto)
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RECOMMENDATION
Staff recommends Council approve a Community Development Block Grant (CDBG) Loan Agreement (Exhibit “A”- CDBG Agreement) in the amount of $3 million with Silvercrest, Inc., for property acquisition of the former Parkside Inn Motel located at 1415 W. Olive Avenue, Fresno 93728, and approve the HOME-ARP Program resolution (Exhibit “B” - Resolution) for proposed funding in an amount not to exceed $858,000 for rehabilitation and construction costs.
EXECUTIVE SUMMARY
If approved as recommended, Silvercrest, Inc., will execute a CDBG loan Agreement in the amount of $3 million with the City for property acquisition of the former Parkside Inn Motel site and receive a resolution for conditional HOME-ARP program funding in an amount not to exceed $858,000 for rehabilitation and construction costs upon receive of a Reservation Letter from the California Tax Credit Allocation Committee (CTCAC) for first round 9% Low-Income Housing Tax Credits (LIHTC) to the project in a sufficient amount to fully fund the Project and commence construction of the Project within the 2024 calendar year. The estimated substantial rehabilitation / new construction project cost is $21 million. Seven units will be CDBG-assisted units reserved for low-income households whose income at 80 percent, or less, of the area median income for Fresno County. The Parkside Inn Motel site is located at W. Olive Avenue and Highway 99 in west central Fresno. The approval of this CDBG loan Agreement will help the City of Fresno meet its timeliness test.
BACKGROUND
On May 19, 2023, the Housing and Community Development Division released a 2023-2024 Notice of Funding Availability (NOFA) for the creation of new affordable housing projects or substantial rehabilitation of existing housing. In response to the NOFA, the City received several applications, one of which was the Parkside Inn project that is being recommended to receive $3 million in CDBG Program funding for property acquisition of the former motel site. 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. After preliminary underwriting and technical assessment of the applications, the Parkside Inn project was determined to be one of the most shovel ready and is therefore being recommended for funding in the amount of $3 million. The CDBG loan will be made at two percent interest, hold a no worse than 4th position lien, be repaid from residual receipts, with any balance of principal and interest due in full at the 55-year maturity date. In addition, the City is proposing to provide up to $858,000 for rehabilitation and construction cost of the project with HOME-ARP funds. A funding HOME-APR funding agreement will be presented to the Council at a later date.
The Parkside Inn project cost is estimated at $21 million: $3 million CDBG loan, $13,231,875 tax credit equity, $3,759,124 State of California Homekey funds, and $858,000 in proposed HOME-ARP funds. (Exhibit “C” - Project Budget). The construction cost per square foot for a residential unit is estimated at $458 ($21,000,000 / 45,821 square feet) which was derived from the total development cost, less the costs for specialized professional services, reserves as a condition financing, application fees, costs associated with submitting funding applications, on- and off-site improvements, etc.
Residential units will be contained within the existing 2.6-acre property with 27 rehabilitated units in the existing two-story motel structure for the Phase I and an additional 12 newly constructed units to be situated at the south end of the former motel property Phase II, located at 1415 W. Olive Avenue. (Exhibit “D” - Project Location Map). The combined Phase I and Phase II includes a 2,300 square foot community room which will include management offices, multi-purpose room, kitchen, restroom facilities, onsite laundry, and recreation area. The site currently offers 52 on-site parking spaces, eight accessible parking spaces, and short- and long-term bike racks and storage. In addition, construction materials will be durable and environmentally friendly and incorporate accessibility features. The City Housing and Community Development Division will inspect the completed property annually for housing quality standards and overall property management. Also, the site is centrally located and situated near public transportation, schools, grocery stores, medical clinic, parks, and other shopping venues.
The Parkside Inn project will consist of 38 affordable rental units (12 studios, 7 one-bed/one-bath, 10 two-bed/one-bath, 9 three-bed/two-bath, and one on-site manager unit). Unit sizes will range from approximately 356 square feet for a studio, 712 square feet for a one-bedroom, 947 square feet for a two-bedroom, and 1,194 square feet for a three-bedroom. Seven units will be City-assisted floating two-bedroom units and be reserved as affordable units available to lower income households for a period of 55 years through a declaration of restrictions recorded on the property. Qualifying tenants’ income will range from 30 percent to 60 percent of the area median income for Fresno County. Proposed rents will range from $409 to $1,216 per unit depending on bedroom size and location within the property and subject to change to allowable rents at the time of initial lease up. Twelve of the units will be reserved for formerly homeless households through the State of California Homekey Program.
Ownership structure consists of Fresno 1415 W. Olive Ave., LP, a California limited partnership; a to-be identified tax credit investor that will serve as limited partner; Silvercrest, Inc., a nonprofit affiliate of Housing Authority that will serve as the Managing General Partner; and Fresno 1415 W. Olive Ave., LLC which will serve as the Administrative General Partner of which the Housing Authority of the City of Fresno is the sole member and Manager.
Project team members currently consists of Ballard Spahr, LLP (attorney) Novogradac, LLP (CPA), California Housing Partnership (financial consultant), James G. Palmer (Appraiser), R.L. Davidson (Architect), Melas Engineering (Energy Consultant), Laurin & Associates (Market Analyst), and GSF Properties (Property Management Company).
Over the past 60 years, the Housing Authority has constructed, rehabilitated, managed, and owned thousands of affordable housing units for lower income households. As part of its mission to create vibrant communities, the Housing Authority provides service rich social programs to its residents to help promote self-sufficiency. Some of the Housing Authority’s most recent projects include the City View Apartments at Van Ness Avenue and Inyo Street in downtown Fresno, Monarch at Chinatown at F Street and Mariposa Street, and Avalon Commons Phase I, which is currently under construction at Alluvial Avenue and Chestnut Avenue in northeast Fresno.
The approximate completion date of the Parkside Inn project is December 31, 2025. In the event an extension of time is needed, the CDBG Agreement provides for an administrative extension of up to 180 days for unforeseen delays. Any extension of time requested by the developer beyond the 180 days requires an amendment to the Agreement which will be brought forth to the Council for approval consideration.
Once completed, the Parkside Inn will assist the City of Fresno with its affordable housing goals as identified in the 2015-2023 Housing Element of the 2035 General Plan, 2020-2024 Consolidated Plan, 2023-2024 Annual Action Plan, and 2023-2025 One Fresno Housing Strategy. In addition, this substantial rehabilitation / new construction project is expected to make a positive impact on the surrounding neighborhood by rehabilitating an existing dilapidated motel structures and providing new quality and durable construction at the rear of the property for full use of the 2.6-arce site.
ENVIRONMENTAL FINDINGS
In June of 2023, the Director of Planning and Development approved Development Permit Application No. P22-04444 proposing a lodging to dwelling conversion for the Parkside Inn project, consistent with all project features described above. In addition, the City determined that the Parkside Inn project is exempt from CEQA pursuant to a Class 32/15332 Categorical Exemption. A notice of exemption was filed on June 8, 2023. This approval is to implement the funding portion of the overall project which was determined to be categorically exempt. No further assessment pursuant to CEQA is required at this time. In addition, and as required for the use of federal funding, a National Environmental Policy Act assessment for the project activities was completed on January 18, 2024, and resulted in a Finding of No Significant Impact. On March 1, 2024, the project received U.S. Department of Housing and Urban Development authorization to use grant funds for the proposed substantial rehabilitation/new construction Parkside Inn project.
LOCAL PREFERENCE
Local preference was not used based on conditions of federal funding.
FISCAL IMPACT
The CDBG Program funds for the proposed Parkside Inn Project were appropriated in the 2024 Planning and Development Department Budget.
APPENDICES
Exhibit A - CDBG Agreement
Exhibit B - Resolution
Exhibit C - Construction Budget
Exhibit D - Project Location Map