REPORT TO THE CITY COUNCIL
FROM: JENNIFER K. CLARK, AICP, Director
Planning and Development Department
PHILIP SKEI, Assistant Director
Planning and Development Department
BY: JENNIFER DAVIS, Senior Management Analyst
Planning and Development Department
SUBJECT
Title
Approve the First Amendment to a Memorandum of Understanding between the City of Fresno and Fresno Mission Communities, Inc., a California nonprofit public benefit corporation, establishing additional terms and conditions for the Project, including the contract term’s expiration date of July 11, 2029, the procedures for the payment of the Homekey 3 Operating Award in the amount of $1,087,605 (COSR), and a revised project schedule
Body
RECOMMENDATION
Staff recommends the City Council approve the First Amendment to a Memorandum of Understanding between the City of Fresno and Fresno Mission Communities, Inc., establishing additional terms and conditions for the Project’s contract term, the payment of Homekey COSR, and a revised project schedule.
EXECUTIVE SUMMARY
On April 20, 2023, the City Council authorized a joint application with Fresno Mission Communities, Inc. to the California Department of Housing and Community Development (HCD) for the Homekey 3 Program. The purpose of the Homekey 3 application was to rehabilitate and operate the City Studios Project located at 3876 North Blackstone Avenue (APN 436-260-22), converting a 44-room motel into 34 permanent affordable housing units for individuals and youth experiencing or at risk of homelessness. Upon construction completion, Fresno Mission Communities will act as the owner, operator, and service provider for the Project.
The Project was awarded Homekey 3 Program Funds in the amount of $9,598,131 on February 14, 2024. The City and Fresno Mission Communities, Inc. entered into a Memorandum of Understanding on March 29, 2024, establishing terms, conditions, roles, and responsibilities between the Parties as it relates to the Homekey 3 Program Funds for the development of the City Studios Project. Approving the First Amendment to the Memorandum of Understanding will provide additional terms and conditions for the Parties, including the contract term’s expiration date of July 11, 2029, the procedures for the disbursement of the Homekey 3 Operating Award in the amount of $1,087,605 (COSR), and a revised project schedule.
BACKGROUND
On March 29, 2023, HCD announced a Notice of Funding Availability (NOFA) for approximately $736 million in Homekey Round 3 Program Funds for the purpose of rapidly expanding housing for those experiencing or at-risk of homelessness. On April 20, 2023, the City Council adopted Resolution 2023-097 authorizing a joint application with Fresno Mission Communities, Inc. (Fresno Mission) for Homekey Round 3 Program Funds to rehabilitate and operate the property formerly known as the Travelodge Motel at 3876 North Blackstone Avenue, also known as 1780 East Saginaw Way (APN 436-260-22) (Property). Also on April 20, 2023, City Council adopted Resolution 2023-098 committing City funds in an amount up to $5,000,000 for the Project, contingent upon the full award of Homekey Round 3 Program Funds; and voted to enter a purchase and sale agreement for the Property for the future conversion into permanent affordable housing.
The Property consists of a 0.91-acre parcel situated just east of Blackstone Avenue along the south side of East Saginaw Way and is comprised of a two-story L-shaped motel building, a first-floor office, a second-floor on-site manager’s unit, and a separate laundry room. The City Studios Project will convert the existing 44-room motel into 34 permanent supportive housing units reserved for individuals and youth who are experiencing or at-risk of homelessness and whose income level is at or below 30% Annual Median Income (Project).
The City submitted a joint application with Fresno Mission on May 16, 2023, in response to the NOFA for Homekey 3 Program Funds. On September 28, 2023, City Council voted to proceed with the purchase of the Property and adopt a finding of Categorical Exemption based on the results of the CEQA analysis performed. This analysis confirmed that the Property is a suitable site for the development of permanent affordable housing. The City funded the acquisition of the Property on September 29, 2023, utilizing Encampment Resolution Funding Program Round 2 (ERF-2) Funds in the amount of $4,401,709, for the exclusive purpose of developing permanent affordable housing. On November 6, 2023, HCD confirmed that the Property qualifies as “exempt surplus land” under Government Code section 54221, subdivision (f)(1)(A). On December 7, 2023, the City Council declared the Property “exempt surplus land” through Resolution No. 2023-308, and proper noticing to HCD was completed in compliance with the Surplus Land Act.
On February 14, 2024, the Project was awarded $9,598,131 in Homekey Round 3 Program Funds. The Program award included Homekey Capital Funds in the amount of $8,510,526 for rehabilitation and relocation fees, and a Homekey Capitalized Operating Subsidy Reserve (COSR) in the amount of 1,087,605 for operating expenses. This funding will provide 34 units of permanent affordable housing, including 21 studio apartments, 9 one-bedroom units, 2 two-bedroom units, and 2 three-bedroom units. Of these, 23 Homekey-assisted units will be reserved for individuals at-risk of homelessness, 10 Homekey-assisted units reserved for homeless youth or youth at-risk of homelessness, and one unit for an on-site manager. The Homekey-assisted units will be reserved for households whose income level is at or below 30% Annual Median Income (AMI).
On April 18, 2024, City Council authorized the acceptance of $9,598,131 in Homekey Round 3 Program Funds from HCD for the Project, to be used for eligible capital and operating costs and expenses. Also on April 18, 2024, City Council approved a Memorandum of Understanding between the City and Fresno Mission dated March 29, 2024 (Agreement), which established the roles and responsibilities between the City and Fresno Mission related to the Project as part of the Homekey 3 Program.
Currently, the City seeks to enter into a First Amendment to the Memorandum of Understanding with Fresno Mission Communities, Inc. (First Amendment), establishing additional terms and conditions for the Project, including the contract term’s expiration date of July 11, 2029, the procedures for the payment of the Homekey 3 Operating Award in the amount of $1,087,605 (COSR), and a revised project schedule due to unforeseen delays in construction.
The Homekey Program seeks to rapidly expand housing for those experiencing or at-risk of homelessness, and as such, the Project was originally expected to be completed on February 14, 2025, just twelve months after receiving HCD’s award letter. However, the Project’s overall schedule has experienced significant delays due to supply chain issues on the delivery of the switchgear, which is a critical element of the Project’s electrical infrastructure. In addition, there has been a substantial delay from PG&E in energizing the Project. The current anticipated completion date for the Project is no later than the end of January 2026. Upon completion of construction, the City will transfer ownership of the Property to Fresno Mission, which will serve as both the owner and direct service provider of the Project.
Fresno Mission will provide comprehensive supportive services to all residents, including high quality and individualized case management with a housing focused approach. These services will include linkage to substance abuse treatment services, school services, vocational services, mental health services, entitlement program assistance, health and disease education, 24/7 peer support, housing retention skills, legal assistance, and medical services.
The Project will provide affordable quality housing, thereby increasing the City’s housing stock and assisting to meet its affordable housing goals as outlined in the One Fresno Housing Strategy, 2025-2029 Consolidated Plan, and the Housing Element of the Fresno 2035 General Plan. Fresno Mission is a highly respected organization with a proven track record of successful partnership with the City’s efforts to reduce homelessness and increase housing availability. This adaptive reuse Project will foster neighborhood revitalization, promote sustainable and equitable development, and improve the overall well-being of the community.
ENVIRONMENTAL FINDINGS
On September 28, 2023, the City Council adopted a finding of Categorical Exemption pursuant to Sections 15301/Class 1 (Existing Facilities) and 15332/Class 32 (In-fill Development) of the California Environmental Quality Act (CEQA) Guidelines. Staff reviewed the project and determined that none of the exceptions to Categorical Exemptions set forth in Section 15300.2 of the CEQA Guidelines apply.
LOCAL PREFERENCE
Local preference was not considered because the action today does not include a bid or award of a construction or services contract.
FISCAL IMPACT
The project is located in City Council District 4 and will have no impact on the General Fund. The source of funding for this Project was appropriated from the California Department of Housing and Community Development Homekey Round 3 Program Award.
Attachments:
First Amendment to Memorandum of Understanding
Original Memorandum of Understanding