REPORT TO THE CITY COUNCIL
FROM: JENNIFER CLARK, Director
Planning and Development Department
THROUGH: PHILIP SKEI, Assistant Director
Planning and Development Department
BY: BRANDON SISK, Senior Management Analyst
Community Development Division
SUBJECT
Title
Actions pertaining to funding provided by the U.S. Department of Housing and Community Development Office of Community Planning and Development (HUD CPD):
1. HEARING to obtain public comments regarding Substantial Amendment 2023-01 to the 2023-2024 Annual Action Plan and submission of a $20 million Section 108 Loan Application to the United States Department of Housing and Urban Development (HUD) for the development of a Senior Activity Center, located at 4343 North Blackstone Avenue
2. ***RESOLUTION - Adopting Substantial Amendment 2023-01 to the Fiscal Year (FY) 2023-2024 Annual Action Plan; authorizing submission to the U.S. Department of Housing and Urban Development (HUD) to apply for a $20 million Section 108 Loan for the development of a Senior Activity Center; and authorizing the City Manager or designee to sign all necessary implementing documents required by HUD (Subject to Mayor’s veto)
Body
RECOMMENDATION
Staff recommends the City Council obtain the views and comments from interested persons regarding Substantial Amendment 2023-01 and Section 108 Loan Application for the development of a Senior Activity Center; thereafter adopt Substantial Amendment 2023-01 to the 2023-2024 Annual Action Plan; and authorize submission of Substantial Amendment 2023-01 and Section 108 Loan Application to HUD.
EXECUTIVE SUMMARY
HUD Section 108 Loan proceeds have been identified as a key component in the financing plan for the planned Senior Activity Center. To secure this financing, HUD requires an approved Substantial Amendment to the 2023-2024 Annual Action Plan and an authorized submission of a Section 108 Loan Application.
BACKGROUND
In its 2020-2024 Consolidated Plan, City residents identified the need for developing a public facility for senior recreation and community-building. To meet this need, the City reprogrammed $4,993,211.79 in CDBG funds to acquire property to develop a senior activity center through Substantial Amendments 2020-01 and 2020-03 to the 2020-2021 Annual Action Plan.
The new senior activity center will be located at 4343 N. Blackstone Avenue on a 5.5-acre parcel west of N. Blackstone Avenue between E. Holland and E. Swift Avenues. A contiguous parcel to the South was purchased to develop senior affordable housing but is not part of this substantial amendment.
The City would like to create a 30,000 square foot senior activity center that provides recreation and enrichment activities to seniors in Fresno. The main features of the facility will be determined through a community outreach process, but the City envisions possible features to include multi-purpose meeting and recreation areas with modular walls for small group activities; a kitchen for warming meals; areas to accommodate indoor and outdoor recreational activities; a computer lab with the ability to access the Internet and print documents; a dance room; a game room with board games; a dedicated fitness area; a community garden; a stage to produce plays and present awards; a TV area with access to cable or satellite programming; sharps disposal; and restrooms that include grab bars and handrails, raised toilets, lever faucets, and an alert system in cases of emergency.
Based on estimated construction costs and projected financing fees, the City’s estimate to construct the Senior Activity Center is $25 million. Section 108 Loan proceeds have been identified as a key component of the financing for this project. The total amount available via the Section 108 Loan Guarantee program is equal to five times the City’s current annual CDBG entitlement less any unpaid principal on prior loans. Since the City does not have any outstanding loans, the City can borrow up to $34,485,805, which equals five times its current allocation of $6,897,161.
The City is proposing to make a substantial amendment to its Program Year 2023 Annual Action Plan to apply for a $20 million Section 108 Loan to develop the senior activity center. The remaining $5 million in funding needed to complete the project may be achieved using local funding or private funding sources. The City is estimating the following financing terms for the Section 108 funds:
• 0.94% financing fee, equal to $188,000 ($20,000,000 * .0094).
o The financing fee is scheduled to increase to no more than 2% on September 20, 2023. If the City is unable to submit the Section 108 loan prior to that date, the financing fee will equal up to $400,000 ($20,000,000 * .02).
• 20-year term with variable interest rate based on the 10-year Treasury Note, which is at 5.456% as of August 14, 2023. As of May 1, 2021, HUD has required 35 basis points, or 0.35%, be added to the variable interest rate. This makes the City’s total interest rate 5.806%.
• The City’s future CDBG grant funds, in addition to the constructed senior activity center would serve as collateral for the loan.
To access Section 108 financing, the City proposes to pledge a portion of its future CDBG grants (Program Years 2023-2043) as collateral for repayment. The City proposes to use the maximum repayment period allowable, twenty years, to minimize the potential reduction of CDBG grant funds in any given year. In the event the United States Congress terminates the CDBG program prior to loan payoff, the City pledges the subject land and improvements as collateral. An appraisal will be completed to ensure that the property and improvements have a current loan-to value ratio greater than 80%. In the event the property and improvements do not meet this requirement, the City will work with HUD to find additional collateral to secure the loan.
The City plans on incurring eligible costs prior to the Section 108 Loan Guarantee commitment. The City is requesting permission from HUD to reimburse itself for pre-award costs per 24 CFR §570.200(h).
To submit a substantial amendment to HUD, the City must follow its Citizen Participation Plan which includes publishing the draft substantial amendment for a 30-day public comment period. The list below provides the citizen participation component of the process.
Citizen Participation
• July 17, 2023: Public Notice distributed via Fresno Bee
• July 17, 2023: Public notice distributed on social media, through the Housing and Community Development Division (HCDD) email distribution list
• July 17, 2023: Draft documents published to HCDD webpage for 30-day public comment period
• August 17, 2023: End of 30-day public comment period
• September 14, 2023: Public Hearing
The City received zero public comments during the public comment period. The comments received at today’s hearing and the City’s responses will be included with the final submission to HUD.
ENVIRONMENTAL FINDINGS
This is not a project for purposes of CEQA pursuant to CEQA guidelines Section 15378 and is exempt for NEPA purposes pursuant to 24 CFR 58.34.
LOCAL PREFERENCE
Local preference is not applicable because of the use of federal funding.
FISCAL IMPACT
Adoption of Substantial Amendment 2023-01 will allow the City to apply for $20 million in Section 108 Loan funds for the development of the Senior Activity Center.
Attachments: Resolution - Substantial Amendment 2023-01