HomeMy WebLinkAboutItem No. 07 - Approving the Substantial Amendment to the 2006 HUD Section 108 Loan
Public Hearing
City of San Bernardino
Request for Council Action
Date: May 20, 2020
To: Honorable Mayor and City Council Members
From: Teri Ledoux, City Manager
By:Michael Huntley, Community & Economic Development Director
Subject: Adopt a Resolution Approving the Substantial Amendment to
the 2006 HUD Section 108 Loan
Recommendation
Adopt Resolution No. 2020-45 of the Mayor and City Council of the City of San
Bernardino, California, approving the Substantial Amendment to the 2006 HUD Section
108 Loan Guarantee Assistance for the North Arden Guthrie Project.
Background
The City of San Bernardino is an entitlement jurisdiction that receives Community
an
On September 16, 2006, the City entered into a contract for loan guarantee assistance
under Section 108 of the Housing and Community Redevelopment Act of 1974, as
amended, Title 42 of the United States Code § 5308 (CDBG Section 108 Contract No.
B-03-MC-06-
HUD for the development of approximately 17.43 acres of underutilized land located
Property was deemed eligible for HUD assistance pursuant to 24 U.S. Code of Federal
the City
confirmed that the census tract in which the Property is located meets all the
requirements of 24 CFR § 570.208 (a) (4) (v).
The obligations under the Contract were evidenced by a promissory note in the
maximum principal amount of Seven Million Five Hundred Thousand Dollars
Contract, HUD requires certain security to be provided by the Borrower, which was the
City, and the Sub-recipient, which was the former-Redevelopment Agency of the City of
San Bernardino, with respect to repayment of the Promissory Note. Therefore, as
stated within Contract Sections 15(a) and (b), the Contract describes the security
pledged by the City and the Sub-Recipient as collateral for repayment of the Promissory
Note pursuant to the Pledge, Assignment and Security Agreement; with Contract
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Section 15(c) requiring the City to provide HUD additional security for repayment of the
Promissory Note, the primary of which is the Deed of Trust. With the sale and transfer
of the Property to a developer, the Deed of Trust shall be released and the outstanding
balance on the Promissory Note shall be paid in full.
With the 2006 Section 108 Loan proceeds, eligible activities within the Contract (site
acquisition, pursuant to 24 CFR § 570.703 (a); residential relocation assistance,
pursuant to 24 CFR § 570.703 (d); and demolition and clearance, pursuant to 24 CFR §
570.703 (e)) were implemented by the Sub-recipient. Due to the dissolution of
redevelopment agencies statewide, and the Sub-Recipient being the former
Redevelopment Agency of the City of San Bernardino, title to the Property was
transferred to the Successor Agency of the former Redevelopment Agency of the City of
with the loss of its proposed anchor tenant, Home Depot, in 2017. Also, due to the
changes in the commercial real estate market, Mark Development, LLC, (the
types of tenants currently in the market place today. As a result of this economic set-
back and changes to the Site Plan, HUD has requested that the City prepare a
move the Project forward developing a neighborhood shopping center thereby creating
the necessary jobs to fulfill the National Objective.
The City and the Successor Agency are currently in negotiations with the Developer for
the sale and development of the property and the Developer has submitted preliminary
designs to develop
Discussion
HUD has requested that the City and the Developer use reasonable efforts in the
development and operation of the Project to meet the national objective of jobs creation
pursuant to 24 CFR § 570.208 (a) (4), where at least 51 percent of the jobs, computed
on a full time equivalent basis, are held or made available to low and moderate-income
income, adjusted by family size); and pursuant to 24 CFR § 570.208 (a) (4) (iv), all jobs
moderate-
in which the property is located meets all the requirements of 24 CFR § 570.208 (a) (4)
(v).
As directed by HUD, the City of San Bernardino has prepared a Substantial Amendment
to the 2006 Section 108 Loan to identify the changes to the 2012 Site Plan, and
establish new time frames and benchmarks for completion of the Project. The
Substantial Amendment to the 2006 Section 108 Loan is attached to the Resolution as
, El Chicano
(Spanish newspaper) newspapers, , announcing the availability of
the Substantial Amendment to the 2006 Section 108 Loan for public review and
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comment. The public comment period was held for no less than 30 days and a public
hearing to hear oral comments from interested parties will be held on March 18, 2020.
The approval of the attached Resolution will address a more timely completion of the
Project to the satisfaction of HUD.
2020-2025 KEY STRATEGIC TARGETS AND GOALS
Approval of the Substantial Amendment is consistent with Key Target No. 1: Secure a
long-term revenue stream. The development of the Project involves the sale and
development of the Property to wind-down the former Redevelopment Agency, which
will result in the transfer of real property assets to third parties to place them into highest
which will create economic activities, create job opportunities, remove blight, improve
neighborhoods, and increase sales tax and/or transit occupancy tax revenues. The
development of the Project will also result in the fulfillment of monetary obligations
resulting in the full payment of the 2006 Section 108 Loan to HUD.
Fiscal Impact
There will be no impact to the City
Amendment will only identify new timeframes and benchmarks for Project completion.
In addition, there are no new activities to be allocated with federal funds through the
approval of this Substantial Amendment.
Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino,
California, adopt Resolution No. 2020-45, approving the Substantial Amendment to the
2006 HUD Section 108 Loan Guarantee Assistance for the North Arden Guthrie Project.
Attachments
Attachment 1 Resolution 2020-
Ward: 7
Synopsis of Previous Council Actions:
July 24, 2006 Resolution 2006-271 of the Mayor and Common Council of the City
of San Bernardino approving and authorizing the Mayor to Execute
the Contract and related documents for the Loan Guarantee
Assistance under Section 108 of the Housing and Community
Development Act of 1974, as amended, 42 USC Section 5308
(CDBG Section 108 Contract No. B-03-MC-06-0539) - North Arden
Guthrie Commercial Development Project (IVDA Redevelopment
Project Area).
Page 3
Resolution No. 2020-45
RESOLUTION NO. 2020-45
RESOLUTION OF THE MAYOR AND CITY COUNCIL OF
THE CITY OF SAN BERNARDINO, CALIFORNIA,
APPROVING THE SUBSTANTIAL AMENDMENT TO THE
2006 HUD SECTION 108 LOAN GUARANTEE ASSISTANCE
FOR THE NORTH ARDEN GUTHRIE PROJECT
WHEREAS, the City of San Bernardino is an entitlement jurisdiction that receives
Housing and Urban Development (
WHEREAS, on September 16, 2006, the City entered into a contract for loan guarantee
assistance under Section 108 of the Housing and Community Redevelopment Act of 1974, as
amended, Title 42 of the United States Code § 5308 (CDBG Section 108 Contract No. B-03-
MC-06-
development of approximately 17.43 acres of underutilized land located along Highland Avenue
WHEREAS, the Property was deemed eligible for HUD assistance pursuant to Title 24
and the
City confirmed that the census tract in which the Property is located meets all the requirements
of 24 CFR § 570.208 (a) (4) (v); and
WHEREAS, the obligations under the Contract were evidenced by a promissory note in
the maximum principal amount of Seven Million Five Hundred Thousand Dollars ($7,500,000)
WHEREAS, pursuant to Section 15 of the Contract, HUD requires certain security to be
provided by the Borrower, which was the City, and the Sub-recipient, which was the former-
Redevelopment Agency of the City of San Bernardino, with respect to repayment of the
Promissory Note; and
WHEREAS, Sections 15(a) and (b) of the Contract describe the security pledged by the
City and the Sub-Recipient as collateral for repayment of the Promissory Note pursuant to the
Pledge, Assignment and Security Agreement; and
WHEREAS, Section 15(c) of the Contract requires City to provide HUD additional
security for repayment of the Promissory Note, the primary of which is the Deed of Trust; and
WHEREAS, with the sale and transfer of the Property to a developer, the Deed of Trust
shall be released and the outstanding balance on the Promissory Note shall be paid in full; and
Resolution No. 2020-45
WHEREAS, with the 2006 Section 108 Loan proceeds, eligible activities within the
Contract (site acquisition, pursuant to 24 CFR § 570.703 (a); residential relocation assistance,
pursuant to 24 CFR § 570.703 (d); and demolition and clearance, pursuant to 24 CFR § 570.703
(e)) were implemented by the Sub-recipient; and
WHEREAS, due to the dissolution of redevelopment agencies statewide, and the Sub-
Recipient being the former-Redevelopment Agency of the City of San Bernardino, title to the
Property was transferred to the Successor Agency of the Redevelopment Agency City of San
WHEREAS, to continue advancing the Property towards its ultimate development, the
City and the Successor Agency are currently in negotiations with a Mark Development, LLC (the
WHEREAS, the Developer has submitted preliminary designs to develop the Property
as a neighbo
WHEREAS, HUD has requested that City and the Developer use reasonable efforts in
the development and operation of the Project on the Property to meet the national objective of
jobs creation pursuant to 24 CFR § 570.208 (a) (4), where at least 51 percent of the jobs,
computed on a full time equivalent basis, are held or made available to low and moderate-income
income, adjusted by family size); and
WHEREAS, pursuant to 24 CFR § 570.208 (a) (4) (iv), all jobs created on the Property
and moderate-
HUD and the City have confirmed the census tract in which the Property is located meets all the
requirements of 24 CFR § 570.208 (a) (4) (v); and
WHEREAS,
Project stalled with the loss of its proposed anchor tenant, Home Depot in 2017; and
WHEREAS, as a result of this economic setback, HUD has requested that the City
d
operation of the Project on the Property; and
WHEREAS, the City of San Bernardino proposes to substantially amend its 2006
Section 108 Loan to identify new time frames and benchmarks for completion of the Project; and
WHEREAS, the Substantial Amendment to the 2006 Section 108 Loan is attached
WHEREAS, public notices were published in the San Bernardino Sun and El Chicano
Substantial Amendment to the 2006 Section 108 Loan for public review and comment; and
Resolution No. 2020-45
WHEREAS, the public comment period was held for no less than 30 days and a public
hearing to hear oral comments from interested parties was held on March 18, 2020; and
WHEREAS, the approval of this Resolution will address a more timely completion of
the Project to the satisfaction of HUD; and
WHEREAS, there are no new activities allocated with federal funds through the
approval of this Substantial Amendment to the 2006 Section 108 Loan.
BE IT RESOLVED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF
SAN BERNARDINO AS FOLLOWS:
SECTION 1. The above recitals are true and correct and are incorporated herein by this
reference.
SECTION 2. The Substantial Amendment, attached hereto
SECTION 3. The City Council does hereby authorize the City Manager to be the
official representative of the City of San Bernardino to submit the Substantial Amendment to the
2006 Section 108 Loan to HUD.
SECTION 4. The City Council finds that adoption of this Resolution is exempt from the
result in a direct or reasonably foreseeable indirect physical change in the environment) of the
CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly. Moreover,
the City Council finds that this Resolution is also exempt under CEQA, pursuant to Guidelines
Section 15061(b)(3) (there exists no possibility that the activity will have a significant adverse
effect on the environment), because this Resolution will not cause a change in any of the
physical conditions within the area affected by the Resolution.
SECTION 5. Severability. If any provision of this Resolution or the application thereof
to any person or circumstance is held invalid, such invalidity shall not affect other provisions or
applications, and to this end the provisions of this Resolution are declared to be severable.
SECTION 6. Effective Date. This Resolution shall become effective immediately.
APPROVED and ADOPTED by the City Council and signed by the Mayor and attested
by the Acting City Clerk this _____ day of __________ 2020.
John Valdivia, Mayor
City of San Bernardino
Resolution No. 2020-45
Attest:
Genoveva Rocha, CMC, Acting City Clerk
Approved as to form:
Sonia Carvalho, City Attorney
Resolution No. 2020-45
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF SAN BERNARDINO) ss
CITY OF SAN BERNARDINO )
I, Genoveva Rocha, CMC, Acting City Clerk, hereby certify that the attached is a true
copy of Resolution No. 2020-45, adopted at a regular meeting held on the ______ day of
________ 2020 by the following vote:
Council Members: AYES NAYS ABSTAIN ABSENT
SANCHEZ _____ _____ _______ _______
IBARRA _____ _____ _______ _______
FIGUEROA _____ _____ _______ _______
SHORETT _____ _____ _______ _______
NICKEL _____ _____ _______ _______
RICHARD _____ _____ _______ _______
MULVIHILL _____ _____ _______ _______
WITNESS my hand and official seal of the City of San Bernardino this ______ day of
___________ 2020.
Genoveva Rocha, CMC, Acting City Clerk
City of San Bernardino
Substantial Amendment
to the Section 108 Loan Guarantee Assistance
Arden-Guthrie Neighborhood Redevelopment Project
City of San Bernardino
rd
3 Floor
San Bernardino, CA 92401
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I.Background
In July 2006, the City entered into contract
Under Section 108 of the Housing and Community Development Act of 1974, As Amended, Title
42 U.S. Code § 5308 Promissory Note No. B-03-MC-06-0539, with the
Secretary of Housing and Urban
under the Contract were evidenced by a promissory note in the maximum principal amount of
Seven Million, Five Hundred Thousand Dollars ($7,500,000) . The
intent of the Contract was to redevelop underutilized property at North Arden Guthrie (the
and/ in order to create jobs for San Bernardino residents.
A Substantial Amendment to the Contract requested by
HUD reasonable efforts in
the development and operation of the Project on the Property.
II. The National Objective and Eligibility
Eligible Contract activities:
Site acquisition, pursuant to 24 § 570.703
(a);
Residential relocation assistance, pursuant to 24 CFR § 570.703 (d); and
Demolition and clearance, pursuant to 24 CFR § 570.703 (e).
HUD has requested that City and Developer use reasonable efforts in the development and
operation of the Project on the Property to meet the national objective of redeveloping the
underutilized and blighted property to create jobs (214 full-pursuant to
24 CFR § 570.208 (a) (4), where at least 51 percent of the jobs (51% of 214 jobs = 109 jobs),
computed on a FTE basis, are held or made available to low- and/or moderate-
persons (i.e., persons with family incomes that are not more than 80% of median income,
adjusted by family size).
The Project was deemed eligible for HUD assistance pursuant to 24 CFR § 570.208 (a) (4) (iv),
LMI
because HUD and the City have confirmed the census tract in which the Property is located
meets all the requirements of 24 CFR § 570.208 (a) (4) (v).
To assist in achieving the foregoing, the City will facilitate the availability of the services from the
County of San Bernardino Workforce Development
cost for certifying to HUD compliance with meeting the national objective under 24 CFR §
570.208 (a) (4) as described above. To this end, City and Developer will work to ensure
business operators on the Property, within thirty (30) days of commencing business operations
on the Property, submit an FTE report to the City that specifies the number of FTEs to be
provided by the business operator, as outlined above. The FTE Report shall include job title,
annualized paid hours of all employees (the result of dividing the projected annualized paid
number of hours of all employees by 2080). Based on the foregoing, WDD will as well report to
City the number of FTEs provided by the Project and the City shall thereafter report to HUD with
respect to the total FTEs provided by the Project.
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III. Status of Project to Date
The Project contains 17.43 acres, or 74 parcels of land. All parcels are currently owned by the
Fund, the Property was acquired, residents relocated, and structures and roadways were
demolished and cleared. To date, over $17 million have been expended on the project as the
following tasks have been completed:
Acquisition of 74 parcels;
Relocation of 76 occupied units;
Demolition of 24 structures;
Demolition of street infrastructure;
Environmental Analysis; and
Marketing of Project Site.
The Section 108 Loan proceeds were expended as follows:
Arden Guthrie Project Section 108
Revenue and Expenditures
Revenue Source:
Section 108 Loan $7,500,000.00
Trustee Charge for Section 108 ($37,270.00)
Interest Earned $193,194.60
Total Revenue $7,655,924.60
Expenditures-Land Acquisition:
14 parcels contain 14 structures $7,655,924.60
As of February 1, 2020, the balance owed on the Section 108 Loan is $4,308,000.
loss of its proposed anchor tenant, Home Depot in 2016. However, in May 2017, the City
The following tasks show the progression of the Project with its new Developer:
May 2017, the City approved an ERNA Developer for purchase and development of the
Property;
June 2017, Developer submitted Preliminary Feasibility Study of Development
Scenarios;
August 2017, Developer submitted Preliminary Development Concept Package;
February 2018, Developer submitted a Revised Preliminary Development Concept
Package in response to City comments;
June 2018, Developer submitted Final Development Concept Package;
Ќ
June 20, 2018, the City approved the Final Development Concept Package, which
Loan requirements;
June 2018, the City extended ERNA date to November 2018 for the purposes of
negotiating a purchase and sale agreement;
Developer requested additional time due to the lull in real estate transactions that often
occur during the end of the year holiday period;
January 2019, Developer submitted its ultimate development plans, which identified
seven (7) credit tenants, confirming the economic feasibility of the Project;
June 2019, a fair market value appraisal was completed; and
Negotiations underway for purchase and sale agreement.
The Developer will pay fair market value for the Property and has already secured many Letters
of Interest from national credit tenants, along with interest from a national hotelier.
IV. Time Frame and Benchmarks for Completion
The
request for a schedule for timely completion the Project. As the Purchase and Sale Agreement
has not been executed as of the date of the Substantial Amendment, barriers to the tasks listed,
along with mitigation measures, have been included to demonstration to HUD that the City is
resolute to the completion of this Project and any other project that may take its place.
Property to be sold at fair market value;
Purchase and no
later than December 2020;
HUD Compliance Agreement to be executed between City and Developer prior to close
of escrow;
Escrow to open within 5 days of the PSA being effective;
Escrow to close no later than Mid-2021;
o Barriers:
PSA must be approved by San Bernardino Countywide Oversight Board
CWOB only meets once a month with 8 weeks lead time for agenda
setting
DOF has 100 days in which to render a decision
o Mitigation measures:
Open escrow as soon as PSA is executed and approved by Developer
and City
Environmental Impact Report to be updated;
Entitlements to be updated;
Property to be developed into shopping center;
rd
Construction to begin 3 Quarter of 2021;
th
Construction to be completed no later than 4 Quarter 2022;
Ultimate creation of 214 FTE jobs, of which no less than 109 jobs are made available to
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LMI persons, to be achieved no later than 3 Quarter 2023;
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San Bernardino County Workforce Development Department to assist City and
Developer to locate and hire LMI persons;
Developer to monitor jobs created; and
Job creation reports to be submitted to HUD.
V. Summary of the Citizen Participation Process
This substantial amendment is consistent with HUD requirements. The notice of the proposed
change to the Contract was provided to the public in accordance with the Citizen Participation
Plan. Required notice(s) was circulated 30 calendar days prior to the hearing date of March 18,
2020. On March 18, 2020, those wishing to speak to the item were allowed and upon
conclusion, the amendment was adopted by the City Council. Copies of the public notice are
included as Attachment 1.
Public Comments (Summary):
\[TO BE INSERTED AFTER PUBLIC HEARING\]
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