Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Raymond Hodges, Director, Department of Housing
Subject: Additional Funding Commitment for Rehabilitation of 721 Airport South San Francisco Permanent Supportive Housing Project
RECOMMENDATION:
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Adopt a resolution:
A) Authorizing and allocating an additional $3,000,000 from the general fund or other available sources to fund the rehabilitation and associated costs of the 721 Airport, South San Francisco property for conversion to permanent supportive housing; and
B) Authorizing the director of the Department of Housing, or designee(s), acting in consultation with the County Attorney, to negotiate and execute any and all agreements, documents, certificates and amendments as may be necessary and advisable to effectuate the delivery of the additional allocated funding authorized pursuant to this resolution.
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BACKGROUND:
A. The County’s Development of Permanent Supportive Housing at 721 Airport Boulevard, South San Francisco
This Board has authorized numerous actions in connection with the County’s participation in the State Homekey program, which supports the creation of permanent supportive housing for people experiencing homelessness. With this Board’s authorization, the County used Homekey funds to acquire the former Ramada Hotel located at 721 Airport Blvd., South San Francisco, with the intention of rehabilitating the property and converting it to permanent supportive housing (the “Project”). The Homekey program also provides operating subsidies to support the Project.
This Board’s past authorizations in connection with the Project are summarized as follows:
On June 13, 2023, the Board adopted Resolution Number 079743, which took the following primary actions:
•Authorized the County’s application to Homekey Round 3 for the Project for funding in an amount not to exceed $27,585,600;
•Allocated American Rescue Plan Act (ARPA) funds in the amount of $6,750,000 in local match of funding for capital expenses, and $8,100,000 in the form of County Housing Vouchers to fund Project operations for five years;
•Authorized a Memorandum of Understanding (“MOU”) setting forth the terms and conditions by which a Special Purpose Entity owned by Episcopal Community Services (“ECS”), as the County’s co-applicant for the Homekey award, would acquire, rehabilitate, manage, operate, and provide supportive services at the Project; and
On September 12, 2023, this Board declared its intent to purchase the Property.
On August 13, 2024, the Board adopted Resolution Number 080574, which clarified the County’s funding commitments for the Project and took the following primary actions:
•Approved an updated resolution in a form required by HCD.
•Approved an updated commitment of local matching funds for capital development expenditures and a commitment of five years of the Project’s operating expenses.
•Declared support and an intent to commit an allocation not to exceed $19,100,000 in Measure K funds under the County Housing Voucher Program to provide operating support for the Project, including $8,100,000 in years 2 to 7 (as authorized in Resolution Number 079743) and $11,000,000 in years 7 to 13 of the Project.
•Declared support for a funding plan for the provision of operating subsidies for the Project using such County, state or federal funds as may be available in the amount of $4,493,678 for years 13-15 of the Project.
•Authorized the Director of DOH to enter into various agreements with ECS and the Special Purpose Entity as referenced in their MOU.
B. Rehabilitation Budget for Project
Pursuant to this Board’s authority, in December 2024, the County entered into a loan agreement with ECS’ Special Purpose Entity, 721 Airport LLC, to fund rehabilitation of the Ramada property with $7,350,000 in ARPA monies, provided in the form of a loan, secured by a deed of trust and subject to a regulatory agreement to ensure the Project would remain continuously affordable for the target population for 55 years. The deed of trust and regulatory agreement will be recorded on 721 Airport LLC’s leasehold interest in the property, following entry of a ground lease agreement with the County.
Since development of the initial budget for the rehabilitation and following further design development and review of guaranteed maximum pricing proposals, the cost to complete the rehabilitation and pay for incurred costs has increased by an additional $3,000,000. The increased rehabilitation cost is generally attributed to: 1) the change in population served from adults to seniors (in all cases the target population are households experiencing or at risk of homelessness) and requisite architectural design elements to meet the needs of the new target residential population; and 2) unforeseen conditions in the existing building and added necessary structural reinforcements.
The ECS development team has submitted their rehabilitation plans for review by the San Mateo County Planning & Building Department, which have been approved. Construction is expected to commence following conveyance of the ground lease to the Project operator in or shortly after mid-January 2026.
DISCUSSION:
Staff recommends that this Board authorize an allocation of an additional $3,000,000 for the Project, which will close the gap in construction funding necessary to complete the rehabilitation of the Project, and pay for costs incurred during the predevelopment phase. The rehabilitation funding will be provided in the form of an amendment to the existing loan agreement with 721 Airport LLC, repayment of which will be evidenced by an amended promissory note, secured by a deed of trust, and repaid through a share of residual receipts of the Project.
Staff further recommends that the Board authorize the Director of the Department of Housing, or designee(s), acting in consultation with the County Attorney, to negotiate and execute any and all agreements, documents, certificates and amendments as may be necessary and advisable to effectuate the delivery of the additional allocated funding authorized by this action.
The County Attorney has revised the proposed resolution as to form.
COMMUNITY IMPACT:
The additional funding provided by this action will facilitate the rehabilitation of the Project which will ultimately deliver permanent supportive housing to households experiencing or at risk of homelessness. The Project will positively impact a vulnerable population and the community as a whole by providing housing and access to supportive services.
FISCAL IMPACT:
Under the proposed action, the County would allocate an additional $3,000,000 in general fund or such other sources as may be available. These funds are provided at 100% Net County Cost, provided that residual receipts repayments may be received by the County over the course of the loan term. This amount will be accounted for in the Department of Housing’s FY 2026-27 Recommended Budget.