Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Raymond Hodges, Director, Department of Housing
Subject: Management Agreement for Casa Esperanza
RECOMMENDATION:
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Adopt a resolution:
A) Approving and authorizing the Director of the Department of Housing, or designee, to execute an agreement with Episcopal Community Services of San Francisco (ECS), or a special purpose entity managed by ECS, to manage and operate the Casa Esperanza permanent supportive housing project (the “Project”), for an initial term through December 31, 2025 in accordance with an approved budget as provided therein, funded by and as may be adjusted to include, additional previously authorized or allocated American Rescue Plan Act (ARPA) Homekey program and County Housing Voucher Program funding for the Project, as may be necessary and advisable, and waiving competitive bidding in connection therewith; and
B) Authorizing the Director of the Department of Housing, or designee, in consultation with County Attorney, to negotiate and execute a ground lease agreement with ECS, or a special purpose entity managed by ECS, for the long-term operation and management of the Project, for a term of 55 years; and
C) Authorizing the Director of the Department of Housing, or designee(s), acting in consultation with the County Attorney and the approval of the County Executive, to negotiate and execute any and all agreements, documents, certificates, extensions and amendments as may be necessary and advisable and within the scope of funding authorized by the Board or otherwise received under the Homekey program for the Project.
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BACKGROUND:
Project Homekey is a State program that provides local public agencies with funding to purchase a broad range of housing types, such as hotels, motels, vacant apartment buildings, and other properties, and convert them into permanent or interim housing for those experiencing homelessness, or at risk of homelessness, and disproportionately impacted by COVID-19 (the “Target Population”).
On October 5, 2021, by Resolution No. 078472, this Board authorized the County’s application to the Homekey Program for funds to purchase and convert the Comfort Inn & Suites located at 1818 El Camino Real in Redwood City, CA, as permanent supportive housing for the Target Population. The Board also authorized an allocation of up to $7,697,170 in American Rescue Plan Act (ARPA), or other funds as determined by the County Executive, as match of local funds as required by the Homekey Program, in the event the County’s application for funds to from the Homekey Program was approved.
On February 9, 2022, the California Department of Housing and Community Development (CA HCD) notified the County that it was awarded $15,978,232 to finance the acquisition, rehabilitation, and operation of the Comfort Inn in Redwood City to be converted to a service-enriched 51-unit permanent affordable housing site (known as “Casa Esperanza” or the “Project”). On March 3, 2022, by Resolution No. 078787, this Board authorized the County Executive to accept the Homekey Round funds. Pursuant to this Board’s authorizations, in 2022, the County acquired the Casa Esperanza property and rehabilitated it for conversion to permanent supportive housing for the Target Population.
In 2022, pursuant to this Board’s authorizations, the County entered into agreements with AH 1818 ECR LLC (managed by Alta Housing) to operate Casa Esperanza. This Board also authorized operating subsidies for Casa Esperanza through the County Housing Voucher Program and authorized the Director of the Department of Housing (DOH) to enter into agreements to provide such subsidies for the Project. (Resolution Nos. 079847 and 080302). Casa Esperanza has been operating and providing 51 units of permanent supportive housing to the Target Population since early 2023.
On May 7, 2024, by Resolution No. 080331, this Board authorized the Director of DOH to execute a third amendment to an agreement with AH 1818 ECR LLC to provide funds for capital improvements and property operations. Not all these funds were expended.
The County’s agreements with 1818 AH ECR LLC to manage Casa Esperanza have been terminated by Alta Housing as of March 28, 2025. Staff have been coordinating with Alta to provide a smooth transition to a new operator for Casa Esperanza to ensure continuity for this critical affordable housing site.
DISCUSSION:
DOH has collaborated with the County Executive’s Office to identify a new operator for Casa Esperanza and recommends that the County move forward with an agreement with Episcopal Community Services of San Francisco (ECS) or a special purpose entity formed and managed by ECS, to serve in this capacity. The mission of ECS is to help homeless and very low-income people every day and every night obtain the housing, jobs, shelter, and essential services each person needs to prevent and end homelessness.
The County previously selected ECS to co-apply for Homekey funding to convert a Ramada hotel in South San Francisco to permanent supportive housing, following a competitive selection process. (The County was awarded Homekey funding for the Ramada site, and staff have been collaborating with ECS to move forward with the conversion and to provide affordable housing there.) With this Board’s approval, ECS will operate the Project or manage a special purpose entity (likely an LLC entity) to do so. Staff recommends that the Board waive any additional competitive requirements to select ECS or a special purpose entity managed by ECS to operate the Project.
Consistent with the County’s funding commitments for Casa Esperanza under the Homekey program and to fund operations and capital expenses, staff recommends that the Board authorize the DOH Director, or designee, to execute a management agreement (the “Agreement”) with ECS, or a special purpose entity managed by ECS, as the new operator of Casa Esperanza. The Agreement would fund operations and capital improvements using 1) ARPA funds obligated under the amended agreement with the prior operator (AH 1818 ECR LLC) in the amount of $1,075,176.82 (as approved by the Board Resolution No. 080331), and 2) Homekey operating funds in the amount of $2,069,093.08. The Project budget will also include revenues to be provided under the County Housing Voucher Program pursuant to the Board’s prior authorizations for the Project under Resolutions 079847 and 080302. The funds would be expended in accordance with a budget approved by DOH as Exhibit C to the Agreement as specified therein, for an initial term through December 31, 2025, funded by and as may be adjusted within the scope of the ARPA, County Housing Voucher Program and Homekey funds previously authorized for the Project. The budget reflects operating expenses and capital expenditures for the Project.
The Agreement would be in place to ensure effective management of Casa Esperanza during a transition period and would be replaced by a long-term ground lease approved by CA HCD. Staff recommends that the Board approve and authorize the Director of the Department of Housing, or designee to execute the proposed Agreement with ECS or a special purpose entity managed by ECS to manage and operate the Project.
In addition, for the long-term continuity of the Project management and consistent with Homekey Program approvals, Homekey properties are typically ground leased to an operator to manage and operate in accordance with the use and occupancy restrictions and services requirements for the Target Population. Staff therefore recommends that the Board authorize the Director of DOH to enter into such a long-term ground lease with ECS or a special purpose entity managed by ECS for a period of 55 years.
Staff further recommends that the Board authorize the Director of the Department of Housing, or designee(s), acting in consultation with the County Attorney and the approval of the County Executive, to negotiate and execute any and all agreements, documents, certificates, extensions and amendments as may be necessary and advisable and within the scope of funding authorized by the Board or otherwise received under the Homekey program for the Project.
The County Attorney has reviewed and approved the resolution and proposed Agreement as to form.
IMPACT:
Casa Esperanza provides 51 units of permanent supportive housing for individuals who have experienced or are at risk of homelessness. The proposed action will provide continuity of services for residents which will further the goals of the Board to address homelessness in San Mateo County.
FISCAL IMPACT:
The proposed Agreement would be funded using Homekey operating funds provided to the County under a Standard Agreement with CA HCD and remaining ARPA funds previously obligated to the Project by this Board under the terminated agreement with the prior operator. Specifically, there are currently $2,069,093.08 in Homekey operating funds remaining under Homekey Program Standard Agreement, 21-HK-17082 and $1,075,176.82 in previously obligated but unexpended ARPA funds that would be utilized to fund the proposed Agreement. Neither of these passed-through funding sources result in Net County Costs. The proposed Agreement also includes revenues for the Project that will be provided under the County Housing Voucher Program, previously authorized by the Board under Resolution Nos. 079847 and Resolution No. 080302