Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Raymond Hodges, Director of the Department of Housing
Subject: Measure K: Capitalized Operating Subsidy Reserve funding for Casa Esperanza located in Redwood City
RECOMMENDATION:
title
Measure K: Adopt a resolution:
A) Allocating $4,100,000 in Measure K reserve to fund a Capitalized Operating Subsidy Reserve to fund operating expenses and reserves of the Casa Esperanza permanent supportive housing project; and
B) Authorizing the Director of the Department of Housing, or designee, acting in consultation with the County Attorney, to negotiate and execute an agreement with Episcopal Community Services of San Francisco (ECS), or a special purpose entity managed by ECS, to provide a Capitalized Operating Subsidy Reserve, in an amount not to exceed $4,100,000, for the Casa Esperanza permanent supportive housing project.
body
BACKGROUND:
The Homekey Program is a State program that provides local public agencies with funding to purchase a broad range of property 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, to permanent supportive housing for the Target Population, together with an allocation of up to $7,697,170 in American Rescue Plan Act (ARPA) funds as match of local funds as required by Homekey Program.
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 Program 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.
On March 25, 2025, this Board adopted Resolution No. 081011 which among other actions approved a Management Agreement under which Episcopal Community Services, a nonprofit organization (“ECS”), or a special purpose entity established by ECS, would provide property management services for the Project. This Board also authorized the County to enter into a long-term ground lease with ECS, or a special purpose entity controlled by ECS, to manage and operate the Project. The ground lease has not yet been finalized, and operations continue under the terms of the Management Agreement.
On September 23, 2025, this Board adopted Resolution No. 081433, which authorized a commitment of CDBG-CV funds for wrap-around supportive services at both Casa Esperanza and another permanent supportive housing project. The CDBG-CV funding must be fully expended by December 31, 2026.
DISCUSSION:
Permanent supportive housing projects often utilize revenue from multiple sources to fully fund operating expenses. Casa Esperanza has access to CDBG-CV funding, which expires December 31, 2026, and Homekey operating subsidies, which must be fully expended by June 30, 2027. The Project also receives funding authorized by this Board under the County Housing Voucher Program (CHVP), which supplements tenant rent payment. The CHVP subsidy is a vital source of funding for the Project but is not sufficient to cover the property management and supportive services program expenses planned for the initial 5 years of operations at Casa Esperanza when expenses are projected to be highest.
In view of the Project’s funding requirements, staff recommends that the Board approve an allocation of an additional $4,100,000 from Measure K reserves to fund a supplemental Capitalized Operating Subsidy Reserve (“COSR”). The funding in the COSR will fill the funding gap to help cover operations and supportive services costs at the Project during early operating years. The allocation will be provided to the Department of Housing via an Appropriation Transfer Request presented to this Board in connection with the September revisions to the FY 2026-27 Recommended Budget.
With this Board’s authorization, the COSR will be established under an agreement between the County and ECS, or its special purpose entity, negotiated in consultation with the County Attorney, and will ensure the County’s control and supervision of the funds. The COSR agreement will require that the funds be used for expenses authorized by the County and that such funds remain with the Project.
The funding provided under the proposed COSR agreement will support clients in achieving greater stability in their lives and developing skills that promote greater self-sufficiency, with the primary goal of maintaining housing and gaining independence.
The County Attorney has reviewed the proposed resolution as to form.
COMMUNITY IMPACT:
The Casa Esperanza project provides 51 units of permanent supportive housing for individuals who have experienced or are at risk of homelessness. While not a senior-specific property, a substantial number of those served are elderly, which is a segment of the population experiencing increases in homelessness in the county. The proposed action will ensure funding for services for residents of the Project which will positively impact the Target Population and further the goals of the Board to address homelessness in San Mateo County including reaching and maintaining functional zero status.
FISCAL IMPACT:
Under the proposed action, the County would allocate an additional $4,100,000 in Measure K reserve funds and there is no impact to Net County Cost. This amount will be included in the September revisions to the FY 2026-27 Recommended Budget.