Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Raymond Hodges, Director of Housing
Subject: Loan Forgiveness - CDBG Loan
RECOMMENDATION:
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Adopt a resolution authorizing and directing the director of the Department of Housing, or designee(s), to forgive a Community Development Block Grant loan currently held by the Belmont Successor Agency relating to a property located at 730 El Camino Real in Belmont in the original principal amount of $260,000, and to take all actions and execute all documents and amendments as necessary and advisable, in consultation with the County Attorney, to effectuate the loan forgiveness and the release and reconveyance of security instruments issued in connection therewith.
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BACKGROUND:
On May 16, 1995, the County issued a Community Development Block Grant (CDBG) loan in the original principal amount of $260,000 (of which $259,472.90 was disbursed) to Mercy Housing California to finance improvements to a facility at 730 El Camino Real in Belmont. The CDBG loan was made pursuant to a loan agreement and Promissory Note secured by a Deed of Trust recorded against the property. Mercy operated the property as housing for individuals with AIDS pursuant to a separate Development Agreement with the Belmont Redevelopment Agency.
The CDBG loan is a no interest loan and initially required repayment through residual receipts, which were to begin in 2001. Under the Promissory Note, the term of the loan is 47 years from recordation of the Deed of Trust. The loan agreement included a shared appreciation clause that would provide the County with a pro rata share of realized appreciation at note maturity.
In 1999, Mercy ceased operations at the facility and assigned its obligations under the loan to the Belmont Redevelopment Agency, who then leased the property to Kainos, a non-profit organization enabling persons with developmental and intellectual disabilities to live independently in San Mateo County. In connection with the assignment of the CDBG loan, the residual receipts payment provision was removed, such that no payments were due on the CDBG loan until maturity of the promissory note. The Belmont Redevelopment Agency concurrently forgave its $325,000 loan.
Upon dissolution of the Belmont Redevelopment Agency in 2012, its ownership of the property and its obligations under the CDBG loan would have been transferred to the Belmont Successor Agency.
DISCUSSION:
Under the circumstances and in service of the public interest, DOH staff recommend that the Board authorize forgiveness of the CDBG loan. The improvements financed by the CDBG loan were completed decades ago, and the other public agency loan relating to the property has been forgiven. To date, no shared appreciation has been realized by the County on this loan, and the repayment obligation is not due until note maturity, in another 17 years.
Moreover, given the many years that Kainos has been operating the facility and serving the needs of individuals with developmental and intellectual disabilities, loan forgiveness would serve the public interest. Staff recommend that the Board authorize the Director of the Department of Housing, or designee(s), to forgive the CDBG loan and release all rights to the property currently secured by the Deed of Trust.
The County Attorney has reviewed the proposed resolution as to form.
EQUITY IMPACT:
Forgiveness of this loan will support continued work addressing the needs of persons with developmental and intellectual disabilities.
FISCAL IMPACT:
Forgiveness of this CDBG loan would have no fiscal impact on the County’s General Fund. The loan was originally issued to fund improvements to the facility using federal CDBG funds. If repayments were made, they would be considered CDBG program income and returned to the CDBG program. There is no net County cost associated with the proposed loan forgiveness.