To: Board of Supervisors
Department or Agency Name(s): County Administrator’s Office
Staff Name and Phone Number: Lois Hopkins, 707 565-2431
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
Approval of RED Housing Fund (RHF) 2023 Annual Report
End
Recommended Action:
Recommended action
A) Accept and approve the 2023 Annual Report and associated audited financial statements from the RED Housing Fund (RHF), a California non-profit benefit corporation, as required by its $10 million loan agreement with the County.
B) Upon approval of the 2023 Annual Report, and per the terms of the loan agreement, direct the County Executive to issue “Year 3 Statement of Loan Forgiveness to RHF in the amount of 5% of the original loan amount, or $500,000.
end
Executive Summary:
On September 14th, 2021, the Board authorized the County Administrator, in consultation with County Counsel, to execute a Loan Agreement (“Agreement”) and any related documents for the County’s $10 million loan to the RED Housing Fund (“RHF”). Paragraph 3 of the Agreement (Attachment A) provides that the loan is forgivable over a 20-year period, at a rate of 5% ($500,000) per year, provided that:
i. No Event of Default has arisen under the Loan Documents;
ii. RHF is in compliance with Lender’s Requirements as set forth in Exhibit D to the Loan Agreement; and
iii. The Board of Supervisors has reviewed and approved RHF’s Annual Report.
On April 30, 2024, the RHF timely submitted its 2023 Annual Report, Financial Statements and Independent Auditor Report (“Report”) for its fiscal year beginning on January 1, 2023 and ending on December 31, 2023. The full report can be found HERE. <https://redhousingfund.org/wp-content/uploads/2024/04/RHF-Annual-12.31.23.pdf>
The RHF is required to request forgiveness at least 60 days in advance of the anniversary date of the Agreement’s effective date (September 4, 2024), which was sent to the County on April 26, 2024. (Attachment B, page 1). Upon the Board of Supervisors’ review and approval, the County Executive will issue a “Loan Forgiveness Statement” (Exhibit B, page 2) on the anniversary date of the Agreement. Staff recommends the Board review and approve RHF’s 2023 Annual Report, which represents the third and final loan forgiveness term condition that needs to be met and direct the County Executive to issue the Year 3 Statement of Loan Forgiveness in the amount of $500,000.
Discussion:
The official review of the Annual Report is intended to verify that County loaned funds are being used to providing financing, credit enhancement, and/or guarantees to support development of housing projects that meet the RFH’s investment criteria, which can be found on pages 5-6 of the Annual Report.
Section 8 of the Agreement requires the Fund to provide a Report to the Board within 180 days following the close of the Fund’s fiscal year, which runs from January 1st to December 31st. On April 30, 2024, the RHF timely submitted its 2023 Annual Report for its third fiscal year.
The Auditor-Controller-Treasurer-Tax Collector’s (ACTTC) Office has reviewed the Financial Statements and Independent Auditor Report and determined that it demonstrates compliance with Section 6 of the Agreement (Use of Loan Funds).
County Administrator staff have confirmed that there has been no default activity on the loans made by RHF. On a quarterly basis, the RHF assesses the loans in its portfolio and assigns a risk rating based on various factors. The Report indicates all loans in RHF’s portfolio have received a passing score.
During fiscal year 2023, the RHF closed two loans for projects in Santa Rosa: (1) 420 Mendocino Ave. with 168 rental units, and (2) South Park Commons with 62 units of affordable housing. These two loans, in addition to three loans made in 2023, represent over 550 new units of housing in Santa Rosa, 275 of which are at affordable rent levels (households earning at or below 60% of area median income “AMI”).
Attachment C is a condensed summary of information for these five projects pulled from the Annual Report.
In addition to project updates, the RHF’s 2023 Report includes a portfolio update, a statement of financial position, and activities that took place during the reporting period.
The Fund’s Profit & Loss Statement reflects earnings through interest income, program-related loan interest, and contribution and grant income. The RHF received a $1 million grant from the California Department of Housing and Community Development to be used for additional lending capital.
Audited financial statements can be found in Appendix 2 of the Report.
In summary, the Fund has timely submitted its Annual Report and the County Administrator and ACTTC staff have reviewed the report and determined that it is in compliance with the terms of the Agreement. Accordingly, staff recommends that the Board of Supervisors review and approve the Renewal Enterprise District Housing Fund’s 2023 Annual Report, and direct the County Executive and to issue a Year 3 Statement of Partial Loan Forgiveness in the amount of $500,000.
Strategic Plan:
This item directly supports the County’s Five-year Strategic Plan and is aligned with the following pillar, goal, and objective.
Pillar: Healthy and Safe Communities
Goal: Goal 3: In collaboration with cities, increase affordable housing development near public transportation and easy access to services.
Objective: Objective 3: Create incentives for developers to promote affordable housing development in the County.
Racial Equity:
Was this item identified as an opportunity to apply the Racial Equity Toolkit?
No
Prior Board Actions:
8/22/23: The Board reviewed and approved the Renewal Enterprise District Housing Fund’s Annual Report for fiscal year 2022 and directed the County Administrator to issue Year 2 Statement of Partial Loan Forgiveness for 5% of the original loan amount ($500,000).
8/30/22: The Board reviewed and approved the Renewal Enterprise District Housing Fund’s Annual Report for fiscal year 2021 and directed the County Administrator to issue Year 1 Statement of Partial Loan Forgiveness for 5% of the original loan amount ($500,000).
9/14/2021: The Board voted to authorize the County Administrator, in consultation with County Counsel, to execute a loan agreement and related documents for the County’s $10 million loan to the Renewal Enterprise District Housing Fund funded from the PG&E Settlement fund.
Fiscal Summary
Narrative Explanation of Fiscal Impacts:
$500,000 of the PG&E Settlement Fund will not be replaced given the County forgiveness terms being met by the RHF Annual Report.
Narrative Explanation of Staffing Impacts (If Required):
N/A
Attachments:
Attachment A: County and RHF Loan Agreement
Attachment B: RHF Request for Loan Forgiveness and draft Statement of Partial Loan Forgiveness
Attachment C: RHF Projects Summary
Related Items “On File” with the Clerk of the Board:
N/A