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9.B. - Page 3 <br /> Over the past year, Habitat has taken steps to acquire and prepare the Jefferson site for <br /> development of affordable housing. Habitat has conducted Phase 1 and 2 <br /> environmental studies to determine the extent of hazardous materials at the site and <br /> prepared preliminary historical analysis of their project on the adjacent historic resource <br /> at 620 Jefferson (the Hanson Lumber Company Employee Housing). In addition, the <br /> City has awarded CDBG grants of $114,895 for Fiscal Year 2015 and $276,493 for <br /> Fiscal Year 2016 for a total CDBG grant of $391,388 over a two-year period. The Fiscal <br /> Year 2015 grant contained an Affordability Covenant that restricts the units as <br /> affordable for 30-years from the date of project completion. These grants helped fund <br /> acquisition of the site and will assist with pre-development costs. Habitat has also <br /> conducted initial site planning activities and has prepared conceptual architectural <br /> drawings. Design development would continue over the next two to three months. <br /> Habitat expects to submit a formal application for review in August 2015. <br /> As Council is aware, development of affordable housing is an expensive and complex <br /> undertaking, and local support through grants, loans and donations are critical to the <br /> success of these projects. Habitat funds construction through a combination of state <br /> and local government sources (e.g. City CDBG, County CDBG and Measure A funds), <br /> as well as contributions from institutions like the Sand Hill Foundation, Wells Fargo and <br /> private donors. City investment in this Habitat development is essential to its success, <br /> and provides the leveraging power necessary for securing private and public grant <br /> funding. The City's contribution of $1.42 million will be a significant component of the <br /> total funding required for the project. <br /> Funding Options <br /> Staff requests Council direction regarding the funding options for the $1.42 million "One <br /> Marina" affordable housing funds. There are two general options for establishing an <br /> agreement with Habitat. Overall, staff believes "Option 1" is the best option for the City, <br /> though both options would facilitate the partnership. <br /> 1. Provide the funds structured as a long-term loan with favorable terms, such as <br /> zero percent interest and no payments required during the loan term. The loan <br /> could also contain a forgiveness allowance if Habitat satisfies the housing <br /> affordability covenants. Long-term loans typically reduce the risk for a City, in that <br /> the terms of the loan typically include provisions that would only allow the use of <br /> the funds as late in the development process as possible and after other funding <br /> sources have been utilized. <br /> 2. Provide the funds as an affordable housing grant, similar to the CDBG grants that <br /> were approved for FY15 and FY16. The grant could be structured in a manner <br /> that ties distribution of the funds to the completion of specific events, such as <br />