Title
Authorization to Award Contracts to Gorman & Company, Inc. for Rental Assistance Demonstration Co-Development Partner (Ordinance S-43748)
Description
This report requests authorization for the City Manager, or his designee, to award contracts to Gorman & Company, Inc. (Gorman) to serve as a co-development partner in the redevelopment and implementation of a U.S. Department of Housing and Urban Development (HUD) Rental Assistance Demonstration (RAD) conversion at two multi-family rental properties in the City's public housing portfolio, A.L. Krohn East and Foothills Village Apartments. Further request authorization for the City Manager, or his designee, to execute any and all documents and agreements and take any and all other actions necessary or appropriate to carry out the purposes of this item.
Report
Summary
On April 18, 2017, the Sustainability, Housing, Efficiency and Neighborhoods Subcommittee authorized staff to issue a Request for Proposals (RFP) for a co-development partner(s) to assist with the redevelopment of two multi-family rental properties in the City's public housing portfolio. In February 2017, HUD awarded the Housing Department conditional approval for RAD conversion of A.L. Krohn East (38 units) and Foothills Village Apartments (200 units). The RAD Program enables the Housing Department to convert these two hundred thirty-eight units from public housing operating subsidy to a long-term, renewable, project-based Section 8 rental assistance contract.
In response to the RFP that was issued on April 20, 2017, the City received four proposals for A.L. Krohn East, and five proposals for Foothills Village; however, one of the five Foothills Village proposals was determined non-responsive. Proposals were evaluated on experience, capacity and financial viability; project approach; proposed fee structure; community outreach and services; and construction, design and energy efficiency. The evaluation panel, comprised of housing and development professionals, deemed Gorman, a Wisconsin-based affordable and mixed-income housing developer, the best and most responsive proposer.
Gorman and their proposed project team have extensive experience successfully securing and implementing various national and local financing programs, including RAD and Choice Neighborhoods grants, to develop and redevelop affordable and mixed-income housing communities in Arizona and nationwide. Gorman and the Housing Department will work together to secure financing and implement capital improvements at these sites which can include demolition, new construction and/or rehabilitation. This partnership will leverage the City's resources and allow for the use of Low Income Housing Tax Credits (LIHTC) as well as private sources of funding to convert the public housing properties into affordable and/or mixed-income housing developments. Due to HUD's time-sensitive performance requirements, the co-development team must proceed expeditiously to meet critical deadlines, including applying for LIHTC in 2018.
Certain proposed terms of the co-development agreements include the following:
(1) The City will maintain ownership of the land, and lease the land to the project for a period of at least 65 years.
(2) The City's share of the developer fee is anticipated to be between 35 and 51 percent per project, depending on negotiated business terms.
(3) Gorman will absorb certain guarantee risks during construction, lease-up, and during the full operating deficit guarantee period.
(4) Gorman will prepare all funding applications and be responsible for any associated fees.
Predevelopment funding will be shared as follows:
(1) A.L. Krohn East - The City is not expected to provide predevelopment funding. Gorman will secure all predevelopment funding.
(2) Foothills Village - The City's share is approximately $400,000 or 44 percent; Gorman's share is approximately $500,000 or 56 percent of total predevelopment costs.
All final business terms will be negotiated prior to entering into development agreements for each property.
Financial Impact
There is no impact to the General Fund. Gorman's contract fees will be paid out of project funds approved through separate City Council actions to implement the RAD developments.
Location
A.L. Krohn East, 14th and Monroe Streets, District 8
Foothills Village, 920 W. Alta Vista Road, District 7
Concurrence/Previous Council Action
This item was heard at the Sustainability, Housing, Efficiency and Neighborhoods Subcommittee meeting on June 20, 2017 and approval was recommended by a vote of 3-0.
Department
Responsible Department
This item is submitted by Deputy City Manager Deanna Jonovich and the Housing Department.