PROPOSED CHANGES TO 2017 HHH REGULATIONS - PUBLIC COMMENTS RECEIVED

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1 1 General 2 General 3 General 4 General 5 General 6 General 7 Financing Structure 1.2 An exception to per project percentage requirements should be granted specifically for public housing redevelopment projects, since they have large, multi-phased developments (not stand-alone buildings) that are "strong, service-enriched, and amenitized". Percentage requirements should be calculated against non-replacement housing portions of their projects, not the entirety of the units since they have high number convenanted for returning tenants (i.e. if a project of 100 units has 50 as replacement, HHH should require 25 units or 50% of 50 units for homeless instead of the current 50% of 100 units). Clarify whether supportive housing projects applying for the 9% Pipeline are eligible for $80,000 in supplemental funding. The HHH application is scheduled after the LACDC NOFA application. HCIDLA and LACDC must coordinate for projects needing HHH funding commitments to score points in the LACDC NOFA. Confirm how this will be handled ASAP in preparation for the October 24th deadline. Since most projects funded with HHH dollars will require a PBV contract from HACLA, please confirm how HCIDLA and HACLA will be working together to issue PBV contracts for these projects and the timeline/mechanism for doing so. Do projects that are structured with 4% competitive LIHTC equity/state Tax Credit equity and are planning to submit an HHH application need to also submit an Affordable Housing Managed Pipeline application? Allow for a release in target population and income restrictions in case operating subsidies are unavailable and/or the needs of the homeless population shifts. Concern exists about HCIDLA missing deadlines, putting extra acquisition and predevelopment risk on developers to maintain site control Recommend allowing other City agencies and authorities to issue tax exempt bond for HHH projects. As it stands now, this request does not meet stakeholder consensus. However, with additional analysis and discussion, HCIDLA will revisit this and consider revising during future revisions. Only 9% projects that are currently in the pipeline are eligible to apply for HHH and supplemental funding. HCIDLA cannot issue support letters for projects anticipating the use of HHH unless they have been admitted into the applicant pool. However, in the future we are expected to have a coordinated effort with the LACDC NOFA. HCIDLA and HACLA's processes will run concurrently. Projects do not need to be in the Pipeline to access competitive State credits. HCIDLA will closley monitor the requests submitted by all City-funded projects to avoid oversubscription. HCIDLA Loan Documents contain "float up" provisions similar the those used in HCD programs. HHH will run on a fixed schedule, opening the Call for Projects three times per year each October, February, and July. HCIDLA's Bond Policies allow for a General Manager's waiver of the City issuer requirement under limited conditions. 9% tax credit projects admitted into the HCIDLA Pipeline may apply for HHH funding in a future Call for Projects. Clarify that 9% projects are allowed if admitted into Pipeline, including in future rounds.

2 8 9 Funding Commitment Eligible Applicants Extend 24 month conditional commitment by 6 months or up to 1 year if project is determined likely to close construction loans in that timeframe. There's an assumption that there are 2 funding rounds for every leveraging source every 12 months, which isn't the case for VHHP and AHSC. Term should be extended to 24 months to match HHH guidelines. Developer should demonstrate a history of serving the intended population. Define "lead developer," "special needs," and "lead service provider". In joint venture arrangement, with nonprofit usually qualifying as the "partner with experience managing Special Needs projects" but isn't the "lead" developer, would these joint applications still qualify for HHH funding even though the nonprofit isn't the lead? No change recommend. Regulations revised to the following: "Lead Developer" will be defined as the guarantor of the tax credits financing the project being developed, as defined in the project s Limited Partnership Agreement Eliminate "managing" since for-profit developers and administrative general partners wouldn't be eligible applicants. Capacity criteria and documentation should apply to the two projects required of a lead developer, not the developer s entire portfolio. HCIDLA should allow for alternative methods other than HMIS to generate the report to prove housing retention. Surveys must be conducted every 2 years, but says qualifying projects need only be in service for 1 year, meaning a project might not have conducted its first tenant satisfaction survey. Revise language to allow applicants to provide surveys for qualifying projects if available and certify that surveys will be conducted every 2 years in proposed project. Projects in place when lower staffing ratios were practiced might be disqualified from HHH funds, and shouldn't be penalized retroactively for new, higher standards. Regulations should be modified requiring project to prove they're meeting ratios as required by regulatory agencies and financing agreements applicable to the project Any project with a commitment from a Los Angeles County Health Agency (the Departments of Health Services, Mental Health, and Public Health) to provide supportive services funded by Measure H must, at the time of application, provide a letter from the County Health Agency identifying its intent to provide services for special needs units in the proposed project. If supportive services are provided by the County Health Agency for a Special Needs population, a Supportive Service Plan is not required for that population. Contact Leepi Shimkhada at the Los Angeles County Department of Health Services, Housing for Health, for a commitment letter at lshimkhada@dhs.lacounty.gov. Please note that a Supportive Service Plan with an identified lead service provider is required at the time of application for any general low-income units or Special Needs units in the proposed project that are not supported by the County Health Agency.

3 11 Eligible Projects Eligible Projects f 13 Eligible Activities Calculation of Interest Remove none shall have more than two bedrooms" clause and let Coordinated Entry System data determine bedroom number limitation; or increase limit on units with 2 and 3 bedrooms (e.g. 25%); or apply 10% limit only for the units targeting chronically homeless, not all PSH units. Revise kitchen facilities description to include a stove or range top. Reduce the required PSH percentage to 20-30% (HCID can still prioritize projects with 50%+ PSH units); required percentage of units dedicated for chronically homeless should match actual number intended to serve (i.e. if project is focused on vets, 50% requirement might be prudent based on 2017 homeless count, but if project is family focused, 50% requirement doesn't reflect the population need since homeless families are only 3% of 2017 homeless population) Revise the 50% threshold to either 25% PSH or 15 total units PSH. This will provide a minimum of 15 total HHH units in any project to ensure economies of scale for City resources and better enable projects to include HHH units in "higher opportunity" areas where resistance to homeless housing is greater. For example, would the city rather have 50% PSH in a 30-unit project, or 25% PSH in a 80-unit project? The latter option is preveneted by the current regulations. Clarify whether projects must have a commitment in place for sponsorbased or project-based rental assistance prior to applying for HHH funds. Project-based rental voucher applications favor projects going in the next TCAC round, which would be later than the HHH application. Already existing hotel units should be allowed to be acquired/rehabilitated to convert to PSH units with HHH funding. Define "relocation" to distinguish between temporary and permanent relocation. Exempt public housing redevelopments from the 100% net increase in unit requirement For consistency, method to calculate interest should be the same within the AHTF and HHH regulations Applicants seeking to include units with two or more bedrooms must submit evidence provided by the Los Angeles Homeless Services Agency (LAHSA) that they can provide a sufficient number of referrals through the Family Coordinated Entry System for the Service Planning Area in which the project is located to reasonably fill those units within nine (9) months of completion. Kitchen facilities description accepted and revised. A deviation from the 50% PSH requirement for HHH funded projects would represent a substantial policy shift that must be reviewed and accepted by all stakeholders. This comment has merit, however, to be discussed in future regulation revisions and updates. Prior to the construction loan closing, projects must have a commitment for sponsor- or project-based rental assistance for no less than fifty percent (50%) of the units in the proposed project, with a contract term of no less than five (5) years, as evidenced at minimum by a letter of intent from the appropriate governmental entity. An exemption has been made in the Affordable Housing Managed Pipeline regulations for residential hotels meeting specific criteria.

4 15 Payment Conditions for Conversion Equity Share Default Required payment of the total interest on HCIDLA s Acquisition- Predevelopment/Construction Loan that will have accrued during the construction period should be eliminated (it exacerbates TCAC's high cost test and brings deal closer to HCIDLA's limit of $500,000/unit). Or instead of eliminating it, HCID could allow accrued interest to be added to the permanent loan principle, or allow payment from residual receipts (especially when subject to PLA). see comments on If interest isn't deferred and paid concurrently with the permanent loan conversion, projects are paying construction loan interest on HCIDLA's interest. The proposal that HCIDLA should be entitled to an equity share in sale of property that fails to perform and that has an HCIDLA loan is unjustified and we propose the elimination of this requirement. As an alternative to elimination, the Department should consider amending the provision with the following language: HCIDLA s share in the appreciation will be equal to the proportion of the HCIDLA loan used for the acquisition of the property to the original purchase price of the property. If the borrower fails to perform within a specified period and the property is ultimately sold, appreciation should be calculated as net of transaction costs. Additionally, original purchase price of the property should be changed to total funding sources at the time HCIDLA loan was originated. Please change requirement that commercial space be financed separately from City-controlled funds to City funds, as sometimes City and other lenders enter into agreements that may be construed as giving City control over other funds that could be used for commercial space. Revise the definitions associated with cost overruns, especially in cases where situations are already well-covered between the developer and banking and investor partners in their agreements. Regulations revised to the following: For any loan funded by the HCIDLA, if the borrower fails to perform within a specified period of time and the property is ultimately sold, HCIDLA will be entitled to a share in any appreciation that has occurred between the price paid at acquisition and the time of sale. HCIDLA s share in the appreciation will be equal to the proportion of the HCIDLA loan amount to the original purchase price of the property. However, if the project does not proceed, at no fault of the borrower, this provision will not be invoked and HCIDLA will not require any share of the appreciated equity. It is normal that schedules will shift, and regulations should allow for that

5 Environmental Review Property Management Commercial Space and Calculation of Residual Receipts Building Permits Leveraging Source Application Demonstration of Site Control Projects should be required to prove CEQA clearance only prior to HHH funds distribution, not at application Requirement to have all affordable housing units leased within 6 months should be extended to 9 months We encourage HCID to reconsider its strict bifurcation of residential and commercial space development. We base this recommendation on the opinion that tax credits are not City-controlled funds and therefore cannot be limited in their use by the City. Many of the properties that will be funded through HHH or other city funds were awarded to developers through an RFP process that actually emphasized the inclusion of commercial space as an important part of the development design and program. As a result, the language as drafted needs to be modified to clarify that tax credits are not Citycontrolled funds and the equity proceeds from those credits cannot be limited in their use by the City. HCID should accept a Ready-to-Issue letter in lieu of building permit as a condition of any HHH loan closing Including HCD, VHHP and AHSC applications with the HCID-HHH application is burdensome and costly; edit the HCID application to include an identification of additional funding sources anticipated and allow a 24 month period to secure funds. For consistency, leveraging source requirements in AHMP/HHH applications should match. An executed Exclusive Negotiation Agreement (ENA) with a public agency should be satisfactory demonstration of site control If your public agency is Metro are you requiring a DDA by November 2017? Or are you saying an ENA is acceptable for the application in November but a DDA is required for all projects by Dec 29, 2017? Clarify timeframes communication will occur, and HCID should notify applicants of recommendations going to Council 30 days before planned council meeting. HCIDLA updated the AHSC form for HHH and included it in the attachment list. An executed Exclusive Negotiation Agreement with a Public Agency is acceptable at application provided a fully executed Disposition and Development Agreement (DDA) with that Agency will be received by HCID by December 29, The sole Public Agency that applicants are not required to receive a DDA from is the Los Angeles County Metropolitan Transportation Agency.

6 25 Meeting Cost Parameters 2.3 Cost parameters should be consistent with TCAC regulations. Because PSH have high operating reserves resulting from the indeterminate nature of some of their funding streams, reserves from the calculation of costs associated with residential component of the project should be excluded, and that sentence should be eliminated. There should be an annual point in time notification about the amount of HHH funding allocated toward nonpsh affordable housing along with the overall 20% cap figure. Limiting amount of total portfolio awarded to any one applicant is understood, but please clarify what HCID s loan portfolio balance is. HCIDLA will publish quarterly reports with updates on how much of the non-psh affordable housing 20% cap has been allocated. HCIDLA is also considering including its loan balance when publishing each Call for Projects Maximum Proposed HCIDLA Contribution Maximum Projects per Developer Compliance with HCID Asset Mgt, Rent Stabilization Divisions ) This states that the subsidy for the Supportive Housing Program can only be calculated on units at or below 60% AMI, however, Proposition HHH states that the units must be at 50% AMI or below. This should be changed to be in line with the approved proposition. It is only the 20% of the bond for general affordable housing that can be used for units serving at/or below 80% AMI, not the Supportive Housing component. 2) the chart depicting subsidies based on the type of unit built and its financing "seems incongruous and should be removed unless additional regulations are added explaining how these funds would be expended." Limit the max number of developments one entity, or its subsidiary(ies), can participate in at any one time to 7 regardless of the phase of the developments. Also, does this restriction apply only to HHH-funded projects? We recommend adding to the second to last sentence, "...until the deficiencies are corrected or it is substantiated that the Applicant has an upcoming rehabilitation that will correct the deficiencies. Modify the $10,000 limit on residual receipts owed by any developer to reduce the proportionate impact on developers with large portfolios, perhaps to $10,000/project and a total aggregate of $40,000/developer The project number limitation per developer for HHH funding is separate from the limit on the number of Affordable Housing Managed Pipeline (AHMP) projects a developer can have. A developer can have seven (7) projects funded by HHH and seven (7) additional projects with AHMP funding. HCIDLA's Loan Portfolio has changed their procedures to require a background check only one time for HHH-funded projects; once a project's sponsor has passed the background check, the results are sufficient for the duration of the project's development.

7 Portfolio Management Occupancy Monitoring Letter of Acknowledgment Organization Documentation and Self Certification Statements Organization Documentation and Self Certification Statements Minimum Feasibility A. (5) Edit limit on residual receipts owed by any developer to HCID to be no more than $10,000 per Developer / Sponsor-owned project, or no more than $25,000 in total for all projects, with the total amount outstanding for a period of more than six months at the time of application, and all payments must be negotiated and paid in full prior to loan closing. Compliance reports frequently aren't issued in a timely manner and often have inaccurate info. HCID should issue a pre-qualified list of developers 2x/year to prevent ultimately disrupting new project applications. Allow applicants to be able to submit proof that the project summary was delivered to the local Councilmember since some won't sign ackowledgement letter despite "no position" option, effectively killing the project. Clarify that the board approval may occur earlier, and that it's just the execution of the resolution that must occur within 90 days of application. Clarify that it's the Board Resolution that must be executed within 90 days of application, not the list of directors. Reference the TCAC regulation instead of inputting the definition to prevent having to update this section later if TCAC modifies its definition Utilize a system of property valuation based on highest and best use or as if vacant (similar to TCAC or HCD) to not penalize applicants seeking up-zoning or developing projects in high opportunity areas. See HCIDLA's response to comments on section See HCIDLA's response to comments on section City Council support for a project is essential and developments cannot proceed without their local Councilmember's support. The resolution from the Board of Directors must be executed within 90 days of the Call for Projects application deadline. See HCIDLA's response to comments on section Appraisals Development potential is necessary to consider in the purchasing price, and should be included in the method of appraisal. should have separate appraisal requirements for different property types (vacant, intended for new construction, rehab)

8 36 37 Phase I Environmental Assessment or Phase I with Required Phase II Property Management PROPOSED CHANGES TO 2017 HHH REGULATIONS - PUBLIC COMMENTS RECEIVED Move the liquefaction report from governing the Phase I Environmental Assessment to governing the Soils Report where it is more appropriately placed. Recommend allowing for either the applicant, its Phase I, or Soils report to provide evidence that site falls within an area that requires special investigations or analysis on liquefaction, earthquake-induced landslide, and fault-rupture hazard. Confirm the Earthquake assessment in the Environmental Assessment in is within the scope of Phase 1 consultants, or add the applicant as an entity that can complete certification that property is or is not on NavigateLA website. Revise to reflect permanent supportive housing and current best practices, such as the use of the Coordinated Entry System in place of the affirmative marketing plan noted in the proposed regulations. Property Management plan should be submitted with HHH application Regulations revised to include the following in the second paragraph: "If submission of soils report will be deferred as provided under of these Regulations." Regulations revised to the following: Skilled property management is critical to the success of affordable housing developments. Applicants/developers must submit a Property Management Plan (PMP) (Attachment ). The PMP shall include a clear outline of how the project fits into the Los Angeles County Continuum of Care (CoC) system, including detailed information concerning outreach to the various communtiies interested in leasing mobility and sensory accessible units, and ongoing monitoring of the occupancy in these units (Exhibit 4). The HCIDLA shall only accept PMPs that are completed using the template supplied by HCIDLA as Exhibit 4. Any PMP that is different from the HCIDLA-supplied template will not be accepted. In addition, before HCIDLA will commit to funding any loan for a project selected through the Call for Projects process, the developer must submit the qualifications of its management entity.

9 38 Supportive or Enhanced Services Plan Relocation Accessibility Certification Requirements HCIDLA Business Policy The City should utilize the County maintained list of approved service providers so developers could identify approved service providers as part of their application for HHH funding. Supportive Service plan should be submitted with HHH application Eliminate consideration of relocation costs in determining feasibility. Distinguish between temporary and permanent relocation. Exempt public housing redevelopments from the 100% net increase in unit requirement Clarify when the Accessibility Design Review Report is required to be submitted SCANPH members have experienced significant shortcomings associated with HCID s Background Checks. They are routinely delivered in and untimely fashion and containing erroneous information that require extraordinary time and effort to resolve. HCID should develop a list and provide an updated list twice per year. Such an approach will limit unnecessary fire drills to ensure compliance in order to clear the way for an application to the HHH and Managed Pipeline Call for Projects. Regulations revised to the following: Any project with a commitment from the LA County Health Agency (the Departments of Health Services, Mental Health and Public Health) to provide supportive services funded by Measure H must, at the time of application, provide a letter from the CHA identifying its intent to provide services for special needs units in the proposed project. If supportive services are provided by the CHA for a Special Needs population, a Supportive Service Plan is not required for that population. If you wish to have supportive services provided to your NOFA project by the LACHA, please contact Leepi Shimkhada at the LA County Dept. of Health Services, Housing for Health, for a commitment letter. Ms. Shimkhada's is: lshimkhada@dhs. lacounty.gov. The commitment letter should then be included in the NOFA application. A Supportive Service Plan with an identified lead service provider is required at the time of application for any general low-income units or Special Needs units in the proposed project that are not supported by the County Health Agency. See HCIDLA's response to comments on section

10 Assessment of Long-Term Viability Operating Reserve Supportive Services Reserve Fund and Supportive Services Coordination and Case Management Minimum Debt Coverage Ratio Developer Fee 3.5 Confirm that what HCID means by "how suitable the proposed rents are relative to the market" it means at least 10% below market to align with TCAC? Recommend accepting the investor requirements for the establishment of operating reserve accounts, and change the language to require that the operating reserve is established at the conversion to permanent financing. Require at least 3 months operating reserves. The Supportive Services Reserve Fund for low income seniors and other tenant populations should be increased to at least $1,000/unit/yr, or $1,040/unit/yr. Revise this requirement to align with the County's intensive case management program/definitions. Case management definition should be expanded: Case management must include outreach and engagement with tenants, appropriate referrals to and coordination with service partners, and the development and support for a case management plan to address health and mental health needs and works toward other goals." Revise case mgt ratios to align with best practices and funding standards: - One FTE Case Mgr to no more than 20 units for chronically homeless; - One FTE Case Mgr to no more than 20 units for homeless TAY; - One FTE Case Mgr to no more than 30 units for homeless people with special needs; - One FTE Case Mgr to no more than 45 units for low-income seniors or others. Reference the TCAC regulation instead of inputting the definition to prevent having to update this section later if TCAC modifies its definition For consistency with TCAC regulations, the sentence Notwithstanding the CTCAC developer fee maximums, the maximum developer fee that may be paid out of development funding sources is $2.5 million and the following sentence should be stricken. Clarify phantom income and expectations on impacts for for-profit developers and administrative general partners, as well as timing of capital contributions. Comments regarding case management best practices have been accepted and the regulations are revised to reflect the change.

11 48 Developer Fee for Small DDAs Consulting Fees Purchase Price Fees in excess of $2.5m can be deferred? 2018 SDDA map on HUD website shows no SDDAs in City of LA. Developer fee policy should be aligned with TCAC's for both 4% and 9% projects. Increase the $100,000 cap on consulting fees to $250,000, especially for complex projects (e.g. multiple lenders/bonds, projects not developed by right or with density bonuses, those requiring extensive public engagement and permit application processes); or allow the possibility to increase the cap for special cases. Establish eligible consultants for exemptions (e.g. those helping obtain local entitlements or comply with local hire mandates excluded). Edit Purchase Price provision to: "An appraisal performed by a qualified appraiser in conformance with the Uniform Standards of Professional Appraisal Practice is required for all projects. The appraisal must indicate the Fair Market Value of the site as of a date that is within 6 months of executing the purchase contract, before construction or rehabilitation, and without consideration of any financial implications of tax credits or project-based vouchers." For Bond/4% LIHTC projects within the 2017 federally-designated Small DDAs, HHH applicants may budget a developer fee consistent with the CCR section 10327(c)(2)(B) guidelines, whereby any balance in excess of $2.5 million shall be deferred or contributed as equity to the project. Regulations revised to the following: Consulting fees must not exceed $100,000 and should be dependent on the size and complexity of the project. Specific consulting services could include: preparation of tax credit applications; preparation of HCIDLA applications and other public agency applications; preparation of applications for conventional financing; as well as provision of general development services such as the selection and coordination of the development team, loan documentation, and processing local approvals. Fees required for construction management and entitlement consulting are not included in this category if they are provided by a third party. See HCIDLA's response to comments on section Utilize a system of property valuation based on highest and best use or as if vacant (similar to TCAC or HCD) to not penalize applicants seeking up-zoning or developing projects in high opportunity areas 51 Cost Controls Land costs shouldn't be included in the cost per unit calculation 52 Project Labor Agreement Threshold should be on 120+ units, nothing lower. TCAC s proposed 2017 regulations have projects of 120+ units are eligible for federal credit, so having that be the PLA threshold would align better with TCAC and allow additional leveraging of tax credit equity. To be determined by the Bureau of Contract Administration.

12 53 Cost Certification Utility Allowance Appeal Process 4.4 Clarify whether HCIDLA means Borrower's TCAC Cost Certification or Cost certification of the General Contractor's hard costs. In either event, 60 days after Certificate of Occupancy is not sufficient time. Recommend 180 days. Allow developers to use the HACLA utility allowance guidelines for all project types. CHPC complete comment: Reference to rehabilitation projects should be stricken from the regulations. Request more clarification and detail for this process, including but not limited to, timeline in which Applicants must submit an appeal. Regulations revised to the following: (a) Availability Unsuccessful applicants may file an appeal of a HCIDLA Staff recommendation for disqualification of application pursuant to 2 - Threshold Requirements; (b) Timing The appeal must be submitted in writing to the HCIDLA, Housing Development Bureau, to the attention of the Assistant General Manager (AGM) within seven (7) calendar days of the notice of determination. The appeal shall identify specifically, based upon previously submitted application materials, the applicant's grounds for the appeal. Consequently, the appeal review shall be based upon the existing documentation submitted by the applicant when the application was filed. The HCIDLA AGM will respond in writing to the appeal letter within five (5) working days after receipt of the appeal letter. 56 Release of Funds Transit Oriented Development Geographic Distribution HHH funds should be available for predevelopment activities, especially if development is occuring on city/public agency-owned land. Using the Affordable Housing Sustainable Communities Program definition of High Quality Transit cuts out large areas of the city. TOD definition should include LA Metro s Rapid (700 series) bus service. Achieving geographic distribution hinges on ensuring TODs are encouraged using the recommendation in section 5.1. HCIDLA's TOD definition will align with the City Planning's definition of Transit Oriented Communities.

13 59 Projects Containing over 50 units 60 s 61 s 62 s 5.5 Reduce unit requirement for larger projects to be prioritized in high opportunity areas to 25 (instead of 50) since costs in high opportunity areas are significantly higher (costs of land, holding costs, etc.). We are applying to the County NOFA due 10/24, are you able to please send the Article 34 compliance and a letter of support for the project by Thursday, October 19? And will NEPA be required for this project, and will that go through HCID? The application procedures are not current on the website. When is the final deadline for the HHH application? Will the HHH presentation from Sept 14th Stakeholders meeting be posted on the website? Commitment letters can serve as a letter of support. NEPA is only required for projects utilizing HUD assistance, including 8 subsidies, or impacting historic properties. The PowerPoint presentation used at the September 14, 2017 Stakeholders meeting is posted on HCIDLA's website now.