Item 6-H

Council Meeting: 2/25/97                Santa Monica, CA

To:       Mayor and City Council

From:          City Staff

Subject:  Recommendation to Approve One-Time Waiver of
          Multifamily Earthquake Repair Loan Program (MERL)
          Guidelines to Approve Construction/ Permanent Financing
          for the 1438-1444 16th Street Housing Development

This report recommends a one-time waiver of the MERL per unit
funding cap for the 1438-1444 16th Street new construction
housing development.  MERL Guidelines cap the City's loan at 
$1,944,000  for this 17 unit , 100% affordable housing loan under
Program III of MERL Guidelines. The City has committed $1,851,874
of MERL Community Development Block Grant (CDBG) funds to this
housing development and staff recommends increasing that
commitment in an amount not to exceed  $535,000 in MERL CDBG
funds  to a total amount not to exceed $2,386,874.  In addition,
approval of the staff recommendation satisfies the provision of
the MERL Guidelines that requires Council approval of any MERL
loan which exceeds $2,000,000.

Subsequent to the 1994 Northridge Earthquake, the City received
three grants from the Department of Housing and Urban Development
for multifamily housing earthquake recovery to repair and replace
units damaged and destroyed.  The establishment of the MERL
program for the administration of these funds has provided an
important financial resource to allow the City to rebuild its
multifamily housing stock.  Earthquake grant funds designated for
loans to multifamily property owners total $30,046,500.

As of February 7, 1997, 30 housing loans have closed or received
City commitments, and 20 more are in review and expected to
receive commitments.  Excluding the 16th Street loan recommended
in this staff report, staff expects that loan commitments
totaling up to $29,548,030, dependent on actual commitments, will
have been made by the time the Council meets on February 25,
1997.  This would leave a balance of $498,470 to $535,000

This housing development, sponsored by the Community Corporation
of Santa Monica (CCSM), will provide 17 units of affordable
housing for families at 1438-1444 16th Street.  The total
development cost for the housing development is estimated to be
$3,388,837.  To date, the City has committed $1,851,874 of MERL
funds to this housing development.  The gap in financing of
$1,536,963 is expected to be filled, on a permanent basis, 
through a loan from the Affordable Housing Program (Federal
Reserve Bank program) of $76,211; a conventional bank loan of
$100,000; and proceeds from the sale of low-income housing tax
credits of $1,360,752.  The tax credit proceeds are dependent on
an allocation of tax credits to CCSM based on its upcoming
application to the Tax Credit Allocation Committee administered
by the State of California.  If the application is successful,
the additional $535,000 will be used as a short term construction
loan to be repaid when the tax credit syndication proceeds are
realized.  The loan repayment will be received by the City as
CDBG program income, and its reuse will be governed by the same
rules as other CDBG program income.  Because the competition for
tax credits is intense, an allocation is in no way guaranteed. 
If the tax credit application is denied then the permanent
financing gap would be closed with a MERL Loan up to $535,000 and
financing from the Citywide Housing Trust Fund.

By adopting the recommendation in this report it is anticipated
that the City will have committed all MERL loan funds before the
Federal deadline of February 28, 1997.  Failure to commit by that
date would result in the return of uncommitted funds to the
Department of Housing and Urban Development.

The additional commitment of MERL CDBG funds in an amount not to
exceed $535,000, in the form of a construction/permanent loan,
will be for a term of 55 years at 0% interest.  The term and
interest rate conform to MERL Guidelines.  In the event tax
credits are received for this housing development, the City loan
will be repaid within 2 years from disbursement of City funds.

The existing loan, under account #19-000-000-00000-9545-04861 in
the amount of $1,851,874, will be increased to an amount not to
exceed $2,386,874.

It is recommended that the City Council approve a one-time waiver
of the MERL per-unit loan amount guidelines for the affordable
housing development to be located at 1438-4444 16th Street to
allow an increase of MERL CDBG funds to this housing development,
in an amount not to exceed the $535,000, from the City's current
commitment of $1,851,874 to a maximum of $2,386,874.

Prepared by:   Jeff Mathieu, Director Resource Management Dept.
               Bob Moncrief, Housing Manager
               Tina Rodriguez, MERL Program Coordinator
               Ellen Alderman Comis, Senior Admin. Analyst