A Foster City nonprofit’s reputation and “serving the public interest” were the major contributors to a decision to extend a loan agreement on a Sunnyvale housing complex for the poor.
At the Sunnyvale City Council’s most recent meeting, MidPen Housing implored the council to extend a housing development agreement by 55 years. The development, Carroll Inn, located at 174 Carroll St. in downtown Sunnyvale, provides 122 single-room apartments for an average of $550 a month.
“This boils down to a public-interest question, the value of having the property there today and the benefit that it serves the community versus what happens in alternate scenarios,” said Council Member Russ Melton. “I start out with a very powerful bias of the thing you’re asking is a reasonable thing.”
The council had to decide whether to demand that MidPen pay the balance of a $1.5 million public loan it took out 30 years ago. However, when the council weighed the benefit of getting that money and what the development offers the city, it opted to extend the loan.
Jenny Carloni, housing officer, called the development “critical to downtown Sunnyvale.” The money the city would get by demanding that MidPen Housing repay the loan immediately, the city could support 40 families for a year through its rental assistance program.
The housing and human services commission took issue with the nonprofit asking for the extension.
Jim Davis, who sits on the commission, said the commission preferred to restructure the loan for 20 or 25 years, possibly forgiving the interest but was told that option was not tenable.
“It is something that we should be able to structure in a manner that is suitable to both them and to us,” he said.
Davis pointed to his own business and how he and his partner planned for rehabilitation and wondered why MidPen was unable to do the same.
Government subsidies fund the development.
Looking at the salaries the nonprofit pays, some members of the housing and human services commission challenged whether MidPen Housing could repay the loan.
According to MidPen’s form 990, it paid $14.7 million in salaries and benefits last year.
Kyle Attenhoffer, senior vice president of asset management MidPen Housing, told the council that developments with such low rent often take much longer to repay any debt they accrue. While the nonprofit could technically repay the loan, if such practice were common, the group would quickly be unable to serve the community long-term.
He pointed to the benefit of having the Carroll Inn around for years, even beyond the 55 years the restructured loan provides for. MidPen will sell the property “over [their] dead bodies,” he added.
“Carroll Inn stands out as one of the premier prides of our organization and our community,” said Attenhoffer. “Again, it is serving the highest need population, the special needs, very, very low income, and it is incredibly successful,”
MidPen Housing’s reputation played a key role in the council’s decision to restructure the loan. Although the housing and human services commission was skeptical of the request, even Davis said he has “great respect” for MidPen, calling it a “very important part of the community.”
The council shared the sentiment.
“MidPen has been, over the many endeavors that I’ve seen them work on in Sunnyvale, they seem like a very trustworthy stakeholder in our community, especially in affordable housing,” said Council Member Linda Sell.
Salaries at the nonprofit are not “out of whack,” Melton said. The decision was fairly “straightforward” because of MidPen’s “strong governance,” he added.
Council Member Richard Mehlinger said private sector salaries would dwarf what its executives earn. The “crux of the issue is public interest,” he added.
“Replacing those units would take years and cost much, much more than $1.5 million,” he said. “It would cost tens of millions of dollars at current construction costs. If there is one iron law of capitalism it is you get what you pay for.”
Mayor Larry Klein said he was “overjoyed” to support the city employees’ recommendation to extend the loan. The council unanimously approved the item.
City Requires Charities Housing Grant Money to be Repaid
The topic of public interest — as it relates to so-called “affordable housing” — came up again during another item. This time, however, the council opted to deny the request. Similar to the MidPen, Charities Housing came to the council asking for forgiveness of a $200,000 loan the city ponied up back in 2000.
That loan, a Community Development Block Grant (CDBG), funded a portion of a low-income development for domestic violence victims. HomeSafe, located on El Camino Real in Santa Clara, provides 24 single-room apartments.
Since the development is no longer financially viable, Jenny Carloni, housing officer, told the council that Charities Housing intends to demolish the building and build another development. The new development will still host 24 apartments for domestic violence victims but will also feature 46 more traditional below-market-rate apartments.
Because the loan is in deferral, no payments have been made. The situation is, as Carloni said, “unique.” Santa Clara owns the land, and eight cities across the Bay Area gave Charities Housing grants to fund the project. However, since the site is in Santa Clara, residents there are given priority for placement. Only one resident of the complex is a Sunnyvale resident.
Carloni said the city could better use the money to fund its home improvement program for two or three years.
“While the city does not wish for charities to be burdened with an early repayment schedule, the repayment of this CDBG loan would allow the city greater direct benefit to Sunnyvale residents,” she said.
The council essentially had to choose between three options: forgive the loan as a sort of gift, stay invested in the project and restructure the loan or, as the city employees recommended, require Charities Housing to pay the loan.
They chose the third option.
Nobody on the council disputed the project’s importance, but many saw it as another issue of public interest.
Council Member Russ Melton called the intent of “huge societal importance.”
Council Member Richard Melinger called it a “very worthy cause” but said he had trepidation about allowing domestic violence victims to mix with the general population in the development.
“I would like to see a lot more due diligence done on that,” he said. “If we are going to be spending Sunnyvale resources, there needs to be a strong nexus of interest with the Sunnyvale residents.”
Construction on the new development will likely start in three to four years.
Several members of the council said they weren’t closing the door on Charities Housing returning later with a more specific vision for the site — one the council could get behind. At that time, perhaps the council would decide to re-up its commitment.
“Showing that community good, to me, isn’t a one-time snapshot,” said Mayor Larry Klein. “It is a history. That is an important portion of the story to tell for a development like this.”
The council unanimously approved requiring Charities Housing to repay the loan.
Sunnyvale City Council Consent Calendar Spending
The council approved the following spending in one motion through the consent calendar:
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A 10-year, $5.49 million contract with Hexagon of Madison, Ala. for implementation, licensing, maintenance and support for public safety on-call dispatch system.
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A $489,474 contract with YEI Engineers, Inc. to provide design and construction support for emergency generators and electrical upgrades at four fire stations.
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A $691,920 contract with Royal Electric Company for SMaRT Station NexGen electrical upgrade.
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A $450,000 purchase order with Univar Solutions USA for “sodium hypochlorite,” commonly known as bleach.
Council Member Alysa Cisneros was absent.
