Bringing in the reserves
Council OKs $50,000 deal as city moves to beat tiny homes deadline
The City of Lodi will put aside $50,000 in operational and maintenance reserves for the tiny homes planned at 301 E. Lodi Ave., a move that positions the city to beat a deadline that if not met could result in the forfeiture of millions of dollars.
The Harmony Homes Project calls for the construction of four units that will provide housing for at-risk individuals and families, as well as the formerly homeless. The project will be funded by a $1.25 million Homeless Emergency Aid Program grant awarded to the city in 2018 and a subsequent $336,000 Permanent Local Housing Allocation grant awarded to the city in 2020. The grant funding must be expended by the end of June.
The city is negotiating with the Housing Authority of San Joaquin to develop, own and manage the project, similar to its other housing properties.
Grant stipulations require that the property and site improvements remain in suitable condition for permanent supportive housing at least 55 years into the future.
During a special meeting on Tuesday morning, the Lodi City Council voted unanimously to give staff the go-ahead to provide the housing authority a $50,000 reserve for operational deficits and major maintenance and repairs.
The city will also set aside another $150,000 to cover extraordinary maintenance and repair costs that might occur. To access the emergency funds, qualifying maintenance and repair costs would have to exceed the housing authority’s routine maintenance and repair obligations and must not be covered by required insurance policies. As Harmony Homes would be new construction, the city does not anticipate costs incurred from the $150,000 reserve anytime soon.
The city will go back to council should a request be made to utilize the $150,000 in reserve funds.
Councilman Mark Chandler expressed concerns that the deal could pose a greater risk to future city expenditures.
“There is some risk,” City Manager
Steve Schwabauer responded. “We’ve already agreed to put out the project and already spent some funds. We may have to pay back some money if the project isn’t completed.”
The city could purchase the homes for half a million dollars, Schwabauer told the council. The city has considered developing the property if the grant doesn’t require the normal bidding process, Schwabauer said, adding that city staff will meet with housing authority officials this week to determine which agency could develop the property the quickest.
The city will also consider other options if it can’t reach a deal with the housing authority, Schwabauer said.
Councilman Doug Kuehne inquired about Schwabauer’s comfort level with setting aside the $50,000 in reserves.
“I’m comfortable with it,” Schwabauer said, noting that the funds could be drawn through Measure L, a half-cent sales tax passed in 2018.
“I’m a little frustrated it wasn’t required with other projects they’re doing, but ultimately I’m comfortable with it.”
The housing authority requested the reserves after learning that a 20-year note will be required for the project, which could hamper their ability to take out loans against the property to finance improvements, Schwabauer said.
Prior to the vote, Councilman Alan Nakanishi said he’s ready to get the project started so the city can begin efforts to get homeless people off the streets and out of the parks.
“We should not stall any longer,” he said.
“There is some risk. We’ve already agreed to put out the project and already spent some funds. We may have to pay back some money if the project isn’t completed.”
STEVE SCHWABAUER, LODI CITY MANAGER