Vallejo City Council passes on applying for state housing funds in shadow of ‘failed projects’

VALLEJO –  The Vallejo City Council chose not to seek state funds for three supportive housing proposals on a tight deadline at a meeting on Monday, and instead voted to shore up city processes for affordable housing development. 

As much as $2.1 billion in supportive housing project funding is available in the state’s Homekey+ funding round with a May 30 deadline to apply. The state Department of Housing & Community Development issued a notice of funding availability in November, but city staff initially communicated to developers that the city is not in a position to partner on the funding opportunity due to staff capacity issues and uncertainty about the city’s unfinished Project Homekey development, a long-delayed 47-unit supportive housing project on Broadway that required a $6 million bailout last year. 

Still, over the past year, the city received proposals from three development groups interested in partnering with the city to apply for the additional round of Homekey funding, intended for permanent supportive housing projects that provide behavioral health services. 

Mayor Andrea Sorce said in a statement that the City Council had only recently learned about the projects and last week she requested the special meeting to discuss the proposals.

“There was some confusion over whether or not we were even eligible for Homekey+, what it would take for us to apply for Homekey+, what the status was of the different applications, and in the questions and misinformation, I felt, and I think the Council felt that it was important for us to have this conversation transparently,” Sorce said at the meeting Monday.

City Manager Andrew Murray said that at this late date the city would have to rely on the developers to complete the majority of the state application. Further vetting of project funding sources and the development teams would have to take place while the applications are under consideration. 

Murray said that if a project received a funding award, the city would have the option to decline the funding but may face a penalty that could affect future grants. 

On the other hand, he said, if the city were to accept the Homekey funding, the city and the co-applicant would be financially responsible for completing the project if any portion of funding were to fall through, similar to the $6 million funding gap that arose on the Broadway project.

The projects included an addition to an existing housing development on Eucalyptus Drive east of Columbus Parkway at Springs Road called Vista La Terraza. The developer, Ethos Environmental LLC, proposed to build 28 homes identical to the existing development but with minor modifications to convert each home to a duplex, creating a total 54 units for homeless veterans. 

The other two projects involved hotel conversions that would remodel the rooms to add kitchens and to create community spaces and offices for supportive services. 

The group Enough Housing, proposed to convert a Motel 6 at 1455 Enterprise St. to create 55 units. Another group, California Supportive Housing, proposed to convert the Country Inn and Suites hotel at 1000 Admiral Callaghan Lane across from the Tesla dealership. 

The groups provided the City Council with information about the project designs, their partners, previous experience on affordable housing projects as well as descriptions of service programs and potential service providers.

Although there was a wide range of questions from councilmembers throughout the five-hour meeting, the topic of ensuring full funding for the projects came up repeatedly.

The project presenters listed grants that they plan to apply for, one of which was also near the application deadline, but others potentially offered regular rounds of funding on an annual or biannual basis.

All of the project developers were interested in applying for federal housing vouchers to support long term operation of the project. The Vista La Terrazza developer planned to apply for vouchers specifically allocated for veterans, while the two hotel conversion projects planned to apply for the city’s allotment of project based vouchers. 

The reliance on project based vouchers raised concerns about whether the city’s current allotment is enough to accommodate the projects.  

Assistant City Manager Gillian Haen said that the city’s Housing and Community Development Commission was slated to vote on allocation of vouchers to two projects, including the Broadway project, at their meeting Tuesday. If those projects are approved, she said that the city would have only 23 remaining vouchers.

Councilmember Tonia Lediju said that she is concerned about the projects relying on the federally funded housing voucher programs because additional vouchers may not be forthcoming under the Trump Administration.

The city also asked each developer what the city could have done better to support their process of bringing the projects forward. Caleb Esborg of the Vista La Terraza proposal said that, over the four years he has been working with the city on the proposal, as soon he began to make progress in conversations with staff members, he suddenly found himself starting over again with a new staff member because of the city’s high turnover. 

After the city’s $6 million bailout of the Broadway project, the City Council ordered an independent audit of the city’s management practices related to the project. In December, the auditor provided a list of management recommendations designed to avoid similar problems with affordable housing projects in the future. 

The recommendations included hiring a housing development officer with expertise in finance oversight, creating a housing development policy and procedure handbook and properly vetting developers through a request for qualifications process.

According to Murray, the auditor recommendations have not yet been implemented. 

“Under a different timeline,” Murray said, “we would have implemented the best practices recommendations of the assessment. We would have had dialog with these potential co-applicants. We would have gone through the analysis and underwriting to determine whether the project teams and proposals had the capacity and the financing to successfully carry these projects out.”

The council chose not to partner with any of the groups on applications for Homekey funding and instead unanimously approved a motion to direct the city staff to return to council by July with a timeline to implement the auditor recommendations. The motion also included the intention to coordinate more closely with the city’s housing commission and to review a land trust proposal submitted by the Housing Justice Coalition.  

Sorce said that a lot of time and commitment had gone into the project proposals and that they were in no way rushed on account of the developers. She said that one developer began conversations with the city 4 years ago, another, nearly a year ago, and a third applied shortly after the notice of funding availability. 

She said that she is concerned that the proposals may have been delayed due to a slow response from the city or because of the city’s staffing issues or experience with the Broadway project. 

“We want to be open and transparent about that, because that is what accountability looks like,” Sorce said. “That is us sitting up here with our staff and our city manager going, ‘you know what? After the last experience with Homekey, these are all the reasons why we might not be able to do this.’” 

Sorce expressed interest in finding other options to fund the projects without the constraints of a tight deadline.

“I would like to see us change the way we do business, so that we are a better partner to folks that want to come and do business in this city, so that we can welcome in and attract reputable developers, reputable investors, philanthropy, we can actually get going in Vallejo,” Sorce said.