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Council approves ENA amendment to support Mercy Housing application for 555 Kelly senior farmworker housing
Summary
Half Moon Bay City Council voted 3-1 to authorize an amendment to the exclusive negotiations agreement (ENA) with Mercy Housing that adds a proposed 65-year ground-lease term and a $1-per-year lease payment to strengthen Mercy’s state and county funding applications, including the Joe Serna Farmworker Housing grant.
Mayor Brownstone and the City Council on Tuesday approved an amendment to the exclusive negotiations agreement (ENA) with Mercy Housing to add a proposed 65-year ground lease term and a proposed $1-per-year lease payment for a senior affordable housing project at 555 Kelly Avenue.
The amendment does not obligate the city to execute a final affordable housing and property disposition agreement (AHPDA) or ground lease but was described by staff and Mercy Housing as necessary to demonstrate site control and improve the developer’s competitiveness for state and county funds, including the Joe Serna Farmworker Housing grant (application window referenced as April 15). Council approved the amendment by roll-call vote: Councilmember Johnson — yes; Councilmember Nagengast — no; Vice Mayor Redick — yes; Mayor Brownstone — yes.
City housing programs manager Mike Noche told council the ENA amendment is intended to align Mercy’s project pro forma with funding requirements for layered affordable-housing financing. “The proposed ground lease of 65 years with an option to extend and a proposed lease payment of $1 — these are ongoing negotiation points, but they are needed starting points for the developer in regards to entering into their funding requirements with the state,” Noche said. Mercy Housing’s Kelly Hollywood said the 65-year term was requested after the state Housing and Community Development Department’s Super NOFA workbook and scoring guidance were released; Mercy needs a long-term site-control document to demonstrate eligibility and earn higher scores for the Joe Serna application.
The council and city attorney discussed whether adding the lease terms in an ENA raised legal risk — including if the action could be considered a “legislative” decision subject to referendum. The city attorney said courts look at the substance of agreements (whether they lock the city into a specific project at a place) rather than the label used; because the ENA continues to leave the city discretion to approve a follow-up AHPDA or ground lease, the attorney said it was unlikely the amendment itself would be found to be legislative. The council asked staff to be clear in future reports about urgency tied to grant deadlines.
At public comment, more than a dozen speakers supported the amendment and urged the council to move the project forward to provide housing for aging farmworkers; supporters included community faith groups and affordable-housing advocates. A smaller group of commenters urged caution, asked the council to preserve referendum rights, and requested further cost analyses before committing long-term terms. Mercy representatives said the amendment was timed to the state funding window and that they would continue negotiating AHPDA and ground-lease terms with the city’s ad hoc committee and return required documents to the council.
The council motion authorizes the city manager to execute an amendment to the ENA (original ENA dated 06/30/2024), adding language that would position Mercy to apply for state and county competitive funds while leaving final AHPDA and ground-lease approvals to the council.
Why it matters: Council members and residents framed the project as an attempt to address long-standing housing needs among farmworkers on the coast side while balancing legal, fiscal, and process transparency concerns. The amendment preserves the city’s option to approve or decline a final AHPDA and ground lease, but it creates a site-control signal Mercy told staff it needs for competitive grant scoring.
What’s next: Mercy will submit for the Joe Serna grant and other county and state sources; staff and the ad hoc negotiating committee will continue working on AHPDA and ground-lease terms and return those documents to council for approval.
