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Council approves $3.5 million loan to housing authority for 400 West Carrillo Street; residual‑receipts terms draw scrutiny
Summary
The City Council adopted an ordinance authorizing a $3.5 million loan to the Housing Authority for development at 400 West Carrillo Street, imposing a deed of trust and a 90‑year affordability covenant; the vote was 6–1 after councilmembers discussed budgetary impacts and repayment uncertainty for residual‑receipts loans.
The Santa Barbara City Council on Sept. 9 adopted an ordinance approving a $3.5 million loan from the general fund to the Housing Authority of the City of Santa Barbara for a project at 400 West Carrillo Street. The loan will be secured by a deed of trust and a 90‑year affordability covenant.
Council voted 6–1 to adopt the ordinance. The motion was moved by Councilmember Santa Maria and seconded by Councilmember Harmon; the council record did not specify the dissenting member by name.
Council questions and loan structure
Council discussion focused on the loan mechanism and the fiscal tradeoffs of using general‑fund dollars for housing subsidies. Councilmember Jordan, who said he would not block the project but raised concerns, warned that "every dollar that leaves a general fund and goes to another entity ... is a sacrifice that the rest of the organization is making. That's a dollar that we don't get to spend on salaries, on programs, and on services." He urged future scrutiny of general‑fund commitments to housing.
Staff clarified loan terms during the discussion. The loan is structured as a residual‑receipts loan with a 3% interest rate and a 30‑year term; payments depend on project income and may vary over the loan term. Staff noted that while the loan principal is expected to be repaid, residual‑receipts structures have in some past cases resulted in reduced or forgiven repayments depending on project performance.
Project composition and affordability controls
Councilmember Knecht noted the project would create 63 rental apartments: seven restricted to low income households and 55 restricted to moderate income households, characterizing the development as "a 100% affordable project." The approved ordinance also includes a 90‑year affordability control covenant recorded on the property to preserve affordability over the long term.
Next steps and caveats
With the ordinance adopted, the Housing Authority may proceed with project financing and development actions consistent with the deed of trust and covenant. Council members stressed the need to monitor loan performance and said future projects using residual‑receipts financing should be evaluated for impacts to the city general fund and departmental budgets.
