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Council revises repayment terms for $2.7M affordable‑housing loan to help close financing gap
Summary
Council approved revised repayment terms for a $2.7 million housing trust loan to Pacific West Communities’ Harrington Grove project, reducing the city's share of residual cash flow to enable private investor participation.
The Folsom City Council on March 25 approved revised loan repayment terms for a previously authorized $2.7 million affordable‑housing loan from the city’s housing trust fund to support the Harrington Grove multifamily development.
Stephanie Henry of the Community Development Department summarized the project and the requested change. The Harrington Grove development will include 52 affordable rental units (51 affordable units plus one manager’s unit) serving low‑, very low‑ and extremely low‑income households. Council had previously approved the $2.7 million loan in July 2024, the Planning Commission approved design and density bonus permits in November 2024, and the project received a tax‑exempt bond allocation in December 2024.
Henry said the developer chose not to include state tax credits in its federal/state tax‑credit application for the August 2024 round to increase the project’s chances of receiving the scarce tax‑exempt bond allocation; that decision left an estimated $4 million funding gap. Private investors identified a solution but required that they receive 75% of residual cash flow, which in turn required the city to accept a smaller share of residual cash flow. The developer asked the city to revise its loan terms so the city would receive 25% of residual cash flow (down from 50%).
City staff and the city’s affordable housing loan consultant reviewed the request and recommended the change, along with strengthened loan provisions around final disbursement, cost savings and residual reserves. Henry told the council the change would defer repayment of the city’s loan principal and accrued interest but would not affect the city’s general fund. Given the competitive nature of CDLAC allocations and the limited size of the request relative to the city’s housing fund balance (staff said roughly $22 million available), staff recommended approval.
The council moved, seconded and approved Resolution No. 11346 revising the repayment terms as recommended; the roll‑call vote was unanimous.
