Title
Recommendation to Authorize the City Manager to Sign a Commitment Letter to MidPen Housing and the Alameda Point Collaborative to Provide Operating Subsidy of up to $1 Million Annually with a 2.5% Annual Escalation for Twenty Years for the Stardust Gardens Supportive Housing Project Commencing in Fiscal Year 2028-2029 (Base Reuse & Economic Development, 29061822)
The streamlining provision of Public Resources Section 21083.3 and Section 15183 of the CEQA Guidelines apply and no further environmental review is required.
Body
To: Honorable Mayor and Members of the City Council
From: Gerry Beaudin, City Manager
EXECUTIVE SUMMARY
RESHAP (Rebuilding Existing Supportive Housing at Alameda Point) is a supportive housing redevelopment led by MidPen Housing in partnership with Alameda Point Collaborative (“APC”), Building Futures, and Operation Dignity (collectively, the “Collaborating Partners”) that will replace the Collaborating Partners’ existing World War II-era housing and facilities with 332 permanent homes for formerly unhoused individuals and families and low-income households. The first phase of the project, the 80-unit Stardust Gardens building, being developed by MidPen Housing and Alameda Point Collaborative, has received most of its construction funding, but cannot move to the final step until it secures an operating subsidy to cover the gap in rents needed to ensure affordability for extremely low-income households over the course of the project.
From the time RESHAP was initially approved by the City of Alameda (City) in 2017, the City, MidPen, and the Collaborating Partners have been transparent with AHA about the need for a rental subsidy to continue to serve the existing residents. APC has an existing contract with AHA for 25 project based vouchers (“PBVs”). APC has anticipated this contract would be canceled and could be awarded to Stardust Gardens. However, the Alameda Housing Authority (AHA) has not been willing or able to provide this commitment on the timeline needed to keep the project advancing, despite a decade of discussion. This apparent misalignment of AHA and the City’s priorities is highly concerning.
Stardust Gardens is the first of several developments that could collectively deliver as many as 2,300 new housing units at Alameda Point, by providing critical replacement housing for current families and households that currently live in dated, Navy-era housing that is in an area entitled for higher density housing. It is critical to keep the Stardust Gardens development moving forward on its current schedule to meet the City Housing Element goals and deliver multiple new housing developments. Therefore, staff recommends that City Council authorize the City Manager to provide a commitment letter offering up to twenty years of operating subsidy, as needed, for an amount up to $1 million per year, with an annual 2.5% escalation. This will allow the project to proceed on schedule, with the hope that AHA or another entity may be able to align its priorities with the City’s, and provide the vouchers in lieu of this subsidy when residents move into Stardust Gardens.
BACKGROUND
RESHAP and West Midway
City Council originally approved the Disposition and Development Agreement (DDA) for RESHAP in July, 2018. In July 2023, City Council approved an updated DDA for RESHAP and approved the West Midway DDA. The RESHAP and West Midway Developments are located between Main Street, West Tower Avenue, Pan Am Way, and West Midway Avenue. RESHAP is intended to fully replace the aging Navy-era, supportive housing operated by the Collaborative Partners. This housing, and associated wraparound services, support families and individuals who are formerly unhoused or at risk of homelessness. City Council, as part of the West Midway agreement committed a $9.5 million loan to the West Midway developer team in order to accelerate the construction of the RESHAP campus, reflecting the City’s longstanding commitment to RESHAP as a priority supportive housing development.
While RESHAP and West Midway are separate developments governed by separate DDAs, their implementation is interdependent. A portion of the existing APC housing units are located within the West Midway Phase 3 development area. Stardust Gardens, the first residential phase of RESHAP, will provide replacement housing needed to relocate these residents, clearing the way for West Midway Phase 3 to proceed. Stardust Gardens also begins the broader relocation sequence necessary for future redevelopment of the Main Street Neighborhood North area.
The West Midway developer, Catellus and Brookfield, has completed the infrastructure improvements required under the West Midway DDA to support Stardust Gardens. The City provided the West Midway developer a $9.5 million loan to fund these improvements, which is not required to be repaid to the City until construction commences on West Midway Phase 3. Site work supporting RESHAP is nearly complete.
RESHAP will provide 332 new homes in a campus at the corner of PanAm Way and West Midway Avenue. Catellus and Brookfield, developers for West Midway, will build 478 market-rate, workforce and moderate-income homes on the remainder of the block. Additionally, the City commenced a study of the potential for development north of West Midway Avenue, where more Collaborating Partners existing housing is located that would be replaced by future phases of RESHAP. Collectively, staff believes that by relocating all of the Collaborative Partners housing to the RESHAP campus, the City could deliver up to 2,300 new homes in the area, at least 25 percent of which would be affordable.
Stardust Gardens
MidPen Housing (MidPen), a non-profit affordable housing developer, is the lead developer partner that is planning, securing funding for, and building RESHAP. MidPen has been actively seeking and securing funding sources for Stardust Gardens, the first, 80-unit building in the RESHAP campus. MidPen secured approximately $52 million in capital financing for the project, including achieving the highest ranked application in the State of California Affordable Housing and Sustainable Communities (AHSC) program in the last round. In mid-August, MidPen received notice from the State of California Department of Housing and Community Development (CA HCD) that it was to be awarded a $15 million Multifamily Housing Program (MHP) loan.
A requirement of the MHP loan is that MidPen must, upon acceptance, commit to applying for an allocation of low-income housing tax credits (LIHTC) in the next application round, meaning that MidPen must submit an application for LIHTC by September 8, 2026. LIHTC is generally the last funding source for affordable housing developments, which must essentially be “shovel ready” upon application and able to start construction within approximately 180 days of receipt of an award. With this MHP award, MidPen can apply for a 4% LIHTC award which is generally a noncompetitive award, and as such, offers a fairly predictable timeline for construction commencement.
Base Closure and the Standards of Reasonableness
The Federal Base Closure and Community Redevelopment and Homeless Assistance Act of 1994 requires that reasonable accommodations be made on closing military bases to meet the needs of the unhoused and sets forth procedures for doing so. At the former Naval Air Station Alameda (Alameda Point), the predecessor to the City and Collaborating Partners negotiated a set of “Standards of Reasonableness” specifying the resources that would be allocated to the Collaborating Partners, including 20 percent of the existing housing, conveyed housing stock for the purpose of serving formerly unhoused individuals and families, and those at risk of homelessness. These requirements are legally enforced through a series of “Legally Binding Agreements” (LBAs) that essentially function as leases for the properties being used by the Collaborating Partners, and were executed by the predecessors to the City, Collaborating Partners, and Alameda County Housing and Community Development Department (County HCD).
City staff, County HCD, MidPen, and the Collaborating Partners have been discussing the potential release or modification of the LBAs as RESHAP progresses in order to free up land for development once RESHAP provides permanent housing for residents. County HCD has been clear that its goal is to ensure the preservation of the services being provided, and it will only consider modification or termination of the LBAs if there is a clear path to preserving these services. As such RESHAP must serve residents who are formerly unhoused or at risk of homelessness before the LBAs can be released.
While MidPen could conceivably have submitted a LIHTC application for an affordable housing project serving a higher income population, given the Standards of Reasonableness and the LBAs, the RESHAP DDA and associated documents specify the types of households that must be served in order to adequately replace the supportive housing for the Collaborative Partners. Moreover, the intent is to serve the existing Alamedans living at Alameda Point to the greatest extent possible.
Housing Vouchers
Existing APC residents within the West Midway Development footprint cumulatively pay less than $250,000 in rent annually and APC currently has 25 Project Based Vouchers (PBVs) at Alameda Point, totaling at least $750,000 in contract rent annually. To continue serving the same residents in RESHAP, MidPen will need to secure an ongoing operating subsidy. Typically, nonprofit affordable housing developers secure this through vouchers, and MidPen, APC, and the City have been engaged with AHA for over a decade to seek a path to securing PBVs for RESHAP. Since operating subsidies are only needed once Stardust Gardens is operational in 2029, at this point MidPen only needs to submit a commitment letter indicating that an operating subsidy will be provided at the completion of constructions; no actual funds need to be issued now.
Alternative Option Necessary - Housing Vouchers Not Forthcoming from AHA
Unfortunately, to date, the City, APC, and MidPen have been unable to find a successful path with AHA to secure vouchers. On August 19, 2026, the AHA Board of Commissioners met to discuss whether AHA would be willing to provide a commitment letter to Stardust Gardens. Citing concerns about a potential budget shortfall in the future, and criticisms from AHA staff that competitions used to award $45 million in State funds were insufficient to be used to make a noncompetitive award, the Board instead directed AHA staff to “polish up” the competitive process, and return on September 16 with further information, with no commitment to running a competitive process, and certainly no commitment to Stardust Gardens.
AHA Concerns and Priorities: Competitive Process
According to the AHA Administrative Plan, which is a guiding document adopted and amended by the AHA Board, AHA can award Project Based Vouchers in one of three ways:
1. For a property owned by AHA, the AHA Board can award PBVs without engaging in a PBV selection process;
2. AHA may solicit proposals by using a Request for Proposals (RFP) to select proposals on a competitive basis in response to the AHA request;
3. AHA may select proposals based on a development’s previous submission and award under a federal, state, or local government assistance competition subject to other requirements.
At its August meeting, AHA staff informed the AHA Board that, despite the successful AHSC award and MHP Award, these state run competitions cannot be used to make a noncompetitive award to Stardust Gardens because the AHSC application included PBVs as a non-committed funding source, and MHP was only awarded to Stardust Gardens because it had AHSC. The City and MidPen do not agree with AHA on this point. AHSC did not directly provide points to the project for showing PBVs, but only awarded points for committed funding sources. Moreover, MidPen explicitly engaged the State during its review of the MHP application to ensure that they understood PBVs were not committed.
It is common practice for affordable housing developers to show all anticipated “sources and uses” when applying for any fund source, which is desired and generally encouraged by granting authorities seeking to understand a developer’s intended path to construction, as it was by the State with AHSC. As a major affordable housing funder, State HCD understands that the project underwriting will change as different sources are secured.
AHA Concerns and Priorities: Budget Shortfall
Also at its August meeting, AHA staff informed the AHA Board that housing authorities in budget shortfall are not permitted to issue new PBVs, and HUD regulations become increasingly restrictive on housing authorities each time they enter shortfall. AHA is not currently in a budget shortfall, but AHA staff asserted to its Board that a budget shortfall is likely in future years, and therefore it would not be financially prudent to award new PBVs at this time.
In prior discussions with AHA and at the August AHA Board meeting, City staff and MidPen asserted that if new PBVs could be issued when the Collaborating Partners vouchers are terminated, there would be only a small marginal increase in the budget. Moreover, City staff have repeatedly offered to AHA staff to explore approaches for the City to help address any net difference in expenses resulting from RESHAP but have not been able to engage in productive conversation with AHA staff.
Unfortunately, the AHA Board did not direct AHA staff in its motion on August 19 to engage in a dialogue with the City to explore ways to find a solution to the shortfall issue.
Staff Recommendation
Due to the urgent nature of retaining the MHP funds and applying in the September 2026 LIHTC round to keep the project on track, staff is recommending to City Council that the City issue its own commitment letter to MidPen and APC, offering to provide the operating subsidy up to $1 million per year for up to 20 years with a 2.5% annual escalation, or until an alternative subsidy amount is secured.
As an alternative or additive motion, City Council may consider directing staff to work with AHA to explore a possible shared subsidy mechanism to address the shortfall. This alternative is discussed further below.
Another alternative that City Council may wish to explore is the possibility of making changes to the Housing Authority Board and/or relationship of the Housing Authority to the City of Alameda.
DISCUSSION
The recommendation to commit $1 million annually with a 2.5% annual escalation for up to 20 years to operating subsidies is not a decision that staff brings to City Council lightly. If MidPen cannot secure an operating subsidy source prior to its September LIHTC application, there are major impacts to housing development at Alameda Point and associated improvements that cannot be ignored. However, if City Council directs staff to allocate funds are allocated from the Alameda Point Fund (290), there are serious negative consequences for the continued progress, development and maintenance of Alameda Point. Both paths are discussed below.
Impacts of Delays to RESHAP if Operating Subsidy is not Provided
The RESHAP construction start date has already been delayed by one year, as the Stardust Gardens project was not competitive for certain funds in 2024. Fortunately, State funding allocations in 2025 and 2026 have greatly catalyzed the delivery of the project. As discussed above, MidPen can only accept the $15 million MHP commitment from the State of California if it commits to applying in the September LIHTC round. If it misses this round, MidPen will need to forfeit the $15 million award, and will need to wait until spring 2026 to apply for the much more competitive 9 percent LIHTC program, which would add an additional approximate 6-month delay to the project, and additional risk to the timeline if they are not awarded.
In addition to delaying replacement housing for the outdated, Navy-era units that the Collaborating Partners’ residents currently live in, this delay has major impacts on future development at Alameda Point and places other City and regional projects at risk:
• The 478-unit West Midway development cannot move forward. While the first and second phases of this development are east of Orion Street and will not require relocation of existing residential units, Phase 3 of the development will require the demolition of housing currently housing APC tenants who are planned to move into RESHAP. West Midway Developers Catellus and Brookfield have already indicated that they cannot proceed with Phase 1 if they do not have a certain delivery timeline for Phase 3. As such, no units will be delivered until this delay is addressed. Failure of West Midway to move forward jeopardizes repayment of the City’s $9.5 million loan to the West Midway developer and completion of the 478 units.
• Future development of the area north of West Midway Avenue has been planned in the Main Street Neighborhood Specific Plan, and staff have commenced evaluation of the potential for future development. Staff determined that the area could deliver anywhere from 600 to 1,500 new housing units. However, all of RESHAP must be completed to accommodate the Collaborating Partners units that are located in this area.
• The City and MidPen received a $40 million AHSC grant, which includes funding to be allocated to the Water Emergency Transportation Authority (WETA, or SF Bay Ferry) for the Seaplane Lagoon Charging Float to support the ferry electrification. Further, the grant included funds to construct bicycle and pedestrian improvements in West Alameda. The grant's success is predicated on delivering Stardust Gardens by the grant deadline. If the City and MidPen fail to meet this deadline, the City will be at risk of having to return the transportation funds, and MidPen will be penalized in future affordable housing project applications to this source.
Impacts to Alameda Point of Committing Operating Subsidy Funds to Stardust Gardens
The Alameda Point Fund (290) and its sister Alameda Point Tidelands Fund (291) currently collect approximately $14 million in lease, license, and other revenue each year, and the City’s operating budget to manage and maintain Alameda Point is also approximately $14 million. Allocating an additional $1 million per year from Fund 290 for Stardust Gardens operating subsidy would mean that the City would need to either generate additional revenue, or reduce its annual expenses.
Unfortunately, this comes at a time when the City has significant need for these funds including:
• An estimated $840 million in Alameda Point’s Master Infrastructure Plan expenses, including replacing backbone streets, wet and dry utilities, sewer pump stations, stormwater outfalls, parks, sea level rise adaptation investments, and other improvements.
• The Reuse Area infrastructure improvements planned in the Master Infrastructure Plan, East Bay Municipal Utility District 10-Year Infrastructure Agreement, and the City’s Disposition Strategy.
• Deferred maintenance and repair needs for piers, bulkheads, commercial and residential roofs, paint, siding, and risk of ruptured Navy-era water lines or other failing Navy-era utilities.
Allocating $1 million a year would require some deferment and delay to these activities.
Precedent with Other Cities
Federal Housing Vouchers are the primary source of rent subsidies that help ensure affordable housing serves the most vulnerable, low-income households. However, there are other instances where cities have made direct commitments of funds to rent subsidies.
San Francisco has created a “Local Operating Subsidy Program” that provides an annual operating budget allocation to cover rents in support of housing developments serving households experiencing or at risk of homelessness. If City Council provides affirmative direction to make this commitment to RESHAP, staff will conduct further investigation into San Francisco’s model and other models to structure the commitment appropriately before returning to City Council for full authorization of the agreements.
Misalignment of AHA and the City’s Priorities
It is of equal, if not greater concern, that AHA and the City’s supportive housing priorities have become so greatly misaligned in recent years. AHA sets the timing of its competitive PBV award processes and sets the evaluation criteria. AHA has held at least two competitive processes during the last nine years where Stardust Gardens has applied but not been awarded. There is a perceived tension between AHA’s own development projects and others in the City; in its deliberations on August 19, one AHA Board member expressed concern about the possible impacts on AHA’s own development program by awarding PBVs to RESHAP.
Potential to Secure an Alternative Subsidy Source
Despite this, staff still suggests leaving the door open for the City and AHA to reach an agreement to allocate PBVs to Stardust Gardens. City staff is open to further negotiations with AHA around addressing their budget shortfall concerns where Stardust Gardens is concerned. However, the AHA Board’s August 19 rejection of the City and MidPen’s proposed path to a noncompetitive award to Stardust Gardens will make it difficult for AHA staff to engage the City in a discussion of ways to address the budget shortfall. They cannot negotiate for a project they are not committed to supporting with PBVs. Nonetheless, the commitment letter, included as Exhibit 1, has been written to allow for another source of subsidy to replace the City’s, anticipating that AHA will find a path forward before the project is constructed and needs subsidy in 2029. However, there is a risk that this does not occur.
ALTERNATIVES
• Authorize the City Manager to execute the commitment letter as included.
• Direct the City Manager to execute a modified commitment letter with a different operating subsidy amount.
• In addition, or instead of 1 and 2, direct staff to work with AHA to explore subsidy solutions that would enable AHA to issue PBVs to Stardust Gardens.
• In addition to the alternatives specific to Stardust Gardens, direct staff to explore structural modifications to the City’s relationship with AHA to generally to improve alignment of priorities and return to City Council for further discussion at a later date.
• Do not adopt the resolution or commitment letter. The project will be delayed as discussed above.
FINANCIAL IMPACT
The recommended action would require allocation of up to an additional $25.5 million over a period of 20 years from the Alameda Point Fund (290), potentially causing a reduction to Alameda Point’s operating expenses, or a delay or reduction in future, uncommitted capital improvements. Funding allocations will be requested during the Biennial Budget process as no fund commitment is needed in the current fiscal year. There is no impact to the General Fund.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Main Street Neighborhood Specific Plan
Alameda Point Zoning and EIR (2014)
Master Infrastructure Plan for Alameda Point (2014/2020)
City of Alameda Housing Element (2023-2031)
Strategic Plan:
TIE 25 Implement the City’s Alameda Point Disposition Strategy
TIE 26 Alameda Point Attraction and Retention Program
TIE 35 Reuse and Renovate Buildings in the NAS Alameda Historic District
HH6 Support Implementation of West Midway and RESHAP
HH7 Implement Housing Element
HH7a Next Steps for a New Residential Development North of West Midway at Alameda Point
ENVIRONMENTAL REVIEW
Pursuant to the streamlining provision of Public Resources Sections 21166 and 21083.3 and Sections 15162 and 15183 of the CEQA Guidelines, no further environmental review is required because the RESHAP project, as amended, is consistent with the development density in an adopted Specific Plan for the area; the environmental impacts of the development of the area consistent with the Specific Plan were considered in the Alameda Point Project Final Environmental Impact Report (APP FEIR) adopted by City Council on February 4, 2014, in compliance with CEQA; the RESHAP implements the City’s Housing Element adopted on November 15, 2022; the environmental impacts of the Housing Element and the development of the sites included in the Housing sites inventory were considered in the General Plan Update EIR adopted by City Council on November 30, 2021; and as documented in the project CEQA Checklist and Mitigation Monitoring and Reporting Program (MMRP), the RESHAP project would not result in new or substantially more severe significant impacts than identified in the APP FEIR or the General Plan Update FEIR due to changes in the project, changed circumstances, or new information and there are no new or considerably different feasible mitigation measures or alternatives from those identified in the APP FEIR or the General Plan Update FEIR that would substantially reduce one or more significant effects that the project proponent declines to adopt; and the RESHAP project would not result in significant impacts that: (1) are peculiar to the project or project site; (2) were not already identified as significant effects, cumulative effects, or off-site effects in the APP FEIR and the General Plan Update FEIR; or (3) were previously identified as significant effects; but are determined to be substantially more severe than discussed in the APP FEIR and the General Plan Update FEIR.
CLIMATE IMPACT
While this action would increase the amount of infill housing development in Alameda, which would generate a net greenhouse gas reduction for the region and implement California’s climate action goals, the City would have less revenue to allocate to Sea Level rise adaptation projects at Alameda Point.
RECOMMENDATION
Authorize City Manager to sign commitment letter to MidPen Housing and the Alameda Point Collaborative to provide operating subsidy of up to $1 million annually with a 2.5% annual escalation for twenty years for the Stardust Gardens supportive housing project commencing in fiscal year 2028-2029.
Respectfully submitted,
Abigail Thorne-Lyman, Base Reuse & Economic Development Director
Financial Impact section reviewed,
Ross McCarthy, Finance Director
Exhibit:
1. Commitment Letter