California infill financing critical; state also wants federal stimulus included
SANTA ROSA – Funding was the primary obstacle left in the way of the mixed-use Railroad Square project in Santa Rosa getting under way, and it looked to be closer than ever, but a new wrinkle has appeared: the federal economic stimulus bill.
Sonoma Marin Area Rail Transit and New Railroad Square LLC, comprised of Creative Housing Associates, The Santa Rosa Canners, Equity Community Builders and developer John Stewart, signed a series of documents Feb. 11 giving the company the option to buy SMART’s land.
“All of that is in very good shape,” said Michael Dieden, principal of Creative Housing Associates. “We are in a much stronger position now we have control of the real estate.”
The next step in the process for the developers is to secure financing. The option agreement requires New Railroad Square to secure the funds to begin and complete phase one before it can actually buy the land.
The developers, with the recommendation of the city, are going to apply to the state for bond money as an infill project. Proposition 1C is the housing bond California voters passed in 2006 allocating $2.85 billion to infill projects. The group plans to request $11.5 million to help get the project started.
To qualify for Proposition 1C funding, the project must get a certain number of points based on requirements set by the state. There is a high level of competition for the funds. In this round of funds, only $100 million is available for the whole state, $45 million of which is for all of Northern California, including San Francisco.
“This is money a lot of projects are trying to get,” Mr. Stewart said.
Now, with the $787 billion federal economic stimulus package signed into law, the State of California made an additional 10 points dependent on a project getting some of those funds. “We still feel we have a strong application, but there was a last-minute change,” said Mr. Stewart. “We are busy trying to figure out how to survive in a world where the goalposts keep changing.”
The proposed multi-phase, multi-use infill project will include affordable for-rent housing, market rate for-sale condos, a 40,000-square-foot public market, 40,000 square feet of office space, the Sonoma County Food and Wine center, a 263-space parking garage and several restaurants.
The whole project will run roughly $187 million.
Phase one will cost $67 million and consists of the commercial, retail parking and affordable housing units.
The affordable housing part of the project will be funded separately from the New Railroad Square project by Burbank Housing, the local nonprofit dedicated to housing Santa Rosa’s low-income residents. John Lowry, the executive director of Burbank Housing, said without the Prop. 1C funding it would be very difficult to proceed.
“The project was all set to score very high, but then there was this very vague statement about federal money throwing a wrench in the mix,” he said. No one really knows much about applying for the money, he said, and there is a fear that there is not enough time to get it together.
“The structure of getting that money is that the cities have identified priority projects and let those projects be known to the state, and the state will then distribute the money,” said Mr. Dieden. “Railroad Square is priority one.”
The city of Santa Rosa under the direction of David Gouin, director of economic development and housing, is putting together a competitive application for the California bond money that includes local match money available. The City Council has to issue its approvals in the month of March to make the April 1 deadline for the bond money.
“The state is messaging that there is a desire to have projects include federal money,” Mr. Gouin said. “This is a complex financed project; all the pieces need to fit and come together.”
John Nemeth, planning manager for SMART, added that on top of the federal money issue, the state budget is still in turmoil, which is where the Prop. 1C funds are coming from.
“They are hoping that it will be resolved and they can float these bonds,” he said. The same day the documents were signed with the developers, six manufacturing companies unveiled proposed rail car designs to SMART. There has not yet been a decision made as to who the manufacturer will be, but the submissions are in for the board to look at.
Mr. Dieden said that despite the wrinkles, they continue to be very excited about the project. “The SMART train is going to be such a catalyst for Sonoma County,” he said. “And ours is the first station that will be done.”
