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minimizing the impact of tenant relocations. In return for these contributions, the Board would continue to meet its mission of providing safe and suitable housing for lower income senior citizens. At this time, it is assumed that the Pleasanton Gardens Board would not have a direct role in owning or managing the new development which would be controlled through a regulatory agreement, ground lease, financing documents and HUD requirements between the City, MidPen and financing agencies. Staff anticipates reporting back to the City Council within 90 days with a recommended MOU. HUD As indicated on page 17 of the Predevelopment Report, the City must receive approval from HUD before it can demolish and dispose the existing Kottinger Place development. Because HUD has recently modified its guidelines for this process, the exact outcome is not known at this time. However, MidPen and staff are optimistic that HUD's approval will be forthcoming. Nevertheless, it remains a significant hurdle that warrants immediate attention. In the event there are issues with receiving this approval, staff will report to the City Council for direction. City Financial Contribution As indicated in the Predevelopment Report, the City's anticipated financial contribution will be dependent upon a number of factors including final unit counts, success with other sources of financing (including the favorability of the tax credit market), HUD requirements, etc. The recommended appropriation of $8 million to a project reserve will assure that these funds are secured for this project. In the event the project does not receive final planning approval, the other funds needed to proceed, or HUD approval, the funds would be transferred back to the Lower Income Housing Fund for other affordable housing projects. Because of the amount of anticipated City contribution, staff and MidPen will focus on leveraging other resources and value engineering the development in a way that minimizes City financial resources. The City does not have any other financial commitments for the Lower Income Housing Fund but has had discussions with Habit For Humanity regarding an affordable ownership development on Vineyard Avenue and there are sufficient funds for this project should the City Council decide to proceed with its development. Note that the City's contribution would occur during the financing and construction phase of the project. Following full occupancy, the current financial plan calls for the development to be financially independent without any ongoing City operating/maintenance subsidies. Note that in addition to the City financial cash contribution, it is donating (through a 55- year ground lease) the Kottinger Place site to the project. For purposes of generating total development costs, the land value is assumed to be approximately $10 million. Page 4 of 5