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Recently, MidPen met with staff and expressed that the $8 million may be insufficient to meet project costs pending the outcome of a number of financing variables, including the equity paid by the tax credit investor, and as a result, it is possible that this gap could increase to $10 million. As such, the DDA includes the $10 million contribution and by its approval, the City is obligating itself to contribute this amount subject to project planning approvals. Note that the outcome of the HUD disposition process could also impact overall project financing. Regarding the City's financial contribution, it is important to be clear that overall, obtaining project financing will require a highly competitive 9% tax credit award through the states' Tax Credit Allocation Committee (TCAC) and approval from HUD regarding demolition and disposition of Kottinger Place with terms that assure the project is financially feasible over the long term. As a result of these two conditions, not to mention typical ongoing matters that can impact project costs, the City is at risk for those portions of the predevelopment loan paid prior to a final decision from TCAC and HUD. Staff is confident that MidPen has the administrative capacity and expertise to present the best possible case for both of these processes but even with that, approval is not guaranteed and not receiving approval by HUD and/or TCAC is a possibility. As a result of the above, should project financing, HUD approval and/or City PUD approval not materialize and its decided to terminate the development, the City's total maximum exposure is $2.8 million with the understanding that the City retains all material prepared in connection with the development. The remaining $7.2 million will be paid during the construction phase of the development after financing has occurred and therefore at this time, it is not at risk. However, as noted above, the final loan documents will contain provisions assuring that project financial stability has a higher priority than repayment of the City loan, and therefore, it is not assumed that the City will receive payments on the loan. It is also important to note that while the City's $10 million contribution covers the entire project, the project financing and construction will occur in two phases to help mitigate the need for off-site resident relocation. As stated earlier, a portion of the Kottinger Place site will constitute the first phase, and the remainder of the Kottinger Place site and the entire Pleasanton Gardens site will make up the second phase. Although the two phases will operate as one cohesive development once they are complete, there will be an additional tax credit/financing process that will need to occur after the first phase of the project is funded. Pleasanton Gardens MOU Included as Attachment 3, is the recommended Memorandum of Understanding between the City of Pleasanton, The Housing Authority of the City of Pleasanton and Pleasanton Gardens, Inc. that establishes terms of cooperation between the City and Pleasanton Gardens. As the City Council may recall, Pleasanton Gardens is a privately owned non-profit entity that has been operating Pleasanton Gardens since its construction in 1969. Like the City, the Pleasanton Gardens Board of Directors has been concerned about the long term viability of its project since is does not have current amenities or code requirements found in more modern senior only affordable housing Page 7 of 9