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BACKGROUND In May/June 2014, the City Council approved a General Plan Amendment, Planned Unit Development Application, and CEQA Mitigated Negative Declaration to construct a new 185-unit senior housing development to be located on the current Kottinger Place and Pleasanton Gardens sites located on Kottinger Drive. At the same time, the City Council also approved a residual receipts loan of up to $10 million and appropriated the funds from the City's Lower Income Housing Fund (LIHF). Of the $10 million, $2.8 million is currently being used for predevelopment expenses and the remaining $7,200,000 will be used as a construction loan. As the City Council may recall, the project was proposed to be developed in two phases with 131 units developed first on the existing Kottinger Place site followed by 54 units constructed on the current Pleasanton Gardens site. Both the existing Kottinger Place and Pleasanton Gardens developments and the City's existing Regalia House would be demolished as part of the overall project. Based on this approval, staff and MidPen focused on advancing the project by accomplishing three critical project steps as follows: 1. Obtaining approval from the Department of Housing and Urban Development's (HUD) Special Application's Center to remove Kottinger Place from HUD's Public Housing Inventory allowing its demolition, and transfer of ownership of the site from the Pleasanton Housing Authority to the City of Pleasanton. 2. Receiving approval from the Alameda County Housing Authority for a project-based section 8 contract for 50 new units at Kottinger Gardens to assure that existing residents will be able to retain rents at 30% of their current income levels. 3. Obtaining project financing Listed below is a status of these three items 1. Obtaining Department of Housing and Urban Development Disposition Approval A formal approval letter from HUD was received on February 26, 2015 and the ownership transfer will be formalized through the execution of a Disposition Agreement, Release of the Declaration of Trust, and a Use Agreement. Achieving HUD's approval for this disposition request represents a critical milestone for the City and MidPen since without it the project would not be able to move forward due to the fact it is currently under HUD control. Further, it also sets the stage for MidPen to make application to the Tax Credit Allocation Committee (TCAC) for an allocation of 9% Federal Low-Income Housing Tax Credits (Tax Credits). You may recall that staff previously expressed its concerns that HUD may not relinquish its control of the project and therefore, MidPen is to be commended for accomplishing this task. Page 2of7