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Gardens units at 80% of the Area Median Income for a 30-year period. Before signing these important documents, HUD will also need to approve the draft ground lease between the City and MidPen. To this end, the City and MidPen have negotiated the key terms of the lease and are preparing to send it to HUD this month to begin their review. Once the Disposition documents are executed, the City and MidPen will perform a Lot Line Adjustment and Merger to create a single parcel that will include the current Kottinger Place Property, the 4138 Vineyard Avenue Property, and the Regalia House Property. HUD's execution of the documents and the new parcel map will need to occur by February 2016, ahead of a March 2016 construction start. Financing and Financial Underwriting MidPen received an allocation of 9% Low-Income Housing Tax Credits (LIHTC) for Kottinger Gardens Phase 1 from the California Tax Credit Allocation Committee (TCAC) on September 23, 2015. As the Council may recall from previous discussions, the 9% LIHTC are allocated two times per year with applications due in March and July. Kottinger Gardens Phase 1 competed in the North/East Bay Region, which includes projects located in the five counties. Given that each application round is over-subscribed, the TCAC has established a competitive process involving adherence to specific criteria and a grading system that determines awards. Projects that apply generally have a perfect score that is based on the project's proximity to local amenities such as parks, grocery stores, pharmacies, libraries, and transit. In addition, projects must have all their local approvals in place and all other financing sources committed. Because most 9% tax credit applications have a perfect score, in order to determine which projects receive a tax credit allocation, TCAC uses a tiebreaker system which measures a project's ability to leverage public funding and its cost efficiency. This means that a project is incentivized to reduce its Tax Credit request and to secure more public funds in order to increase its tiebreaker. In the most recent July 2015 LIHTC round, the amount of credits requested by projects competing in the North/East Bay Region exceeded the amount of credits available by a 4:1 ratio. With this competitive situation in mind, MidPen surveyed the other projects expected to compete in the North/East Bay Region ahead of the July application round. Based on MidPen's findings, the City Manager and MidPen staff determined that the entire $13,750,000 City Lower-Income Housing Fund commitment and waivers of the in-lieu park dedication fee, traffic development fee, and public facilities fee would be required in the application in order to obtain a tiebreaker high enough to win an award of 9% LIHTC. This strategy proved successful and Kottinger Gardens Phase 1 was one of only two projects that received a 9% LIHTC award out of ten projects that applied for funding. Staff and MidPen are working together to develop the financing plan for Kottinger Gardens Phase 2. Potential project savings from Kottinger Gardens Phase 1 may be able to be returned to the Lower-Income Housing Fund and re-committed to Kottinger Page 3 of 6