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Since the Measure Al funds were allocated by City Council, City staff has been working with County HCD to discuss the REACH ADU project proposal to ensure that the project complies with the Measure Al Bond program policies. At its May 9, 2023, meeting, County HCD staff obtained the Alameda County Board of Supervisors (BOS) approval to commit these funds as a low interest loan to the project. County HCD staff is currently working on the loan documents that must be executed by REACH prior to the project commencing construction. DISCUSSION Changes in Financing Commitments In June 2023, Tri-Valley REACH communicated to the City its proposal to utilize the entire $552,772 Measure Al funding towards the construction of the ADU at the Tanager property only, and to temporarily pause the construction of the ADU at the Hansen property until new funding is secured. Per REACH, this change in the original project of constructing the two ADUs was necessary due to delays and general increase in construction costs. Furthermore, the Measure Al funds have labor compliance requirements, specifically the use of prevailing wage labor, that is resulting in higher-than-expected costs for the project.' Construction of the Tanager ADU could begin after the Measure Al contract is approved by the Alameda County BOS and the County HCD loan documents are executed. This contract, as well as this change in REACH's project, which requires an amendment to the BOS resolution approving this project, is currently slated to be reviewed and approved by BOS at its upcoming September 19, 2023, meeting. Proposed Alternative Funding for Hansen ADU Since the City became aware of the changed financial circumstances of this project, REACH and the City have been exploring options to assist with the construction of this second ADU and are working collaboratively to develop a proposed solution to meet the funding gap. REACH has secured approximately $200,000 from its own fundraising efforts for this project, and it plans to commit this sum towards constructing the Hansen ADU; however, there is still currently a $300,000 funding gap. Staff recommends providing REACH with a $300,000 loan to close the funding gap and make the Hansen ADU project financially feasible and able to move forward. The $300,000 loan is proposed to consist of $241,176 in federal HOME Program funds and $58,824 in LIHF funding. The loan would be proposed as a typical 3 percent simple interest loan and would be brought to the City Council for final approval. Pleasanton is a member of the Alameda County HOME Consortium with County HCD as the entitlement jurisdiction receiving the annual allocation of federal HOME Investment Partnerships Program funds. The City currently has more than $300,000 of unspent HOME Program funds from prior years, and the HOME Program allows the City to re-allocate the unspent funds towards other eligible HOME Program activities. The ' City staff and REACH initially requested a waiver of the prevailing wage requirement to minimize construction costs, but County HCD ultimately decided not to grant this waiver. Page 4 of 6