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BACKGROUND The Parkview, which is owned by BLP Partnerships, Inc. and managed by Eskaton, opened in January 2007 as a 105-unit assisted living community consisting of 86 assisted living units and 19 memory care units. In September 2005, the City provided a nearly $4 million loan and entered into a 55-year ground lease agreement to assist in the development of the property. Of the 105 units, 72 are market rate units with monthly rents ranging from $5,100 - $11,300 and 33 units are below market rate (BMR) units for low-income residents with monthly rents ranging from $1,329 - $3,333. As a California licensed assisted living facility, in accordance with the requirements for Residential Care Facility for the Elderly pursuant to California Health and Safety Code Section 1569 et seg. and its implementing regulations, The Parkview provides its residents with: three (3) meals a day, housekeeping services, linen services, assistance with daily living such as dressing, bathing, and grooming, medication management, 24-hour staffing, an emergency call system, health monitoring, coordinated activities for socialization, and transportation services. Operating Deficit The COVID-19 pandemic had significant impacts on the facility, starting in 2020 and continuing through 2022, and causing operating deficits in both 2021 and 2022. The City Manager previously approved a $188,114 draw down from The Parkview's operating reserves in 2021, and an additional $701,935 withdrawal is now requested to cover an operating deficit in 2022. The cumulative amount of$890,049 that The Parkview is requesting to withdraw from its operative reserves exceeds the City Manager's individual budget authority; therefore, this item is before the City Council for approval. The operating deficits are largely due to rent loss from vacant units and an increase in operating expenses stemming from higher staffing costs for temporary staff needs during the COVID-19 pandemic, as detailed below. Prior Withdrawal Request In May 2022, City staff coordinated with the City Attorney's Office to review a request from The Parkview to withdraw $188,114 from its operating reserve to cover its operating deficits incurred in 2021 due to similar pandemic-related circumstances. Per Section 2.3(a)(ii) of the Loan Agreement between the City and BLP Partnership, Inc., dated September 1, 2005, The Parkview's Operating/Management Reserve Deposit, as defined in Section 2.3(a)(vii) of the Loan Agreement, could be used to cover the property's operating deficit for "extraordinary operating costs". Furthermore, the definition of Operating/Management Reserve Deposit gives flexibility as it "may be used for an unforeseen economic situation related to the Project and shall not be considered ongoing Gross Revenue". These unforeseen 2021 operating costs and expenses included the following: 1) a significant high rate of vacancy during 2021 as residents did not want to move during the pandemic which resulted in a large reduction in rental income; 2) increased supply costs of personal protective equipment (PPE) and other COVID-related health and safety supplies for staff and residents; and 3) the increased costs for temporary staff to cover vacant permanent staff positions due to staff illness or resignations. Page 2 of 5