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Staff will continue to research other potential sources for matching funds for the DPA program. However, we believe that it is important to move forward with other options so that the DPA program can continue to be available in the near term, particularly given the current favorable housing environment and apparent high demand. The program was originally designed based on matching funds (i.e., using a combination of funds from Ca1HFA and the City's Lower Income Housing Fund). This allowed the City to minimize the use of its limited local resource while still providing important assistance to Pleasanton home buyers. Staff is concerned that maintenance of the existing criteria (Alternative 2) if the DPA program is based on 100% City funding. If interest remains high, the typical maximum loan amount of $60,000 may pose a drain on the City's Lower Income Housing Fund. Staff recommends that the Commission approve an option that is based on Alternative 3 above. Specifically, staff recommends making minor additions to the existing guidelines that would maintain the existing program criteria for loans that are funded through matching funds (i.e., City funds matched with funds from another outside source such as Ca1HFA) but would create a new set of criteria for loans that are funded 100% from City funds. The primary modification would be to reduce the maximum loan amount for 100% City-funded loans from $60,000 to $20,000. This would reduce the potential impact to the Lower Income Housing Fund so that it is similar to the existing provisions for loans that come from matching funds. No other significant changes to the guidelines are proposed. The current DPA program guidelines -with recommended changes highlighted -are attached for your reference. The modified guidelines would keep the existing DPA program intact in case additional matching funds are received in the future. In addition to modifying the guidelines, staff recommends that the Commission approve the allocation of $300,000 from the City's Lower Income Housing Fund to the DPA program. Based on the proposed $20,000 maximum loan, this would allow at least 15 additional loans to be approved through the program. As stated earlier, staff will continue to pursue options for securing new matching funds for the DPA program. The guidelines, if modified as proposed, will allow the City to consider higher loans amounts (i.e., up to $60,000) if matching funds become available in the future without further review by the Housing Commission and City Council. Page - 4 -