TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: David Chantarangsu, AICP, Development Services Director
PREPARED BY: Carl Stiehl, City Planner
SUBJECT:
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Murrieta Housing Authority Revolving Loan Fund
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ABSTRACT
The Revolving Loan Fund will provide short-term loans to affordable housing projects in the City. The program is designed to provide construction financing in the form of low-interest, short-term loans providing early-stage and gap financing for qualifying projects in the City. Loan repayments are reinvested into future projects, creating a sustainable, ongoing funding source for affordable housing in Murrieta. Staff is returning to the City Council for authorization to approve loans utilizing the approved RLF program.
RECOMMENDATION
recommendation
Adopt Resolution No. 26-4914 entitled: A Resolution of the City Council of the City of Murrieta Authorizing the City’s Housing Authority to Establish a Revolving Loan Fund;
Approve the establishment of the RLF Program for the Authority to be managed by Authority staff and the Executive Director;
Authorize staff and the Executive Director to approve loans consistent with program requirements and execute all necessary documents for the RLF program; and
Direct staff to report annually to the City Council on the Revolving Loan Fund Program as part of the City’s annual housing reporting to the State.
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PRIOR ACTION/VOTE
On May 6, 2025, the City Council authorized the City Manager to sign a Memorandum of Understanding (MOU) with the Southern California Association of Governments (SCAG) to develop a revolving loan fund (RLF) for the City’s Housing Authority (Authority) in order to receive program grant funds and directed staff to develop a RLF to receive the grant award (Vote: 5-0).
CITY COUNCIL GOAL
Plan, program and create infrastructure development.
DISCUSSION
Background
Following confirmation in the 2024 State Budget that the $4.1 million SCAG grant awarded to the City would not be reduced, staff worked with the Authority consultant team from RSG during the second half of 2025 to develop the RLF. In May 2025, the City Council adopted a resolution to accept the grant funds, authorizing the City Manager to sign an MOU with SCAG and directing staff to prepare the RLF in May 2025.
Revolving Loan Fund Program
Working with SCAG and the Authority’s consultant team, staff developed a Project Management Plan consistent with the MOU and advanced the RLF's development. A Public Outreach Plan was prepared, and staff created a program website with an FAQ and survey to gather stakeholder input. Stakeholder outreach focused on the affordable housing community, including developers, service providers, property managers, residents, Community Land Trusts, and other government entities. Staff conducted one-on-one interviews with prospective loan applicants with projects in the City and other SCAG grant recipients with established revolving loan funds. Staff also hosted two virtual workshops and solicited input from the Development Advisory Group, as well as through the program website and online survey.
Using stakeholder input and the general direction of the RLF program, staff developed an RLF Application (Application) and RLF Guidelines (Guidelines) for loans utilizing the RLF (Attachments 2 and 3). Once funding becomes available, eligible applicants with qualifying projects may submit an application that will be reviewed for compliance with the Guidelines and qualifying criteria. Loans will be provided on a first-come, first-serve basis via an over-the-counter application process. Loans will be short-term with a five percent (5%) interest rate, due and payable upon the earlier of conversion to construction/permanent financing or loan maturity, not to exceed 60 months. The anticipated loan awards range from $500,000 to $1 million, depending on the project. The Authority may exercise discretion to adjust loan amounts based on project-specific considerations, for example, allocating a smaller amount for a smaller project. The initial approach is to distribute available funds across multiple projects to maximize the number of units supported.
Authority staff has also prepared an RLF Fundraising Strategy, consisting of Strategic Goals and Strategy and an Implementation Plan (Attachment 4), to support the City’s continued delivery of high-quality affordable homes and the advancement of the RLF. The intent is not only to establish the fund and make initial loans using SCAG seed funding, but also to grow the RLF over time. In addition to funds generated from RLF loan interest payments, the City will continue to pursue additional funding sources as they become available.
Staff is conducting an application and loan origination fee study to determine the appropriate fee levels to recover staff time associated with review, award, and closing of the RLF award. Any proposed fees will be presented for consideration in a future staff report. Staff anticipates releasing a Notice of Funding Availability (NOFA) for the first round of RLF funding shortly after SCAG grant funds are received and once the application and loan origination fees have been established.
Working with SCAG, staff developed, reviewed, and received approval for several required RLF components, including the Public Outreach Plan and Fundraising Strategy, consistent with the MOU. Staff met monthly with SCAG to draft the RLF program in alignment with the City’s Lasting Affordability Grant Program application and applicable REAP 2.0 performance metrics. Monthly progress reports on RLF development have also been submitted to SCAG.
SCAG has requested that staff obtain City Council approval of the RLF, including the Application, Guidelines, and Fundraising Strategy, prior to releasing grant funds to the City. SCAG is required to disburse the $4.1 million in grant funding to the City before June 2026; otherwise, the funds must be returned to the State as unspent REAP 2.0 funds. Staff anticipate receipt of the full grant award upon City Council approval of the RLF as requested in this report.
General Plan Conformance
The City’s Housing Element supports innovative programs, such as an RLF managed by the Authority, to provide additional funding sources and a direct investment by the City in affordable housing projects. The establishment of the RLF by the Authority for direct investments in affordable housing projects in the City is a financial incentive that implements the following Housing Element policies:
Policy 1.2 Encourage the development of affordable housing in the City through use of financial and/or regulatory incentives.
Policy 1.3 Encourage development of senior and low-income housing through use of financial and/or regulatory incentives.
Next Steps
Direct staff to proceed with the establishment of the RLF, it is anticipated that SCAG will provide the entire grant amount of $4.1 million in the next month, as SCAG has already provided general approval of the program, pending the City Council’s approval.
Staff anticipates the release of a NOFA and potential acceptance of the over-the-counter applications for loans soon after receiving the grant funds from SCAG, with the anticipation of a future fee to be established to cover staff time on RLF applications and loans.
FISCAL IMPACT
There is no fiscal impact to the Authority to receive the grant funds from SCAG. There will be administrative costs associated with the establishment of a Revolving Loan Fund. The Authority and Finance staff will establish the appropriate special revenue fund to account for the grant fund and the revolving loan fund operations.
Ongoing costs are anticipated for the Authority to administer the RLF. In the near term, these costs are expected to be primarily covered through the existing consultant contract with RSG, which is already allocated in the current fiscal year budget. Potential future staffing costs would be primarily paid for by the Authority budget, including the RLF and any future RLF application and loan origination fees. The administration of the RLF will become part of the Authority's ongoing activities. As the RLF grows, the RLF may support a portion of the cost of a permanent Authority staff position, in combination with other Authority funding sources. Staff is already analyzing a position for the Authority called a Housing Specialist, who would, in part, manage the RLF. A portion of the funding sources to cover the new position may include existing Authority funds currently allocated to RSG for housing services. The creation of a Housing Specialist position for the Authority is anticipated to be considered in a future budget cycle.
ATTACHMENTS
ATT 1 - Resolution No. 26-4914
ATT 2 - RLF Guidelines
ATT 3 - RLF Application
ATT 4 - RLF Memo for Funding and Implementation