Since 2018, the City of Merced and the Merced Housing Successor Agency have retained RSG for housing consulting services. Among other activities, RSG assisted the City in issuing a Request for Proposals to develop affordable housing on Housing Successor property. RSG reviewed and analyzed pertinent data and materials provided in each developer submittal to evaluate the completeness of the proposal in accordance with the criteria and requirements identified in the RFP. RSG’s evaluation included a detailed analysis of the development costs for the improvements based on current third-party cost data obtained from Marshall & Swift Valuation Services, our recent comparable project experience, as well as the related “indirect” construction costs identified by each developer proposal. RSG also scrutinized the developers’ assumptions to ensure that the anticipated costs, revenues, and operating and replacement reserves were realistic and not over/understated. RSG also prepared a long-term cash flow for each proposal to ensure that the prospective developer could remain solvent as an operator throughout the duration of the affordability period.
Based on RSG’s detailed evaluation of the proposals, we recommended finalists to the City and prepared interview questions to be used for the selected developers. RSG participated in interviews along with staff to select a developer that best meets the needs of the community. RSG also worked with staff and legal counsel to prepare and present developer submittals to the Council.
RSG has conducted HOME subsidy layer analyses for the City of Merced. These analyses include routinely identifying and tracking the use of the agency’s HOME funds to ensure they are leveraging funds and meeting legal requirements. Activities include conducting a subsidy layering review that entails reviewing the developer’s development pro forma to determine the reasonableness of estimated development costs, revenue assumptions, and proposed financing structure, including, but not limited to, the potential for receiving HOME funds. RSG evaluated whether the cost being funded by the HOME Program were eligible and whether the HOME funds per unit exceeded the maximum per-unit subsidy limits. We also determined whether the developer’s cash flow projections were reasonable given economic conditions at the time.
Finally, RSG prepared a memorandum detailing our findings and recommendations regarding the economic feasibility of the proposed development, and whether the total requested amount of program funding and other governmental assistance exceeds the amount necessary to make the project feasible due to the unreasonableness of the costs and/or projected rate of return.