HomeMy WebLinkAboutItem 6c. Reissuance of Conduit Financing for HASLO for the aquisition and rehabilitation of 172 Affordable Housing Units (TEFRA Hearing)City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: December 13, 2022
TO: Mayor and Council
FROM: Michael Codron, Community Development Director
VIA: Derek Johnson, City Manager
SUBJECT: ITEM 6C - REISSUANCE OF CONDUIT FINANCING FOR HASLO FOR
THE ACQUISITION AND REHABILITATION OF 172 AFFORDABLE
HOUSING UNITS (TEFRA HEARING)
RECOMMENDATION
Continue the public hearing to January 10, 2023, for the reissuance of conduit financing
under the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 and pursuant to the
requirements of the Internal Revenue Code of 1986.
DISCUSSION
Staff is recommending continuation of this item to a date certain, January 10, 2023, to
allow time to accomplish noticing in accordance with the Internal Revenue Code, which
requires the locations of all the units to be identified in the notice of the hearing. A
summary description had been published, but in this case all 175 addresses need to be
included in an expanded notice. This requirement has been noted by staff and supervisors
in Community Development so that the error does not reoccur.
Item 6c
Department: Community Development
Cost Center: 4008
For Agenda of: 12/13/2022
Placement: Public Hearing
Estimated Time: 15 minutes
FROM: Michael Codron, Community Development Director
Prepared By: Owen Goode, Assistant Planner
SUBJECT: REISSUANCE OF CONDUIT FINANCING FOR THE HOUSING
AUTHORITY OF THE CITY OF SAN LUIS OBISPO FOR THE
ACQUISITION AND REHABILITATION OF 172 AFFORDABLE HOUSING
UNITS LOCATED IN THE CITY
RECOMMENDATION
1. Conduct a public hearing under the Tax Equity and Fiscal Responsibility Act
(TEFRA) of 1982 and pursuant to the requirements of the Internal Revenue Code
of 1986, as amended; and
2. Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of
San Luis Obispo, California, adopting the Reissuance of a Tax-Exempt Note by
the Housing Authority of San Luis Obispo” allowing the reissuance of a tax-exempt
obligation by the Housing Authority of the City of San Luis Obispo (HASLO), for
the purpose of providing financing for the acquisition and rehabilitation of various
multifamily rental housing facilities located in the City (the “Project”), in order to
preserve existing affordable housing; such adoption of the resolution is solely for
the purposes of satisfying the requirements of TEFRA, the Code, and the California
Government Code Section 6500 et seq.
POLICY CONTEXT
A public hearing to maintain the tax-exempt status of various “notes” by HASLO for
various multi-family rental housing facilities is required by the Tax Equity and Fiscal
Responsibility Act of 1982 (commonly known as “TEFRA"), which is codified in Section
147(f) of the Internal Revenue Code (“the Code”). This effort is also supportive of the
Council’s 2021-23 adopted Major City Goal focused on affordable housing.
DISCUSSION
Background
On October 16, 2018, the City Council adopted Resolution 10949 (2018 Series)
authorizing the Housing Authority of the City of San Luis Obispo (the “Authority”) to
procure tax-exempt financing of up to $62,000,000 (approximately $57,000,000 actually
issued) for the acquisition and rehabilitation of 14 affordable rental housing properties ,
consisting of a total of 172 units, located in the City to preserve the affordable housing.
Page 437 of 449
Item 6c
The Authority is now requesting that the City Council of the City of San Luis Obispo (the
“City”) hold a public hearing to facilitate the reissuance of that tax-exempt debt obligation,
with a current principal balance of approximately $13,700,000, to change the amortization
term from 17 years to 35 years. This is needed, as some of the originally executed
documents contained the incorrect amortization term.
The proceeds of the tax-exempt debt have been used to pay expenses incurred in
connection with the issuance of the Bonds and to finance the acquisition and rehabilitation
of the following multifamily rental housing facilities:
Current Name
of Facility Location of Facility Number of Rental
Housing Units
1. King-South-
Branch
448 South Street, 441 Branch Street and
2173 King Street, San Luis Obispo, CA 8
2. Torro Gardens 1600 Toro Street, San Luis Obispo, CA 20
3.
Hathway
Apartments
508-520 Hathway Street, San Luis
Obispo, CA 20
4. High Street 478-480 High Street, San Luis Obispo, CA 10
5. Palm View
Apartments
11650-11690 Los Osos Valley Road, San
Luis Obispo, CA 20
6. Leff Street
Apartments 456-493 Leff Street, San Luis Obispo, CA 20
7. Highland
Apartments 228 High Street, San Luis Obispo, CA 6
8. Loma Vista
Apartments
2929 Augusta Street, San Luis Obispo,
CA 16
9. Harris 2126 Harris Street, San Luis Obispo, CA 3
10. Royal Way 1497 Royal Way, San Luis Obispo, CA 8
11. Southwood 1240 Southwood Drive, San Luis Obispo,
CA 3
12. Upham 711 Upham Street, San Luis Obispo, CA 3
13. Puerta Del Sol 4280 South Higuera, San Luis Obispo, CA 15
14. Arbor Place 1172 Leff Street, 1175 Islay Street and
1635 Toro Street, San Luis Obispo, CA 20
TOTAL 172
The rehabilitation project was completed by September 2021, and all the units have been
placed back into service. As part of this process, new regulatory agreements have been
recorded on the properties guaranteeing the affordability requirements for 55 years.
The Housing Authority is committed to providing much needed a dditional affordable
housing in the City of San Luis Obispo. Preservation of existing affordable housing is
identified as a key implementation strategy in the City’s affordable housing program and
adopted Housing Element. The primary funding source for this project is the low-income
housing tax credits awarded by the California Tax Credit Allocation Committee (TCAC).
These tax credits are then purchased by investors who become s limited partners.
Page 438 of 449
Item 6c
California statue does not allow Housing Authorities to be a party in these partnerships,
so the Housing Authority holds its interest through its related entity San Luis Obispo Non-
profit Housing Corporation (SLONP). The facilities financed are owned by RAD175, LP,
a California limited partnership (the “Borrower”) formed by SLONP, and the facilities will
be operated by the Authority. There is no financial exposure or liability to the City in taking
the requested actions and this hearing is a requirement of the Tax Equity and Fiscal
Responsibility Act of 1982 (commonly known as “TEFRA"), which is codified in Section
147(f) of the Internal Revenue Code.
Previous Council or Advisory Body Action
On October 16, 2018, the City Council adopted Resolution 10949 (2018 Series) approving
the Housing Authority of the City of San Luis Obispo (the “Authority”) to incur tax-exempt
financing of up to $62,000,000 for the acquisition and rehabilitation of 14 affordable rental
housing properties located in the City to preserve the affordable housing. This project has
been completed and the hearing is required to allow an amendment to be made to the
existing agreements to appropriately identify the amortization date. These amendments
will create a cost reduction for HASLO, an affordable housing provider within the City of
San Luis Obispo.
Public Engagement
A legal notice of the TEFRA hearing was published in The New Times, a newspaper
circulated in the city of San Luis Obispo. Public comment may be provided to the City
Council through written correspondence prior to the meeting and through public testimony
at the meeting. This is an administrative item, so no outside public engagement was
completed.
ENVIRONMENTAL REVIEW
The project is exempt from environmental review per Section 15061 (b)(3) General Rule
of the CEQA Guidelines. The project is an action to award funding.
FISCAL IMPACT
Budgeted: N/A Budget Year: 2022-23
Funding Identified: N/A
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ $ $ $
State
Federal
Fees
Other:
Total N/A N/A N/A N/A
Page 439 of 449
Item 6c
The reissuance of HASLO’s debt with a longer term will be the sole responsibility of the
HASLO, and the City will have no financial, legal, moral obligation, liability or responsibility
for this debt or its repayment for the financing of the above-described Project. The debt
does not become an obligation of the City and will not show up on its debt schedules and
will for HASLO.
All financing documents with respect to the issuance of the Bonds will contain clear
disclaimers that the Bonds are not obligations of the City or the State of California but are
to be paid for solely from funds provided by the Borrower.
ALTERNATIVES
1. Do not approve the issuance of financing for the benefit of the multifamily
residential facilities. Due to the lack of liability for repayment of financing by the
City, this option is not recommended.
2. Defer consideration of the request. Due to the critical need for tax exempt bond
financing to complete the acquisition and rehabilitation of the Project, this option is not
recommended.
ATTACHMENTS
A - Draft Resolution adopting the Reissuance of a Tax-Exempt Note by the Housing
Authority of San Luis Obispo
B - Resolution No. 10949 (2018 Series)
Page 440 of 449
R _____
RESOLUTION NO. ______ (2022 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, APPROVING THE REISSUANCE OF A TAX-
EXEMPT NOTE BY THE HOUSING AUTHORITY OF THE CITY OF SAN
LUIS OBISPO THAT PROVIDED FINANCING FOR VARIOUS
MULTIFAMILY RENTAL HOUSING FACILITIES LOCATED IN THE CITY
IN ORDER TO PRESERVE EXISTING AFFORDABLE HOUSING
WHEREAS, the Housing Authority of the City of San Luis Obispo (the “Authority”)
is authorized by Chapter 1 of Part 2 of Division 24 of the Health and Safety Code of the
State of California, as amended (the “Act”), to incur indebtedness and to make loans for
housing purposes specified in the Act; and
WHEREAS, on October 16, 2018, the City Council of the City adopted Resolution
No. 10949 (2018 Series) approving the incurrence by the Authority of a tax -exempt
obligation of the Authority (the “Note”) for the purpose of providing financing for the
acquisition and rehabilitation of various multifamily rental housing facilities located in the
City in order to preserve existing affordable housing; and
WHEREAS, on August 13, 2019, the Authority issued the Note in the principal
amount of $57,000,000 and loaned the proceeds of the Note to RAD 175, L.P., a
California limited partnership (the “Borrower”), the managing general partner of which is
the San Luis Obispo Nonprofit Housing Corporation, and the Borrower used the proceeds
of the loan to acquire and rehabilitate the housing facilities ide ntified in Exhibit A to this
Resolution (the “Housing Facilities”); and
WHEREAS, all or a portion of the rental housing units in the Housing Facilities are
being rented to persons and families of low or very low income as required by the Act and
the Internal Revenue Code of 1986, as amended (the “Code”); and
WHEREAS, the interest payable on the Note is exempt from federal income taxes
under the provisions of the Code; and
WHEREAS, the Note is payable solely from payments made by the Borrower, and
the Note is currently outstanding in the principal amount of $13,664,227.77; and
WHEREAS, the Borrower and Pacific Western Bank, the entity currently holding
the Note, have agreed to modify some of the documents executed in connection with the
issuance of the Note to change the amortization schedule for the repayment of the
principal of the Note (the “Modification”), and the Modification will result in a “reissuance”
of the Note for purposes of the Code; and
Page 441 of 449
Resolution No. ______ (2022 Series) Page 2
R _____
WHEREAS, in order for the interest on Note to continue to be tax-exempt, Section
147(f) of the Code requires that the “applicable elected representative” with respect to the
Authority approve the reissuance by the Authority of the Note following the holding of a
public hearing with respect thereto; and
WHEREAS, the Authority has determined that the Council of the City is the
“applicable elected representative” to approve the reissuance by the Authority of the Note
because all of the Housing Facilities are located within the City; and
WHEREAS, notice of a public hearing by the Council regarding the reissuance of
the Note and the financing of the Housing Facilities has been duly given as required by
the Code, and the Council has held the public hearing at which all interested persons
were given an opportunity to be heard on all matters relative to the financing of the
Housing Facilities, including the Authority's reissuance of the Note; and
WHEREAS, the City has no liability or responsibility related to the repayment or
administration of the Note, and the reissuance of the Note will not impose any legal,
financial or moral obligation on the City; and
WHEREAS, it is in the public interest, for the public benefit and in furtherance of
the public purpose of the City that the Council approve the reissuance by the Authority of
the Note for the aforesaid purposes.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
SECTION 1. Approval of Reissuance of Note. The Council of the City of San Luis
Obispo hereby approves the reissuance by the Authority of the Note for purposes of the
Code.
SECTION 2. Effective Date. This Resolution shall take effect upon its adoption.
Page 442 of 449
Resolution No. ______ (2022 Series) Page 3
R _____
SECTION 3. Authorization to Execute. The Council hereby authorized the City
Manager, Community Development Director and/or Finance Director of the City of San
Luis Obispo to execute any documents necessary to effectuate the purposes of this
Resolution.
Upon motion of Council Member _______________ seconded by Council Member
_________________, and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing Resolution was adopted this ______ day of ______________, 2022.
Mayor Erica A. Stewart
ATTEST:
Teresa Purrington,
City Clerk
APPROVED AS TO FORM:
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the
City of San Luis Obispo, California, on ______________________.
Teresa Purrington
City Clerk
Page 443 of 449
Resolution No. ______ (2022 Series) Page 4
R ____
EXHIBIT A
HOUSING FACILITIES THAT WERE FINANCED
Current Name
of Facility Location of Facility
Number
of Rental
Housing
Units
King-South-Branch 448 South Street, 441 Branch Street and
2173 King Street, San Luis Obispo, CA 8
Torro Gardens 1600 Toro Street, San Luis Obispo, CA 20
Hathway Apartments 508-520 Hathway Street, San Luis Obispo, CA 20
High Street 478-480 High Street, San Luis Obispo, CA 10
Palm View Apartments 11650-11690 Los Osos Valley Road, San Luis
Obispo, CA 20
Leff Street Apartments 456-493 Leff Street, San Luis Obispo, CA 20
Highland Apartments 228 High Street, San Luis Obispo, CA 6
Loma Vista Apartments 2929 Augusta Street, San Luis Obispo, CA 16
Harris 2126 Harris Street, San Luis Obispo, CA 3
Royal Way 1497 Royal Way, San Luis Obispo, CA 8
Southwood 1240 Southwood Drive, San Luis Obispo, CA 3
Upham 711 Upham Street, San Luis Obispo, CA 3
Puerta Del Sol 4280 South Higuera, San Luis Obispo, CA 15
Arbor Place 1172 Leff Street, 1175 Islay Street and
1635 Toro Street, San Luis Obispo, CA 20
Page 444 of 449
1010 Marsh Su, San Luis Obispo, CA 93401
(805) 546-8208 . FAX (805) 546-8641
PROOF OF PUBLICATION
(2015.5 C.C.P.)
STATE OF CALIFORNIA,
County of San Luis Obispo,
I am a citizen of the United States and a resident
of the county aforesaid; I am over the age of
eighteen years, and not a party interested in the
above entitled matter. I am the principal clerk
of the printer of the New Times, a newspaper
of general circulation, printed and published
weekly in the City of San Luis Obispo, County
of San Luis Obispo, and which has been
adjudged a newspaper of general circulation by
the Superior Court of the County of San Luis
Obispo, State of California, under the date of
February 5, 1993, Case number CV72789: that
notice of which the annexed is a printed copy
(set in type not smaller than nonpareil), has been
published in each regular and entire issue of said
newspaper and not in any supplement thereof on
the following dates, to -wit:
b2.CkVV'M9_Ir- 1-
in the year 2022.
I certify (or declare) under the the penalty of
perjury that the foregoing is true and correct.
Dated at San Luis Obis o, California, this day
1 of 0 2022.
Michael Gould, New Times Legals
A 'h nu dl-NTMGAd ,/NTMG C1fin/9USINrsS1ww, Nebm/PmrdW
Proof of Publication of
SAN LUIS OBISPO
0 CITY COUNCIL
NOTICE OF PUBLIC HEARING
The San Luis Obispo City Council invites all interested persons
to attend a public hearing on Tuesday. December 13, 2M2 at
SZ p.m held in the Council Chambers at City Hall, 990 Palm
Street, San Luis Obispo. Please note that Zoom participation
will not be supported, es this will be an in -person meeting.
Meetings can be viewed remotely on Government Access
Channel 20 or streamed live from the City s YouTube channel at
fin l/hut b I .:iMW Public comment, Prior to the start of the
meeting, may be submitted in writing via U.S. Mail delivered to
Me City Clerk's office M 990 Palm Street, San Luis Obispo, CA
93401 or by email to €ma'Icounc IDislo dv
PUBLIC HEARING ITEM:
• TAX AND EQUITY FISCAL RESPONSIBILITY ACT (TEFRA)
HEARING FOR THE HOUSING AUTHORITY OF THE CITY OF
SAN LUIS OBISPO REGARDING REISSUANCE OF A TAX-
EXEMPT OBLIGATION THAT FINANCED THE ACQUISITION
AND REHABILITATION OF 172 AFFORDABLE HOUSING
UNITS LOCATED IN THE CITY.
NOTICE IS HEREBY GIVEN that a public hearing, as
required by Section 147(f) of the Internal Revenue Code
of 1986, will be held by the CM Council of the City of Son
Luis Obispo as set form above with respectto the proposed
reissuance by the Housing Authority of the City of San Luis
Obispo )the "Authority"l of a tax-exempt revenue note (the
"Nate) in a principal amount of $13,664,227,77. Proposed
amendments to the documents for the Note that was issued
by the Authority in August of 2019 will result in a reissuance
of the Note for purposes of the IMemal Revenue Code of
1986, as amended.
For more information, you are invited to corm ct Orion
Goode of the City's Community Development Oepa,m,mm
I8051781-7576 or aood ®l iN
The City Council may also discuss other hearings or business
items before or after the items listed above. If you challenge
the proposed project in court, you may be limited to raising
only those issues you or someone else raised at the public
hearing described in this notice, or in written correspondence
delivered to the City Council at, or prior to, the public hearing.
Council Agenda Reports for this meeting will be available
for review one week in advance of the meeting date on the
City's websde, under the Public Meeting Agendas web page:
fifth// I Hv / d n 'l/
mom Please call the Choy Clerk's Office at
(805) 781-7114 for more information. The City Council meeting
will be televised live on Charter Cable Channel N and live
streaming on the City's YouTube channel hno://vourabe slo cow.
December 1, 2an