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HomeMy WebLinkAboutItem 7a - TEFRA Hearing for 60 Affordable Units for Sendero Apartments at 165 Cessna Court Item 7a Department: Community Development Cost Center: 4003 For Agenda of: 9/15/2026 Placement: Public Hearing Estimated Time: 15 mins FROM: Timmi Tway, Community Development Director Prepared By: David Amini, Housing Coordinator SUBJECT: TAX EQUITY AND FISCAL RESPONSIBILITY ACT (TEFRA) HEARING REGARDING THE ISSUANCE OF A TAX-EXEMPT DEBT OBLIGATION TO FINANCE CONSTRUCTION OF 60 AFFORDABLE HOUSING UNITS FOR SENDERO APARTMENTS LOCATED AT 165 CESSNA COURT 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 (the “Code”); and 2. Adopt a draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving the issuance of Revenue Bonds by the California Municipal Finance Authority in an aggregate principal amount not to exceed $15,000,000 for the purpose of financing or refinancing the acquisition, construction, improvement, and equipping of Sendero Apartments and certain other matters relating thereto” allowing the issuance of Bonds by the California Municipal Finance Authority (“CMFA”) for the benefit of C&C Development Co., LLC (the “Sponsor”), on behalf of Avila Ranch, L.P., a California limited partnership, or an ownership entity to be created by the Sponsor or an affiliate of the Sponsor (such limited partnership or other ownership entity, the “Borrower”), to provide for the financing of Sendero Apartments (the “Project”); such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code, and California Government Code Section 6500, et seq. POLICY CONTEXT The Avila Ranch project consists of 720 residential units under construction, including 75 units of below market rate affordable housing. As part of the Avila Ranch Development Agreement and the Phase 3 Affordable Housing Agreement, the developer was required to dedicate Lot 186 to an affordable housing provider to construct and manage a 60-unit affordable rental housing development known as Sendero Apartments. The lot was dedicated to Avila Ranch, L.P., a California limited partnership consisting of Orange Housing Development Corporation and C&C Development Co, LLC as its developer general partner. C&C Development applied for and received about $35 million in funding towards the project, including $1,721,964 in annual federal tax credits, $9,934,000 in total Page 131 of 145 Item 7a state tax credits, and tax-exempt bond financing up to $15,000,000. The tax-exempt bond financing is administered by the California Municipal Finance Authority. Section 147(f) of the Internal Revenue Code requires public approval for private activity bonds, such as the tax-exempt bond financing administered by CMFA. Per this section, the City is the applicable governmental unit having jurisdiction over the area of the development and must hold a public hearing to provide an opportunity for community members to speak in favor of or against the use of tax-exempt bonds for the financing of the Project. At the close of the hearing, the City is required to provide approval of the issuance of the Bonds by CMFA for the financing of the Project to proceed . The City is not the entity ultimately issuing or recieving the bond financing. DISCUSSION Background The Sendero Apartments is funded through a variety of sources, including tax credits and tax-exempt bonds administered by CMFA. Avila Ranch, L.P. (the “Borrower”) requested that the CMFA serve as the municipal issuer of the bonds in an aggregate principal amount not to exceed $15,000,000 of tax-exempt revenue bonds (the “Bonds”). The proceeds of the Bonds will be used to finance the acquisition, development, construction, and equipping of a 60-unit affordable rental housing facility for low-income households to be owned and operated by the Borrower and located at 165 Cessna Court in the City of San Luis Obispo, California (the “Project”). This public hearing is a step that is required by section 147(f) of the Internal Revenue Code for CMFA to issue the bonds to the project. City Council Public Hearing and Action The City Council, as the applicable governmental unit per the requirements of section 147(f) of the Internal Revenue Code, must hold a public hearing to provide an opportunity for community members to speak in favor of or against the use of tax-exempt bonds for the financing of the Project. Prior to such TEFRA Hearing, reasonable notice must be provided to community members to give the opportunity to speak in favor of or against the use of tax-exempt bonds for the project. Following the close of the TEFRA Hearing, an “applicable elected representative” of the governmental unit hosting the Project must provide its approval in order for the issuance of the Bonds for the financing of the Project to proceed. The City’s “applicable elected representative” is the City Council. (26 U.S.C. 147(f)(2)(E).) This public hearing and notices of the public hearing satisfy all the above requirements. Staff recommends Council approval of the issuance of tax-exempt bond financing due to the fact that the Sendero Apartments will assist the City in meeting its Regional Housing Needs Assessment (RHNA) obligations, will provide much needed deed-restricted housing to low-income and below households, and is a major component of the affordable housing provided in the Avila Ranch area. Page 132 of 145 Item 7a Previous Council or Advisory Body Action On October 3, 2017, City Council approved Ordinance 1639 approving the Development Agreement between the City of San Luis Obispo and Avila Ranch LLC. On January 23, 2024, City Council approved the final map for Avila Ranch Phase 2 and 3, includ ing the Phase 3 Affordable Housing Agreement requiring the dedication of the Sendero Apartments property (Resolution). On February 14, 2024, the Planning Commission reviewed the multi-family, high density residential (R-4) component in Phase 3 of the Avila Ranch Development Plan, including the 60-unit Sendero Project (Agenda Packet). The Planning Commission found the Project consistent with applicable City planning regulations and approved the Project (Resolution). Public Engagement This item is on the agenda for the September 15, 2026, City Council meeting and will follow all the required posting and notification standards. Public comment on the item can be provided to the City Council through written correspondence prior to the meeting and through public testimony at the meeting. A TEFRA Hearing Public Notice was published in the New Times and on the City’s website. CONCURRENCE The City Finance Department has reviewed and concurs with staff’s recommendation. ENVIRONMENTAL REVIEW The adoption of the Resolution approving the issuance of the Bonds is exempt from environmental review per Section 15061(b)(3) of the California Environmental Quality Act because the proposed action is in regard to the financing of an affordable housing project that has previously been reviewed for environmental compliance, and it can be seen with certainty that there is no possibility that the issuance of the Bonds will have a significant effect on the environment beyond those effects which have previously been studied. FISCAL IMPACT Budgeted: N/A Budget Year: 2026-27 Funding Identified: N/A Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost General Fund $ $ $ $ State Page 133 of 145 Item 7a Federal Fees Other: Total $0 $0 $0 $0 There is no direct fiscal impact to the City related to this item. The Bonds to be issued by the CMFA for the Project will be the sole responsibility of the Borrower (Avila Ranch, L.P.), and the City will have no financial, legal, or other obligation, liability or responsibility for the Project or the repayment of the Bonds for the financing of the Project. 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 and are to be paid solely from funds provided by the Borrower. The Board of Directors of the California Foundation for Stronger Communities, a California non-profit public benefit corporation (the “Foundation”), acts a s the Board of Directors for the CMFA. Through its conduit issuance activities, the CMFA shares a portion of the issuance fees it receives with its member communities and donates a portion of these issuance fees to the Foundation for the support of local c harities. With respect to the City of San Luis Obispo, it is expected that $14,000 of the issuance fee attributable to the City will be granted by the CMFA to the General Fund of the City. Such grant may be used for any lawful purpose of the City, including but not limited to the costs of holding the public hearing. The City can choose whether to receive the issuance fee. The final issuance fee will be distributed to the City as part of the project’s financial closing, currently scheduled for October. ALTERNATIVES 1. Do not approve the issuance of bonds by CMFA. All necessary entitlements, as well as the City impact fee deferral loan commitment, have previously been approved by the City and the Project will close escrow shortly. The City has no liability to repay the bond and this approval is merely a statutory requirement, without which the bonds cannot issue. Bond funding is critical to construction of the Project, which is scheduled to commence in October. 2. Defer consideration of the request. Continuance of the request would mean that CMFA would not be able to issue the tax-exempt bonds towards the Sendero Apartments project, which is a critical portion of the project’s financing necessary to commence construction in October. ATTACHMENTS A - Draft Resolution approving the Issuance of Tax-Exempt Revenue Bonds by CMFA Page 134 of 145 R ______ RESOLUTION NO. _____ (2026 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, APPROVING THE ISSUANCE OF REVENUE BONDS BY THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $15,000,000 FOR THE PURPOSE OF FINANCING OR REFINANCING THE ACQUISITION, CONSTRUCTION, IMPROVEMENT AND EQUIPPING OF SENDERO APARTMENTS AND CERTAIN OTHER MATTERS RELATING THERETO WHEREAS, Avila Ranch LP (the “Borrower”) a partnership of which C&C Development Co., LLC (the “Developer”) or a related person to the Developer is the general partner, has requested that the California Municipal Finance Authority (the “Authority”) adopt a plan of financing providing for the issuance of exempt facility bonds for a qualified residential rental project pursuant to Section 142(a)(7) of the Internal Revenue Code of 1986 (the “Code”) in one or more series issued from time to time, including bonds issued to refund such exempt facility bonds in one or more series from time to time, and at no time to exceed $15,000,000 in aggregate principal amount (the “Bonds”), to finance or refinance the acquisition, construction, improvement and equipping of a multifamily rental housing project located at 165 Cessna Court, San Luis Obispo, California (the “Project”); and WHEREAS, pursuant to Section 147(f) of the Code, the issuance of the Bonds by the Authority must be approved by the City of San Luis Obispo (the “City”) in order to proceed, because the Project is located within the territorial limits of the City; and WHEREAS, the City Council of the City (the “City Council”) is the applicable elected representative to approve the issuance of the Bonds under Section 147(f ) of the Code; and WHEREAS, the City’s approval of the issuance of the bonds is a statutory requirement and does not impose upon the City any legal or financial obligation to repay the bonds; and WHEREAS, the Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirement of Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the “Agreement”), among certain local agencies, including the City; and WHEREAS, pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the Bonds by the Authority. Page 135 of 145 Resolution No. _____ (2026 Series) Page 2 R ______ NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. The foregoing recitals are true and correct. SECTION 2. The City Council hereby approves the issuance of the Bonds by the Authority. It is the purpose and intent of the City Council that this resolution constitute approval of the issuance of the Bonds by the Authority, for the purposes of (a) Section 147(f) of the Code by the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement. SECTION 3. The issuance of the Bonds shall be subject to the approval of the Authority of all financing documents relating thereto to which the Authority is a party. The City shall have no financial, legal, or other responsibility or liability whatsoever with respect to the Bonds. SECTION 4. The adoption of this Resolution shall not obligate the City or any department thereof to (i) provide any financing to acquire or construct the Project or any refinancing of the Project; (ii) approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary for the acquisition, construction, rehabilitation, installation or operation of the Project; (iii) construct the Project or any component thereof, in whole or in part; (iv) make any contribution or advance any funds whatsoever to the Authority; or (v) take any further action with respect to the Authority or its membership therein. SECTION 5. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby. SECTION 6. This resolution shall take effect immediately upon its adoption. 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 _______________ 2026. ___________________________ Mayor Erica A. Stewart Page 136 of 145 Resolution No. _____ (2026 Series) Page 3 R ______ 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 137 of 145 Page 138 of 145 1 TEFRA Hearing for Sendero Apartments Tuesday, September 14, 2026 2 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 (the “Code”); and 2.Adopt a resolution approving the issuance of Revenue Bonds by the California Municipal Finance Authority to provide for the financing of Sendero Apartments (the “Project”); such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code, and California Government Code Section 6500, et seq. 3 Background •Sendero Apartments is an approved 60- unit, 100% affordable housing project that is part of the 720 unit Avila Ranch area, located at 165 Cessna Ct. •C&C Development Co. applied for and received over $35 million in funding for the project, including tax-exempt bond financing of up to $15 million administered by the California Municipal Finance Authority •TEFRA hearing is required under federal regulations for tax-exempt bond financing Project Site 4 California Municipal Finance Authority •The CMFA is a joint powers authority formed to assist local governments, non-profit organizations, and businesses with the issuance of both taxable and tax-exempt debt •The City will have no financial or legal obligations or responsibilities with regard to the repayment of the debt. •City has approved 16 similar resolutions allowing tax- exempt conduit financing since 1985, most recently Tiburon Place in 2022 5 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 (the “Code”); and 2.Adopt a resolution approving the issuance of Revenue Bonds by the California Municipal Finance Authority to provide for the financing of Sendero Apartments (the “Project”); such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code, and California Government Code Section 6500, et seq.