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HomeMy WebLinkAbout04-04-2017 Item 18, TEFRA Hearing - 3175 Violet St Meeting Date: 4/4/2017 FROM: Michael Codron, Community Development Director Prepared By: Jenny Wiseman, Acting Housing Programs Manager SUBJECT: TAX AND EQUITY FISCAL RESPONSIBILITY ACT (TEFRA) HEARING REGARDING THE HOUSING AUTHORITY OF SAN LUIS OBISPO ISSUANCE OF TAX EXEMPT DEBT OBLIGATIONS TO FINANCE 36 AFFORDABLE HOUSING UNITS TO BE LOCATED AT 3175 VIOLET STREET RECOMMENDATION 1. Conduct a public hearing under the Tax and Equity Fiscal Responsibility Act (TEFRA) of 1982 and pursuant to the requirements of the Internal Revenue Code of 1986. 2. Adopt a resolution allowing the issuance of a tax -exempt bond by the Housing Authority of the City of San Luis Obispo (HASLO) to finance 36 affordable multi-family housing units at 3175 Violet Street. DISCUSSION Background The Housing Authority of the City of San Luis Obispo (“HASLO”) is requesting that the Council hold a public hearing regarding the issuance of a tax -exempt debt obligations to finance the development of Courtyard at the Meadows, a 36-unit multi-family affordable housing development located at 3175 Violet Street (“Project”). Although there is no financial participation (or liability, direct or indirect) by the City in approving the issuance of this “conduit” financing, Council conduct of a public hearing and approval of the reissuance is required under federal regulations for tax-exempt financing. The Housing Authority is committed to providing much needed additional affordable housing in the City of San Luis Obispo. The primary funding source for this project will be low income housing tax credits awarded by the California Tax Credit Allocation Committee (TCAC). These tax credits are then purchased by investors who become a limited partner. California statue does not allow housing authorities to be a party in these partnerships, so HASLO will hold its interest through its related entity the San Luis Obispo Non-profit Housing Corporation (“SLONP”). SLONP will serve as the sole Managing General Partner for Courtyard at the Meadows. The partnerships have a 15-year compliance period over which the tax credits are earned. After the 15 years, the limited partner has the option to seek a buyer for its interest. The project will feature an affordability requirement for a minimum of 55 years. Packet Pg. 365 18 Project Summary 1. Courtyard at the Meadows will consist of 100% of the units to be rented to households at 60% Area Median Income and below for a minimum of 55 years. The project consists of 36 units: 9 one bedroom units, 18 two bedroom units, and 9 three bedroom units. 2. Estimated total development costs are projected to be $11.6 million. Of this, an amount not to exceed $10 million in tax exempt bond financing will be utilized to finance the project development. 3. A resolution (Attachment B) has already been approved by the Housing Authority’s Board of Directors setting forth HASLO’s official intent to incur the tax-exempt obligation in order to finance construction of the project. 4. The issuance of the Bond requires that the Council conduct a public hearing regarding the financing of the Project under the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), and pursuant to the requirements of the Internal Revenue Code of 1986. The TEFRA public hearing allows Council to adopt a resolution (Attachment A) approving the issuance by HASLO of the debt obligations, in order to finance development of the affordable housing units. No City Liability for the Financing There is no City liability in approving the issuance of conduit financing. The bonds are payable solely from the payments by the borrower on a loan made to it (the “Borrower Loan”) by HASLO from the proceeds of the bonds. The rental payments by tenants in the Project are the source of revenue used by the borrower to repay the borrower loan. The City has no financial, legal, or moral obligation, liability or responsibility for the project or for the repayment of the bonds or the repayment of the Borrower Loan. The documents for the bonds clearly provide that the bonds are payable solely from payments on the Borrower Loan made by the borrower. Outside of holding this hearing and adopting the required resolution, no other participation or activity of the City with respect to the bonds will be required. City’s Conduit Financing Policy While the Council is not obligated to approve this request, it would be consistent with past City actions regarding conduit financing. Under the City’s debt financing and management policies, consideration of a request for conduit financing is generally a two-step process: 1. First asking the Council if they are interested in considering the request and establishing the ground rules for evaluating it; and then 2. Return with the results of this evaluation and recommending approval of appropriate financing documents if warranted. Given the Council’s prior approval of conduit financing to HASLO in the past, and due to the close and ongoing relationship between the City and HASLO; staff finds that HASLO is capable of achieving the public purpose of providing these debt obligations to finance much needed affordable housing using tax exempt bonds. Packet Pg. 366 18 City’s Past Experience with Conduit Housing Bonds The City has approved eleven “conduit” housing bond issues in the past as reflected in the following summary, with the majority being issued by HASLO. There have been no financial difficulties with any of these bond issues. 1. 1985. 168-unit apartment development on Southwood Drive (refinanced in 1993). 2. 1998. 30-unit development (all affordable for seniors and persons with disabilities) on Brizzolara Street. 3. 1999. 122-unit apartment development by the De Vaul Ranch Company, of which 26 units will be affordable: 24 for “very-low” and 2 for “moderate” income households. 4. 2002. 19-unit senior apartment development at 433 Pacific Street (Pacific and Carmel). 5. 2005. 40 affordable one-bedroom units for seniors as well as one manager’s unit in an existing historic single-family residence at 2005 Johnson Avenue (“Del Rio Terrace”). 6. 2009 and 2011. 8-unit housing project at 1468 East Foothill Boulevard for the University Board of the Santa Barbara Presbytery. 7. 2012. 120-unit apartment project affordable to low and very-low income households located at 1550 Madonna Road. 8. 2013. 19-unit apartment project affordable rental apartment facility for seniors located at 433 Pacific (“Carmel Street Apartments”). 9. 2013. 40-unit affordable rental apartment facility for seniors located at 2005 Johnson Avenue (“Del Rio Terrace”). 10. 2015. Rehabilitation of 55 affordable rental units located at 1092 Orcutt Road, 1102 Ironbark, and 1363 Pismo Street. 11. 2016. 46-unit affordable apartment development at 3680 Broad Street (“Iron Works”). Next Steps After the TEFRA public hearing and adoption of the Resolution of the Council approving the issuance of the debt obligations, HASLO or its managing general partner will apply for low income housing tax credits and tax exempt bonds in Summer of 2017. There will be no further actions required by the City. ENVIRONMENTAL REVIEW This action is exempt from environmental review per Section 15061(b)(3) of the California Environmental Quality Act Guidelines because the action is in regards to financing a future affordable housing project. The financing activity in question will not have a significant impact on the environment. A Mitigated Negative Declaration (Resolution No. 10512) was approved for Tract 2353 (Serra Meadows), which included the future development of the Project. The project was found to be in conformance with the MND at time of entitlement. FISCAL IMPACT There are no fiscal impacts to the City associated with this matter. As noted above, the City has no liability, directly or indirectly, for the financing. Packet Pg. 367 18 ALTERNATIVES 1. Do not approve the issuance of bonds by HASLO. The project has already received all necessary entitlements. Due to lack of liability for repayment of the Bonds by the City, this option is not recommended. 2. Defer consideration of the request. Due to the critical need for tax exempt bond financing in order to construct the apartments, this option is not recommended. Attachments: a - Council Resolution b - Housing Authority Board Resolution No. 19 (2016 Series) Packet Pg. 368 18 R ______ RESOLUTION NO. ______ (2017 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, APPROVING THE HOUSING AUTHORITY OF THE CITY OF SAN LUIS OBISPO ISSUANCE OF TAX EXEMPT DEBT OBLIGATIONS TO FINANCE 36 AFFORDABLE HOUSING UNITS LOCATED AT 3175 VIOLET STREET 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, the Authority has expressed an interest in establishing a California limited partnership (the “Borrower”) and in assisting the Borrower in constructing the Courtyard at the Meadows affordable rental project at 3175 Violet Street (referred to in this Resolution as the “Housing Facility”); and WHEREAS, such assistance will involve the issuance by the Authority of debt obligations (which may be in the form of a loan evidenced by a note or tax-exempt revenue bonds, and referred to in this Resolution as the “Bonds”) in the amount not to exceed $10,000,000, and a loan of the proceeds of the Bonds to the Borrower; and WHEREAS, all housing units in the Housing Facilit y will be 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 Bonds will be considered to be a "qualified exempt facility bonds" under Section 142(a) of the Code; and WHEREAS, Section 147(f) of the Code requires that the "applicable elected representative" with respect to the Authority approve the issuance by the Authority of the Bonds following the holding of a public hearing with respect thereto; and WHEREAS, the Authority has determined that the City Council is the "applicable elected representative" to approve the issuance by the Authority of the Bonds because the Housing Facility is located within the City; and WHEREAS, notice of a public hearing by the Council regarding the financing of the Housing Facility has been duly given as required by the Code; and WHEREAS, 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 location, operation and financing of the Housing Facility, including the Authority's issuance of the Bonds and subsequent lending of the proceeds thereof to the Borrower to pay costs of the construction by the Borrower of the Housing Facility; and Packet Pg. 369 18 Resolution No. ______ (2017 Series) Page 2 R ______ WHEREAS, the City will not be a party to any of the agreements or other documents related to the Bonds and the financing of the Housing Facility, the City will have no liability or responsibility related to the repayment or administration of the Bonds, and the issuance of the Bonds and the financing of the Housing Facilit y 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 issuance by the Authority of the Bonds for the aforesaid purposes. NOW, THEREFORE, BE IT RESOLVED that the Council of the City of San Luis Obispo does declare, determine and order as follows: SECTION 1. The Council of the City of San Luis Obispo hereby approves the issuance by the Authority of the Bonds for purposes of the Code. SECTION 2. Environmental Determination. The City Council has determined that the above actions will not have a signification impact on the environment, as defined by Section 15061(b)(3) of the California Environmental Quality Act, and is exempt from environmental review. A Mitigated Negative Declaration (Resolution No. 10512) was approved for Tract 2353 (Serra Meadows), which included the future development of the Project. The project was found to be in conformance with the MND at time of entitlement. SECTION 3. This Resolution shall take effect immediately upon its adoption. Packet Pg. 370 18 Resolution No. ______ (2017 Series) Page 2 R ______ Upon motion of _______________ seconded by _______________ and on the following vote: AYES: NOES: ABSENT: The foregoing Resolution was adopted this ______ day of ____________ 2017. Mayor Heidi Harmon ATTEST: Carrie Gallagher 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, this ______ day of ______________, _________. ______________________________ Carrie Gallagher City Clerk Packet Pg. 371 18 RESOLUTION NO. 19 (2016 SERIES) A RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF SAN LUIS OBISPO SETTING FORTH THE AUTHORITY'S OFFICIAL INTENT TO INCUR A TAX-EXEMPT OBLIGATION IN ORDER TO FINANCE THE ACQUISITION AND CONSTRUCTION OF COURTYARD AT THE MEADOWS APARTMENTS, AND AUTHORIZING RELATED ACTIONS WHEREAS, the Housing Authority of the City of San Luis Obispo (the "Authority") is authorized by Chapter 1 (commencing with Section 34200) 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 the purpose of financing the acquisition and construction of multifamily rental housing facilities located within the area of operation of the Authority; and WHEREAS, the Authority expects to enter into agreements necessary to sell multifamily housing revenue bonds or otherwise incur indebtedness (referred to in this Resolution as the "Bonds") and to lend the proceeds of the Bonds to a limited partnership to be established by the Authority (the "Borrower") that will use proceeds of the loan to acquire and construct a 36 unit affordable rental housing facility to be located at 408 Prado Road in the City of San Luis Obispo (the "Housing Facility"); and WHEREAS, the Authority, in the course of assisting the Borrower in financing the Housing Facility, expects that the Borrower, once it is formed, may pay certain expenditures (the "Reimbursement Expenditures") in connection with the Housing Facility prior to the date of issuance of the Bonds; and WHEREAS, Section 1.150-2 of the United States Treasury Regulations (the "Treasury Regulations") requires that the Authority declare its official intent to reimburse the Reimbursement Expenditures for the Housing Facility with proceeds of a subsequent tax-exempt borrowing if the proceeds of the borrowing are to be used to finance the Reimbursement Expenditures; and WHEREAS, the Authority wishes to declare its intention to authorize the issuance of the Bonds for the purpose of financing costs of the acquisition and construction by the Borrower of the Housing Facility (including reimbursement of the Reimbursement Expenditures) upon such terms and conditions as may be agreed upon by the Authority, the Borrower and the purchaser of the Bonds, in an aggregate principal amount not to exceed $10,000,000; and WHEREAS, Section 146 of the Internal Revenue Code of 1986 limits the amount of multifamily housing bonds that may be issued in any calendar year by entities within a state (the "state ceiling") and authorizes the governor or the legislature of a state to provide the method of allocation within the state; and WHEREAS, Chapter 11.8 of Division 1 of Title 2 of the California Government Code governs the allocation of the state ceiling among governmental units in the State of California having the authority to issue private activity bonds; and WHEREAS, Section 8869.85(b) of the California Government Code requires a local agency desiring an allocation of the state ceiling for a particular financing to file an application with the California Debt Limit Allocation Committee ("CDLAC") for such an allocation, and CD LAC has certain policies that are to be satisfied in connection with any such allocation; and WHEREAS, it is in the public interest, for the public benefit and in furtherance of the public purposes of the Authority that the Authority declares its official intent to issue the Bonds to finance the Housing Facility and to authorize the Executive Director to take all actions necessary to apply to CDLAC for an allocation of tax-exempt bond authority for the Bonds. Packet Pg. 372 18 NOW, THEREFORE, BE IT RESOLVED by the Housing Authority of the City of San Luis Obispo, that: 1. The Authority hereby finds and determines that it is necessary and desirable to provide financing for the acquisition and construction by the Borrower of the Housing Facility (including reimbursement of the Reimbursement Expenditures) by the issuance and sale of the Bonds pursuant to the Act in the aggregate principal amount not to exceed $10,000,000. 2. This Resolution is being adopted by the Authority for the purpose of establishing compliance with the requirements of Section 1.150-2 of the Treasury Regulations. In that regard, the Authority declares its official intent that the Authority use proceeds of the Bonds to reimburse the Reimbursement Expenditures. This action is taken expressly for the purpose of inducing the Borrower to undertake the acquisition and construction of the Housing Facility. 3. The Executive Director of the Authority is hereby authorized and directed to apply to CD LAC for an allocation of the state ceiling of private activity bonds for the Bonds in an amount not to exceed $10,000,000, and to take any and all other actions as may be necessary or appropriate in connection with such application, including but not limited to the payment of fees, the posting of a performance deposit and the provision of certificates. 4. The law firm of Quint & Thimmig LLP is hereby designated as bond counsel to the Authority for the Bonds. The Executive Director is hereby authorized to execute an agreement with such firm for its services related to the Bonds in a form acceptable to the Executive Director; provided that any and all compensation to such firm is contingent upon the successful issuance of the Bonds. 5. Notwithstanding the foregoing, the issuance of the Bonds shall only occur on terms that are satisfactory to the Authority, and subject to the adoption by the Authority of a resolution approving the documents providing for the terms of the Bonds. 6. This Resolution shall take effect immediately upon its adoption. On motion of Commissioner Souza and on the following roll call vote: , seconded by Commissioner Chubon AYES: NOES: ABSENT: ABSTAINED: Commissioners Souza, Chubon, Booker, La Rue, Beck None Commissioners Steinberg, Reed None The foregoing Resolution was duly adopted and passed this 8th day of December, 2016. ATTEST: -2 -Packet Pg. 373 18 Page intentionally left blank. Packet Pg. 374