HomeMy WebLinkAbout07-10-2018 Item 14 - Judson Terrace Financing - TEFRA Meeting Date: 7/10/2018
FROM: Michael Codron, Community Development Director
Prepared By: Cara Vereschagin, Assistant Planner
SUBJECT: CONDUIT FINANCING FOR THE JUDSON TERRACE HOMES
APARTMENTS AFFORDABLE HOUSING PROJECT
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 1 986, as amended
(the “Code”); and
2. Adopt a resolution allowing the issuance of tax-exempt bonds (the “Bonds”) by the
California Municipal Finance Authority (CMFA), for the benefit of Judson Terrace Senior
Housing, L.P., a California limited partnership, or another entity to be created by Beacon
Communities, Inc., or an affiliate thereof (the “Borrower”), to finance the acquisition and
rehabilitation of a 107-unit multifamily rental housing facility located at 3000 Augusta Street
(the “Project”), such adoption is solely for the purposes of satisfying the requirements of
TEFRA, the Code and the California Government Code Section 6500 et seq.
DISCUSSION
Background
Beacon Communities, Inc. requested that the CMFA serve as the municipal issuer of the Bonds
in an aggregate principal amount not to exceed $44,000,000 of tax-exempt revenue bonds. The
proceeds of the Bonds will be used to finance the acquisition and rehabilitation of a 107-unit
multifamily rental housing facility to be owned and operated by the Borrower and located at
3000 Augusta Street. All 107 units of this project are currently affordable to low-income elderly
persons, through a long-term affordability agreement with the U.S. Department of Housing and
Urban Development (HUD), meaning the City does not hold any restrictions on the property.
Per Federal regulations of the issuance of these Bonds, the active affordability agreement will be
extended for an additional fifty-five (55) years with HUD, thus further maximizing the term of
affordability of the multifamily facility.
In order for all or a portion of the Bonds to qualify as tax-exempt bonds, the Borrower is
requesting that the City Council hold a public hearing (the “TEFRA Hearing”) providing for the
members of the community an opportunity to speak in favor of or against the use of tax-exempt
bonds for the financing of the Project. Prior to such TEFRA Hearing s, reasonable notice must be
provided to members of the community. Following the close of the TEFRA Hearing, an
“applicable elected representative” of the governmental unit hosting the Project must provide its
approval of the issuance of the Bonds for the financing of the Project.
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California Municipal Finance Authority
The CMFA was created on January 1, 2004 pursuant to a joint exercise of powers agreement to
promote economic, cultural and community development, through the financing of economic
development and charit able activities throughout California. To date, over 300 municipalities,
including the City of San Luis Obispo, have become members of CMFA.
The CMFA was formed to assist local governments, non-profit organizations and businesses
with the issuance of t axable and tax-exempt bonds aimed at improving the standard of living in
California. The CMFA’s representatives and its Board of Directors have considerable experience
in bond financings.
No City Liability for the Financing
There is no City liability in approving this financing arrangement between the Borrower and the
CMFA for the benefit of Judson Terrace Homes ; a transaction generally referred to as “conduit
financing.” The Bonds are payable solely from the payments by the Borrower on a loan made to
it (the “Borrower Loan”) by the CMFA 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 any other 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 co nsidering the request and establishing the
ground rules for evaluating it.
2. And then returning with the results of this evaluation and recommending approval of
appropriate financing documents if warranted.
City’s Past Experience with Conduit Housing Bonds
The City has approved twelve “conduit” housing bond issues in the past as reflected in the
following summary. 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.
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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 Presbyterian.
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. Reissuance of financing for the 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”).
12. 2018. 36-unit affordable apartment development at 3175 Violet Street (“Courtyard at the
Meadows”).
Next Steps
After the TEFRA public hearing, adoption of the Resolution of the Council approving the
issuance of the Bonds, and approval of the Borrower’s application for tax-exempt financing, the
Borrower can expect to receive the bond allocation in September 2018. There will be no further
actions required by the City.
ENVIRONMENTAL REVIEW
The project is exempt from environmental review per Sectio n 15061 (b)(3) General Rule of the
CEQA Guidelines. The project is an action to award funding.
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Item 14
FISCAL IMPACT
Since t he Bonds to be issued by the CMFA for the Project will be the sole responsibility of the
Borrower, the City will have no financial liability associated with 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 but are to be paid for 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 as 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 charities. With respect to the City of San Luis Obispo it is
expected that a portion o f 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.
ALTERNATIVES
1. Do not approve the issuance of bonds for the benefit of Judson Terrace Homes. Due to the
lack of liability for repayment of 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 complete the acquisition and rehabilitation of the Pr oject, this option is not
recommended.
Attachments:
a - DRAFT Resolution for Judson Terrace Homes
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Item 14
R ______
RESOLUTION NO. _____ (2018 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 $44,000,000
TO FINANCE A 107-UNIT MULTIFAMILY RENTAL HOUSING
FACILITY FOR THE BENEFIT OF JUDSON TERRACE SENIOR
HOUSING, L.P. (OR AN AFFILIATE), AND CERTAIN OTHER MATTERS
RELATING THERETO
WHEREAS, Judson Terrace Senior Housing, L.P., a California limited partnership, or
another entity to be created by Beacon Communities, Inc., or an affiliate thereof (the “Borrower”),
has requested that the California Municipal Finance Authority (the “Authorit y”) issue one or more
series of revenue bonds in an aggregate principal amount not to exceed $44,000,000, including but
not limited to revenue bonds issued as part of a plan to finance the Project described herein (the
“Bonds”) for the acquisition and rehabilitation of a 107-unit multifamily rental housing facility
(the “Project”) to be owned and operated by the Borrower and located at 3000 Augusta Street
within the City of San Luis Obispo (the “City”); and
WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986 (the
“Code”), the issuance of the Bonds by the Authority must be approved by the City 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 elected legislative
body of the City and is one of the “applicable elected representatives” required to approve the
issuance of the Bonds under Section 147(f) of the Code; 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
WHEREAS, per Federal regulations upon issuance of the Bonds, the active long-term
affordability covenant with the U.S. Department of Housing and Urban Development will be
extended for an additional fifty-five (55) years, ensuring affordability; and
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 Project, 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 Project will not impose any legal, financial or moral obligation on the City; and
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Item 14
Resolution No. _____ (2018 Series) Page 2
R ______
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 by the Council of the City of San Luis Obispo
declares as follows:
SECTION 1. Approval of Issuance of Bonds. The Council of the City of San Luis Obispo
hereby approves the issuance by the Authority of the Bonds for the purposes of the Code.
SECTION 2. This Resolution shall take effect immediately upon its adoption.
Upon motion of _______________________, seco nded by _______________________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _____ day of _____________________ 2018.
____________________________________
Mayor Heidi Harmon
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, this ______ day of ______________, _________.
____________________________________
Teresa Purrington
City Clerk
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E
JUL 0 2
THENewspaper of the Central Coast SLO czTY CFRK
3825 South Higuera • Post Office Box 112 • San Luis Obispo, California 93406-0112 • (805) 781-7800
In The Superior Court of The State of California
In and for the County of San Luis Obispo
AD #3728980
CITY OF SAN LUIS OBISPO
OFFICE OF THE CITY CLERK
STATE OF CALIFORNIA
ss.
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 and not
interested in the above entitled matter; I am now, and at
all times embraced in the publication herein mentioned
was, the principal clerk of the printers and publishers of
THE TRIBUNE, a newspaper of general Circulation,
printed and published daily at the City of San Luis
Obispo in the above named county and state; that notice
at which the annexed clippings is a true copy, was
published in the above-named newspaper and not in any
supplement thereof — on the following dates to wit;;
JUNE 26, 2018 that said newspaper was duly and
regularly ascertained and established a newspaper of
general circulation by Decree entered in the Superior
Court of San Luis Obispo County, State of California, on
June 9, 1952, Case #19139 under the Government Code
of the State of California.
I certify (or declare) under the penalty of perjury that the
foregoing is true and correct.
Q
(Sign(#ure of Principal Clerk)
DATE: JUNE 26, 2018
AD COST: $337.56
Alt, CM SIM OLUJ[S OBISPO
SAN LUIS OBISPO CITY COUNCIL
NOTICE OF PUBLIC HEARING
The San Luis Obispo City Council invites all interested persons to
atlertd a public hearing on Tuesday, July 10, 2018, at 6:00 p.m.,
or as soon thereafter as the matter may be heard, in the City Hall
Council Chamber, 990 Palm Street, San Luis Obispo, Califor-
nia, relative to the following:
TAX AND EQUITY FISCAL 1LSPONSIBILrrY AC7 iT£FRAI
HEARING REGARDING CALIFORNIA MUNICIPAL FINANCE
AUTHORITY ISSUANCE OF TAX-EXEMPT DEBT OaLIGA-
TIONS TO FINANCE THE ACQUISITION AND REHABILITATION
OF A 107-UNrr MULTIFAMILY RENTAL HOUSING
FACILITY LOCATES? AT 3000 AUGUSTA STREET_
NOTICE IS HEREBY GIVEN that on July 10, 2018, a public hear-
ing as required by Section 147(f) of the Internal Revenue Code of
1986 will be held by the City Councit of the City of Sari Luis Obi-
spo (the "0it7l') with respW to the propesed issuance by the Cali-
fornia Municipal Finance Authority (the "Aulic.itn of its revenue
bonds in one or more series in an amount not to exceed
S44,000,GGO, including but not limited to revenue bonds issued as
part of a plan to finance the facilities described herein (the "Bond-
s°]. The proceeds of the Bonds will be used to: (1) finance the ac-
quisition and rehabilitation of a 107 -unit 1nWftrrtity rental housing
facility ideated at 3000 Augusta Street, San Luis Obispo, Califor-
nia; and (2} pay certain expenses ineuvred In connection with the
issuance of the Bonds. The facilities are to be awned and operat-
ad by Judson Terrace Senior Housing, L.P., a California limited
partnership, or another entity to be created by Beacon Communi-
fies, Inc., or an affiliate thereof (the "Borrower").
The Bonds, and the obligation to pay principal thereof and interest
thereon and any redemption premium with respect thereto, do not
constitute indebtedness or an obligation of the City of San Luis
Obispo, the Authority, the State of California or any political subdi-
vision thereof, within the meaning of any constitutional or statutory
debt limitation, or a charge against the general credit or taxing
powers of any of them. The Bonds shall be a limited obligation of
the Authority, payable solely from certain revenues duly pledged
therefor and generally representing amounts paid by the Borrower.
The hearing will commence at 6:00 p.m. or as soon thereafter as
the matter can be heard, and will be held in the City Council
Chambers, located at 990 Palm Street, San Luis Obispo, Califor-
nia. Interested persons wishing to express their views on the issu-
ance of the Bonds or on the nature and location of the housing fa-
cilities proposed to be financed may attend the public hearing or,
prior to the time of the hearing, submit written comments.
Additional information concerning the above matter may be ob-
tained from, and written comments should be sent prior to the pub
Ile hearing to the City Clerk of the City of San Luis Obispo, at 990
Palm Street, San Luis Obispo, California 93401.
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 descri-
bed in this notice, or in written correspondence delivered to the
City Council at, or prior to, the public hearing.
Reports for this meeting will be available for review in the City
Clerk's Office and online at www.slocity.org by dose of business
on Tuesday, July 3, 2018. Please call the City Clerk's Office at
(805) 781-7100 for more information. The City Council meeting
will be televised live on Charter Cable Channel 20 and live stream-
ing on www.slocity.org.
Teresa Purrington
City Clerk
City of San Luis Obispo
Jure 26, 2018 3728980
7/10/2018
1
TAX AND EQUITY FISCAL RESPONSIBILITY ACT (TEFRA)
HEARING REGARDING CALIFORNIA MUNICIPAL FINANCE
AUTHORITY ISSUANCE OF TAX EXEMPT DEBT OBLIGATIONS
TO FINANCE THE ACQUISITION AND REHABILITATION OF A 107-
UNIT MULTIFAMILY RENTAL HOUSING FACILITY LOCATED AT
3000 AUGUSTA STREET
City Council
July 10, 2018
1
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, as
amended; and
2.Adopt a resolution allowing the issuance of a tax-exempt
Bonds by the California Municipal Finance Authority (CMFA),
for the benefit of Judson Terrace Senior Housing, L.P., a
California limited partnership, or another entity to be created
by Beacon Communities, Inc., or an affiliate thereof (the
Borrower), to finance the acquisition and rehabilitation of a
107-unit multifamily rental housing facility located at 3000
Augusta Street (the Project”), such adoption is solely for the
purposes of satisfying the requirements of TEFRA, the Code
and the California Government Code Section 6500 et seq.
2
Staff Presentation - Item 14
7/10/2018
2
Background
Beacon Communities, Inc. requested that the CMFA
serve as the municipal issuer of the Bonds in an
aggregate principal amount not to exceed
$44,000,000 of tax-exempt revenue bonds. The
proceeds of the bonds will be used to finance the
acquisition and rehabilitation of a 107-unit multifamily
rental housing facility to be owned and operated by
the Borrower and located at 3000 Augusta Street
TEFRA hearing is required under federal regulations
for tax-exempt financing
3
California Municipal Finance
Authority (CMFA)
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 debt issued will be the responsibility of Judson
Terrace Senior Housing, L.P.
The City will have no financial or legal obligations or
responsibilities with regard to the repayment of the
debt.
4
Staff Presentation - Item 14
7/10/2018
3
Past TEFRA Experience
City has approved twelve similar resolutions allowing
tax-exempt conduit financing since 1985
Request is consistent with past Council action and
General Plan Housing Element policies
No financial difficulties with past projects
5
Past TEFRA Experience
Iron Works Apartments (3680 Broad Street)
46 affordable rental units
Currently under construction
Awarded bonds in 2016
Laurel Creek Apartments (1092 Orcutt Road)
Rehabilitation of 55 affordable rental units
Placed into service in June 1994; awarded bonds in 2015
$1,200,000 in capital improvements needed
Del Rio Terrace (2005 Johnson Avenue)
40 affordable rental units for seniors
Awarded bonds in 2013
6
Staff Presentation - Item 14
7/10/2018
4
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, as
amended; and
2.Adopt a resolution allowing the issuance of a tax-exempt
Bonds by the California Municipal Finance Authority (CMFA),
for the benefit of Judson Terrace Senior Housing, L.P., a
California limited partnership, or another entity to be created
by Beacon Communities, Inc., or an affiliate thereof (the
Borrower), to finance the acquisition and rehabilitation of a
107-unit multifamily rental housing facility located at 3000
Augusta Street (the Project”), such adoption is solely for the
purposes of satisfying the requirements of TEFRA, the Code
and the California Government Code Section 6500 et seq.
7
Staff Presentation - Item 14