HomeMy WebLinkAbout04-19-2016 Item 12 Tax and Equility Fiscal Responsibility Act (TEFRA) to aquire 55 Afforadable Houisng units
Meeting Date: 4/19/2016
FROM: Michael Codron, Community Development Director
Prepared By: Jenny Wiseman, Planning Technician
SUBJECT: REQUEST FROM THE HOUSING AUTHORITY OF THE CITY OF SAN
LUIS OBISPO REGARDING ISSUANCE OF A TAX-EXEMPT LOAN TO
ACQUIRE AND REHABILITATE 55 AFFORDABLE HOUSING UNITS AT
1092 ORCUTT ROAD, 1102 IRONBARK, AND 1363 PISMO 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; and
2. Adopt a resolution (Attachment A) allowing the issuance of a tax-exempt loan by the
Housing Authority of the City of San Luis Obispo to acquire and rehabilitate Laurel
Creek Apartments, Ironbark Apartments, and Pismo Buchon Apartments.
DISCUSSION
Background
The Housing Authority of the City of San Luis Obispo (the “Authority”) is requesting that the
Council hold a public hearing regarding the issuance of a tax-exempt loan to acquire and
rehabilitate 55 units of affordable housing. The units are located in the Laurel Creek Apartments
(1092 Orcutt Road), Ironbark Apartments (1102 Ironbark), and Pismo Buchon Apartments (1363
Pismo).
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 issuance is required under federal regulations for tax-exempt financing.
The Housing Authority was the original developer for Laurel Creek Apartments, Ironbark
Apartments, and Pismo Buchon Apartments, to provide additional affordable housing in the City
of San Luis Obispo. The primary funding source for each of these projects was the low-income
housing tax credits awarded by the California Tax Credit Allocation Committee (TCAC). These
tax credits were then purchased by an investor who became a limited partner. California statute
does not allow Housing Authorities to be a party in these partnerships, so the Housing Authority
transferred its interest to San Luis Obispo Non-profit Housing Corporation (SLONP). SLONP
serves as the sole Managing General Partner. 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.
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Laurel Creek Apartments, Ironbark Apartments, and Pismo Buchon Apartments have all passed
the 15 year compliance period, and the limited partner, WNC & Associates, wishes to dissolve
the partnership and sell its interest in the properties. All of the properties have capital
improvement needs that must be addressed in the near future. The combined dollar value of
capital improvements needed is approximately $1,820,000.
The Housing Authority wishes to purchase the partnership interests in Laurel Creek Apartments,
Ironbark Apartments, and Pismo Buchon Apartments. The Housing Authority will then work
with SLONP to form a new partnership to apply for new tax credits and tax-exempt bonds to
provide funding for the acquisition and capital improvement that are necessary.
Project Summary
1. Laurel Creek Apartments is a 24 unit affordable rental apartment complex located at 1092
Orcutt Road. Laurel Creek Apartments was placed into service in June 1994 and is in need
of approximately $1,200,000 in capital improvements.
2. Ironbark Apartments, located at 1102 Ironbark, has 20 affordable rental units and was placed
into service in November 1995. Approximately $20,000 per unit in capital improvements is
needed for the site, for a total of $400,000.
3. Pismo Buchon Apartments are located at 1363 Pismo Street. The affordable housing complex
has 11 rental units and was placed into service in 2000. Approximately $220,000 is needed in
capital improvements for this complex.
4. The issuance of the Bond requires that the Council conduct a publ ic 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 approving the issuance by the
Authority of the Bonds, in order to maintain purchase and rehabilitate the three housing
facilities.
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 the
Authority 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.
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City’s Conduit Financing Policy
While the Council is not obligated to approve this request, it would be consistent with past City
actions regarding the Project. Requests for conduit financing are considered based on the liability
to the City in issuing the bonds on behalf of the applicant, determining that there is a clear public
purpose in providing this financing, and that the applicant is capable of achieving the public
purpose.
Under the City’s debt financing and management policies, outlined in the 2015-17 Financial
Plan, consideration of a request for conduit financing is generally a two-step process:
1. First ask the Council if they are interested in considering the request , and if so, establish
the ground rules for evaluating it.
2. Return to the Council with the results of this evaluation and recommend approval of
appropriate financing documents if warranted.
Given the Council’s prior approval of conduit financing to the Housing Authority in the past, and
due to the close and ongoing working relationship between the City and Housing Authority; staff
recommends that the Council find that the Housing Authority is capable of achieving the public
purpose of maintaining and providing affordable housing funded partially through tax-exempt
loans.
City’s Past Experience with Conduit Housing Bonds
The City has approved nine “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.
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”).
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9. 2013. 40-unit affordable rental apartment facility for seniors located at 2005 Johnson
Avenue (“Del Rio Terrace”).
Next Steps
After the TEFRA public hearing and adoption of the Resolution of the Council approving the
issuance of the Bonds, the Authority will apply for low income housing tax credits and tax-
exempt bonds in July of 2016. There will be no further actions required by the City Council.
ENVIRONMENTAL REVIEW
This project is exempt from environmental review per Section 15061(b)(3) of the California
Environmental Quality Act Guidelines because action is in regards to financing an existing
affordable housing project that was reviewed for environmental compliance at time of
development. The activity in question will not have a significant impact on the environment.
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.
ALTERNATIVES
1. Do not approve the issuance of bonds by the Authority. Given the approvals that the
Project has already received from the City and the lack of any liability for repayment of the
Bonds by the City, this option is not recommended.
2. Defer consideration of the request. Due to the need for rehabilitation resulting from the
issuance of the Bonds, and the deadline for tax credit applications, this option is not
recommended.
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R ______
RESOLUTION NO. ______ (2016 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, APPROVING THE INCURRING OF A TAX
EXEMPT OBLIGATION BY THE HOUSING AUTHORITY OF THE
CITY OF SAN LUIS OBISPO FOR THE PURPOSE OF PROVIDING
FINANCING FOR THE ACQUISITION AND REHABILITATION OF
LAUREL CREEK, IRONBARK, AND PISMO BUCHON APARTMENTS
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 acquiring and rehabilitating the
following three apartment facilities (collectively referred to in this Resolution as the “Housing
Facilities”): Laurel Creek Apartments, located at 1092 Orcutt Road, Ironbark Apartments located
at 1102 Ironbark Street, and Pismo Buchon Apartments, located at 1363 Pismo Street; and
WHEREAS, such assistance will involve the issuance by the Authority of debt
obligations (which may be in the form of a loa n evidenced by a note or tax-exempt revenue
bonds, and referred to in this Resolution as the “Bonds”) in the approximate amount of
$6,000,000, and a loan of the proceeds of the Bonds to the Borrower; and
WHEREAS, a portion of the housing units in the Housing Facilities 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 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 Facilities are all located within the City; and
WHEREAS, notice of a public hearing by the Council regarding the financing of the
Projects 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 location, operation and financing of the Housing Facilities, including the
Authority's issuance of the Bonds and subsequent lending of the proceeds thereof to the
Borrower to pay costs of the acquisition and rehabilitation by the Borrower of the Housing
Facilities; and
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Resolution No. ______ (2016 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 Facilities, 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 Facilities 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.
BE IT RESOLVED that the Council of the City of San Luis Obispo does declare,
determine and order as follows:
SECTION 1. Environmental Determination. The City Council has determined that the
above actions will not have a significant impact on the environment, as defined by §15061(b)(3)
of the California Environmental Quality Act and are exempt from environmental review.
SECTION 2. Action. The Council of the City of San Luis Obispo hereby approves the
issuance of the Bonds by the Authority for purposes of the Code. This resolution shall take effect
immediately upon its adoption.
Upon motion of , seconded by , and on the
following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing Resolution was adopted this ______ day of ____________ 2016.
Mayor Jan Marx
ATTEST:
Lee Price, MMC
Interim City Clerk
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Resolution No. ______ (2016 Series) Page 3
R ______
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 ______________, _________.
______________________________
Lee Price
Interim City Clerk
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blank.
THENewspaper of the Central Coast
TMBUM
3825 South Higuera • Post Office Box 112 • San Luis Obispo, Californi
In The Superior Court of The State of California
In and for the County of San Luis Obispo
AFFIDAVIT OF PUBLICATION
AD # 2355916
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;
APRIL 2, 2016, 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.
A rc.` .
(Signore of Principal Clerk)
DATED: APRIL 22, 2016
AD COST: $336.40
AM cTnop
M uM O$i1 0
SAN LUIS OBISPO CITY COUNCIL
NOTICE OF PUBLIC HEARING
The San Luis Obispo City Council invites
all interested persons to attend a public
hearing on Tuesday, April 19, 2016, at
6:00 p.m. in the My Hall Council Charn-
ber, 990 Palm Street, San Luis Obispo,
Califam la, relative to the following:
TAX AND EQUITY FISCAL RESPoNSf-
BILITY ACT (7EFRA; HEARING FROM
THE HOUSING AUTHORITY OF THE
CITY OF SAN LUIS OBISPO REGARD-
ING ISSUANCE OF A TAX-EXEMPT
LOAN TO ACQUIRE AND REHA81L1-
TATE 55 AFFORDABLE HOUSING
UNITS AT #092 ORCUTT ROAD. 1102
IRONBARK, AND IM3 PISMO STREET
NOTICE IS HEREBY GIVEN that on April
19, 2016, a public hearing as required by
Section 147(f) of the Internal Revenue
Code of 1986 will be held by the City Coun-
cil of the City of San Luis Obispo (the
'City") with respect to the proposed Issu-
ance by the Housing Authority of the City
of San Luis Obispo (the 'Authority"] of debt
obligations (which may be in the form of a
kran evidenced by a note or tax-exempt
revenue bonds, and referred to in this No-
tice as the 'Bonds') in one or more series
in an aggregate amount of approximately
'56,000,000. The proceeds of the Bonds
will be used to: (1) finance the acquisition
and rehabilitation of a 24 unit rental hous-
ing facility located at 1092 Orcutt Road in
the City known as Laurel Creek Apart-
ments, (2) finance the acquisition and reha-
bilitation of a 20 unit rental housing facility
located at 1102 Ironbark Street in the City
known as Ironbark Apartments, (3) finance
the acquisition and rehabilitation of an 11
unit rental housing facility located at 1363
Pismo Street in the City known as Pismo
Buchan Apartments: and (4) pay certain ex-
penses incurred in connection with the issu-
ance of the Bonds. The facilities to be fi-
nanced are to be owned by a California lim-
Red partnership (the "Borrower') to be
formed by the Authority, and the facilities
will be operated initially by the Authority or
another entity selected by the Borrower. All
or a portion of the rental units in the hoes
Ing facilities will be rented to persons And
families of low or very low income.
The Bonds and the obligation to pay princi-
pal of and interest thereon and any redemp-
Von premium with respect thereto will not
ccinsfaute an indebtedness or an obligation
of the Authority, the City of San Luis Obi-
spo, the State of California or any political
subdivision thereof within the meaning of
any constitutional or statutory debt linta-
tion, or a charge against the general credit
or taxing powers of any of them, but will be
payable solely from certain revenues duly'
pledged therefor and generally represent-
ing amounts paid by ft Borrower.
The hearing will commence at 6:00 p.m. or
as soon thefeafter as the matter can be
heard, and will be held in the City Council
Chambers, located at 990 Palm Street,
San Luis Obispo, California. Interested per-
sons wishing to express their views on the
issuance of the Bonds or on the nature and
location of the housing facilities proposed
to be financed may attend the public hear -
Ing or, prior to the time of the hearing, sub-
mit written comments.
Additional information concerning the hous-
ing facilities to be financed may be ob-
tained from Ken Litzinger, Director of Fi-
nance and Chief Financial Officer of the Au-
thority, telephone number (805) 594-5304;'
and any written comments should be sent
prior to the public 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 limit-
ed to raising only those issues you or
someone else raised at the public hearing
described in this notice, or in written corre-
spondence 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 on-
line at www.sla_ city.oM on Wednesday,,
April 13, 2016. Please call the City Clerk's.
Office at (805) 781-7100 for more informa-
tion. The City Council meeting will be tele-
vised live on Charter Cable Channel 20
and live streaming on www.slocity.orp.
Lee Price, MMC
Interim' City Clerk
City of San Luis Obispo
April 2, 2016 2355916
Request from the Housing Authority of the City of San
Luis Obispo Regarding Issuance of a Tax-Exempt Loan
to Acquire and Rehabilitate 55 Affordable Housing Units
at 1092 Orcutt, 1102 Ironbark, and 1363 Pismo
April 19, 2016
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.
2.Adopt a resolution allowing the issuance of a tax-
exempt loan for the Housing Authority of the City of
San Luis Obispo to acquire and rehabilitate Laurel
Creek Apartments, Ironbark Apartments, and Pismo
Buchon Apartments.
2
Background
Housing Authority has requested the City Council hold
a public hearing for the “issuance” of the tax-exempt
bonds for the purpose of acquisition and rehabilitation
TEFRA hearing required under federal regulations for
tax-exempt financing
No financial participation by the City
3
Project Summary
Laurel Creek Apartments (1092 Orcutt Road)
24 affordable rental units
Placed into service in June 1994
$1,200,000 in capital improvements needed
Ironbark Apartments (1102 Ironbark)
20 affordable rental units
Placed into service in November 1995
$400,000 in capital improvements needed
Pismo Buchon Apartments (1363 Pismo Street)
11 affordable rental units
Placed into service in 2000
$220,000 is needed in capital improvements
$6 million in tax-exempt bond financing will be utilized to acquire these properties and rehabilitate
4
Past TEFRA Experience
City has approved nine 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
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 loan for the Housing Authority of the City of
San Luis Obispo to acquire and rehabilitate Laurel
Creek Apartments, Ironbark Apartments, and Pismo
Buchon Apartments.
6