HomeMy WebLinkAbout04-19-2016 Item 13 Tax and Equility Fiscal Responsibility Act (TEFRA) to develop 46 Affordable Housing 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
DEVELOP 46 AFFORDABLE HOUSING UNITS AT 3680 BROAD 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 (Attachment A) allowing the issuance of a tax-exempt loan by the
Housing Authority of the City of San Luis Obispo to develop 46 affordable housing units
at 3680 Broad Street.
DISCUSSION
Background
The Housing Authority of the City of San Luis Obispo (the “Authority”) is requesting that the
City Council hold a public hearing regarding the issuance of a tax-exempt loan to develop Iron
Works Apartments, 46 affordable housing units located at 3680 Broad Street.
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 will then be purchased by an investor who becomes a limited partner. California
statute does not allow Housing Authorities to be a party in these partnerships, so the Housing
Authority will hold its interest through its related entity San Luis Obispo Non-profit Housing
Corporation (SLONP). SLONP will serve as the sole Managing General Partner for Iron Works
Apartments. 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.
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Project Summary
1. Iron Works Apartments 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
46 units: 12 one bedroom units, 19 two bedroom units, and 15 three bedroom units.
2. Estimated total development costs are projected to be $14.9 million. Of this, it is
anticipated that roughly $10 million in tax-exempt bond financing will be utilized to
finance the project development.
3. 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 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.
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. 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 asking the Council if they are interested in considering 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.
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
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finds that the Housing Authority is capable of achieving the public purpose of providing much
needed affordable housing funded partially through tax-exempt loans.
City’s Past Experience with Conduit Housing Bonds
The City has approved nine “conduit” or tax-exempt housing bond issues in the past as reflected
in the following summary. There have been no financial difficulties with any of these bon d
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”).
Next Steps
After the TEFRA public hearing and adoption of the Resolution of the Council (Attachment A)
approving the issuance of the Bonds, the Authority will apply for low income housing tax credits
and tax-exempt bonds in March of 2016. There will be no further actions required by the City
Council.
ENVIRONMENTAL REVIEW
The 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 a future
affordable housing project which will be subject to environmental review. The activity in
question will not have a significant impact on the environment.
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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. The project has already received
all necessary land use entitlements, as well as multiple City loan commitments. 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.
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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 CONSTRUCTION OF IRON WORKS
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 to develop Iron Works Apartments, a
46 unit affordable housing project located at 3680 Broad 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 approximate amount of
$10,000,000, and a loan of the proceeds of the Bonds to the Borrower; and
WHEREAS, a portion of the housing units in the Housing Facility 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
Project 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
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Resolution No. ______ (2016 Series) Page 2
-2-
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
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 significant impact on the environment, as defined by §15061(b)(3)
of the California Environmental Quality Act and are exempt from environmental review.
SECTION 3. 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
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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, MMC
Interim City Clerk
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Newspaper of the Central Coast
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3825 South Higuera • Post Office Box 112 • San Luis Obispo, California I
In The Superior Court of The State of California
In and for the County of San Luis Obispo
AFFIDAVIT OF PUBLICATION
AD # 2355932
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.
"
(Signat of Principal Clerk)
DATED: APRIL 22, 2016
AD COST: $315.52
APR 0 6 2916
r OF
� 0J3I; o
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
6:09 p.m. in the City Hall Council Cham-
ber, 990 Palm Street, San Luis Obispo,
California, relative to the following:
NOME 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
loan evidenced by a note or fax -exempt
revenue bonds, and referred to in this No-
tice as the 'Bonds') in one or more series
in an aggregate amount of approximately
si 0,000,000. The proceeds of the Bonds
will be used to: (1) finance the develcp-
,ment of a 46 unit affordable rental housing.
taalrty located at 3680 Broad St. in the
City, to be (mown as Iron Works Apart-
ments; and (2) pay certain expenses incur-
red in connection with the issuance of the
Bonds, The facilities to be financed are to
be owned by a California limited partner-
ship (the 'Borrower") to be formed by the
Authority, and the facilities will be operated
initially by the Authority or another entity, se-
lected by the Borrower. All or a portion of
the rental units in the housing facilities will
be rented to persons and families of low or
very low income.
The Bonds and the obligation to pay pnnci-
pal of and interest thereon and any redemp-
tion premium with respect thereto will not
constitute an indebtedness or an obligation
of the Authority, the City of San Lu s -Cbl
spo. the State of California or any political
subdivision thereof within the meaning of
any constitutional or statutory debt limita-
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 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, 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 -
ma 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 ClerWs Office and on -
,line at www.slocitv,orq on Wednesday.
April 13, 2016. Please call the City Clerk's
Otfice at (805) 781-7100 for more informs-
fion. The City Council meeting will be tele-
vised live on Charter Cable Channel 20
and live streaming on www.slocity.orm
Price, MMC
im City Clerk
of San Luis Obispo
2. 2016 2355932
Request from the Housing Authority of the City of
San Luis Obispo Regarding Issuance of a Tax-
Exempt Loan to Develop 46 Affordable Housing
Units at 3680 Broad Street
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 by the Housing Authority of the City of
San Luis Obispo to develop 46 affordable housing
units at 3680 Broad Street.
2
Background
Housing Authority has requested the City Council hold
a public hearing for the “issuance” of the tax-exempt
bonds for construction
TEFRA hearing required under federal regulations for
tax-exempt financing
No financial participation by the City
Project has received all planning entitlements
3
Project Summary
Iron Works Apartments
46 affordable units deed restricted for 55 years
12 one-bedroom units
19 two-bedroom units
15 three- bedroom units
4,000 square feet of commercial space
Estimated total development costs of $14.9 million
$10 million in tax-exempt bond financing will be utilized to
finance the project development.
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 by the Housing Authority of the City of
San Luis Obispo to develop 46 affordable housing
units at 3680 Broad Street.
6