REPORT TO COUNCIL
SUBJECT
Title
Adopt a resolution to become a member of the California Municipal Finance Authority (CMFA) and to approve the CMFA’s issuance of tax exempt bonds relating to the financing of 145 Affordable Housing Units at 2904 Corvin Drive
Report
BACKGROUND
Allied Housing has requested that the California Municipal Finance Authority (CMFA) issue and sell revenue bonds in the maximum principal amount of $54,000,000 as part of a plan to finance the costs of the acquisition, construction and improvement of a 145-unit 100 percent affordable rental housing facility for low-income tenants, including persons experiencing homelessness, located at 2904 Corvin Drive within the City of Santa Clara (“Project”).
For all or a portion of the bonds to qualify as tax-exempt bonds, the City of Santa Clara (City) must conduct a public hearing under the Tax Equity and Fiscal Responsibility Act (the “TEFRA Hearing”) to provide the members of the community an opportunity to speak in favor of or against the use of tax-exempt bonds for financing the Project. Public notice must be provided to the members of the community prior to the TEFRA Hearing. Following the close of the TEFRA Hearing, an “applicable elected representative” of the City must provide its approval of the issuance of the bonds for financing the Project.
California Municipal Finance Authority
For the CMFA to have the authority to serve as the issuer of the bonds for the project, it is necessary for the City of Santa Clara to become a member of the CMFA. 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 charitable activities throughout California. To date, over 300 municipalities have become members of CMFA.
The CMFA was formed to assist local governments, non-profit organizations and businesses with the issuance of taxable 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.
DISCUSSION
Adoption of the proposed resolution will allow the City of Santa Clara to execute the Joint Exercise of Powers Agreement (Attachment 1) and become a member of the CMFA. The CMFA is a public entity, separate and apart from each member executing such an agreement. The debts, liabilities and obligations of the CMFA do not constitute debts, liabilities or obligations of the members executing such an agreement. The bonds to be issued by the CMFA for the Project will thus be the sole responsibility of Allied 2904 Corvin, L.P. or another entity to be created by the Allied Housing, Inc. or an affiliate (collectively the “Borrower”), and the City will have no financial, legal, moral 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 but are to be paid for solely from funds provided by the Borrower.
There are no costs associated with membership in the CMFA and the City will in no way become exposed to any financial liability by reason of its membership in the CMFA. In addition, participation by the City in the CMFA will not impact the City’s appropriations limits and will not constitute any type of indebtedness by the City. Outside of holding the TEFRA hearing, adopting the required resolution and executing the Joint Exercise of Powers Agreement of the CMFA, no other participation or activity of the City or the City Council with respect to the issuance of the bonds will be required.
The Joint Exercise of Powers Agreement expressly provides that any member may withdraw from such agreement upon written notice to the Board of Directors of the CMFA. In the case of the proposed bond financing for the Project, the City following its execution of the Joint Exercise of Powers Agreement, could, at any time following the issuance of the bonds, withdraw from the CMFA by providing written notice to the Board of Directors of the CMFA.
The Project site is located within the Lawrence Station Area Plan and has all of the zoning and general plan designations required for the development of a high density residential project, as proposed. The Project was approved by the City’s Architectural Committee at the January 16, 2019 Committee meeting. On February 19, 2019, the City approved a Loan Agreement with Allied Housing for a loan with a principal of up to $5,000,000 to support construction of the project.
A summary of the anticipated Sources as presented on February 19 includes the following:
|
Sources |
Construction |
|
Permanent |
|
Construction Loan to be financed through CMFA |
$54,000,000 |
|
$0 |
|
City of Santa Clara Loan |
$0 |
|
$5,000,000 |
|
County Loan |
$13,931,517 |
|
$28,213,471 |
|
1st Mortgage |
$0 |
|
$9,242,900 |
|
Deferred fee (paid via cash flows) |
$0 |
|
$1,000,000 |
|
General Partner (Allied Housing) Equity |
$0 |
|
$1,000,000 |
|
Tax Credit Equity |
$2,608,350 |
|
$26,083,495 |
|
Total Sources |
$70,539,866 |
|
$70,539,866 |
Conducting the TEFRA hearing and approving the City’s membership in the CMFA are procedural actions the City is required to take that will allow implementation of the Project, advancing the City’s goals and objectives related to the production of affordable housing and consistent with the City’s General Plan and the Lawrence Station Area Plan.
FISCAL IMPACT
There is no cost to the City other than administrative staff time and expense.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
As required by TEFRA regulations, a 15-day notice was published on March 20, 2019 in The Santa Clara Weekly.
RECOMMENDATION
Recommendation
1. Hold a Tax Equity and Fiscal Responsibility Act public hearing for the issuance of up to $54,000,000 in tax-exempt private-activity bonds by California Municipal Finance Authority (CMFA) for the benefit of Allied 2904 Corvin, L.P.; and
2. Adopt the resolution authorizing the City Manager or designee thereof to execute the Joint Exercise of Powers Agreement with the CMFA, and approving the issuance of the Bonds by the CMFA for the benefit of Allied 2904 Corvin, L.P., to provide for the partial financing of the Project.
Staff
Reviewed by: Andrew Crabtree, Director of Community Development
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. CMFA Joint Powers Agreement
2. TEFRA Resolution for 2904 Corvin Road