REPORT TO COUNCIL
SUBJECT
Title
Hold a Public Hearing under the Tax and Equity Fiscal Responsibility Act (TEFRA) and Action on the Adoption of a Resolution Approving the California Municipal Finance Authority (CMFA) Reissuance of Tax-Exempt Bonds Relating to the Financing of 145-unit Affordable Housing Project for Low-income Households, Located in the City of Santa Clara, California at 3311 Kifer Road
Report
COUNCIL PILLAR
Promote and Enhance Economic, Housing and Transportation Development
BACKGROUND
Allied Housing, Inc. (the “Sponsor”), on behalf of Allied 2904 Corvin, L.P. or another entity to be created by the Sponsor or an affiliate of the Sponsor (collectively the “Borrower”), has requested that the CMFA reissue and sell revenue bonds in the maximum principal amount of $35,000,000 including but not limited to revenue bonds reissued as part of a plan to refinance the Project described herein for the purpose of making a loan to the Borrower, to enable the Borrower to refinance the costs of the acquisition, construction and improvement of a 145-unit rental housing facility for low-income tenants, including persons experiencing homelessness, located at 3311 Kifer Road (formerly 2904 Corvin Drive) within the City. This development is also known as Calabazas Apartments.
In order for all or a portion of the Bonds to qualify as tax-exempt bonds, the City of Santa Clara must conduct 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 hosting a TEFRA Hearing, reasonable notice must be provided to the 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.
A TEFRA hearing was held, and a resolution unanimously approved by the City Council on April 9, 2019 for the original financing. The original financing has now closed, and the project has been constructed. However, the borrower has asked to extend the maturity date of the bonds. This has triggered a technical reissuance of the bonds which requires another TEFRA hearing.
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 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
The Bonds to be reissued by the CMFA for the Project will be the sole responsibility of 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 refinancing 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.
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 Santa Clara, the CMFA shared a portion of the issuance received at closing of the original financing in an amount of $15,000 that was granted by the CMFA to the General Fund of the City.
The City of Santa Clara is already a member of CMFA. 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. Outside of holding the TEFRA hearing and adopting the required resolution, no other participation or activity of the City or the City Council with respect to the issuance of the bonds will be required.
Conducting the TEFRA hearing is a procedural action 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.
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.
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.
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.
ALTERNATIVES
1. Conduct the public hearing under the requirements of TEFRA and the Internal Revenue Code of 1986, as amended (the “Code”).
2. Adopt the resolution approving the reissuance of the Bonds by the CMFA for the benefit of Allied 2904 Corvin, L.P., to provide for the refinancing of the Project, such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code and the California Government Code Section 6500 (and following).
3. No action by City Council.
RECOMMENDATION
Recommendation
1. Conduct the public hearing under the requirements of TEFRA and the Internal Revenue Code of 1986, as amended (the “Code”).
2. Adopt the resolution approving the reissuance of the Bonds by the CMFA for the benefit of Allied 2904 Corvin, L.P., to provide for the refinancing of the Project, such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code and the California Government Code Section 6500 (and following).
Staff
Reviewed by: Andrew Crabtree, Director, Community Development Department
Approved by: Rajeev Batra, City Manager
ATTACHMENTS
1. CMFA Joint Powers Agreement
2. TEFRA Resolution for 2904 Corvin Road