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December 17, 2024
ITEM TITLE
TEFRA Hearing: Approve a Plan of Finance for the Issuance of Revenue Bonds by the California Municipal Finance Authority for the Teresina Apartments Affordable Housing Project Report Number: 24-0309
Location: 1250 Santa Cora Avenue
Department: Housing and Homeless Services
G.C. § 84308: No
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act (“CEQA”) State Guidelines. Therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Conduct a public hearing and approve the issuance of tax-exempt multifamily revenue bonds for the Teresina Apartments affordable housing project in connection with its acquisition and rehabilitation by CG Teresina Apts LP.
SUMMARY
The City of Chula Vista (the “City”) has received a request for the approval of issuance of tax-exempt bonds by the California Municipal Finance Authority (the “CMFA” or the “Authority”), in an amount not to exceed $100,000,000, to finance and refinance the acquisition, rehabilitation, improvement and equipping of a 440- unit qualified residen tial rental project (the “Project”) to be owned and operated by the Borrower and located at 1250 Santa Cora Avenue within the City of Chula Vista, California.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment.
Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA.
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Thus, no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable
DISCUSSION
Nuveen Alternatives Advisors LLC, a California limited liability company (the “Sponsor”), on behalf of CG Teresina Apts LP, a Delaware limited partnership, or another ownership entity created by the Sponsor or by another affiliate of the Sponsor (such limited partnership or other ownership entity, the “Borrower”), has requested that CMFA undertake a proposed plan of finance that includes the issuance and reissuance by the Authority from time to time of one or more series of revenue bonds in an outstanding principal amount not to exceed $100,000,000 (the “Bonds”) to finance and refinance the acquisition, rehabilitation, improvement and equipping of the Project.
Tax-Exempt Bonds
Tax-exempt multifamily revenue bonds are a common form of financing for affordable housing development.
Because the interest on the bonds is paid to bondholders on a tax -free basis, they can be issued at lower interest rates than taxable forms of financing, thereby reducing the financing cost of affordable development.
The statewide volume cap for such bond issuances is determined by a prescribed formula, and the California Debt Limit Allocation Committee (“CDLAC”) determines which projects are recommended to receive funds.
Tax-exempt bonds are usually paired with an awa rd of tax credit equity from the California Tax Credit Allocation Committee (“CTCAC”), along with other public and private financing. Tax-exempt bonds are repaid with rental revenue from tenants. Local jurisdictions, such as the Chula Vista Housing Authori ty, or joint powers authorities such as the CMFA act as the issuer of the bonds, essentially performing an administrative role. These bonds are not municipal bonds, do not affect the City’s credit rating or bonding capacity, and do not pose a financial liability for the City.
California Municipal Finance Authority
The CMFA will serve as the issuer of the Bonds. 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 350 municipalities, including the City, 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.
The Chula Vista Housing Authority (“Housing Authority”) updated its bond policies on May 21, 2024, pursuant to Housing Authority Resolution No. 2024 -004. The updated policies generally require that the Housing Authority, rather than CMFA or other entities, be the issuer for any new bonds issued in connection with affordable developments within Chula Vista . However, exceptions may be granted when an outside issuer is needed to ensure project viability. In this instance, the CMFA will be issuing recycled bonds in addition to the new bonds being issued. Recycled bonds are bonds that have been recently repaid by another borrower, that can then be applied to a new project within a certain time frame. Due to the scoring framework for state funding programs, the use of recycled bonds greatly increa ses the likelihood that a P a g e | 3
project will successfully attain state funds. The Housing Authority does not have sufficient transaction volume to enact a bond recycling program, whereas the CMFA, as one of the largest issuers in the state, does have such a program. Therefore, staff supports the use of the CMFA as bond issuer in this instance.
TEFRA
In compliance with Section 147(f) of the Internal Revenue Service Code of 1986, reflecting the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), in order for all or a portion of the Bonds to qualify as tax - exempt bonds, the City, as the “applicable elected representative” of the governmental unit hosting the Project 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 such TEFRA Hearing, reasonable notice must be provided to the members of the community.
Following the close of the TEFRA Hearing, the City must also provide its approval of the issuance of the Bonds for the financing of the Project by the CFMA.
If the proposed resolution is adopted, the public notice, TEFRA Hearing, and local approval of the bond issuance will have been fulfilled and the Project will be authorized to proceed with the issuance of the Bonds.
The Project
Teresina Apartments is a 440 -unit rental housing development that completed construction in 2000. The Project is composed of a mixture of one-, two-, and three-bedroom units. Eighty-eight units (20% of the total Project) are deed restricted as affordable, with the remaining 352 units (80%) rented at market rates. The 88 affordable units are restricted to Very Low-Income households earning at or below 50% of the Area Median Income (“AMI”). Current income and rent restrictions for the affordable units are shown below:
Table 1: Teresina Apts. - 2024 50% AMI Maximum Income Levels 1 Person 2 Persons 3 Persons 4 Persons 5 Persons
$53,050 $60,600 $68,200 $75,750 $81,850
Table 2: Teresina Apts. - 2024 50% AMI Maximum Rent Levels 1 Bedroom 2 Bedrooms 3 Bedrooms
$1,420 $1,705 $1,970
In 2006, the City was the issuer for $37,940,000 in multifamily housing revenue bonds for a refinancing of the Project. These bonds will be assumed by the Borrower in connection with the acquisition. The City will continue to enforce its regulatory agreement with the Project through 2061.
DECISION-MAKER CONFLICT
Staff has reviewed the property h oldings of the City Council members and has found no property holdings within 1,000 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property -related financial conflict of interest under California Code of Regulations Title 2, section 18702.2(a)(7) or (8), for purposes of the Political Reform Act (Cal. Gov’t Code §87100, et seq.).
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Staff is not independently aware, and has not been informed by any City Council members, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
Bond Financing is a self -supporting program with the Borrower solely responsible for the payment of all costs of issuance and other costs of the bonds. 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.
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 co nduit 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. A portion of the CMFA’s issuance fee will be granted to the City, and may be used for any lawful purpose of the City. Such grants are typically deposited into accounts that advance the work of the City’s Housing and Homeless Services Department.
Borrower is responsible for payment to the City of a $3,500 fee for costs of the TEFRA hearing and related actions.
ONGOING FISCAL IMPACT
There will be no further fiscal impact as this is a one-time action, with the CMFA responsible for all ongoing activities associated with monitoring compliance of the regu latory restrictions and administration of the outstanding Bonds.
ATTACHMENTS
1. Notice of Public Hearing
Staff Contact: Brian Warwick, Housing Manager