CITY COUNCIL STAFF REPORT
October 20, 2026
Subject
Tax and Equity Fiscal Responsibility Act (TEFRA) public hearing and approval of conduit financing for The RISE Block 5 Apartments Project Recommended Action
1. Conduct the public hearing under the requirements of the Tax and Equity Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended (the “Code”).
2. Adopt Resolution No. 26-___ approving the issuance of Bonds by the California Municipal Finance Authority (CMFA) for the benefit of Eden Housing, Inc., a California nonprofit public benefit corporation (the “Developer”), on behalf of a limited partnership or another ownership entity to be formed by the Developer or an affiliate of the Developer (such limited partnership or other ownership entity is referred to herein as the “Borrower”), to provide financing for the Project. Such adoption is solely for the purpose of satisfying the requirements of TEFRA and the California Government Code Section 6500 (and following). The resolution will also authorize the Mayor or designee to execute the Joint Exercise of Powers Agreement with the CMFA.
Executive Summary
The Rise Block 5 apartments project consists of 174 very low-income units, 58 low-income units, and 2 manager units of affordable housing to be developed as a phase of the Master Affordable Housing Agreement and Declaration of Restrictive Covenants (Master Affordable Housing Agreement) of the Vallco Rise project. The City Council is required to conduct a public hearing under the Tax and Equity Fiscal Responsibility Act (“TEFRA”) in connection with the proposed issuance of revenue bonds by the California Municipal Finance Authority (the “CMFA”), a joint exercise of powers authority and public entity of the State of California, in an amount not to exceed $135,000,000 (the “Bonds”), to (1) finance and refinance the costs of the acquisition, construction, improvement and equipping of a 234-unit affordable rental housing facility (the “Project”) to be located at 10123 North Wolfe Road, north of Vallco Parkway, on a portion of the site of the former Vallco Mall within the City and to be owned and operated by the Borrower, and to (2) pay certain expenses in connection with the issuance of the Bonds.
The draft resolution (Attachment A), if adopted, would allow the City to become a member of the CMFA through execution of a joint exercise of powers agreement, would approve the financing for the Project by the CMFA, and would result in a payment to the City’s general fund of approximately $24,000, representing 25% of the issuance fee collected by CMFA.
Reasons for Recommendation
Issuance of tax credit financing bonds would support the financing of the construction of the RISE Block 5 affordable housing project. The development of the RISE Block 5 would contribute to the City’s 2023-2031 Housing Element Regional Housing Needs Allocation (RHNA) goals of producing very low and low-income housing. This action will demonstrate progress for meeting the following Housing Element Strategies: HE-2.3.1 (Support Affordable Housing Development) and HE-2.3.5 (Housing Resources).
Staff recommends that the City Council conduct the TEFRA Hearing, execute the Joint Exercise of Powers Agreement of the CMFA, and adopt the draft resolution approving the issuance of the Bonds by the CMFA to support the development of affordable housing.
Background
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 350 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.
TEFRA Hearing
The Borrower requested that the CMFA serve as the municipal issuer of the Bonds in an aggregate principal amount not to exceed $135,000,000 of tax-exempt revenue bonds. The proceeds of the Bonds will be used to finance and refinance (1) the costs of the acquisition, construction, improvement and equipping of a 234-unit affordable rental housing facility (the “Project”) to be located at 10123 North Wolfe Road, north of Vallco Parkway, on a portion of the site of the former Vallco Mall within the City and to be owned and operated by the Borrower; and (2) pay certain expenses in connection with the issuance of the Bonds.
In order for all or a portion of the Bonds to qualify as tax-exempt bonds, the City 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, 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.
Discussion
Execution of the Joint Exercise of Powers Agreement
In order for the CMFA to have the authority to serve as the issuer of the bonds for the Project, it is necessary for the City to become a member of the CMFA. Included as Attachment B to this report is the CMFA’s standard Joint Exercise of Powers Agreement that must be executed by the City in connection with the Bond issuance.
The Joint Exercise of Powers Agreement provides that the CMFA is a public entity, separate and apart from any of its members, all of whom have executed the agreement.
The debts, liabilities and obligations of the CMFA do not constitute debts, liabilities or obligations of any CMFA member.
The Bonds to be issued by the CMFA for the Project will be the sole responsibility of the Borrower, and the City will have no financial, legal, or moral obligation, liability or responsibility for the Project or for the repayment of the Bonds used to finance 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 repaid solely from funds provided by the Borrower.
There are no costs associated with membership in the CMFA and the City will have no financial liability associated with its membership in the CMFA. In addition, participation by the City in the CMFA will not impact the City’s appropriations limits, nor will it constitute any type of indebtedness by the City. Outside of holding the TEFRA hearing, adopting the draft 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, at anytime, from such agreement upon written notice to the Board of Directors of the CMFA. If the City becomes a member of the CMFA and the Bonds are issued, the City could subsequently withdraw from the CMFA by providing written notice to the Board of Directors of the CMFA.
Finally, this project satisfies the qualifications set forth in Cal. Gov. Code section 65913.4, enacted by Senate Bill 35. As such, the project qualifies for the streamlined, ministerial approval process outlined in that statue. If Council fails to approve the CMFA Bond financing, upon challenge a Court might conclude that such failure constitutes a project “denial” in violation of SB 35, resulting in the array of substantial penalties imposed on cities that deny projects in violation of SB 35.
California Environmental Quality Act (CEQA)
The proposed action does not constitute a “project” subject to CEQA.
Sustainability Impact
No sustainability impact.
Fiscal Impact
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. The City of Cupertino will receive 25% of the issuance fee, which may be used for any lawful purpose of the City.
City Work Program (CWP) Item/Description
Preserve existing and develop new BMR/ELI Housing.
City Council Goal
Housing.
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Prepared by: Nicky Vu, Senior Housing Coordinator
Reviewed by: Luke Connolly, Assistant Director of Community Development Benjamin Fu, Director of Community Development
Floy Andrews, Interim City Attorney
Approved for Submission by: Tina Kapoor, City Manager
Attachments:
A – Draft Resolution 26-XXX (Rise Block 5 JPA CMFA Bond Issuance) B – Proposed CMFA JPA Agreement – City of Cupertino
C – Procedures and Municipal Protections under California Municipal Finance Authority Conduit Bond Issuances