CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
6/26/2023
1 SUBJECT:
Consideration of a Joint Exercise of Powers Agreement approving the issuance of tax-exempt Revenue Bonds by the California Municipal Finance Authority for the purpose of financing or refinancing the acquisition, rehabilitation, improvement and equipping for The Bluffs at Pacifica Apartments at 380 Esplanade Avenue (APN 009-131-060). Recommended California Environmental Quality Act (CEQA) Status: General Rule Exemption, CEQA Guidelines Section 15061(b)(3).
RECOMMENDED ACTION:
1) Conduct the public hearing under the requirements of Tax Equity & Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended (the “Code”); and 2) Adopt the attached resolution authorizing and directing execution of a Joint Exercise of Powers Agreement relating to the California Municipal Finance Authority and approving the issuance of qualified 501(c)(3) bonds in an aggregate principal amount not to exceed $50,000,000 for the purpose of financing or refinancing the acquisition, rehabilitation, improvement and equipping of The Bluffs at Pacifica Apartments at 380 Esplanade Avenue (APN 009-131-060) and certain other matters thereto, and finding the action exempt from the California Environmental Quality Act (CEQA).
STAFF CONTACT:
Christian Murdock, AICP, Planning Director
(650) 738-7341
[email protected]
BACKGROUND/DISCUSSION:
The entity IH Bluffs Pacifica LLC, with Affordable Housing Alliance II, Inc., dba Integrity Housing as the sole member (the “Borrower”) has selected California Municipal Finance Authority (the “CMFA”), a joint powers authority, to be the issuer of tax-exempt revenue bonds to acquire, rehabilitate, and improve The Bluffs at Pacifica Apartments located at 380 Esplanade Avenue (the “Project”), in an amount not to exceed $50 million, and has requested that the City conduct a public hearing in accordance with the Tax Equity and Fiscal Responsibility Act of 1983 (“TEFRA”). The issuance of tax exempt, private activity bonds must be approved by the jurisdiction in which a project is located following a public hearing. A public hearing is required to provide a reasonable opportunity for interested individuals to express their views orally or in writing, on the proposed issuance of bonds and the location and nature of a proposed project to be financed. Additionally, to authorize CMFA to serve as the issuer of the bonds for the Project, the City of Pacifica is required to become a member of the CMFA by executing a Joint Exercise of Powers Agreement (“JEPA”). All financial obligations of the bond issuance are the responsibility of the Borrower and not the CMFA or the City of Pacifica.
In October 1978, the City approved the development of The Bluffs at Pacifica project and since then various building permits were issued for improvements to the units, common areas, and wireless facility at the apartment building. Integrity Housing submitted an application to the CMFA requesting it to be the issuer of tax-exempt financing for The Bluffs at Pacifica. The Project is expected to be financed in an amount not to exceed $50 million of qualified bonds and Pacifica City Council 2
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proceeds would be used to finance the acquisition, rehabilitation, improvement, and equipping of the multi-family housing Project. The Project is made up of 64 units, and 20% of the units (13) will be converted to affordable housing and restricted to 50% of Area Median Income levels, also known as Very Low Income level.
Joint Exercise of Powers Agreement & Bond Issuance
The CMFA was created on January 1, 2004 pursuant to a JEPA 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. To date, over 350 municipalities have become members of CMFA. The CMFA’s representatives and its Board of Directors have considerable experience in bond financing.
The City of Pacifica is required to become a member of CMFA in order to authorize CMFA to serve as the issuer of the bonds for the Project. Attached to this report is a copy of the JEPA to be executed by a designated signatory of the City. The JEPA provides that the CMFA is a public entity, separate and apart from each member executing such agreement. The debts, liabilities and obligations of the CMFA do not constitute debts, liabilities or obligations of the members executing such agreement.
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 JEPA 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 JEPA 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 Borrower, the City following its execution of the JEPA, 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 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 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.
California Environmental Quality Act (CEQA) Status
The California Environmental Quality Act (Section 21000 et seq. of the California Public Resources Code, hereafter “CEQA”) requires analysis of agency approvals of discretionary “projects.” A “project,” under CEQA, is defined as “the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.” CEQA Guidelines Section 15061(b)(3) sets forth the General Rule that CEQA only applies to projects which “have the potential for causing a significant effect on the environment; where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA.”
The action being taken by Council is to adopt a resolution approving, authorizing, and directing execution of a JEPA relating to the CMFA and approving the issuance of revenue bonds by the CMFA to provide for the financing or refinancing of acquisition, rehabilitation, improvement, and equipping of an existing apartment complex known as The Bluffs at Pacifica. Adoption of this resolution is solely for the purposes of satisfying the requirements of TEFRA, the Internal Pacifica City Council 3
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Revenue Code, and the California Government Code Section 6500 (and following). The multifamily rental housing Project was previously approved and environmental impacts associated with that project were analyzed under a separate CEQA document. This City Council action does not involve the approval of any physical development or activity that would have the potential of causing a significant effect on the environment. Therefore, the proposed action does not constitute approval of a project under CEQA and is not subject to CEQA.
ALTERNATIVE ACTION:
The City Council could determine to reject the request to execute the JEPA and reject the request to authorize CMFA to issue revenue bonds to the Borrower.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
The recommended action would be consistent with the following Fiscal Year 2022-2023 City Council goals:
• “Fiscal Sustainability” includes investing in economic development to increase revenues, funding a reserve/emergency fund, and being well prepared for grant opportunities. • “A Healthy and Compassionate Community” includes addressing affordable housing and mental health services, exploring and implementing strategies that relate to homelessness, and supporting community services for all ages.
FISCAL IMPACT:
The Board of Directors of the California Foundation for Stronger Communities, a California nonprofit 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 Pacifica, it is expected that a portion of the issuance fee attributable to the City will be granted by the CMFA to the general fund of the City. Such grant may be used for any lawful purpose of the City.
ORIGINATED BY:
Planning Department
ATTACHMENT LIST:
Attachment 1 - Resolution for JEPA and Bond Issuance Authorization (380 Esplanade Ave) (DOCX)
Attachment 2 - CMFA JEPA Agreement- Pacifica (PDF)