Memorandum — San Jose City Council, August 12, 2025

TO: HONORABLE MAYOR

AND CITY COUNCIL
FROM: Maria Öberg
Erik L. Soliván

SUBJECT: See Below DATE: July 21, 2025

Approved

Date:
7/22/25

COUNCIL DISTRICT: 2

SUBJECT: A pproval of the Issuance of Multifamily Housing Revenue Refunding Bonds and the Loan of the Proceeds Thereof for the Refinancing of the La Moraga Apartments Development and Approving Other Related Documents

RECOMMENDATION

Adopt a resolution:

(a) Authorizing the issuance of tax-exempt multifamily housing revenue bonds designated as “City of San José Multifamily Housing Revenue Refunding Bonds (La Moraga Apartments), Series 2025C” in a principal amount not to exceed $44,856,000 (2025C Bonds);

(b) Approving the loan of 2025C Bond proceeds to La Moraga San Jose, L.P., a California limited partnership, to refinance the outstanding multifamily housing revenue bonds issued by the City in 2012 that financed acquisition, construction, and development of a 275-unit multifamily development known as La Moraga Apartments located at 5822 Charlotte Drive in the City of San José;

(c) Approving in substantially final form a Trust Indenture, a Financing Agreement, an Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, a Bond Purchase Agreement, a Preliminary Official Statement, an Assignment and Intercreditor Agreement and related documents (collectively, the 2025C Bond Documents); and

(d) Authorizing and directing the City Manager, Director of Housing, Director of Finance, Assistant Director of Finance, Deputy Director of Finance – Debt and Treasury Management or their designees, to negotiate, execute and deliver the 2025C Bond COUNCIL AGENDA: 8/12/25
FILE: 25-802
ITEM: 3.8

HONORABLE MAYOR AND CITY COUNCIL
July 21, 2025
Subject: Approval of the Issuance of a Multifamily Housing Revenue Refunding Bonds and the Loan of the Proceeds Thereof for the Refinancing of the La Moraga Apartments Development and Approving Other Related Documents

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Documents together with any documents ancillary to the 2025C Bond Documents for the issuance and sale of the 2025C Bonds and the loan of the proceeds thereof.

SUMMARY AND OUTCOME

In accordance with the City’s Policy for the Issuance of Multifamily Housing Revenue Bonds,
1 St. Anton Capital, a California for-profit corporation (Sponsor), has requested that the City of San José issue tax-exempt multifamily housing revenue bonds designated as City of San José Multifamily Housing Revenue Refunding Bonds (La Moraga Apartments), Series 2025C in a principal amount not to exceed $44,856,000.

Approval of the recommended actions will enable the issuance of the 2025C Bonds to refinance multifamily housing revenue bonds issued by the City in 2012 that financed the acquisition, construction and development of the La Moraga Apartments, located at 5822 Charlotte Drive in San José (Development).

The proceeds of the 2025C Bonds will be loaned to La Moraga San Jose, L.P., a California limited partnership (Borrower), an entity formed by St. Anton Capital. The Borrower will use these proceeds and to refinance the 2012E Bonds.

THE 2025C BONDS WILL NOT BE PAID FROM OR SECURED BY THE GENERAL TAXING POWER OF THE CITY OR ANY OTHER CITY ASSET.

BACKGROUND

Borrower

The Borrower is a California limited partnership consisting of the following entities:

(1) Administrative General Partner: Anton La Moraga, LLC, a California for profit corporation created by St. Anton Capital;
(2) Managing General Partner: PH La Moraga Holdings, LLC, a California limited liability company created by Pacific Housing, Inc., a California not for profit public benefit corporation; and
(3) Limited Partner: St. Anton Investors, LLC, created by St. Anton Capital.

The Sponsor has requested that the City issue the 2025C Bonds for the purpose of refinancing the outstanding 2012E Bonds. The 2012E Bonds received a private activity bond volume cap allocation from the California Debt Limit Allocation Committee

1 City Council Policy #1-16 Policy for the Issuance of Multifamily Housing Revenue Bonds

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(CDLAC) in 2012. However, because the 2025C Bonds are being issued as part of a refunding transaction, they do not require new allocation from the state’s annual federal tax-exempt private activity volume cap allocated by CDLAC.

2012E Bonds

The 2012E Bonds were issued in the principal amount of $52,440,000. These bonds were non-rated, non-credit enhanced, and structured as a private placement, with U.S.

Bank and Mechanics Bank serving as the initial purchasers. After the completion of construction and the lease-up phase of the project, Massachusetts Mutual Life Insurance Company, a Massachusetts corporation (MassMutual), acquired the bonds from the original holders. During the construction period, the bonds paid interest only, at a variable rate indexed to the one-month London Interbank Offered Rate (LIBOR), plus a spread of 2.75%. Following the conversion date, the interest on the Bonds was adjusted to a fixed rate of 4.63%. Pursuant to the Indenture, the 2012E Bonds will mature on September 1, 2025, (ten years after the conversion date of September 1, 2015).

Development Overview

The Development is located on a site formerly owned by Hitachi Global Storage Technologies, Inc. It consists of ten residential buildings of two, three, and four stories.

Construction of the Development commenced in September 2012; and was placed in service on August 27, 2014.

The Development is a 275-unit mixed-income housing project, including (a) 57 units restricted to very low-income households, (b) 33 units restricted to low-income households
2 and (c) 185 apartments that are market rate (including three manager units). The Development is subject to affordability restrictions imposed by the California Tax Credit Allocation Committee regulations for a 55-year period that ends on September 7, 2067, and 58-year affordability restrictions imposed by the City that ends on February 2, 2070. The City did not provide a loan for the development of the affordable units. The financing history of this project is provided as Attachment A – Key Financing Dates.

2 Very low and low income households as defined in accordance with California Health and Safety Code section 50079.5.

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City as Issuer of Multifamily Housing Bonds

In accordance with the City’s policy for the issuance of multifamily housing revenue bonds (City Council Policy 1-16), the City may issue tax-exempt multifamily housing revenue obligations in connection with the financing or refinancing of rental housing projects within the City.

Sources of Development Refinancing

The 2025C Bonds will refinance the outstanding par of the 2012E Bonds in the amount of $44,856,000. Berkadia Commercial Mortgage LLC will underwrite and process a mortgage loan pursuant to Federal National Mortgage Association (Fannie Mae) Delegated Underwriting and Servicing Program in the estimated amount of $11,110,000. The mortgage loan is taxable and will fund a minimal portion of the outstanding 2012E Bonds, accrued interest thereon, transaction costs and a partial return of the equity that the Borrower previously provided to fund the construction of the Development. The taxable loan will have a term of 10 years and will bear interest at a rate of 5.52% per annum.

Attachment A – Key Financing Dates, previously referenced in this memorandum, provides background on the Development’s financing history, while Attachment B – Sources and Uses outlines the estimated sources and uses for the refunding.

ANALYSIS

Overview of the Multifamily Housing Revenue Bond Financing Multifamily housing financing involves the issuance of tax-exempt multifamily housing bonds or notes on behalf of private developers of qualifying affordable rental apartment projects. The advantages of tax-exempt financing to borrowers include below-market interest rates and low-income housing tax credits – features that are not available with a conventional multifamily housing mortgage loan.

The City Charter allows the City to issue, execute, and deliver revenue bonds pursuant to California Health and Safety Code Sections 52075-52098. In accordance, the City is authorized to issue the 2025C Bonds for the purpose of refinancing the outstanding 2012E Bonds proceeds used for the acquisition and construction of multifamily rental housing. Section 52011 of the California Health and Safety Code defines “bonds” to include bonds for purposes of California Health and Safety Code Sections 52075- 52098.

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The 2025C Bonds are limited obligations of the City, payable solely from loan repayments by the Borrower, and are not secured by the general taxing power of the City nor any other asset of the City.

Requirements for Tax-Exemption

For a private activity multifamily housing revenue bond or note to qualify for tax exemption, federal law requires, among other matters, that one of two restrictions apply:

1) A t least 20% of the units in the housing development must be reserved for occupancy by individuals and families whose income is 50% or less of the area median income; or
2) A t least 40% of the units must be reserved for occupancy by individuals and families whose income is 60% or less of the area median income.

The first restriction was incorporated into the Regulatory Agreement for the 2012E Bonds and will be incorporated into the Amended and Restated Regulatory Agreement for the 2025C Bonds. The Development will continue to be subject to additional affordability restrictions, including those previously imposed by CDLAC and the City.

Structure of the 2025C Bonds

Public Offering Structure

The 2025C Bonds will be sold initially to the public by Stifel, Nicholas and Company, Inc. (Underwriter). The 2025C Bonds will be credit enhanced by a direct pay credit enhancement instrument issued by Fannie Mae and are anticipated to be rated “Aa1” by Moody’s.

Upon the issuance and delivery of the 2025C Bonds, the proceeds will be deposited into the loan fund with the Trustee. The bond proceeds will be used to prepay the prior loan, discharge the prior mortgage, and refund the prior bonds. The bonds will bear fixed interest rates expected to be payable on each March 1 and September 1, commencing March 1, 2026.

Principal Amount and Terms

The estimated par amount of the 2025C Bonds will be $44,856,000. The 2025C Bonds will mature on September 1, 2035. The 2025C Bonds will pay interest only and will not amortize.

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Interest Rate

The interest rate on the 2025C Bonds will be fixed at a rate established by the Underwriter based on market conditions at the time of the 2025C Bond sale. Based on market conditions as of July 9, 2025, the interest rate on the 2025C Bonds is estimated at 4.38%. The cost of the Fannie Mae credit enhancement and servicing would result in an all-in rate of 4.75%.

Financing Documents

The following is a brief description of the documents, the Trust Indenture, Financing Agreement, Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, Assignment and Intercreditor Agreement, Bond Purchase Agreement, and Preliminary Official Statement. The staff recommendation requests City Council to approve and authorize the execution of these documents. Copies of these documents will be posted on the City Council Agenda website in advance of the August 12, 2025 meeting.

Trust Indenture

The 2025C Bonds will be issued under Trust Indenture (the Indenture) between the City and Computershare Trust Company, National Association (the Trustee). The Indenture will be executed by the Director of Finance, or another authorized officer, on behalf of the City, and attested by the City Clerk. Pursuant to Indenture, the Trustee is authorized to receive, hold, invest, and disburse 2025C Bond proceeds and other funds established thereunder and:

• Authenticate the 2025C Bonds;
• Apply and disburse payments to the Bondholders; and
• Pursue remedies on behalf of the Bondholders.

The Financing Agreement obligates the Borrower to compensate the Trustee for services rendered under the Indenture.

Financing Agreement

The Financing Agreement is among the City, the Trustee, and the Borrower (the Financing Agreement). The Financing Agreement will be executed by the Director of Finance, or another authorized officer, on behalf of the City. The Financing Agreement provides for the loan of 2025C Bond proceeds to the Borrower to refinance the outstanding note. The loan will be evidenced by a mortgage note (the Mortgage Loan) that corresponds to the payment terms of the 2025C Bonds. The City’s rights to receive payments under the Mortgage Loan will be assigned to the Trustee, along with certain

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other rights under the Indenture; however, certain reserved rights have been retained by the City, such as the City's right to receive fees, notices and to indemnification.

Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants

The Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants (the Regulatory Agreement) is between the City, the Trustee, and the Borrower. The Regulatory Agreement is executed by the Director of Finance and the Director of Housing, or other authorized officers, on behalf of the City. The Regulatory Agreement contains certain covenants and restrictions regarding the Development and its operations, intended to assure compliance with the Internal Revenue Code of 1986.

The Regulatory Agreement amends and restates the regulatory agreement and declaration of restricted covenants that was entered into in connection with the issuance of the 2012 Bonds. The Regulatory Agreement restricts the rental of Development units to low-income residents for a period of at least 55 years after the delivery of the 2012E Bonds (September 7, 2067).

Assignment and Intercreditor Agreement

The Assignment and Intercreditor Agreement (the Assignment) is among the City, the Trustee, and Fannie Mae. The Assignment will be executed by the Director of Finance, or another authorized officer, on behalf of the City. The Assignment assigns the City’s and Trustee’s remedies under the Financing Agreement and Trust Indenture to Fannie Mae.

Bond Purchase Agreement

The Bond Purchase Agreement is among the City, the Borrower, and the Underwriter.

The Bond Purchase Agreement will be executed by the Director of Finance, or another authorized officer, on behalf of the City. The Bond Purchase Agreement sets forth the principal amount, the Underwriter’s fee, and the coupon(s) and yield(s) of the 2025C Bonds, all of which will be determined at the time of the Bond sale.

Preliminary Official Statement

The Preliminary Official Statement is an informational disclosure document released prior to the sale of the 2025C Bonds and is followed by a final Official Statement after pricing the 2025C Bonds and prior to closing. The Preliminary Official Statement and Official Statement describe the 2025C Bonds, their security and sources for payment, associated risk factors, and other pertinent financial matters. The final Official Statement is substantially in the form of the Preliminary Official Statement and is to be updated

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with information that is market-dependent, such as the final principal amount of the 2025C Bonds, interest rate, offering price, redemption provisions, and delivery date.

The distribution of the Preliminary Official Statement and the final Official Statement is subject to federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require the Preliminary Official Statement to include all facts that would be material to an investor in the 2025C Bonds. Information is material if there is a substantial likelihood that the information would have actual significance in the deliberations of the reasonable investor when deciding whether to buy or sell securities. The Securities and Exchange Commission is the federal agency with regulatory authority over compliance with federal securities laws. The Securities and Exchange Commission has indicated that if a member of a legislative body, like the City Council, has knowledge of any facts or circumstances that an investor would want to know prior to investing in securities, such as the 2025C Bonds, whether relating to their repayment, undisclosed conflicts of interest with interested parties, or otherwise, the member of the legislative body should endeavor to discover whether such facts are adequately disclosed in the Preliminary Official Statement. The steps that a member of a legislative body could take to fulfill this obligation include becoming familiar with the Preliminary Official Statement and questioning staff and other members of the financing team about the disclosure of such facts.

Financing Team Participants

The financing team for the 2025C Bonds includes the following participants:.

• City’s Municipal Advisor: Ross Financial
• Bond Counsel: Anzel Galvan, LLP
• Trustee: Computershare Trust Company, N.A.
• Bond Underwriter: Stifel, Nicolaus & Company, Inc.

Payment of all costs associated with the City’s Municipal Advisor, Bond Counsel, and Trustee is contingent upon the closing of the 2025C Bonds and will be paid from the proceeds of a taxable loan funded by Fannie Mae.

Financing Schedule

The current proposed schedule is as follows.

• City Council Approval of 2025C Bond Documents August 12, 2025 • Sale of 2025C Bonds August 20, 2025
• 2025C Bond Closing August 28, 2025

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Public Disclosure Report Relating to Conduit Revenue Obligations

The Borrower has prepared the attached public disclosure report pursuant to California Government Code Section 5852.1, which is included as Attachment C – Public Disclosure Report, providing good faith estimates of certain costs associated with the issuance of the 2025C Bonds.

City Bond Issuance and Monitoring Fees

The City’s Policy for Issuance of Multifamily Housing Revenue Bonds requires that the issuance fee and annual monitoring fee be calculated as follows.

• Issuance Fee is an amount equal to the sum of (a) 0.50% of the first $10,000,000 issued and (b) 0.25% of the remaining par issued; and
• Annual Monitoring Fee is an amount equal to 0.125% of the original principal amount of tax-exempt bonds issued.

City Issuance Fee

Based on the Borrower’s estimate of a 2025C Bond par of $44,856,000, the City’s Policy would require an issuance fee of $137,140. The final fee will be based on the final par issued, subject to a not-to-exceed amount of $44,856,000.

City Annual Bond Monitoring Fee

The Housing Department is charged with monitoring the Development. In general, the City annual monitoring fee is equal to 0.125% of the original principal amount of the Bonds issued. This fee typically applies until the end of the 55-year term of the CDLAC compliance period.

Based on the Borrower’s estimate of a 2025C Bond par of $44,856,000, the City’s Policy requires an annual monitoring fee of $56,070. In connection with the issuance of the 2012E Bonds, the City Council approved an exception to allow a reduction of the annual monitoring fee. The reduced fee was proportionally based on the number of units offered at 50% of Area Medium Income (57) as a percentage of the total units in the development (275). The reduced fee of $13,587 was approved to begin fifteen years after the date on which at least 50% of the units in the Development were first occupied (October 14, 2029). This is documented in the 2012E Supplemental Memorandum to the City Council, see Attachment D.

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EVALUATION AND FOLLOW-UP

The Housing Department posts periodic reports on the status of its affordable properties undergoing rehabilitation or construction on its website3. As the recommended actions in this memorandum do not involve a property undergoing rehabilitation or construction, the Development will not be included in the Housing Department’s periodic reports.

The Housing Department is currently and will continue to monitor the ongoing compliance of the Development, including affordability requirements, rent burden analysis, and periodic property inspections.

COST SUMMARY/IMPLICATIONS

The Borrower will pay all issuance costs of the 2025C Bonds from a taxable loan funded by Fannie Mae. The 2025C Bonds will not be paid from, nor secured by, the general taxing power of the City or any other City asset.

The City is expected to receive revenue from the issuance of the 2025 Bonds in the amount of $137,140 and annual monitoring in the amount of $56,070 until 2029 then in the amount of $13,587 throughout the remainder of the original 55 year CDLAC regulatory compliance period ending on September 7, 2067. The revenue received will be deposited into the Housing Trust Fund.

COORDINATION

This memorandum has been coordinated with City Attorney’s Office and the City Manager’s Budget Office.

PUBLIC OUTREACH

The method of notifying the community of the City’s intent to issue the tax-exempt private activity Bond is the Tax Equity and Fiscal Responsibility Act (TEFRA) hearing.

This hearing was held on June 23, 2025, before the Director of Finance. The public hearing notice for this hearing was published in the San José Post - Record on June 13, 2025. No public comments were made at the TEFRA hearing.

3 Housing Department affordable properties webpage, Web Link: https://www.sanjoseca.gov/your- government/departments-offices/housing/homelessness-program-dashboard

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This memorandum and the 2025C Bond Documents will be posted on the City’s Council Agenda website for the August 12, 2025 City Council meeting.

COMMISSION RECOMMENDATION AND INPUT

No commission recommendation or input is associated with this action.

CEQA

Determination of Consistency with the Environmental Impact Report for the Hitachi Campus and Mixed-Use Transit Village Project, File No. PDC04-031 (Resolution No. 72772).

PUBLIC SUBSIDY REPORTING

This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution.

/s/ /s/
Erik L. Soliván Maria Öberg
Director of Housing Director of Finance

For questions regarding the financing plan, please contact Qianyu Sun, Deputy Director of Finance, at [email protected]
. For questions regarding the project, please
contact Banu San, Deputy Director, Housing Department, at [email protected].

ATTACHMENTS:

Attachment A: Key Financing Dates
Attachment B: Sources and Uses
Attachment C: Public Disclosure Report
Attachment D: Supplemental City Council Memorandum for Series 2012E

Attachment A: Key Financing Dates
The following are the key dates relating to the financing history of the Development:
• February 12, 2012 – The City’s Director of Finance held a TEFRA hearing pursuant to Municipal Code Section 5.06.430 regarding the issuance of tax- exempt multifamily housing revenue bonds by the City in an amount not to exceed $53,500,000 to finance the costs of constructing the Development.

• May 16, 2012 – The City submitted an application to the California Debt Limit Allocation Committee (CDLAC) for an allocation of up to $52,440,000.

• July 18, 2012 – The City received a private activity bond allocation from CDLAC for the 2012E Bonds and the Borrower received a reservation of 4% Federal tax credits in the requested amount.

• August 9, 2012 – The City Council adopted a resolution approving the issuance of the 2012E Bonds.

• September 7, 2012 – The City issued the 2012E Bonds in the amount of $52,440,000.

• June 23, 2025 – The City’s Director of Finance held a TEFRA hearing regarding the issuance of tax-exempt multifamily revenue refunding bonds by the City in an amount not to exceed $45,000,000 for the refinancing of the 2012E Bonds.

• September 1, 2025 – Maturity of the 2012E Bonds.

Attachment B: Sources and Uses

City of San José – La Moraga Apartments
Plan of Finance – Sources of Funding

Source Amount
Tax-Exempt Refunding Bonds. ...................................... $ 44,856,000 Taxable Loan from Fannie Mae .......................................................... 11,110,000 Total .................................................................................................... $ 55,966,000

City of San José – La Moraga Apartments
Plan of Finance – Uses of Funding

Uses Amount
Refund 2012E Bonds Par and Accrued Interest ................................ $ 45,028,410 Estimated Transaction Costs ............................................................. 936,318 Return of Borrower Equity .................................................................. 10,001,272 Total .................................................................................................... $

55,966,000

Attachment C: Public Disclosure Report

Pursuant to California Government Code Section 5852.1, the following good faith estimate is provided by the lender, at the request of the borrower (the Borrower) identified below, to the City of San José (the City) prior to the City’s regular meeting (the Meeting) of its City Council (the City Council) at which Meeting the City Council will consider the authorization of conduit revenue obligations as identified below.

1. Name of Borrower: La Moraga San Jose LP

2. Meeting Date: August 12, 2025

3. Name of Bond Issue / Conduit Revenue Obligations: City of San José Multifamily Housing Revenue Refunding Bonds (La Moraga Apartments) Series 2025C (the Bonds).

4. __ Private Placement Lender or Bond Purchaser, X Underwriter or __ Financial Advisor (mark one) engaged by the Borrower from which the Borrower obtained the following required good faith estimates relating to the Bonds:

(A) The true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the new issue of the Bonds (to the nearest ten-thousandth of one percent): 4.3784%.

(B) The finance charge of the Bonds, which means the sum of all fees and charges paid to third parties: $4,629,816.00 (consisting of $1,020,918.00 paid upfront and $3,608,898.00 during the term of the Bonds and through the end of the compliance period).

(C) The amount of proceeds received by the public body for sale of the Bonds less the finance charge of the Bonds described in subparagraph (B) and any reserves or capitalized interest paid or funded with proceeds of the Bonds:
$44,856,000.

(D) The total payment amount, which means the sum total of all payments the borrower will make to pay debt service on the Bonds plus the finance charge of the Bonds described in subparagraph (B) not paid with the proceeds of the Bonds (which total payment amount shall be calculated to the final maturity of the Bonds): $67,443,168.00 (consisting of total debt service of $62,813,352 and the finance charge noted in paragraph B).

This document has been made available to the public at the Meeting of the City.

July 9, 2025
CITY OF ~

SAN JOSE

CAPITAL OF SILICON VALLEY
COUNCIL AGENDA: 08-28-12
ITEM: 4,2
Memorandum
TO: HONORABLE MAYOR

AND CITY COUNCIL
FROM: Julia H. Cooper
Leslye Corsiglia
SUBJECT: SEE BELOW
Approved
DATE: August 23, 2012
Date
COUNCIL DISTRICT: 2
SUBJECT: APPROVAL OF THE ISSUANCE OF TAX-EXEMPT MULTIFAMILY

HOUSING REVENUE BONDS, LOAN OF BOND PROCEEDS AND

RELATED DOCUMENTS FOR THE LA MORAGA APARTMENTS

SUPPLEMENTAL

REASON FOR SUPPLEMENTAL
To add Recommendation (e) to the existing recommendations in the Council Memorandum, dated August 9, 2012, as follows:
"(e) Approving an exception to the bond monitoring fees to be charged under the Policy for the Issuance of Multifamily Housing Revenue Bonds."
Existing Housing Bond Policy
Under the City’s Policy for the Issuance of Multifamily Housing Revenue Bonds, adopted on June 11, 2002, and last amended on December 6, 2005 (the "Housing Bond Policy"), the City charges an annual fee for monitoring the housing set-aside restrictions required in tax-exempt bond transactions for the period specified in the Regulatory Agreement and Declaration of Restricted Covenants (the "Regulatory Agreement").

The period is the greater of: (a) the minimum required for Federal tax law purposes or (b) some longer period established in the Regulatory Agreement (e.g., because of a commitment made by the borrower to the California Debt Limit Advisor Commission ("CDLAC") in its original application for private activity bond allocation (the "Regulatory Agreement Period"). The Housing Bond Policy sets the fee at 0.125% of the original bond amount subject to (a) a reduction in the bond amount after construction and lease up in the case of non-profit developers and (b) a minimum fee of $7,500 per year.

The Regulatory Agreement typically provides that in the event tax-exempt bonds are repaid before the end of the end of the Regulatory Agreement Period, then the City has the option to Attachment D: 2012E Supplement Memo

HONORABLE MAYOR AND CITY COUNCIL
August 23, 2012
Subject: La Moraga Apartments

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require the borrower to prepay the annual fee otherwise due for the remainder of the Regulatory Agreement Period, at a discount rate equal to the bond rate.

The Housing Bond Policy was formulated in the context of the typical transaction for which the City historically has served as bond issuer - i.e., transactions involving a City subsidy, the restriction of 100% of the units to families or seniors with household incomes that do not exceed 60% of area median income, and bonds with long final maturities (30 years or longer).

Application of the Housing Bond Policy to the La Moraga Project The La Moraga project (the "Project") involves the proposed bond issuance of $52,440,000 of multifamily housing revenue bonds with no City subsidy and a final maturity of approximately 13 years (to 2025). To comply with Federal tax code, the La Moraga San Jose L.P., a California limited partnership (the "Borrower") has restricted 21% of the units to families with household incomes under 50% of area median income. Under the Federal tax code, these restrictions would extend for approximately 17 years. The Borrower further committed to CDLAC to restrict the units for 55 years, despite the shorter period required under the Federal tax code.

Under the Housing Bond Policy, the City is required to charge an annual bond monitoring fee of $65,550 for 55 years, although for Federal tax purposes, the restrictions would terminate in approximately 17 years -at which point the City’s monitoring responsibilities for the Project will be significantly reduced. Housing Department staff believes that a reduction of the $65,550 annual fee after the Federal restrictions terminate is warranted. However, the Housing Bond Policy does not permit such a reduction without City Council approving an exception.

Subject to City Council approval, the Borrower and Housing Department staff agreed to an annual fee of $13,587 after the Federal tax code restrictions end. The fee is based on the ratio of affordable units (57 units) in the Project to the total number of units (275 units) in the Project.

The City will retain the option to require the Borrower to prepay the remaining amounts due under the Regulatory Agreement at such time as the Bonds are repaid.

The Housing Department will work with the Finance Department and the City Attorney to propose amendments to the Housing Bond Policy to restructure the bond monitoring fee requirements to ensure that the fee is commensurate with the types of affordable housing projects that may be prevalent in the future while providing sufficient funds for the City’s on-going obligations as the bond issuer.
/s/
JULIA H. COOPER
Acting Director of Finance
/s/

LESLYE CORSIGLIA
Director, Housing Department
For questions, please contact Julia Cooper, Acting Assistant Director of Finance at (408) 535-7011.

San Jose City CouncilAugust 12, 2025

San Jose City Council
August 12, 2025