Community Development Agency
www.santa-ana.org/cd
Item # 22
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
May 6, 2025
TOPIC: Tax Equity Fiscal Responsibility Act (TEFRA) Resolution Hearing for Estrella Springs Apartments at 1108 North Harbor Boulevard, Santa Ana
AGENDA TITLE
Approve the Tax Equity Fiscal Responsibility Act (TEFRA) Resolution Hearing for North Harbor Housing Partners LP (the “Borrower”) a Partnership of which Jamboree Housing Corporation (the “Developer”), Consisting at Least the Developer or a Related Person to the Developer and One or More Limited Partners
Legal Notice published in the OC Reporter on April 25, 2025
RECOMMENDED ACTION
1. Conduct a Tax Equity and Financial Responsibility Act (TEFRA) Hearing in consideration of the issuance of tax exempt bond financing by the California Municipal Finance Authority (the “CMFA”) on behalf of North Harbor Housing Partners LP (or the “Borrower”), for the benefit of Estrella Springs Apartment, FKA North Harbor Village Apartments (the “Project”) to finance or refinance the acquisition, construction, improvement and equipping of Estrella Springs, a multifamily rental housing project located at 1108 North Harbor Boulevard, Santa Ana (the “Project”).
2. Adopt a resolution approving the issuance of revenue bonds by the CMFA in an amount not to exceed $30,000,000 to finance or refinance the acquisition, construction, improvement and equipping of a multifamily rental housing project located at 1108 North Harbor Boulevard, Santa Ana, California (the “Project”).
RESOLUTION NO. 2025-XXX entitled A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF SANTA ANA APPROVING THE ISSUANCE BY THE CALIFORNIA
MUNICIPAL FINANCE AUTHORITY OF EXEMPT FACILITY BONDS FOR
ESTRELLA SPRINGS
3. Preauthorize the City Manager to execute a future Subordination Agreement with JP Morgan Chase Bank, N.A. for the City’s Community Development Block Grant loan agreement with North Harbor Housing Partners LP.
GOVERNMENT CODE §84308 APPLIES: Yes
Tax Equity Fiscal Responsibility Act (TEFRA) Resolution Hearing for Estrella Springs May 6, 2025
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DISCUSSION
The Borrower has requested the City of Santa Ana (City) to conduct a Tax Equity and Fiscal Responsibility Act (TEFRA) hearing. The tax-exempt bonds to be issued are the sole responsibility of the Borrower. The City bears no financial or legal liability for the project or bond repayment and incurs no indebtedness. Additionally, the City was provided a draft resolution, a draft notice, a draft staff report, and a TEFRA Hearing Fee of $1,011 was required per the City’s Miscellaneous Fee Schedule for the City to conduct the TEFRA hearing.
A TEFRA hearing is a public hearing required by the Internal Revenue Service (IRS) for certain types of tax-exempt bond issuances, particularly those involving private activity bonds (PABs) or bonds issued by nonprofit organizations. The hearing is mandated under the Tax Equity and Fiscal Responsibility Act of 1982 and is a prerequisite for the interest on these bonds to be excluded from gross income for federal tax purposes. The primary purpose of a TEFRA hearing is to provide the public with an opportunity to comment on the proposed use of tax-exempt bond proceeds. This process ensures transparency and accountability in the allocation of public financial benefits, such as tax exemption, to private projects or nonprofit borrowers.
Project Description
A TEFRA hearing for this Project was already held and a TEFRA Resolution was approved on March 2, 2021. The Project is the adaptive reuse and rehabilitation of a Budget Inn Motel to create Permanent Supportive Housing studios for 89 formerly homeless veterans and those living with a mental health diagnosis. The Project has completed construction and is ready to convert from construction financing to permanent financing. The Developer now has a need to increase the permanent bond amount. This simply means that less of the bonds than originally anticipated will be paid off and will be left outstanding upon conversion to permanent financing. Since this is happening outside of the three-year plan of finance window, this triggers a technical reissuance of the Bonds, which requires an additional TEFRA hearing.
The proceeds of the Bonds were used to finance or refinance the acquisition, construction, improvement, and equipping of the Project.
The Borrower has requested that the CMFA participate in the issuance of one or more series of tax-exempt revenue bonds, pursuant to a single plan of financing, in a maximum aggregate principal amount of $30,000,000 (the “Bonds”). These funds are intended to finance or refinance the acquisition, construction, improvement, and equipping of the Project.
However, for any portion of the Bonds to qualify as tax-exempt, a public hearing (the “TEFRA Hearing”) must be conducted that allows community members the opportunity to voice their opinions regarding the use of tax-exempt bonds for the Project's financing.
Tax Equity Fiscal Responsibility Act (TEFRA) Resolution Hearing for Estrella Springs May 6, 2025
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After the TEFRA Hearing concludes, an “applicable elected representative” of the governmental unit hosting the Project, in this case, the City, must provide approval for the CMFA to issue the Bonds for the Project's financing.
The bonds to be issued by the CMFA are the sole responsibility of North Harbor Housing Partners LP. The City bears no financial or legal liability for the project or bond repayment and incurs no indebtedness.
The Board of Directors of the California Foundation for Stronger Communities, a California non-profit public benefit corporation (the “Foundation”), serves as the Board of Directors for the CMFA. Through its conduit issuance activities, the CMFA shares a portion of its issuance fees with its member communities and allocates a portion of these fees to the Foundation to support local charities. At the original closing, the CMFA donated $14,616 to the City as part of this sharing of issuance fees.
Subordination Agreement with JP Morgan Chase Bank
In the title of the original Staff Report published on April 20, 2021, for the approval of a $1,687,047 loan agreement with North Harbor Housing Partners LP, it stated, “approve a future Subordination Agreement with JP Morgan Chase Bank, N.A.” However, there was an error in the Staff Report and the Recommended Action # 2 did not include this approval.
The loan for JP Morgan Chase Bank is larger than the City’s Community Development Block Grant (CDBG) Loan. At the time of permanent loan conversion, JP Morgan Chase Bank (as the senior lender) will require the City to subordinate our $1,687,047 CDBG loan agreement. In order for Jamboree Housing to convert from construction financing to permanent financing for the Project, staff is requesting pre-authorization for the City Manager to execute a future Subordination Agreement with JP Morgan Chase Bank, N.A. for the City’s CDBG loan agreement on behalf of the City, approved as to form by the City Attorney. This will correct the Staff Report from four years ago, and allow Jamboree Housing to close on their permanent loan financing in the future. This is a standard subordination that is customary for the City’s affordable housing projects. Furthermore, Jamboree Housing will not be able to close on their permanent loan financing for the Project without this approval.
FISCAL IMPACT
Funds in the amount of $1,011 will be deposited into the Inclusionary Housing Fund revenue account for the TEFRA Hearing Fee – Housing Project (No. 41718002-53902).
EXHIBIT(S)
1. TEFRA Resolution
2. TEFRA Hearing Notice Proof of Publication
Tax Equity Fiscal Responsibility Act (TEFRA) Resolution Hearing for Estrella Springs May 6, 2025
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Submitted By: Michael L. Garcia, Executive Director of Community Development Agency
Approved By: Alvaro Nunez, City Manager