Agenda Item: 13
CITY OF SANTA CLARITA
AGENDA REPORT
PUBLIC HEARINGS
CITY MANAGER APPROVAL:
DATE: March 22, 2022
SUBJECT: THE CANTERBURY VILLAGE APARTMENTS TAX EQUITY AND
FISCAL RESPONSIBILITY ACT (TEFRA) HEARING
DEPARTMENT: Administrative Services
PRESENTER: Brittany Houston
RECOMMENDED ACTION
City Council conduct a public hearing and adopt a Tax Equity and Financial Responsibility Act resolution approving the issuance of tax-exempt obligations by the California Municipal Finance Authority in an aggregate principal amount not to exceed $15 million.
BACKGROUND
The California Municipal Finance Authority (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 by assisting 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, including the City of Santa Clarita (City), have become members of the CMFA.
The City received a request from CMFA to conduct a public hearing under and in accordance with Section 147(f) of the Internal Revenue Code, in order for CMFA to issue tax-exempt revenue bonds (Bonds) in an aggregate principal amount not to exceed $15 million on behalf of HumanGood Affordable Housing, a California nonprofit public benefit corporation (the “Sponsor”), on behalf of Canterbury Village LP, a California limited partnership, or another entity created by the Sponsor or an affiliate of the Sponsor for the purpose of owning the project described herein (such limited partnership or other entity being referred to herein as the “Borrower”).
The Borrower has requested that the CMFA participate in the issuance of one or more series of revenue bonds in an aggregate principal amount not to exceed $15 million (the “Bonds”) to finance the acquisition and rehabilitation of a 64-unit multifamily rental housing facility for low-
income seniors (the “Project”) located at 23420 Avenida Rotella in Santa Clarita, California.
While the Tax Equity and Financial Responsibility Act Hearing is being requested in an amount not to exceed $15 million, it is anticipated that actual bond issuance will only be in the amount of $11.4 million. Approximately $7 million in bond proceeds will provide for the capital improvement throughout the property, including new windows, new energy efficiency LED lighting, new resident kitchen cabinets, countertops, and appliances. Building-wide upgrades to electrical and plumbing systems will also occur. The improvements will extend the useful life of the building. The remaining bond proceeds will cover temporary resident relocation cost, construction loan interest, architectural/engineering and permitting fees, furniture, fixtures, and equipment; developer fee, lender and legal fees, a hard and soft cost contingency; and seller proceeds.
Upon completion of this project, affordability covenants will be extended out from the current affordability restrictions. First, the current agreement is approximately 25 years into a 40-year HUD affordability restriction. With recordation of a new HUD use agreement, the affordability of the project for seniors in the Santa Clarita area will extend out an additional 20 years. The Tax-Exempt Bond Regulatory Agreement will also extend out affordability for 55 years, to 2077.
Additionally, a new project-based 20-year rental subsidy contract with HUD will be executed, keeping the resident paid portion of the rent at or below 30 percent of resident income.
The Bonds would be tax-exempt private activity bonds for purposes of the Internal Revenue Code and, as such, require the approval of the elected body of the governmental entity having jurisdiction over the area where the Project to be financed is located. The approval and adoption of the resolution authorizing the issuance of the Bonds will not require the City to be financially obligated, liable, or provide any financing for the Project. The City’s credit and bond ratings are not at risk by adopting this resolution, and no City revenues are at risk by this bond issuance.
In order for the CMFA to issue such Bonds, the City must (1) conduct a public hearing allowing members of the public to comment on the proposed Project and the Bonds, and (2) approve the CMFA’s issuance of Bonds on behalf of the proposed financing. Although CMFA, not the City, will be the issuer of the tax-exempt revenue bonds for the Project, the financing cannot proceed without the City, as the governmental entity having jurisdiction over the site, approving the Bonds.
For this item, the Borrower selected the CMFA as the financing agency. As a result of the Borrower selecting the CMFA, the City will receive a one-time issuance fee paid by the Borrower and allocated to the City. Participation by the City will not impact the City’s appropriations limits or constitute any type of indebtedness by the City. Specifically, approval and adoption of the resolution authorizing the issuance of the Bonds will not require the City to be financially obligated, liable, or provide any financing for any of the cost mentioned above. In addition, the City's credit, bond ratings, and revenues are not at risk whatsoever by adopting this resolution or bond issuance.
Once the City holds the required public hearing and adopts the required resolution following the public hearing, no other participation of the City in the actions of the CMFA or in the financing will be required.
Approval pursuant to this resolution does not constitute any other approval by any commission or agency of the City with respect to any other City regulatory or other requirements, such as planning approval, permit or other action necessary, in connection with the Project.
ALTERNATIVE ACTION
1. City Council not agree to approve the issuance of bonds by the CMFA for the Borrower.
2. Other action as determined by City Council.
FISCAL IMPACT
The City will receive 25 percent of a one-time issuance fee from the California Municipal Finance Authority, equating to approximately $7,100, which will be deposited to General Fund miscellaneous revenues (100-462101). The actual amount may vary and will be dependent on the actual closing of the Bonds.
ATTACHMENTS
Notice of Public Hearing
Resolution