City Council
Report
City Council Meeting: September 27, 2022
Agenda Item: 12.A
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue Subject: Public Hearing and Adoption of Resolution Approving the California Municipal Finance Authority (“CMFA”) to Issue Revenue Bonds for the Benefit of 710 Broadway Affordable, LP
Recommended Action
Staff recommends that the City Council:
1. Hold a public hearing under the requirements of the Tax and Equity Fiscal Responsibility Act (“TEFRA”) and the Internal Revenue Code of 1986, as amended; and,
2. Adopt a resolution approving the issuance of California Municipal Finance Authority bonds in an amount not-to-exceed $25,000,000 for the benefit of 710 Broadway Affordable LP or a related or successor entity for the purpose of financing or refinancing the acquisition, construction, improvement, and equipping of a multifamily rental housing project located at 710 Broadway, Santa Monica.
Executive Summary
710 Broadway Affordable LP (“Borrower”), a developer of affordable housing at 710 Broadway in Santa Monica, has requested the City’s approval for the California Municipal Finance Authority (“CMFA”), a joint powers authority of which the City is a member, to issue revenue obligations (“Bonds”) in an aggregate principal amount not to exceed $25,000,000 to finance the project. To qualify as tax exempt facility bonds for a residential rental project pursuant to Section 147 (f) of the Internal Revenue Code and the Tax and Equity Fiscal Responsibility Act (“TEFRA”), the elected representatives of the City must approve the issuance of the Bonds at a public hearing. A proposed resolution approving the issuance of the Bonds by CMFA is attached as Attachment A. 2 of 3
Approval of the Bonds does not obligate the City financially in any way and it is not an approval of the Project for any other purpose.
Discussion
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 of California. The CMFA is a public entity, separate and apart from each member, and the debts and obligations of the CMFA do not constitute debts, liabilities, or obligations of the members. The City is a member of the CMFA. However, 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 and adopting the required resolution no other participation or activity of the City or the City Council with respect to the issuance of the Bonds will be required.
The CMFA proposes to issue up to $25 million of tax-exempt revenue bonds for the purposes of making a loan to Borrower, a partnership of which Related California ("Developer") or a related person to the Developer is general partner, for: (1) the acquisition, construction, improvement and equipping of a multifamily rental housing project located at 710 Broadway, Santa Monica, California, and (2) paying certain costs of issuance in connection with such financing or refinancing.
The Bonds to be issued by the CMFA on behalf of the Borrower will be the sole responsibility of the Borrower. The City will have no financial, legal, moral obligation, liability, or responsibility for the repayment of the Bonds. 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.
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 3 of 3
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 Santa Monica, it is expected that 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.
As required by law, a public hearing notice was published in The Santa Monica Daily Press at least 7 days prior to the hearing date.
Financial Impacts & Budget Actions
The issuance of the Bonds will have no financial impact to the City other than it is expected that CMFA will provide a small portion of the issuance fees to the City. The CMFA will act as issuer and perform all necessary legal and administrative responsibilities associated with the financing. The Bonds are special, limited obligations of CMFA payable solely through the repayment of the loans from the CMFA, which repayment is used to pay the principal of and interest on the Bonds. The Bonds issued by CMFA are not an obligation of the City or any CMFA member. Neither the faith or credit, nor the taxing power of the City, any CMFA member, the State or any other political subdivision is pledged to the repayment of the Bonds.
Prepared By: David Carr, Assistant City Treasurer
Approved Forwarded to Council
Attachments:
A. 2022-9-27 - TEFRA Resolution
B. Written Comment