City Council
Report
City Council Meeting: August 11, 2026
Agenda Item: 12.A
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To: Mayor and City Council
From: Aileen Reynolds, Director, Housing and Human Services Department Subject: Public Hearing and Adoption of Resolution Approving the California Municipal Finance Authority to Issue Revenue Bonds for the Benefit of 1318 4th Street, L.P.
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;
2. Determine that the development of affordable housing at 1318 Fourth Street was previously analyzed in the 6th Cycle Housing Element Environmental Impact Report (SCH#2020100575), and the issuance of the TEFRA bond for this project has no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (“CEQA”) Guidelines; and
3. Adopt a resolution approving the issuance of bonds by the California Municipal Finance Authority in an amount not-to-exceed $80,000,000 for the benefit of 1318 4th Street LP, to finance and refinance the acquisition, development, construction and equipping of a 122-apartment multifamily rental housing development to be owned and operated by the 1318 4th Street, L.P. and to be located at 1318 4th Street, Santa Monica, CA (Attachment A).
Executive Summary
1318 4th Street EAH, LLC, a California limited liability company (the “General Partner”), on behalf of 1318 4th Street LP, a California limited partnership, or another limited partnership of which the General Partner or a related person to the General Partner is the general partner (such limited partnership being referred to herein as the “Borrower”) as requested that the California Municipal Finance Authority (“CMFA”) undertake a proposed plan of finance that includes the issuance and reissuance from time to time of 2 of 6
one or more series of exempt facility bonds for a qualified residential rental project pursuant to Section 142(a)(7) of the Internal Revenue Code of 1986, as amended (the “Code”), in an aggregate principal amount not to exceed $80,000,000 (the “Bonds”) to finance and refinance the acquisition, development, construction and equipping of a 122-apartment multifamily rental housing development (the “Project”) to be owned and operated by the Borrower and to be located at 1318 4th Street, Santa Monica, CA.
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 included as Attachment A. 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. The recommended action is solely to authorize CMFA’s bond issuance and is not for the purposes of approving any other funding, conditions, or business terms for the development. The tax-exempt bond financing was underwritten into the deal terms that were approved by Council when it authorized the City Manager to negotiate and execute the Disposition and Development Agreement (DDA) for the development on October 8, 2024.
Discussion
The CMFA proposes to issue up to $80 million of tax-exempt revenue bonds for the purposes of making a loan to the Borrower, to finance the development, construction and equipping of a 122-apartment multifamily rental housing development to be owned and operated by the Borrower and to be located at 1318 4th Street within the City of Santa Monica, California.
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.
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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 Bonds to be issued by the CMFA on behalf of the Borrower will be the sole responsibility of the Borrower, and 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 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 a portion of the issuance fee attributable to the City will be granted by the CMFA to the City. Such grant may be used for any lawful purpose of the City.
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.
City Council Approved the Project on October 8, 2024
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As the City owns the land at 1318 4th Street and in order to facilitate the redevelopment of this parcel for 100% affordable housing, the City Council took several actions on October 8, 2024 (Attachment B), as follows:
1. Authorize the City Manager to negotiate and execute a Ground Lease with a fifty five (55) year term, with two options to extend by twenty-two (22) years each, and a Disposition and Development Agreement (DDA) with EAH, Inc., for development and operation of affordable and permanent supportive housing at 1318 4th Street;
2. Authorize the City Manager to award a grant in an amount not to exceed $2,000,000, to be used for pre-development costs for the Project, as negotiated in the DDA;
3. Authorize the City Manager to negotiate and execute all necessary documents to make a Housing Trust Fund loan to 1318 4th Street, L.P. in an amount consistent with the Housing Trust Fund Guidelines loan limits; and
1. Adopt a finding that the actions to approve the Ground Leases and DDA for the Development are exempt from CEQA pursuant to CEQA Guidelines Section 15182 and a finding that the Developments have been previously analyzed in the 6th Cycle Housing Element Environmental Impact Report (SCH# 2020100575).
TEFRA Bonds and the City’s Obligations to Affirmatively Further Fair Housing While the decision to approve the issuance of the Bonds by CMFA is within the City’s discretion, the City is required to additionally consider its legal duty to affirmatively further fair housing. Program 2.E of the City’s certified 6th Cycle (2021-2029) Housing Element identified the City-owned site at 1318 4th Street as suitable for a 100% affordable housing project and the City has already committed, by City Council action taken on October 8, 2024, to providing the land to develop 100% affordable housing on the site. According to a technical assistance letter issued by the California Department of Housing and Community Development Division of Housing Policy Development to the 5 of 6
City of Concord, dated June 10, 2024, failure to approve the TEFRA resolution could be construed as a denial of the Project and thus subject the City to penalties and other enforcement actions under the Housing Accountability Act (Government Code section 65589.5). HCD’s technical assistance letter is attached as Attachment C.
Environmental Review
The approval of the bonds is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) (Common Sense Exemption) of the CEQA Guidelines. The bonds are covered by the commonsense exemption which states that CEQA does not apply “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 approval of the bonds is an administrative procedure. Therefore, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.
Furthermore, the 1318 4th Street project for the development of affordable housing was previously approved and deemed exempt from CEQA pursuant to Section 15182 of CEQA. Section 15182 statutorily exempts qualifying residential or a mixed-use projects from CEQA that are consistent with an adopted specific plan. Additionally, the approval of bonds for the development of affordable housing on the property has been previously analyzed in the Final EIR for the Downtown Community Plan (DCP EIR) (State Clearinghouse No. 2013091056) which was certified in July 2017 and in the 2021-2029 6th Cycle Housing Element Environmental Impact Report (EIR) [SCH No. 2020100575] that was certified by Council on October 12, 2021, with an Addendum to the EIR approved on October 11, 2022. Development of affordable housing on City-owned properties implements a portion of that 6th Cycle Housing Element and is consistent with the Housing Element EIR. Therefore, no further CEQA review is necessary.
Financial Impacts & Budget Actions
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The issuance of the Bonds will have no financial impact to the City other than it is expected that CMFA will pay 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: Agustin Aleman, Senior Development Analyst Approved Forwarded to Council
Attachments:
A. TEFRA Resolution - 1318 4th Street
B. October 8, 2024 Staff Report
C. HCD Letter to City of Concord
D. PowerPoint Presentation