C
ITY OF SIMI VALLEY
MEMORANDUM
S
eptember 11, 2023
TO
: City Council
F
ROM: Office of the City Manager
S
UBJECT: A PUBLIC HEARING TO CONSIDER ADOPTION OF A RESOLUTION
APPROVING THE ISSUAN CE OF TAX -EXEMPT REVENUE BONDS BY
THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY FOR THE
FINANCING OF A QUALIFIED RESIDENTIAL RENTAL PROJECT FOR
THE ELDERLY AND THE DISABLED
STAFF RECOMMENDATION
I
t is recommended at the conclusion of this public hearing under the requirements of the Tax Equity and Fiscal Responsibility Act of 1983 (TEFRA) and Section 147(f) of the Internal Revenue Code 1986, as amended, the City Council:
1. Adop
t Resolution No. 2023-39 (page 7) approving the issuance of one or more series of revenue bonds in an aggregate amount not to exceed $20,000,000 by the California Municipal Finance Authority, on behalf of Heywood Gardens, LP to provide for the financing of a residential rental project for the elderly and disabled located at 1770 Heywood Street;
2. Authorize the City Manager, or designee, to execute any supporting documents to effectuate the resolution.
BACKGROUND AND OVERVIEW
I
n January of 2023, Heywood Gardens, LP, expressed interest in purchasing the 75-unit apartment complex, located at 1770 Heywood Street, from CA Elderly Housing, Inc. The City approved the initial “Affordable Housing Agreement” in June of 1991 with CA Elderly Housing, Inc., which provided financial assistance for the preservation of seventy-four (74) affordable units, designated for very low-income (50% of area wide median income) seniors and the disabled, 62 years of age and older, for a forty-year period commencing with the initial occupancy of first unit . I n May 2023, Heywood Gardens solidified their plans to purchase and rehabilitate the property with bond financing from California Municipal Finance Authority (CMFA) and is currently working with the City’s Planning division with regards to plan submittal . The Heywood Gardens’ scope of work includes interior and exterior repairs, balcony upgrades, and addressing deferred maintenance on the property. Additionally, the City’s Housing staff is finalizing proposed modifications to the existing affordability agreement, requested by Heywood Gardens, which is subject to expire on November 19, 2033. These modifications include increasing the income limit AGENDA ITEM NO.
5A
to 60% of area wide median income to provide affordable housing for both very -low and low-income households and to extend the affordability term an additional ten years until 2043. S taff w ill return to the City Council with a new affordability agreement for City Council’s consideration on September 25, 2023
In seeking the bond financing through CMFA, Heywood Gardens LP will act in the capacity of Borrower for the rental project and has partnered with Rebuild America-Simi Valley, LLC, a California limited liability company, who is an affiliate of Rebuild America, Inc., a California nonprofit organization. This partnership provides the mechanism for Heywood Gardens acquisition and rehabilitation to obtain tax exempt financing . To that end, Rebuild America-Simi Valley, LLC has submitted the request for financing through the CMFA on behalf of Heywood Gardens . The debts, liabilities, and obligations of the CMFA financing does not obligate the City in any manner for payment of the principal, interest, fees or any other costs associated with the issuance of 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.
FINDINGS AND ALTERNATIVES
The California Municipal Finance A uthority is a political subdivision of the State of California and was created on January 1, 2004, under the authority provided in the California Government Code, pursuant to a joint exercise powers agreement to assist with economic, cultural and community development, public benefit , and charitable activities throughout California. To date, over 350 municipalities, including the City of Simi Valley, have become members of CMFA to facilitate bond financings in their communities. The sole purpose of C MFA is to assist local governments, non- profit organizations, and businesses with the issuance of taxable and tax -exempt financing aimed at improving the overall quality of life in local communities through the creation of affordable housing, cultural facilities, economic development, health care, and community infrastructure. C MFA, serving as the conduit issuer , provides a mechanism for both private and public sectors to obtain access to capital to finance locally approved projects.
Rebuild America- Simi Val ley, LLC , in partnership with Heywood Gardens, LP , has requested that CMFA issue and sell tax-exempt revenue bonds in the maximum principal amount of $20 ,000,000, for the purpose of financing and refinancing the costs of acquisition, rehabilitation, improvement and equipping of the affordable rental project , located at 1770 Heywood Street, which is designated for low -income seniors and the disabled, 62 years of age and older. To facilitate this request, and because the project is located in the City of Simi Valley, the City must approve the bond issuance by CMFA.
The Joint Exercise of Powers Agreement explicitly provides that CMFA is a public entity, separate and apart from the Member executing the agreement, and the debts, liabilities and obligations of C MFA does not obligate the City in any manner for payment of the principal, interest, fees or any other costs associated with the issuance of bonds. To that 2 end, the B onds issued for this residential project are the sole responsibility of the borrower, Heywood Gardens, LP.
Through its conduit issuance fees, CMFA shares a portion of the issuance fees it receives with its member communities when the bonds are issued. Each public agency who conducts the TEFRA hearing shall receive 25% of CMFA ’s administration fee. The City estimates that it could receive approximately $9,000 for the term of the respective bonds, if the full amount of $20,000,000 is issued for the Heywood Gardens project.
TEFRA Hearing
Pursuant to Section 147(f) of the Internal Revenue Code (1986), as amended, in order for the Bonds to qualify as tax-exempt bonds, the issuance of the Bonds by CMFA must be approved by a governmental unit at a public hearing following reasonable notice to the members of the community. The public hearing requirement is in accordance with the Federal Tax Equity and Fiscal Responsibility Act (TEFRA) and the hearings are known as “TEFRA” hearings. Since Heywood Gardens LP’s residential rental project for the elderly and disabled is located wit hin the Simi Valley City limits, the City’ Council’s approval of the bond issuance is required f ollowing the close of the TEFRA hearing; the Simi Valley City Council is holding the hearing as the “applicable elected representative” of the governmental unit hosting the proposed project.
In accordance with TEFRA, the City published a Notice of Public Hearing in the Ventura County Star on August 28, 2023, and the public hearing provides the opportunity for all interested persons to speak or submit written comments concerning the proposal to issue the bonds and the nature or location of the facility to be financed. However, it should be noted that neither the City nor Heywood Gardens LP is formally obligated to respond to any specific comments made during the hearing or submitted in writing. Further, the Public Hearing is not intended for the City Council to consider the proposed changes to the project; however, comments regarding the project are welcomed.
As noted above, the City shall have no obligations whatsoever to pay any principal, interest, fees, or any other costs associated with CMFA’s issuance of the Bonds for the financing and refinancing of the project.
The following Alternatives are available to the City Council at the conclusion of the public hearing under the requirements of TEFRA and Section 147( f) of the Internal Revenue Code of 1986:
1. Adopt Resolution No. 2023-39 authorizing the issuance of one or more series of revenue bonds in an aggregate amount not to exceed $20,000,000 by the California Municipal Finance Authority, on behalf of Heywood Garden, LP , to provide for the financing of a residential rental project for the elderly and disabled, located at 1770 Heywood Street.
3 2. Authorize the City Manager, or designee, to execute any supporting documents to effectuate the resolution.
3. Do not adopt the resolutions.
Staff recommends Alternate Nos. 1 and 2.
SUGGESTED CITY COUNCIL MOTION
I move:
1) A dopt Resolution No. 2023-39 authorizing the issuance of one or more series of revenue bonds in an aggregate amount not to exceed $ 20,000,000 by the California Municipal Finance Authority, on behalf of Heywood Garden, LP , to provide for financing of a residential rental project for th e elderly and disabled, located at 1770 Heywood Street; and
2) A uthorize the City Manager, or designee, to execute any supporting documents to effectuate the resolution.
SUMMARY
Heywood Garden, LP is seeking financing through the California Municipal Finance Authority (CMFA). To facilitate C MFA’s issuance of tax-exempt bonds to help finance Heywood Garden’s residential rental project for the elderly and disabled , the City must conduct a public hearing regarding the issuance of the B onds. Under no circumstances will the City be in any way responsible or liable for the payment of the Bonds.
_________________________________
Linda Swan
Assistant City Manager
INDEX Page
Public Hearing Procedure .............................................................................................. 5 Resolution No. 2023-39 .................................................................................................. 7
4 PUBLIC HEARING PROCEDURE
HEARING DATE: September 11, 2023
1. CITY CLERK
: This is the time and place set for a public hearing to consider adoption of a resolution authorizing the City of Simi Valley to authorize the issuance of one or more series of tax-exempt revenue bonds in an aggregate amount not to exceed
$20,000,000 by the California Municipal Finance Authority, on behalf of Heywood Gardens, LP, to provide for financing of a residential rental project for the elderly and disabled located at 1770 Heywood Street and authorize the City
Manager, or his designee, to execute any supporting
documents to effectuate the resolution.
May I have a reading of the resolutions?
May we have an oral report on this matter by staff?
2. STAFF
: (Report)
3. MAYOR: Any questions of staff from City Council Members (Questions of staff and staff response)
4. MAYOR: At this time I would like to open the hearing for anyone in the City Council Chambers wishing to be heard on this matter?
5. AUDIENCE
: Public Testimony and Comments
6. MAYOR
: The hearing is now closed.
7. MAYOR: Any further comments or questions from the City Council Members? (Note: If the City Council has any further questions of staff or the applicant at this time, the Public Hearing may need to be re-opened.)
8. MAYOR
: I will now entertain a motion.
9. ANY COUNCIL
MEMBER
:
Adopt, modify, or not adopt Resolution No. 2023-39 (requires a second and a vote; requires reading of resolution).
Suggested motion: I move to adopt the resolution,
authorizing the City of Simi Valley to authoriz e the
issuance of tax -exempt revenue bonds in an aggregate
principal amount not to exceed $20 ,000,000 by the
5 California Municipal Finance Authority for the financing of a residential rental project for the elderly and disabled located at 1770 Heywood Street ; and authorize the City Manager, or designee, to execute any supporting
documents to effectuate the resolution.
* Any action to refer the matter back to staff or to continue the matter requires a second and a vote.
10. ANY COUNCIL
MEMBER
: Second
11. MAYOR
: (Call for vote)
12. MAYOR
: Proceed to the next item.
6 RESOLUTION NO. 2023-39
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIMI VALLEY
APPROVING A PLAN OF FINANCE INCLUDING THE ISSUANCE OF
REVENUE BONDS BY THE CALIFORNIA MUNICIPAL FINANCE
AUTHORITY IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO
EXCEED $ 20,000,000 TO FINANCE AND REFINANCE A QUALIFIED
RESIDENTIAL RENTAL PROJECT FOR THE BENEFIT OF HEYWOOD
GARDENS, LP, AND CERTAIN OTHER MATTERS RELATING THERETO
WHEREAS, Rebuild America -Simi Valley, LLC, a California limited liability company (the “General Partner ”), an affiliate of Rebuild America, Inc., a California nonprofit corporation (the “Sponsor”), on behalf of Heywood Gardens, LP , a California limited partnership (the “Borrower”), has requested that the California Municipal Finance Authority (the “Authority”) undertake a plan of finance, including the issuance from time to time of one or more series of revenue bonds in an aggregate principal amount not to exceed $20,000,000 (together with a like amount of refunding obligations) (the “Bonds”) to finance and refinance the acquisition, rehabilitation, improvement and equipping of a 75-unit qualified residential rental project (the “Project”) to be owned and operated by the Borrower and located at 1770 Heywood Street within the City of Simi Valley (the “City”); and
WHEREAS, an “applicable elected representative” of the jurisdiction in which the Project is located is required to approve the plan of finance for the Project, including the issuance of the Bonds , under Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”); and
WHEREAS, the City Council of the City (the “City Council”) is the elected legislative body of the City and is an “applicable elected representative” for purposes of Section 147(f) of the Code ; and
WHEREAS, the Authority has requested that the City Council approve the plan of finance for the Project, including the issuance of the Bonds by the Authority , in order to satisfy the public approval requirement of Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the “Agreement”), among certain local agencies, including the City; and
WHEREAS, pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the plan of finance for the Project, including the issuance of the Bonds by the Authority.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS:SECTION 1
. The foregoing recitals are true
and correct.
7 SECTION 2. The City Council hereby approves the plan of finance for the Project, including the issuance of the Bonds by the Authority. It is the purpose and intent of the City Council that this resolution constitute approval of the plan of finance for the Project, including the issuance of the Bonds by the Authority, for the purposes of (a) Section 147(f) of the Code by the applicable elected representative of a governmental unit having jurisdiction over the area in which the Project is to be located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement.
SECTION 3. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby.
SECTION 4. The Clerk shall forward a certified copy of this Resolution to the Authority in care of its counsel:
Ronald E. Lee, Esq.
Jones Hall, APLC
475 Sansome Street, Suite 1700
San Francisco, CA 94111
SECTION 5. This resolution shall take effect immediately upon its adoption.
SECTION 6. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk.
PASSED AND ADOPTED this 11th day of September 2023.
Attest:
_______________________________ ________________________________ Lucy Blanco, City Clerk Fred D. Thomas, Mayor of the City of Simi Valley
Approved as to Form: Approved as to Content:
_______________________________ ________________________________ David L. Caceras, City Attorney Brian Paul Gabler, City Manager
8 RES. NO. 2023-39