ITEM 9-B

 

TO:                  Mayor and City Council Members

FROM:            City Staff

SUBJECT:     Public Hearing and Adoption of Resolution Approving the Issuance of Tax-Exempt Bonds for Pacific Court, a Multifamily Affordable Housing Development to be Located at 2209 Main Street

 

INTRODUCTION

This report recommends that the City Council conduct a public hearing on the issuance of tax-exempt bonds by the California Statewide Communities Development Authority (CSCDA) to assist in the financing of Pacific Court, an affordable housing development containing forty-four large family units to be located at 2209 Main Street.  This report also recommends that the City Council adopt the attached resolution (Attachment A) approving the issuance of the bonds by the CSCDA.

 

BACKGROUND

In conjunction with the Pacific Court developer, Community Corporation of Santa Monica (CCSM), staff has identified tax-exempt bonds as an appropriate financing mechanism for Pacific Court.  Tax-exempt bond financing requires an allocation of bond authority from the State of California's Debt Limit Allocation Committee (CDLAC).  Such allocations of authority are obtained through a competitive application process.  Additionally, the federal Tax Equity and Fiscal Responsibility Act (TEFRA) requires that a public hearing be held in connection with the issuance of tax exempt bonds, and that the local legislative body (City Council) approve the issuance of the bonds for a development located in its jurisdiction.

 

DISCUSSION

The City of Santa Monica will not issue the bonds for Pacific Court, and neither the City of Santa Monica nor its residents will be responsible for repayment of the bonds.  Instead, with City Council approval, CSCDA will issue the bonds.  Established in 1987 as a California Joint Powers Authority, CSCDA is a public agency jointly sponsored by the League of California Cities and the California State Association of Counties.  It offers a broad range of tax-exempt financing programs to assist local agencies in achieving economic, financial and social goals.  CSCDA charges prospective borrowers (in this case, CCSM) a fee to review proposed bond financing, to ensure that the proposed financing meets all CSCDA guidelines, to ensure the development satisfies the public benefit requirements for tax-exempt bonds, and to recommend the development for approval for bond allocation by CDLAC.  This “conduit” financing relationship with CSCDA offers two important advantages.  First, the City bears no financial or legal responsibility for repayment of these bonds nor do the bonds pose any risk to the City's credit rating.  Second, the City can rely upon CSCDA's authority and expertise in issuing tax-exempt bonds.  Again, neither the City of Santa Monica nor its residents are responsible for repayment of the bonds.  The repayment of the bonds will be the sole obligation of the Pacific Court affordable housing development.  The sources of repayment are private investor equity from the sale of federal low income housing tax credits, and rental revenue from Pacific Court.

 

Pacific Court will contain forty-four units and will be constructed on 27,000 square feet of vacant land located at the southeast corner of Main Street and Pacific Street.  The Community Corporation of Santa Monica (CCSM), the current owner of the property, will develop it.  Pacific Court will consist of four buildings, with the following unit mix and income affordability:

Number of Units

Bedroom Size

 

Number of Units

Affordability Level

4

One-bedroom

 

21

≤ 35% of Median Income

16

Two-bedroom

 

21

Three-bedroom

 

23

≤ 60% of Median Income

3

Four-bedroom

 

 

The development will include a laundry room, community room, library/computer area and a small office for the resident manager.  Additionally, there will be 1,758 square feet of retail space.

 

CCSM held several neighborhood meetings prior to submitting the development design for Pacific Court to the City for approval.  During 2003, Pacific Court received all of its development entitlements from the Planning and Zoning Division, the Architectural Review Board (design review), and the Coastal Commission. 

 

The total development cost for Pacific Court is projected to be $12,898,980.  The City has already committed $5,180,000 in housing trusts funds to this development and the balance of necessary financing ($7.7 million) will be provided through federal, state and private funding.  The funding for this development is projected as follows:

 

Tax Exempt Bond (permanent portion)

$   1,751,034

Tax Credit Equity

$   3,172,667

Multifamily Housing Program (State)

$   2,430,504

City of Santa Monica Housing Trust Funds

$   5,180,000

Affordable Housing Program (bank)

$      220,000

Developer Equity

$      144,775

TOTAL: 

$ 12,898,980

 

CCSM anticipates submitting an application to CDLAC in October 2004 for Pacific Court seeking tax-exempt bond financing authority not to exceed $8,000,000 (approximately $6.2 million as short-term construction financing and approximately $1.8 million as a 30-year loan).  This financing structure also facilitates an award of federal Low Income Housing Tax Credits (tax credits) conditioned upon issuance of the tax-exempt bonds.  These tax credits will be sold to a professional investor (that is, a partnership involved in the business of tax credits), and the proceeds of the sale of the credits will be used to provide funding to construct the development and to repay the construction portion of the tax-exempt bond.

 

The City's financial advisor, Public Resources Advisory Group (PRAG), has reviewed the tax exempt bond financing structure for this development and has provided a letter contained in Attachment B attesting to the absence of risk to the City in having the City Council approve the issuance of these bonds. 

 

BUDGET/FINANCIAL IMPACT

City approval of the issuance of bonds by CSCDA for this development has no financial or budgetary impact.

 

RECOMMENDATION

It is recommended that the City Council conduct a public hearing and adopt the attached resolution (Attachment A) approving the issuance of tax exempt bonds for the purpose of providing financing for the proposed multifamily affordable housing development, known as Pacific Court, to be located at 2209 Main Street.

 

Prepared by:              Jeff Mathieu, Director, Resource Management Department

                                    Steve Stark, Director of Finance

Bob Moncrief, Housing and Redevelopment Manager

Ron Barefield, Housing Administrator

Jim Kemper, Senior Administrative Analyst

 

Attachment A:      Resolution Approving the Issuance of Bonds by CSCDA for the Purpose of Financing a Multifamily Affordable Housing Development

 

Attachment B:      Opinion of City's Financial Advisor Concerning Risk to City in Approving Issuance of Bonds

 

Attachment A

 

RESOLUTION NO. ____________

 

 

            A RESOLUTION OF THE CITY COUNCIL OF The City of Santa Monica APPROVING THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS BY THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY

 

 

                        WHEREAS, the California Statewide Communities Development Authority (the “Authority”) is authorized pursuant to the provisions of California Government Code Section 6500 et seq. and the terms of an Amended and Restated Joint Exercise of Powers Agreement, dated as of June 1, 1988 (the “Agreement”), among certain local agencies throughout the State of California, including the City of Santa Monica (the “City”), to issue revenue bonds in accordance with Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code for the purpose of financing multifamily rental housing projects; and

 

                        WHEREAS, Community Corporation of Santa Monica, a California nonprofit corporation, or a related entity, has requested that the Authority adopt a plan of financing providing for the issuance of multifamily housing revenue bonds in one or more series issued from time to time, including bonds issued to refund such revenue bonds in one or more series from time to time, and at no time to exceed $8,000,000 in outstanding aggregate principal amount, to finance the acquisition, construction and development of a 44-unit multifamily rental housing project, located at the 2209 Main Street, Santa Monica, California, and generally known as Pacific Court Apartments (the “Project”); and

 

                        WHEREAS, the Bonds or a portion thereof will be “private activity bonds” for purposes of the Internal Revenue Code of 1986 (the “Code”); and

 

                        WHEREAS, pursuant to Section 147(f) of the Code, prior to their issuance, private activity bonds are required to be approved by the “applicable elected representative” of the governmental units on whose behalf such bonds are expected to be issued and by a governmental unit having jurisdiction over the entire area in which any facility financed by such bonds is to be located, after a public hearing held following reasonable public notice; and

 

                        WHEREAS, the members of this City Council (this “Council”) are the applicable elected representatives of the City; and

 

                        WHEREAS, there has been published, at least 14 days prior to the date hereof, in a newspaper of general circulation within the City, a notice that a public hearing regarding the Bonds would be held on the date hereof; and

 

                        WHEREAS, such public hearing was conducted on said date by the City Council, at which time an opportunity was provided to interested parties to present arguments both for and against the issuance of the Bonds; and

 

                        WHEREAS, it is intended that this resolution shall constitute the approval of the issuance of the Bonds required by Section 147(f) of the Code and Section 9 of the Agreement;

 

                        NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF The City of Santa Monica AS FOLLOWS:

 

                        Section 1.            The above recitals are true and correct.

 

                        Section 2.            The Council hereby approves the issuance of the Bonds by the Authority.  It is the purpose and intent of the Council that this resolution constitute approval of the Bonds for the purposes of (a) Section 147(f) of the Code and (b) Section 9 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 that 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 approved hereby.

 

                        Section 4.            The City Clerk of the City shall forward a certified copy of this Resolution and a copy of the affidavit of publication of the hearing notice to:

 

                                                Justin Cooper, Esq.

                                                Orrick, Herrington & Sutcliffe LLP

                                                Old Federal Reserve Bank Building

                                                400 Sansome Street

                                                San Francisco, California  94111

 

                        Section 5.            The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect.

 

 

APPROVED AS TO FORM:

 

 

_______________________

MARSHA JONES MOUTRIE

City Attorney

                        ADOPTED by the City Council of the City of Santa Monica at a regular meeting of said Council held on the 13th day of July, 2004, by the following vote:

   AYES:     

   NOES:  

   ABSENT:  

 

 

 

     

   RICHARD BLOOM

   Mayor

ATTEST:

 

 

 

            

MARIA STEWART

City Clerk

 

 

 

Attachment B