SR-10B (4)
~o .:4t q b 2 ~
1013
F \HOUSING\SHARE\WPFILES\STAFFRPT\TEFRASR WPD
Council Meeting December 9, 1997 Santa Momca, callfof1ft:c 0 9 1937
TO Mayor and Members of the City Council
FROM City Staff
SUBJ ECT Recommendation to Conduct a Public Hearing and Adopt a ResolutIon
Approving the Issuance of Tax Exempt Bonds for an Multi-Family Project to
be Owned by Community Corporation of Santa MOnica
INTRODUCTION
ThiS report recommends that the City Council conduct a public hearing on, and adopt a
Resolution approving, the Issuance of tax exempt bonds by the CalifornIa StatewIde
Commumtles Development AuthOrity (CSCDA) to assist In the finanCing of a 17-umt
affordable family project In the City of Santa Monica
BACKGROUND
As documented In the City's Draft 1998-2003 HOUSing Element Update, sources of funds
for affordable hOUSing. including State and federal funds, have declined slgmflcantly In
recent years In order to continue to respond to the community's need for affordable
hOUSing the City must explore alternative methods of finanCing
The Draft 1998-2003 HOUSing Element Update, which was adopted In concept by the City
CouncIl In Aprrl, '1997, contains a new program to. ;'Assess Alternative Affordable HOUSing
I=lnance Programs" (please see Program 2 e) Among the alternative finance programs
speCifically referenced In Program 2 e are MultIfamily Tax Exempt Bonds
..
I
1013
DEe 0 9 1f"17
.~~t
This proposed project Involves pnvate activIty bonds This flnancmg structure reqUires an
allocation of authority to Issue bonds by the State of California's Debt Limit Allocation
Committee (CDLAC) Once the bond authonty IS allocated and the bonds are Issued, they
will be purchased by Bank of Amenca Commumty Development Bank (Bank) The Bank
will hold the bonds for ItS own account and will not offer bonds for sale to the general
public This private placement of the bonds With the Bank allows the bond proceeds to be
advanced over time as the project IS developed, much like a construction loan, and
reduces the costs Involved In selling the bonds
ThiS finanCing structure also allows for an automatic award of Four Percent Low Income
HOUSing Tax Credits (Tax Credits) conditioned upon Issuance of the tax exempt private
activity bonds These Tax Credits will be sold to a sophisticated Investor (I e , a partnership
Involved In the bUSiness of tax credits). and the proceeds of the sale of the credits will be
used to provide addItional fmanclng (more particularly, equity) to the project
It IS Important to note that the City IS not ISSUing bonds Instead, the City CounCil approves
the Issuance of bonds for the project by the California Statewide Communities
Development AuthOrity (CSCDA) Established In 1987 as a Callforma JOint Powers
AuthOrity, CSCDA IS a publiC agency Jomtly sponsored by the League of Cahforma CIties
and the California State ASSOCiation of Counties offering a broad range of tax exempt
financmg programs to assist local agencies to achieve economiC, financial and SOCial
goals CSCDA charges prospective borrowers (In thiS case, CCSM) a fee to review
proposed bond finanCing, ensure that the proposed finanCing meets all CSCDAgUldelrnes,
2
ensure the project satisfies the public benefit reqUirements for tax exempt bonds, and to
recommend the project for approval for bond allocation by CDLAC
This condUIt financing relationship with CSCDA offers two Important advantages First, the
City does not have to establish Its own authority and mechamsm for Issuing tax exempt
multi-famIly revenue bonds but Instead can rely upon CSCDA's expertIse In dOing so
Secondly, although applicable Federal tax law for tax-exempt bonds reqUIres that CSCDA
secure approval of the bond Issuance by the local elected body (In this case the City
Council) because the project IS located In the City, the City bears no frnanclal or legal
responsibility for these bonds nor do the bonds pose any risk to the City'S credit ratmg
The City's financial adVIsor, Public Resources AdVISOry Group (PRAG), has reviewed the
tax exempt bond flnancmg structure for thiS project and has provided a letter contained In
Attachment A attestmg to the absence of risk on the City's part In havmg the City CounCIl
approve the Issuance of these bonds
The process of obtaining a bond allocation IS a competitive one presided over by the
Callforma Debt Limit Allocation Committee (CDLAC) For the subject project, an
applicatIon must be submitted by CSCDA to CDLAC by December 15, 1997, and the
meetmg to determine which project will receive allocations will occur on January 21, 1998
Assuming the project receIves the tax exempt bond allocation and the bonds are Issued
promptly thereafter, construction would likely begin In early spring, 1998
3
Required by the federal Tax Equity and Fiscal Responsibility Act of 1984 m connection with
the Issuance of tax exempt bonds, the public heanng IS Intended to Inform the public that
the tax exempt bonds are proposed to be used for a project located In the City and to
provide the public with an opportunity for comment
The proposed project Will be a three-story, 17 -umt wood frame bUilding containing 9 three-
bedroom and 8 two-bedroom umts to be constructed on a vacant parcel located at 1438-
1444 16th Street between Colorado Avenue and Broadway As a family-oriented project,
the bUlldmg Will contain a community room and an outdoor play area for children The
project Will mduce a bond Issuance In the amount of approximately $1 9 million
Affordable housing for famllres IS one of the most Significant needs Identified In the City's
Draft 1998-2003 Housmg Element Update In fact, Program 2 h speCifically states,
"FaCIlitate the Development of Housing for Families With Children" Therefore, thiS project
Will serve to carry out the goals and programs of the City's Draft Housing Element
The project team mcludes Community Corporation (CCSM) of Santa MOnica, CCSM
Counsel, Bank of America Community Development Bank, the law firm of QUInt & Thlmmlg
LLP, servrng as City Bond Counsel. the City's finanCial adVisor (PRAG), CSCDA, and, City
of Santa MOnica City Attorney staff and Housing DIVISion staff
BUDGET/FINANCIAL IMPACT
Approving the Issuance of bonds for thiS project has no fmanclal or budgetary Impact
4
RECOMMENDATION
It IS recommended that the City Council conduct a public hearing and adopt the attached
resolution approving the Issuance of tax exempt bonds for the purpose of provldmg
fmanclng for a multifamily rental housmg development to be owned by Commumty
Corporation of Santa Monica
Attachments
A - Opinion of City's Financial AdVisor Concerning Risk to City In
Approving Issuance of Bonds
B-Resolutlon Approving the Issuance of Bonds by CSCDA for the
Purpose of Providing a Loan to Frnance a Multifamily Rental Housmg
Development to be Owned by CCSM
Prepared by
Jeff Mathieu, Director, Resource Management Department
Robert T Moncnef, Housing Manager
Johanna Gullick, Housing Coordmator
Tad Read, Semor Development Analyst
Linda Moxon, Deputy CIty Attorney
5
Attachm.ent A
Public Resources Advisory Group
3550 Wilshire Boulevard
.
SUite 1630
.
Los Angeles. CA 90010
November 4, 1997
.
(213) 380-9344
Mr Robert Moncnef
Housmg Manager
CIty of Santa MOllIca
1685 Mam Street
Santa Momca., CA 90407-2200
Dear Mr Moncnef
As you are aware, Pubbc Resow-ces AdVISory Group serves as the CIty of Santa Momca' s general
financial advISOr WIth the responsIbility of advIsmg the Dtrector of Fmance on capital fmancmg matters,
mcludmg ways to enhanc:c: or mamtam the City'S lugh crecht ratmgs We have been retamed by the Housmg
Depart:meot to revlCW the financmg plan for the Commumty Corporatlon of Santa Momca 1428-1 '!'!'! 16th
Street Project (the "ProJect"), wmch plan mcludes ISSuance of Multifamily Housmg Revenue Bonds (the
"Bonds''), and to advISe the CIty of the potentIal unpact, 1f any, of the fmancmg on the Clty'S credIt ratmgs or
lts ability to access the capItal markets m the future The City will contnbute certatn fimds to the Project but
will have DO CODtmwng financIal obbgatlon to the Project and no responsIbility for repayment of the Bonds
We are of the DplDlOll that the proposed ISSuance of Bonds will not unpact the CIty'S lugh cn:d1t ratmgs and
will not unpact Its ability to access the capital markets for future borroWIng needs
Sumnuuy of the ~ f1nalr.Jn~
Commumty Corporatlon of Santa Momca ("CCSM''), a not-for-profit developer of affordable
housmg, des1RS to borrow funds at tax-exempt mterest rates m order to finance construction of a 17 umt
apartment buildmg to be located lit 1428-1444 16th Stn:cl Use oftax.-cxcmpt financmg IS cntical to the
econna:uc pfOjCCbODS for the Project SlDCC the tax-exempt bonds provlde access to tax credit based eqwty
wluch IS estunated to be as much as 23% of the ProjOCt's ultunate cost. The proposed ISSuer of the tax-
exempt Bonds is the Califonua S!~!~ Commumucs Development Authonty r'CSCDA"), a Jomt Powers
Authonty o~t!~g under State law, of wluch the City IS a member The CSCDA lS bemg requested by
CCSM to ISSue the Bonds ~-11:~ the Clty does not currently hav..: a fmancmg structure m place to serve as a
condwt ISSuer of Mulufanuly Housmg Revenue Bonds
The Bonds Ire cxpccted to be purchased by Bank of Amenca Commumty Development Bank (the
"Bank'') The Bank mteDds to bold the Bonds for Its own account and they WIll not be offered to the general
pubbc Any transfer of the Bonds wtll reqwre the pnor consent of CSCDA and w1l1 only be pem1!~~ If the
transfcrcc is a qualified soplusUcated mvestor The Bonds wdl not obtam a credJt rating The Bonds will be
l'Cpaad solely through Project rental mcome There IS no letter of credJ.t or other guarantee of repayment of the
Bonds
The Bonds WIll be ISSUed to proVIde construcbon fmancmg for the Project Land acqWSltlOD and
other Project costs have been funded ""th a loan from the City's Housmg Department (the "SMHD Loan'')
which w1l1 be repaid from PrOject rental mcome after payment of debt ServIce on the Bonds The amoWlt of
Bonds nutIally ISSued for the PrOject will be reduced m the year foJloWUlg completIon by the proceeds
obtamed by CCSM from the sale of tax credits created by the Project and from the SMHD Loan The ablhty
of the Project to repay the Bonds at the projected rent levels depends on obtammg tax credits ill the amoWlt
projected If CCSM falls to reahze the expected level of proceeds from the sale of tax cred1ts. the amount of
Bonds outstandmg after complebon wdl be lugher than projected and the Project may bave wfficulty repaymg
Public Resources Advisory Group
the Bonds on tune or m full Another situatIon wiuch could create cash flow dIfficulties for the Project woald
be the f;ulure ta generate the project levels of rental Income from the bwldmg
Even lfthc Project runs anta fmanclal difficulty m repaymg the Bonds, tlus Situation would not have
a negatIve IIIlpact on the financial condauon of the City or IQ1pact the City'S ability to access the capital
markets The Bonds are solely obligations of the Project and the City has no fmanclal obligation for their
repayment Investors m the Bonds will recogmz.e the absence of City responsibility and tlus fact will be
clearly !:t!!!~ In all documents related to the Bonds
ConcluslOll
We are of the OPWQI1 that the proposed ISSUance of Bonds wdl not unpact the City'S lugh credIt
ratIngs and will not unpact Its abllJty to access the Capital markets for future borrowmg needs Tlus
conclUSion IS based on the fact that the Bonds are revenue bonds expected to be repaid solely from the rental
mcome of the ProJcct The City WllI have no contJnwng fmanclal obhgatlon to the ProJect and no
responsibility for repaymellt of the Bond$
Please do not hesitate to contact the undersigned 1f you have any questions conc:ermng tlus letter
Smcerely,
vi tnr/'1'/ /(;1,...,
Wesley CH1gh ~ ~ .....
Co-Presldent
cc Mike Ilt!nm~
Joh'lnna Gullick
Jeff Mathieu
Attachment B
RESOLUTION NO. 9226
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF SANTA MONICA APPROVING
THE ISSUANCE OF BONDS BY THE CALIFORNIA
STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY
FOR THE PURPOSE OF PROVIDING A LOAN TO FINANCE
A MULTIFAMILY RENTAL HOUSING DEVELOPMENT
TO BE OWNED BY COMMUNITY CORPORATION OF
SANTA MONICA
WHEREAS, the California Statewide Communities Development
Authority (the "Authority") is authorized by Chapter 7 of Part 5 of
Division 31 of the Health and safety Code of the state of
California, as amended, (the "ActU) to issue its bonds to make
loans from the proceeds for housing purposes specified in the Act;
and
WHEREAS, Community corporation of Santa Monica, a California
non-profit public benefit corporation, (the "CorporationU) has
requested that the Authority use its powers under the Act to issue
tax-exempt bonds (the uBondstl) for the purpose of providing a loan
from the Bond proceeds to the Corporation to enable the Corporation
to finance a multifamily housing rental development located in the
city of Santa Monica (the "Project"); and
WHEREAS, a portion of the housing units in the Project will be
rented to persons and families of very low income as required by
the Act and the Internal Revenue Code of 1986, as amended (the
"Cade"); and
WHEREAS, the Bonds will be considered to be "qualified exempt
facility bonds II under Section 142 (a) of the Code, and Section
147(f) of the Code requires the "applicable elected representative"
to approve the issuance of the Bonds by the Authority following the
holding of a public hearing with respect thereto; and
WHEREAS, the Authority has determined that the city Council of
the City is the "applicable elected representative" with respect to
the Bonds; and
WHEREAS, notice of said publlC hearing has been duly given as
required by the Code, and the City Council has heretofore held such
public hearing at which all interested persons were given an
opportunity to be heard on all matters relative to the location,
operation and financing of the Project and the Authority1s issuance
of the Bonds and the Authority'S loan of the Bond proceeds to the
Corporation, and a copy of all written and a transcript of all oral
1
testimony received at the hearing has been made available to the
City Council; and
WHEREAS, it is in the pUblic interest, for the public benefit,
and in furtherance of the public purpose of the city that the City
Council approve the issuance of the Bonds by the Authority for the
aforesaid purposes.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the city
of Santa Monica as follows:
section 1. The City council of the city of Santa Monica
hereby approves the issuance of the Bonds by the Authority under
the Act and the Code for the purpose of providing funds to the
Corporation to enable the Corporation to finance the Project.
Section 2. This Resolution shall take effect immediately
upon its adoption,
APPROVED AS TO FORM:
--.,
~
.... ~ ~ "'""- ~, ,/ "_ 1-.... -i "'....._
...- n - r"- _
MARSHA JONES MOUTRIE
City Attorney
I
,
2
.
Adopted and approved this ~ day of December
, 1997.
~~~;: ~
Mayor
I hereby certify that the foregoing Resolution 9226 (CCS) was
duly adopted at a meet1ng of the city council held on the 9th
of December , 1997 by the following vote:
Ayes: Councilmembers: 0' Connor. Fe1nste1n. Genser. Rosenste1n, Holbrook
Noes: Councilmembers: None
Abstain: Councilmembers: None
Absent: Councilmembers: Greenberg, Ebner
ATTEST:
M~.
City'Clerk tJ
3