SR-407-003-15
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Council Meeting: July 27, 2004 Santa Monica, California
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
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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.
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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 Number of Affordability
Bedroom Size
Units Units Level
4 One-bedroom = 35% of Median
21
Income
16 Two-bedroom
21 Three-bedroom = 60% of Median
23
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:
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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.
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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.
(See adopted Resolution No. 9964 (CCS)).
Attachment B: Opinion of City's Financial Advisor Concerning Risk to City in
(See below.)
Approving Issuance of Bonds
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area in which any facility financed by applicable elected representatives of City Council (this “Council”) are the WHEREAS, the members of this ¶¶reasonable public notice; andblic hearing
held following pusuch bonds is to be located, after a
Attachment B
Deleted:
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 and the terms of
et seq.
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
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... [1]
Attachment B (continued)
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Page 1: [1] Deleted Joyce.Workman 7/20/2004 1:52:00 PM
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
Page Break
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