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sr-081109-1j (2)c7® c;cror City Council Report Santa Monicsi City Council Meeting: August 11, 2009 Agenda Item: ~ ®~ To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: Tax-Exempt Bonds for Three Affordable Housing Developments Recommended Action Staff recommends that the City Council adopt a resolution approving the issuance of tax-exempt bonds by the California Statewide Communities Development Authority (CSCDA) to assist in the financing of three mixed-use developments that will be affordable to low- and moderate-income households. Executive Summary The developer, NMS Properties, Inc. proposes to fund three affordable housing developments with private funding and tax-exempt bonds. Tax-exempt bonds require City Council approval of the issuance. However, the City will neither issue the bonds nor be responsible for their repayment. Tax-exempt bonds offer lower interest rates compared to regular bank loans and require a minimum of 20 percent of the units to be restricted to very low income households earning up to 50 percent of the area median income. All three developments have received their planning and zoning approvals. Background The three affordable housing developments are all located in or near the downtown area: 1) the Modena, Spoleto, Tuscany development is proposed for scattered sites at 711 Colorado Avenue, 1514 7th Street, and 1437 5th Street; 2) the Quonset Court development is proposed at 819 Broadway; and 3) the Lincoln Walk development is proposed for 1447 Lincoln Boulevard. The developer, NMS Properties, Inc. and its affiliates have identified tax-exempt bonds as an appropriate financing mechanism for the three proposed developments. Tax- exempt bond financing requires an allocation of bond authority from the State of California's Debt Limit Allocation Committee (CDLAC). Such allocations of authorityare obtained through a competitive application process. Additionally, the federal Tax Equity 1 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 the developments, 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 takes responsibility for reviewing proposed bond financing, ensurirg that the proposed financing meets all CSCDA guidelines, ensuring the development satisfies the public benefit requirements for tax-exempt bonds, and recommending the development for bond allocation by CDLAC. The repayment of the bonds will be the sole obligation of NMS Properties, Inc. and its affiliates. The attached resolutions authorize up to $100,000,000 of tax-exempt bohds for the three developments. The developer submitted applications for the bond allocations to CDLAC in July 2009. The three developments will contain 272 units on five sites in or near downtown Santa Monica with the unit mix and affordability shown on the following page: 2 Developments 50%AMI 100%AMI Total Units Modena 7 Studios & 4 Studios 26 711 Colorado Avenue 15Two-Bedrooms Spoleto 20 Two-Bedrooms 5 Studios & 26 1437 5th Street 1One-Bedrooms Tuscany 20 Two-Bedrooms 6 Studios 26 1514 7th Street Quonset Court 20 Studios 75 Studios & 97 819 Broadway 2 One- Bedrooms Lincoln Walk 20 Studios 75 Studios & 97 1447 Lincoln 2 One- Boulevard Bedrooms Total 92 180 272 Financial Impacts & Budget Actions City approval of the issuance of bonds by CSCDA for this developmeht has no financial or budgetary impact. Prepared by: Melissa Lindley, Senior Administrative Analyst Forwarded to Council: Andy Agle, DirectoF°~ Pont Ewell Housing and Economic Development Ci Manager ATTACHMENTS: A. A resolution of the City Council of the City of Santa Monica approving the issuance by the California Statewide Communities Development Authority of Multifamily Housing Revenue Bonds for Lincoln Walk apartments, Quonset Court apartments; and Modena, Tuscany and Spoleto apartments. 3 Reference Resolution No. 10420 (CCS).