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sr-072710-1eCity Council Meeting: July 27, 20'!0 Agenda Item: ~ ~'~ To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: Tax-Exempt Bonds for Lincoln Walk Affordable Housing Development Recommended Action Staff recommends that the City Council adopt the attached resolution approving the issuance of tax-exempt bonds by the California Statewide Communities Development Authority (CSCDA) to assist in the financing of Lincoln Walk, a proposed mixed-use development that will be affordable to very low- and moderate-income households. Executive Summary The developer of Lincoln Walk, NMS Properties, Inc., proposes to fund the affordable housing development with private funding and tax-exempt bonds. City Council approval is required for the issuance of tax-exempt bonds. 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 no more than 50 percent of the area median income. Lincoln Walk has received planning approvals including Administrative Approval and Architectural Review Board Approval. Background Lincoln Walk is located adjacent to the downtown area at 1447 Lincoln Boulevard. The developer, NMS Properties, Inc. has identified tax-exempt bonds as an appropriate financing mechanism for the proposed development. 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. 1 The developer submitted an application for the bond allocation to CDLAC in July 2009. On August 11, 2009, the City Council adopted a resolution approving the issuance of tax-exempt bonds by the California Statewide Communities Development Authority (CSCDA) to assist in the financing of Lincoln Walk. The closing of the development financing must occur within 12 months of the adoption of the resolution. Since the closing is anticipated to occur around October 2010, which exceeds the 12-month limit since adoption of the resolution in August 2009, a new resolution is required. The delay was the result of negotiations between the developer and the bank lender regarding the terms of the construction financing. Discussion The City of Santa Monica will not issue the bonds for the development, 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, ensuring that the proposed. financing meets all CSCDA guidelines, certifying that 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 resolution authorizes up to $21,100,000 of tax-exempt bonds for Lincoln Walk. Lincoln Walk will contain 97 units including 20 studio units at 50 percent of the area median income (AMI), 75 studio units at 100 percent of the AMI and 2one-bedroom units at 100 percent of the AMI. 2 Financial Impacts & Budget Actions City approval of the issuance of bonds by CSCDA for this development has no financial or budgetary impact. Prepared by: Melissa Lindley, Senior Development Analyst Approved: Andy Agle, Director Housing and Econc ATTACHMENT: Development Forwarded to Council: ,- _ ~~~ Rod Gould City Manager 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. 3 Reference Resolution No. 10515 (CCS).