SR-06-14-2011-8CCity Council Meeting: June 14, 2011
Agenda Item: ~~
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Tax-Exempt Bonds for Civic Center Affordable Housing
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 160 affordable housing units in the Civic
Center Village (Village) and authorizing execution of related documents.
Executive Summary
Tax-exempt bonds are one of the sources of financing for the 160 affordable units at the
Civic Center Village development. On October 14. 2008, City Council adopted a
resolution for the issuance of tax-exempt bonds by CSCDA. The original resolution is
no longer valid due to the length of time that has elapsed since its original adoption. An
updated resolution, demonstrating City Council's approval of the issuance, is required
by CSCDA. 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, thus providing cost savings and increased leveraging of City housing trust funds.
Background
The Village property comprises approximately 3.7 acres and will enhance the Civic
Center area with 318 residences (including 160 that will be affordable to low-income
households, including families and artists), public open space, an extension of Olympic
Drive, public art and sustainable design. The City Council approved the Development
Agreement for the Civic Center Village on May 13. 2008. The Redevelopment Agency
approved the Disposition and Development Agreement on June 10. 2008 and approved
a First Amendment to the Disposition and Development Agreement on July 1.2010.
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In conjunction with the Village developer, Related/Santa Monica Village LLC (Related),
staff has identified tax-exempt bonds as an appropriate financing mechanism for the
affordable housing component of the Village (160 units). 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 the Village, 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, ensuring the development satisfies the public benefit requirements
for tax-exempt bonds, and recommending the development for bond allocation by
CDLAC.
The total development cost for the Village affordable housing is projected to be
approximately $63 million. The attached resolution authorizes issuance of up to $50
million in tax-exempt bonds. Related anticipates submitting an application to CDLAC
seeking tax-exempt bond financing authority for the Village in the coming weeks. Most
of the bond financing will be short-term construction financing, with approximately $7
million serving as permanent financing. This financing structure facilitates an award of
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federal Low Income Housing Tax Credits (tax credits) conditioned upon issuance of the
bonds. Proceeds from the sale of tax credits to a professional investor will be used to
provide funding to construct the development and to repay the construction portion of
the tax-exempt bonds. Rental revenue from the Village will be used to repay the
permanent portion. Repayment will be the sole obligation of Related and the City has
no obligation to repay the bonds in the event of a default.
Financial Impacts & Budget Actions
City approval of the issuance of bonds by CSCDA for this development has no financial
or budgetary impact. Not issuing the bonds will disqualify the development from
receiving its Multifamily Housing Program funds and Low Income Housing Tax Credits.
Prepared by: Lisa Luboff, Senior Development Analyst
Approved:
Andy Agle, Director,
Housing and Economic Development
Forwarded to Council:
Rod Gould
City Manager
Attachment A: Resolution Approving the Issuance of Bonds by CSCDA_ for the
Purpose of Financing a Multifamily Affordable Housing Development
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Reference Resolution No.
10582 (CCS)