SR-06-11-2013-3Q - 407-000-03/203-001lama
City of
Santa Aiouiea°
City Council Meeting: June 11, 2013
Agenda Item: 9-Q
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Housing Authority of the County of Los Angeles Scattered Sites Bonds
Recommended Action
Staff recommends that Council adopt the attached resolution required for the Housing
Authority of the County of Los Angeles (HACLA) to secure ongoing financing for 41
affordable apartments that it owns and operates in Santa Monica, located at 1855 9th
Street, 1450 14th Street, and 2006 20th Street (Properties). The proposed resolution
would:
1. Consent to HACLA's issuance of bonds in an amount not to exceed $8,000,000
and issuance or acquisition of mortgage loan(s) in connection with the
Properties; and
2. authorize the City Manager to negotiate and execute a Cooperation Agreement
between HACLA and the City of Santa Monica in connection with Properties.
Executive Summary
In an effort to preserve 41 affordable apartments, HACLA intends to restructure the
financing of the Properties. Current operating subsidies provided by the state will not be
available past 2015. HACLA proposes issuance of tax - exempt, multi - family mortgage
revenue bonds as a potential subsidy source. Issuance of tax - exempt revenue bonds
requires consent by the local legislative body (City Council), although the City of Santa
Monica will neither issue the bonds nor be responsible for their repayment.
Background
HACLA entered into a single, 99 -year ground lease for the Properties in 1982. The
Properties are subsidized by the State of California Housing and Community
Development Department (HCD) through its Rental Housing Construction Program
(RHCP), which provides financing to HACLA to construct, maintain, and operate
affordable housing at the Properties. The RHCP is structured to allow deep affordability
as a result of HCD providing annual operating subsidies. For the past few years, HCD
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has been unable to provide subsidies at levels required to financially sustain the
Properties. Furthermore, HCD has indicated that the annuity fund that was used to fund
the RHCP operating subsidies will not be available after 2015, eliminating the subsidy
entirely, and has asked HACLA to consider options to financially restructure the
Properties.
Discussion
Without the continued HCD subsidy, continued operation of the Properties as affordable
housing is not financially viable because rental income from the very low- income
residents is insufficient to fund operating expenses. In order to preserve the 41
affordable apartments, HACLA has identified federal tax credits, tax - exempt multi - family
revenue bonds, and Section 8 project -based vouchers as appropriate financial
restructuring mechanisms for the Properties.
The California Tax Credit Allocation Committee ( CTCAC) allocates federal low- income
housing tax credits through a competitive application process based on a point system
and need basis. Tax credit awards are conditioned on the issuance of tax - exempt
revenue bonds and Section 8 vouchers. Funding for Section 8 project -based vouchers
comes from funds already obligated by U.S. Housing and Urban Development to a
public housing agency under its annual contributions contract.
HACLA anticipates submitting an application to the CTCAC in 2013 seeking low- income
housing tax credits for the Properties. Issuing tax - exempt revenue bonds and allocating
Section 8 project -based vouchers will facilitate HACLA's application. In order for HACLA
to issue tax - exempt revenue bonds on properties in Santa Monica, the City of Santa
Monica must provide consent in accordance with Chapter 1 of Part 2 of Division 24 of
the Health and Safety Code of the State of California. Moreover, the Tax Equity and
Fiscal Responsibility Act (TEFRA) requires a public hearing regarding the issuance of
tax - exempt revenue bonds, which will be conducted by HACLA. With City Council
consent, HACLA can submit the Inducement Resolution and Tax Equity and Fiscal
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Responsibility Resolution to the HACLA Housing Commissioners and Board of
Commissioners, and to the Los Angeles County Board of Supervisors. The City of
Santa Monica will not issue the bonds or Section 8 vouchers for the Properties, and
neither the City nor its residents will be responsible for repayment of the bonds. The
repayment of bonds and allocation of Section 8 vouchers will be the sole obligation of
HACLA.
The attached resolution consents to HACLA's issuance of up to $8 million of tax - exempt
multi - family revenue bonds and acquisition of mortgage loans, and authorizes the City
Manager to negotiate and execute a Cooperation Agreement with HACLA regarding
appropriate financing restructure mechanisms to preserve the Properties as affordable
housing.
Financial Impacts & Budget Actions
There is no immediate financial impact or budget action necessary as a result of the
recommended actions.
Prepared by: Ava Lee, Senior Development Analyst
Approved: Forwarded to Council:
Andy Agle, Dir t Rod Gould
Housing and Economic Development City Manager
Attachments:
Attachment A: Resolution
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Reference:
Contract No. 9747 (CCS)
And
Resolution No. 10749
(CCS)