SR 11-14-2017 9A
City Council Report
City Council Meeting: November 14, 2017
Agenda Item: 9.A
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue
Subject: Public Hearing and Adoption of a Resolution Approving the California
Municipal Finance Authority to Issue Revenue Bonds for the Benefit of Step
Up On Second Preservation, L.P.
Recommended Action
Staff recommends that the City Council:
1. Hold a public hearing under the requirements of the Tax and Equity Fiscal
Responsibility Act (“TEFRA”) and the Internal Revenue Code of 1986, as
amended;
2. Receive public comment; and
3. Adopt a resolution approving the issuance of the Bonds by the California
Municipal Finance Authority (CMFA) for the benefit of Step Up On Second
Preservation, L.P. (Attachment A).
Executive Summary
In its capacity as a member of the California Municipal Finance Authority (CMFA), a
joint powers authority, Council may assist non-profit organizations and businesses with
the issuance of taxable and tax-exempt bonds aimed at improving the standard of living
in California. Step Up on Second Preservation, LP (Step Up), in partnership with
BlueGreen Preservation & Development, LLC (the “Developer”), is requesting approval
from the Council to issue CMFA Revenue Bonds in an aggregate principal amount not
to exceed $15 million for the rehabilitation, improvement and equipping of a 36-unit
multifamily rental housing project located at 1328 2nd Street, Santa Monica, California.
This facility, generally known as Step Up on Second Apartments (the “Project”), is
currently operated by Step Up on Second. The CMFA is subject to Tax and Equity
Fiscal Responsibility Act (“TEFRA”) requirements, which state that the Council must
hold a public hearing and adopt a resolution approving the issuance of the tax-exempt
CMFA Revenue Bonds. The Bonds to be issued by the CMFA on behalf of Step Up will
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be the sole responsibility of Step Up, and the City will have no financial, legal or moral
obligation, liability, or responsibility for the repayment of the bonds.
Background
The CMFA was formed to assist local governments, non-profit organizations and
businesses with the issuance of taxable and tax-exempt bonds aimed at improving the
standard of living in California. The CMFA is a public entity, separate and apart from
each member, and the debts and obligations of the CMFA do not constitute debts,
liabilities or obligations of the members. The City is a member of CFMA through a joint
powers agreement executed on September 14, 2010 per Council approval (Attachment
B).
Discussion
The CMFA proposes to issue up to $15 million of tax-exempt revenue bonds for the
purposes of making a loan to Step Up On Second Preservation, L.P., in partnership with
BlueGreen Preservation & Development, LLC (the “Developer”) for the rehabilitation,
improvement and equipping of a 36-unit multifamily rental housing project located at
1328 2nd Street, Santa Monica, California, generally known as Step Up On Second
Apartments (the “Project”) and operated by Step Up.
The Bonds to be issued by the CMFA on behalf of the Borrower will be the sole
responsibility of the Borrower, and the City will have no financial, legal or moral
obligation, liability or responsibility for the repayment of the bonds. All financing
documents with respect to the issuance of the Bonds will contain clear disclaimers that
the Bonds are not obligations of the City or the State of California, but are to be paid for
solely from funds provided by the Borrower.
The Board of Directors of the California Foundation for Stronger Communities, a
California non-profit public benefit corporation (the “Foundation”), acts as the Board of
Directors for the CMFA. Through its conduit issuance activities, the CMFA shares a
portion of the issuance fees it receives with its member communities and donates a
portion of these issuance fees to the Foundation for the support of local charities. With
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respect to the City of Santa Monica, it is expected that a portion of the issuance fee
attributable to the City will be granted by the CMFA to the City’s General Fund. The
grant funds may be used for any lawful purpose of the City. The Borrower will be the
beneficiary of the CMFA’s charitable donation through a 25% reduction in issuance
fees.
There are no costs associated with membership in the CMFA and the City will in no way
become exposed to any financial liability by reason of its membership in the CMFA. In
addition, participation by the City in the CMFA will not impact the City’s appropriations
limits and will not constitute any type of indebtedness by the City. Outside of holding the
TEFRA hearing and adopting the required resolution, no other participation or activity of
the City or the City Council with respect to the issuance of the Bonds will be required.
As required by law, staff published this public hearing notice in the Santa Monica Daily
Press on October 30, 2017; at least 14 days prior to the hearing date.
Financial Impacts and Budget Actions
Approving the issuance of bonds by CMFA on behalf of the Borrower has no immediate
financial, legal or budgetary impact. With respect to the City of Santa Monica, it is
expected that a portion of the issuance fee will be granted by the CMFA to the City’s
General Fund and will be deposited into the General Fund Miscellaneous Revenue
Account (01274.404170).
Prepared By: David Carr, Assistant City Treasurer
Approved
Forwarded to Council
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Attachments:
A. Resolution
B. September 14, 2010 Staff Report
REFERENCE –
RESOLUTION NO.
11091 (CCS)