SR 11-13-2018 9A
City Council
Report
City Council Meeting: November 13, 2018
Agenda Item: 9.A
1 of 3
To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue
Subject: Public Hearing and Resolution Reapproving the California Municipal Finance
Authority (CMFA) to Issue Revenue Bonds for Step Up On Second
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; and
2. Adopt a resolution approving the issuance of the Bonds by the CMFA for the
benefit of Step Up On Second Preservation, L.P.
Executive Summary
As a member of the California Municipal Finance Authority (CMFA), the City Council
may issue taxable and tax-exempt bonds to non-profit organizations and businesses
that aim to improve the standard of living in California. While this does not obligate the
City financially in any way, it is the mechanism imposed by the Federal government to
verify that projects meet a legitimate public purpose in order to have t he advantage of
exemption from Federal taxes.
On November 14, 2017, Council held a Tax and Equity Fiscal Responsibility Act
(TEFRA) hearing and approved issuance of California Municipal Finance Authority
Revenue Bonds in an aggregate principal amount not to exceed $15,000,000 for the
acquisition, rehabilitation, improvement and equipping of a 36 -unit multifamily rental
housing project at 1328 2nd Street, a facility known as Step Up On Second Apartments
(the “Project”) and currently operated by Step Up On Second. However, approvals
through TEFRA hearings expire after one year, and due to unforeseen project delays,
issuance of bonds will not be completed by the one -year expiration date. Therefore,
Council must provide approval for the issuance of the bonds again.
2 of 3
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. or a partnership
created by BlueGreen Preservation & Development, LLC (the “Developer”), co nsisting
of at least the Developer or a related person to the Developer and one or more limited
partners. The funds would be used for the acquisition, rehabilitation, improvement, and
equipping of a 36-unit multifamily rental housing project located at 1328 2nd Street,
Santa Monica, California.
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
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 general fund of the City.
Such grant 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.
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.
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 C ity’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
3 of 3
of the City or the City Council with respect to the issuance of the Bonds will be required.
As required by law, staff published a public hearing notice in The Santa Monica Daily
Press on October 26, 2018; 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 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
(01800004.415290).
Prepared By: David Carr, Assistant City Treasurer
Approved
Forwarded to Council
Attachments:
A. November 14, 2017 Staff Report (Web link)
B. Reso - Finance - Step Up on Second
City Council Meeting: November 13, 2018 Santa Monica, California
RESOLUTION NUMBER ______________ (CCS)
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA
APPROVING THE ISSUANCE OF THE CALIFORNIA MUNICIPAL FINANCE
AUTHORITY MULTIFAMILY HOUSING REVENUE BONDS IN AN AGGREGATE
PRINCIPAL AMOUNT NOT TO EXCEED $15,000,000 FOR THE PURPOSE OF
FINANCING OR REFINANCING THE ACQUISITION, REHABILITATION,
IMPROVEMENT AND EQUIPPING OF STEP UP ON SECOND APARTMENTS AND
CERTAIN OTHER MATTERS RELATING THERETO
WHEREAS, the California Municipal Finance Authority (the "Authority") was
formed under a Joint Exercise of Powers Agreement Relating to the California Municipal
Finance Authority, dated as of January 1, 2004 (the "Agreement"), among certain local
agencies in accordance with the provisions of the California Joint Exercise of Powers Act,
California Government Code section 6500 et seq.; and
WHEREAS, on or about September 14, 2010, the City Council of the City of Santa
Monica (the "City Council") adopted Resolution Number 10526 (CCS) directing the
approval, authorization and execution of the Agreement; and
WHEREAS, Step Up On Second Preservation, L.P. (the "Borrower") or a
partnership created by BlueGreen Preservation & Development, LLC (the "Developer")
and consisting of at least the Developer or a related person to the Developer and one
or more limited partners, has requested that the Authority adopt a plan of financing for
2
the issuance of one or more series of bonds issued from time to time, including bonds
issued to refund such revenue bonds in one or more series from time to time, in an
aggregate principal amount not to exceed $15,000,000 (the "Bonds") for the
acquisition, 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; and
WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986
(the "Code"), the issuance of the Bonds by the Authority must be approved by the City
of Santa Monica (the "City") because the Project is locate d within the territorial limits
of the City; and
WHEREAS, the City Council is the elected legislative body of the City and is one
of the "applicable elected representatives" required to approve the issuance of the Bonds
under Section 147(f) of the Code; and
WHEREAS, the Authority has requested that the City Council approve the
issuance of the Bonds by the Authority in order to satisfy the public approval requirement
of Section 147(f) of the Code and the requirements of Section 4 of the Agreement among
certain local agencies, including the City; and
WHEREAS, pursuant to Section 147(f) of the Code, the City Council has, following
notice duly given, held a public hearing on November 13, 2018 regarding the issuance of
the Bonds, and now desires to approve the issuance of the Bonds by the Authority.
3
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
SECTION 1. The City Council hereby approves the issuance of the Bonds by the
Authority. It is the purpose and intent of the City Council that this resolution constitute
approval of the issuance of the Bonds by the Authority by the applicable elected
representative of the governmental unit having jurisdiction over the area in which the
Project is located, in accordance with Section 147(f) of the Code and Section 4 of the
Agreement.
SECTION 2. The issuance of the Bonds shall be subject to the approval of the
Authority of all financing documents relating thereto to which the Authority is a party. The
City shall have no responsibility or liability whatsoever with respect to the Bonds.
SECTION 3. The adoption of this Resolution shall not obligate the City or any
department thereof to (1) provide any financing to acquire or construct the Project or any
refinancing of the Project; (2) approve any application or take any other action in
connection with any planning approval, permit or other action necessary for the
acquisition, construction, rehabilitation, installation or operation of the Project; (3) make
any contribution or advance any funds whatsoever to the Authority; or (4) take any further
action with respect to the Authority or its membership therein.
SECTION 4. The City Manager, or his or her designee, is hereby authorized and
directed, jointly and severally, to do any and all things and to execute and deliver any and
all documents which they deem necessary or advisable in order to carry out, give effect to
4
and comply with the terms and intent of this resoluti on and the financing transaction
approved hereby.
SECTION 5. The City Clerk shall certify to the adoption of this resolution, and
thenceforth and thereafter the same shall be in full force and effect.
APPROVED AS TO FORM:
__________________________
LANE DILG
City Attorney
REFERENCE:
Resolution No. 11149
(CCS)