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HomeMy WebLinkAbout2021-11-02; City Council; TEFRA Public Hearing for Issuance of Tax-Exempt Bonds by the California Municipal Finance Authority Meeting Date: Nov. 2, 2021 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Mandy Mills, Housing & Homeless Services Director mandy.mills@carlsbadca.gov, 760-434-2907 Subject: Tax and Equity Fiscal Responsibility Act Public Hearing for the Issuance of Tax-Exempt Bonds by the California Municipal Finance Authority for the Benefit of Harding Street Neighbors LP, an Affordable Housing Developer (DEV15-058) District: 1 Recommended Action Hold a public hearing, under the requirements of the Tax and Equity Fiscal Responsibility Act and the Internal Revenue Code of 1986 and adopt a resolution approving the issuance of California Municipal Finance Authority multifamily housing revenue bonds for the benefit of Harding Street Neighbors LP or its subsidiary or affiliate in an aggregate principal amount not to exceed $33,000,000 for the purpose of financing or refinancing the acquisition, construction, rehabilitation, improvement and equipping of a multifamily rental housing project in Carlsbad, California. Executive Summary Harding Street Neighbors LP has received city approvals to build 93 affordable apartment units on Harding Street, Carol Place, Jefferson Street and Magnolia Avenue. The project, known as Pacific Wind, was granted authority from the state of California to issue up to $33 million of tax- exempt revenue bonds to finance the project. Harding Street Neighbors is working with the California Municipal Finance Authority to issue the bonds. For all or a portion of the bonds to qualify as tax-exempt, the City of Carlsbad is required under the federal Tax and Equity Fiscal Responsibility Act to conduct a public hearing, known as the TEFRA hearing, to provide an opportunity for community members to speak in favor of or against the use of tax-exempt bonds for the financing of the project. In addition, although the City of Carlsbad is not issuing the bonds or in any way obligated to repay them, the federal Internal Revenue Code requires that the financing be approved by the City Council because the proposed project is located within Carlsbad's jurisdictional boundaries. Discussion Project background In November 2012, the City Council approved a loan of $7,408,000 from the city’s Housing Trust Fund to assist Harding Street Neighbors LP with the acquisition of 42 duplex units to be Nov. 2, 2021 Item #9 Page 1 of 7 demolished and replaced with a larger affordable housing project. The project, now known as Pacific Wind, was approved by the Planning Commission in April 2017 with the intent to demolish those units and build a 93-unit apartment housing project affordable for lower income households. The 3.39 acre site is located on Harding Street, Carol Place, Jefferson Street and Magnolia Avenue west of Interstate-5, near Jefferson Elementary School The project includes the following addresses: Harding Street: 3701, 3703, 3713, 3715, 3712, 3714, 3724, 3726, 3736, 3738, 3748, 3750, 3760, 3762, 3772, 3774, 3784, 3786, 3796, 3798, 3802, 3804, 3814, 3816, 3826, 3828, 3836 and 3838, 3737, 3739, 3785, 3787, 3775, 3777, 3761, 3763, 3749, 3751, 3801, 3803, 3813, 3815, 3827 and 3829 Carol Place: 844 and 846 Jefferson Street: 3824 and 3826 Magnolia Avenue: 901, 903 and an empty lot East of Harding Street (APN 204-292-16) Project financing The developer has secured all financing for the project and is ready to proceed with construction. A large portion of the project financing incudes $33 million in tax-exempt bond financing. The borrower, Harding Street Neighbors LP, has asked the California Municipal Finance Authority to issue tax-exempt facility bonds for its qualified residential rental project in accordance with Section 142(a)(7) of the Internal Revenue Code. The bonds, at no time to exceed $33,000,000 in aggregate principal amount, are to finance or refinance the acquisition, construction, rehabilitation, improvement and equipping the affordable housing project. The California Municipal Finance Authority was formed as a joint powers authority to help local governments, non-profit organizations and businesses through the issuance of taxable and tax- exempt bonds aimed at improving the standard of living in California. The City of Carlsbad is a member of the authority, whose representatives and board of directors have considerable experience in bond financing. Public hearing and resolution Although the Municipal Finance Authority will issue the bonds, the Internal Revenue Code requires an “applicable elected representative” of the governmental unit hosting the project to approve the issuance of the bonds. Once the City Council holds the required TEFRA hearing and adopts the required resolution, no other participation of the City of Carlsbad in the bond financing will be required. All parties should clearly understand: • The debt issued that is financed by the bonds is not debt of the City of Carlsbad in any way. There is no obligation of any kind on the part of the City of Carlsbad, the City Pacific Wind project area Nov. 2, 2021 Item #9 Page 2 of 7 Council or any entity controlled by the City of Carlsbad to repay the debt issued by the California Municipal Finance Authority. All repayment of debt is the strict obligation of the borrower. • All monitoring and administrative actions related to this issuance are the responsibility of the California Municipal Finance Authority. • The City of Carlsbad’s participation in the issuance of these state bonds will not impact the city's appropriation limits and will not constitute any type of indebtedness by the city. Options Staff recommend the City Council conduct the required Tax and Equity Fiscal Responsibility Act hearing in connection with the proposed issuance of tax-exempt revenue bonds by the California Municipal Finance Authority in an amount not to exceed $33 million for the acquisition, construction, rehabilitation, improvement and equipping of the project and adopt the attached City Council resolution in favor of the issuance of the bonds. This action would support the creation of more affordable housing within the city of Carlsbad. The council could choose to not approve the recommended resolution, but there would be no benefit to the city for doing so and this could result in this planned affordable housing development not being able to obtain the required financing, which would not advance the city’s efforts to help create more affordable housing. Fiscal Analysis As noted above, the City of Carlsbad will have no financial, legal, moral obligation, liability or responsibility for the project or the repayment of the bonds for the financing of the project. There is no fiscal impact to the City of Carlsbad for the California Municipal Finance Authority to issue the bonds for this development. The Municipal Finance Authority shares a portion of the issuance fees it receives with its member communities when it issues bonds. The city’s minor administrative and staff costs to prepare the reports and related documents required by the borrower and the Municipal Finance Authority will be reimbursed to the City of Carlsbad through a small portion of the bond issuance fee to be paid to the Housing Trust Fund. Next Steps City staff will forward the approved resolution to the California Municipal Finance Authority so its staff and Harding Street Neighbors LP can proceed with getting the bonds issued. Environmental Evaluation This action does not constitute a project as defined under the California Environmental Quality Act in accordance with Public Resources Code Section 21065, in that these actions may not cause a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. Public Notification and Outreach This item was noticed in keeping with the state's Ralph M. Brown Act and it was available for public viewing and review at least 72 hours before the scheduled meeting date. Nov. 2, 2021 Item #9 Page 3 of 7 A seven-calendar day public Tax and Equity Fiscal Responsibility Act hearing notice was posted in a newspaper of general circulation on Oct. 26, 2021, and on the city website. Copies of the notice are available in the Office of the City Clerk. Exhibits 1. City Council resolution Nov. 2, 2021 Item #9 Page 4 of 7 RESOLUTION NO. 2021-246 A RESOLUTION OF THE CITY COUNCIL OF THE . CITY OF CARLSBAD, CALIFORNIA, APPROVING THE ISSUANCE OF THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY MULTIFAMILY HOUSING REVENUE BONDS FOR THE BENEFIT OF HARDING STREET NEIGHBORS, LP, OR A SUBSIDIARY OR AFFILIATE THEREOF, IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $33,000,000 FOR THE PURPOSE OF FINANCING OR REFINANCING THE ACQUISITION, CONSTRUCTION, REHABILITATION, IMPROVEMENT AND EQUIPPING OF PACIFIC WIND, A MULTIFAMILY RENTAL HOUSING PROJECT LOCATED IN CARLSBAD, CALIFORNIA EXHIBIT 1 WHEREAS, Harding Street Neighbors, LP (the "Borrower") a partnership of which C&C Development Co., LLC (the "Developer") or a related person to the Developer is the general partner, has requested that the California Municipal Finance Authority (the "Authority") adopt a plan of financing providing for the issuance of tax exempt facility bonds for a qualified residential rental apartment project pursuant to Section 142(a)(7) of the Internal Revenue Code of 1986 (the "Code") in one or more series issued from time to time, including bonds issued to refund such tax exempt facility bonds in one or more series from time to time, and at no time to exceed $33,000,000 in aggregate . principal amount (the "Bonds"), to finance or refinance the acquisition, construction, rehabilitation, improvement and equipping of a multifamily rental housing project located at 3701, 3703, 3713, 3715, 3712, 3714, 3724, 3726, 3736, 3738, 3748, 3750, 3760, 3762, 3772, 3774, 3784, 3786, 3796, 3798, 3802, 3804, 3814,3816, 3826, 3828, 3836&3838, 3737, 3739, 3785, 3787, 3775, 3777, 3761, 3763, 3749, 3751, 3801, 3803, 3813, 3815, 3827 & 3829 Harding Street, 844 & 846 Carol Place, 3824 & 3826 Jefferson Street, empty lot on Magnolia Avenue East of Harding Street (APN 204-292-16) and 901 & 903 Magnolia Avenue, Carlsbad, California (the "Project"); and WHEREAS, pursuant to Section 147(f) of the Code, the issuance of the Bonds by the Authority must be approved by the City Council of the City of Carlsbad because the Project is located within the territorial limits of the City; and WHEREAS, the City Council of the City of Carlsbad 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 Nov. 2, 2021 Item #9 Page 5 of 7 the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the "Agreement"), among certain local agencies, including the City of Carlsbad; and WHEREAS, pursuant to Section 147(f) of the Code, .the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the Bonds by the Authority; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. 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, for the purposes of (a) Section 147(f) of the Code by the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement. 3. 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 of Carlsbad shall have no responsibility or liability whatsoever with respect to the Bonds. 4. The adoption of this Resolution shall not obligate the City of Carlsbad or any department thereof to (i) provide any financing to acquire or construct the Project or any refinancing of the Project; (ii) approve any application or request for 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; (iii) make any contribution or advance any funds whatsoever to the Authority; or (iv) take any further action with respect to the Authority or its membership therein. 5. The officers of the City of Carlsbad are 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 and comply with the terms and intent of this resolution and the financing transaction approved hereby. Nov. 2, 2021 Item #9 Page 6 of 7 Good evening All Receive -Ar,~nd ;;i Item # 8..-d-'1 For the lnforrn ;ition of the: CITY COUNCIL Date 1.ll!..121 CA ✓CC _::::: , CM £ACM ./'DCM (3} ~ My name is Chris Durnan and I have lived in Carlsbad for the past 33 years. I am here tonight to ask the Council to reconsider the decision you made a few weeks ago to choose Option 1, of the options the Homeless outreach Management Team came up with, to solve our homeless problem. For the past 4 ½ years I have coordinated the program Showers of Blessings. We provide hot showers, clothing, food, haircuts and medical care to our neighbors experiencing homelessness. In this time I have gotten to know many of them, listened to their stories and helped them try to move forward in their lives. In doing this I have become very aware of how difficult it is for them to move forward. From replacing ID cards, to applying for EBT cards, and finally the exhaustive efforts to locate organizations to help them find housing and jobs. This they have to figure out without phones, without a vehicle, and without money to pay all the fees. It's daunting when they also have to figure out where to sleep and what to eat. They are in what we call survival mode -and it's hard to think of anything else when they are just trying to survive. When a few weeks ago you voted to adopt a "one night in the hotel,, and then for a social worker to "touch base' with them the next day, I laughed! This is a one-night bandaid. This year my husband and I have housed a woman we met through Showers of Blessings. It took her at least 2 months before she felt normal again. She was in a program run by the CRC where she had certain steps she had to complete during this time. It helped her be able to see she could move forward. In the year she was with us she has started working full time -partly creating her own business and partly working for a number of people cleaning their homes. She is out on her own now building a business and no longer just surviving. I would so like to see the Council reconsider the decision you made and seriously consider Option 2, which would give the many people who want to move forward more time. The resources they need could be centralized at the Hyland Hotel. They would feel safe and be able to connect with professional people who can help them deal with the issues they are facing. This is a people problem, not a money problem. We as a community need to come together to help our neighbors who are less fortunate then we are. The only way we can solve this problem is to connect with compassion and sincerity, and listen to what these folks really need. The only way we can do that is to have them together in a place where it is easy to connect and where they can then learn to trust the system they feel has let them down. Chris Durnan Showers of Blessings Carlsbad Chrisd urn an 4@gmail.co m 760-533-7139 PACIFIC WIND AFFORDABLE HOUSING BOND HEARING Mandy Mills, Director Housing & Homeless Services Nov. 2, 2021 Background PACIFIC WIND TAX EXEMPT BONDS •Pacific Wind project received authority to issue up to $33 million of tax-exempt revenue bonds to finance the project. •Project Developer, Harding Street Neighbors, is working with the California Municipal Finance Authority to issue the bonds. •Federal Tax and Equity Fiscal Responsibility Act requires a public hearing on the use of tax-exempt bonds for the project. •Adopt a resolution approving the issuance of multifamily housing revenue bonds not to exceed $33,000,000 for the construction of the Pacific Wind multifamily rental housing project PROJECT •Acquisition/demolition of 42 duplex units, including relocation •To be replaced with 93 affordable housing units •Affordable for 30-60% median income PACIFIC WIND TAX EXEMPT BONDS FISCAL ANALYSIS •Not debt of the City of Carlsbad •No obligation of the City of Carlsbad to repay the debt •All monitoring and administrative actions are the responsibility of the California Municipal Finance Authority. •Will not impact the city's appropriation limits and will not constitute any type of indebtedness by the city. PACIFIC WIND TAX EXEMPT BONDS RECOMMENDATION •Conduct the public hearing •Adopt a resolution approving the issuance of multifamily housing revenue bonds in an aggregate principal amount not to exceed $33,000,000 for the purpose of financing the Pacific Wind multifamily rental housing project PACIFIC WIND TAX EXEMPT BONDS