Title
SUMMARY: Public Hearing to Facilitate a Tax-Exempt Bond Financing for Acquisition, Construction, Improvement, and Equipping of the Site A Affordable Family and Senior Projects by Eden Housing
Public Hearing Under the Tax Equity and Fiscal Responsibility Act (TEFRA) to Consider Adoption of Resolution Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority in an Aggregate Principal Amount Not to Exceed $45,000,000 to Finance a 70-Unit Multifamily Rental Housing Facility for Low- and Very Low-Income Families for the Benefit of Eden Housing Inc., or a Limited Partnership to be Established by Eden Housing Inc. (or an Affiliate); and
Adoption of Resolution Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority in an Aggregate Principal Amount Not to Exceed $40,000,000 to Finance a 60-Unit Multifamily Rental Housing Facility for Low- and Very Low-Income Seniors for the Benefit of Eden Housing Inc., or a Limited Partnership to be Established by Eden Housing Inc. (or an Affiliate). These Revenue Bonds will provide for the financing of the Site A Affordable Family and Senior Projects. (Base Reuse 819099)
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To: Honorable Mayor and Members of the City Council
From: David L. Rudat, Interim City Manager
EXECUTIVE SUMMARY
A public hearing and adoption of two resolutions approving the issuance of Bonds by the California Municipal Finance Authority (CMFA) for the benefit of Eden Housing’s Site A Family and Senior Affordable Housing Projects is a requirement under the Tax and Equity Fiscal Responsibility Act (TEFRA) for all or a portion of the bonds to qualify as tax-exempt bonds. The bonds will not represent a debt of the City, nor do they obligate the City in any way.
BACKGROUND
In June 2015, the City Council approved the Site A Development Plan and a Disposition and Development Agreement (DDA) with Alameda Point Partners (APP) for a 68-acre area within Alameda Point. Site A includes 800 housing units, two hundred (200) of which are required to be affordable. The DDA provides for a donation of land by the City for the Affordable Housing Projects and a developer contribution of $3 million as part of the financing for the projects.
In March 2016, APP assigned the Affordable Housing Implementation Plan contained in the DDA to Eden Housing, which designated Eden Housing as the Qualified Affordable Housing Developer for Site A. On January 16, 2017, the City Council approved County of Alameda Measure A1 funds in the amount of $5 million to Eden’s Family and Senior Affordable Housing Projects. On October 17, 2017, the City Council approved execution of two Ground Lease Agreements between the City and Eden Housing to provide Eden Housing with direct site control over Block 8, designated for the Senior and Family Affordable Housing Projects, which would increase its competitiveness for grants and tax credit funds.
Eden Housing, in coordination with APP, has expended significant staff and financial resources securing financing sources to fund the Block 8 projects and has been successful in obtaining numerous funding sources described in greater detail below. However, earlier this year, Eden was unsuccessful in obtaining funding from two key highly competitive funding sources - 9% Low Income Housing Tax Credits (LIHTC) and the Affordable Housing and Sustainable Communities (AHSC) funding. On October 2, 2018, City Council approved recommended amendments to the DDA ground leases to extend certain dates in the Milestone Schedule to allow Eden Housing to pursue additional funding sources to fund the Projects.
As part of the Milestone Schedule extension, Eden will pursue a new approach to financing and building the affordable housing. Rather than waiting to fully fund both projects and constructing them simultaneously, Eden will move forward immediately on the 60-unit senior housing project (Phase 1) and, once that funding is secured, to then focus on funding the 70-unit family housing project (Phase 2). Exhibit 1 provides a list of funding sources secured to date, sufficient to close and commence construction on the senior project by March 2019 and be completed by July 2020. It also shows the list of funding sources for the family project that is realistic and obtainable over the next 12-18 months.
DISCUSSION
A key funding source for both Projects is the 4% tax credit program. Eden submitted a 4% tax credit application for the Senior Project on September 14, 2018. Issuance of tax credit bonds are necessary to use the 4% tax credits. Therefore, it is recommended that City Council hold the required hearing and approve issuance of the bonds.
Eden has requested, for both the Family and Senior Affordable Housing Projects, that CMFA serve as the municipal issuer of the bonds in aggregate principal amounts not to exceed $45,000,000 of tax-exempt revenue bonds for the Family Project and not to exceed $40,000,000 of tax-exempt revenue bonds for the Senior Project. The proceeds of the bonds will be used for the construction, improvement and equipping of both Projects.
The issuance of the bonds must be approved by the City Council, as the elected legislative body of the City, because the Senior and Family Affordable Housing Projects are located within the territorial limits of the City of Alameda. In order for all, or a portion, of the bonds to qualify as tax-exempt bonds, the City must:
1) Conduct a public hearing under the requirements of TEFRA and the Internal Revenue Code of 1986, as amended (Code). A TEFRA hearing is required by the Code before tax-exempt debt can be issued for the benefit of a private nonprofit corporation. The hearing gives the public an opportunity to comment on the use of tax-exempt funds by the Borrower, Eden Housing.
2) Adopt resolutions approving the issuance of the bonds by CMFA for the benefit of Eden Housing Inc., to provide for the financing of the both Projects. Such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code and California Government Code Section 6500, et seq
Outside of holding the TEFRA hearing, adopting the required resolutions and executing the Joint Exercise of Powers Agreement of the CMFA, which the City did when it became a member, no other participation or activity of the City or the City Council with respect to the issuance of the Bonds will be required.
FINANCIAL IMPACT
The bonds to be issued by CMFA for the Projects will be the sole responsibility of Eden Housing, and the City will have no financial, legal, moral obligation, liability or responsibility for the Projects or the repayment of the bonds for the financing of the Project. 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 solely from funds provided by Eden Housing. The adoption of the resolutions approving the financing for the construction, improvement and equipping of the two Projects and the issuance of the Obligations complies with the requirements of Section 147(f) of the Internal Revenue Code of 1986.
Through its conduit issuance activities, CMFA shares a portion of the issuance fees it receives with its member communities and donates a portion of these issuance fees to the California Foundation for Stronger Communities, a California non-profit public benefit corporation for the support of local charities. With respect to the City of Alameda, it is expected that a portion of the issuance fees attributable to the City will be granted by CMFA to the City’s General Fund. Such grant may be used for any lawful purpose of the City.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The affordable housing projects are anticipated to be built pursuant to and consistent with a number of City documents including the Five-year Affordable Housing Pipeline, the Housing Element of the General Plan and the Site A DDA.
ENVIRONMENTAL REVIEW
On February 4, 2014, the City of Alameda certified the Alameda Point Final EIR in compliance with the California Environmental Quality Act (CEQA). The Final EIR evaluated the environmental impacts of redevelopment and reuse of the lands at Alameda Point consistent with the Town Center Plan, which included Block 8 within Site A. No further review is required for adoption of resolutions approving the issuance of bonds for the Block 8 Senior and Family Projects.
RECOMMENDATION
Conduct a public hearing and, upon conclusion,
1) Adopt a Resolution approving the issuance of revenue bonds by the California Municipal Finance Authority in an aggregate principal amount not to exceed $45,000,000 to finance a 70-unit multifamily rental housing facility for low- and very low-income families for the benefit of Eden Housing Inc., or a limited partnership to be established by Eden Housing Inc. (or an affiliate); and
2) Adopt a Resolution approving the issuance of revenue bonds by the California Municipal Finance Authority in an aggregate principal amount not to exceed $40,000,000 to finance a 60-unit multifamily rental housing facility for low- and very low-income seniors for the benefit of Eden Housing Inc., or a limited partnership to be established by Eden Housing Inc. (or an affiliate).
Respectfully submitted,
Debbie Potter, Base Reuse and Economic Development Director
By:
Michelle Giles, Redevelopment Project Manager
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Project Funding Sources