Title
Public Hearing Under the Federal Tax Equity and Fiscal Responsibility Act of 1982 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 Located within Alameda Point Site A for the Benefit of Eden Housing Inc., or an Entity to be Established by Eden Housing Inc. (or an Affiliate). (Community Development 858)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
A public hearing and adoption of a resolution approving the issuance of bonds by the California Municipal Finance Authority (CMFA) for the benefit of the Site A affordable housing project for low and very-low income families to be constructed by Eden Housing Inc. or an entity to be established by Eden Housing Inc. (or an affiliate) (collectively, Eden) is required under the Federal Tax and Equity Fiscal Responsibility Act of 1982 (TEFRA) for all or a portion of the bonds to qualify as tax-exempt bonds. The bonds are not a debt of the City of Alameda (City), nor do they obligate the City in any way.
Staff recommends that the City Council conduct a public hearing and, upon conclusion, adopt a resolution approving the issuance of revenue bonds (Bonds) by the CMFA in an aggregate principal amount not to exceed $45,000,000 to finance the family affordable housing project to be constructed by Eden.
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 two affordable housing projects (130 units in total) in Phase 1 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, which designated Eden 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 for use in connection with Eden’s family and senior affordable housing projects. On October 17, 2017, the City Council approved execution of two ground leases between the City and Eden to provide Eden 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.
On October 2, 2018, the City Council approved recommended amendments to the DDA ground leases to extend certain dates in the Milestone Schedule to allow Eden to pursue additional funding sources for the projects. As part of the Milestone Schedule extension, Eden pursued a new approach to financing and building the affordable housing projects. Rather than waiting to fully fund both projects and constructing them simultaneously, Eden secured funding and broke ground on the 60-unit senior housing project with competitive 9% tax credits. The senior building will be complete by July 2020.
Eden has been working in tandem on securing funding for the 70-unit family housing project. Exhibit 1 provides a list of realistic and obtainable funding sources for the family project so that it can start construction in 2020.
DISCUSSION
A key funding source for the family project is the 4% tax credit program. Eden submitted a 4% tax credit application for the family project on November 15, 2019. Issuance of tax credit bonds are necessary to use the 4% tax credits.
Eden has requested, for use on the family housing project, that CMFA serve as the issuer of the Bonds in the aggregate principal amount not to exceed $45,000,000. The proceeds of the Bonds will be used for the construction, improvement and equipping of the project.
The issuance of the tax-exempt Bonds will reduce financing costs and debt service costs for Eden as the borrower. To satisfy the requirements for the Bonds to be issued as tax-exempt, an applicable elected representative, which is also a member of the CMFA, is required to conduct the TEFRA hearing and approve the issuance of the tax-exempt Bonds in accordance with Internal Revenue Code Section 147(f). The City Council constitutes an applicable elected representative under Section 147(f) of the Internal Revenue Code.
The issuance of the Bonds must be approved by the City Council, as the elected legislative body, because the family affordable housing project is located within the City. In order for all, or a portion, of the Bonds to qualify as tax-exempt bonds, the City Council 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.
2) Adopt a resolution approving the issuance of the Bonds by CMFA for the benefit of Eden and to finance the family affordable housing project. Such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code and California Government Code Section 6500, et seq.
Besides holding the TEFRA hearing, adopting the required resolution and executing the Joint Exercise of Powers Agreement of the CMFA, which the City did when it became a member on January 1, 2004, no other participation or activity of the City or the City Council with respect to the issuance of the Bonds will be required.
A public notice of today’s public hearing was or will be published by the City on December 5, 2019, which is at least seven days in advance of the hearing, in the Alameda Sun newspaper.
FINANCIAL IMPACT
The Bonds to be issued by CMFA for the family affordable housing project will be the sole responsibility of Eden, and the City will have no financial or legal obligation, liability or responsibility for any aspect of the project or 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 solely from funds provided by Eden. The adoption of the resolution approving the financing for the construction, improvement and equipping of the project and the issuance of the obligations complies with the requirements of Section 147(f) of the Code.
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, 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.
ALTERNATIVES
• Staff recommends that the City Council hold the required public hearing and adopt a resolution approving the issuance of the Bonds required to complete the financing needed for the Site A 70-unit affordable family housing project.
• The City Council could decline to approve issuance of the Bonds or approve issuance in a different amount. Lack of approval, or approval of a lower dollar amount, could impact Eden’s ability to fully fund the affordable family housing project.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The affordable housing project is 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 certified the Alameda Point Final Environmental Impact Report (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 a resolution approving the issuance of bonds for the Block 8 Family Project.
CLIMATE IMPACTS
Issuance of the Bonds for their Site affordable family project has no impact on climate change.
RECOMMENDATION
Conduct a public hearing and, upon conclusion, 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).
CITY MANAGER RECOMMENDATION
The City Manager recommends adoption of a resolution approving issuance of revenue bonds in an amount not to exceed $45,000,000 to finance 70 unit multifamily rental housing.
Respectfully submitted,
Debbie Potter, Community Development Director
By:
Michelle Giles, Base Reuse Manager
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Family Project Funding Sources
cc: Eric Levitt, City Manager