REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Travis Hopkins, Acting City Manager
VIA: David Cain, Interim Chief Financial Officer
PREPARED BY: David Cain, Interim Chief Financial Officer
Subject:
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Conduct a Tax Equity and Financial Responsibility Act public hearing and adopt Resolution No. 2025-05 approving, authorizing, and directing execution of a Joint Exercise of Powers Agreement relating to the California Public Finance Authority and approving the Issuance by the California Public Finance Authority of Revenue Bonds in an amount not to exceed $325,000,000 for Marisol HB, LLC, with no City obligations, as well as a Payment in Lieu of Taxes Agreement
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Statement of Issue:
The City Council is asked to conduct a public hearing under the Tax Equity and Financial Responsibility Act (TEFRA) and adopt a resolution approving the issuance of Revenue Bonds by the California Public Finance Authority (CalPFA) on behalf of Marisol HB, LLC (Applicant), the sole member of which is The Bluhm Family Foundation, an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (Code), in the aggregate principal amount not to exceed $325,000,000, and approving the City becoming a member of CalPFA, a joint exercise of powers authority.
The Applicant is seeking to obtain financing for the acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, and/or equipping of a rental senior living community to be located in Huntington Beach. The tax-exempt obligations will be issued by CalPFA. As a jurisdiction in which the facilities are located, the Council must hold a public hearing under the provisions of the TEFRA within the Code to receive any public testimony regarding the project in order for the Revenue Bonds issued by CalPFA to be issued on a tax-exempt basis.
The City must also become a member of the CalPFA, a joint exercise of powers authority, so that the CalPFA can issue bonds to finance a project located within the City. Becoming a member of the CalPFA does not subject the City to any liability or obligations.
Should the City authorize the issuance of bonds, the City would have no obligation or liability associated with this facility or with these bonds. There is no revenue sharing or expenditure obligation on behalf of the City, either directly or in its capacity a member of CalPFA.
The facilitation of the public hearing under TEFRA requirements and the approval of the resolution authorizing the issuance of the tax exempt obligations by CalPFA, on behalf of the Applicant, best balances the Key Priority of Regional Leadership through Customer Satisfaction in that the City will enable one of its customers to obtain more favorable debt financing to be used for facility financing.
Financial Impact:
The City has no obligation or liability associated with this facility or this financing.
Recommended Action:
recommendation
A) Conduct a public hearing under the requirements of TEFRA and the Internal Revenue Code in consideration of the issuance of tax-exempt bonds by the California Public Finance Authority (CalPFA) for the benefit of Marisol HB, LLC for the acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, and/or equipping of a rental senior living community facility located generally at 2120 Main St., Huntington Beach, CA, 92648, to be known as The Marisol; and,
B) Adopt Resolution No. 2025-05, “A Resolution of the City Council of the City of Huntington Beach Approving, Authorizing and Directing Execution of a Joint Exercise of Powers Agreement Relating to the California Public Finance Authority and Approving the Issuance by the California Public Finance Authority of Revenue Bonds in an Aggregate Principal Amount Not to Exceed $325,000,000 to Benefit Marisol HB, LLC and Certain Other Matters Relating Thereto.”
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Alternative Action(s):
Do not approve the recommended action, and direct staff accordingly.
Analysis:
The City has received a request by the Applicant to hold a public hearing regarding a proposed issuance of Revenue Bonds (Bonds) for the purpose of, among other things, the acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, and/or equipping of a rental senior living community facility located generally at 2120 Main St., Huntington Beach, CA, 92648, to be known as The Marisol. Upon conclusion of the public hearing, the City is then requested to authorize CalPFA to proceed with the issuance of the Bonds.
CalPFA, a Joint Exercise of Powers Authority consisting of numerous California cities, counties, and special districts, is authorized to assist in the financing and refinancing of senior living facilities when it receives the appropriate certified resolutions from each jurisdiction in which the facilities are located. To initiate such financing, the member participant of CalPFA in which the facilities are located must (1) conduct a public hearing and (2) approve CalPFA issuance of indebtedness. Therefore, although CalPFA will be the issuer of the tax exempt obligations for the Applicant, the financing cannot proceed without the City of Huntington Beach’s approval and without the City becoming a member participant of the CalPFA.
The Internal Revenue Code requires all local legislative bodies, (the City Council of the City of Huntington Beach is the legislative body (Council)), to hold this hearing in order for the bonds to be issued on a tax-exempt basis. The attached resolution, if approved by the Council, will provide authorization to the CalPFA to issue tax exempt obligations on behalf of the Applicant in an amount not to exceed $325 million.
The first subject item calls for the Council to hold a “TEFRA” hearing. This acronym stands for the Tax Equity and Fiscal Responsibility Act of 1982. This Act requires the local legislative body of the local agency in which the project is located to notice and conduct a public hearing. The Council will need to hold this hearing and call for any public testimony regarding the proposed project financing. No written testimony as of this date has been received. Holding the public hearing and approving the issuance of the bonds by CalPFA does not obligate the City, either financially or otherwise, with respect to the repayment of the bonds or the completion of the Marisol project.
Staff also understands that the Applicant intends to apply for an exemption from property taxes under California Revenue & Taxation Code Section 214 and, if available, from other taxes. In the event that the Applicant is granted such exemptions in whole or part, the Applicant has agreed to make payments to the City in lieu of property and other taxes in an amount equal to the property and other tax revenues that the City would have received had such exemptions not been granted. In order to memorialize the Applicant’s agreement as set forth in the previous sentence, the Applicant has offered to enter into a Payment in Lieu of Tax Agreement (PILOT) with the City. The PILOT has been reviewed by the City Attorney and Kutak Rock LLP, as special counsel to the City, and contains no City obligations.
Environmental Status:
Not applicable
Strategic Plan Goal:
Goal 1 - Economic Development, Strategy A - Develop an updated economic development strategy to ensure business retention, local investments and job growth.
Attachment(s):
1. Notice of Public Hearing
2. Resolution No. 2025-05, “A Resolution of the City Council of the City of Huntington Beach Approving, Authorizing and Directing Execution of a Joint Exercise of Powers Agreement Relating to the California Public Finance Authority and Approving the Issuance by the California Public Finance Authority of Revenue Bonds in an Aggregate Principal Amount Not to Exceed $325,000,000 to Benefit Marisol HB, LLC and Certain Other Matters Relating Thereto”
3. Payment in Lieu of Tax Agreement (PILOT)
4. PowerPoint Presentation