REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Travis Hopkins, City Manager
VIA: Zack Zithisakthanakul, Acting Chief Financial Officer
PREPARED BY: Zack Zithisakthanakul, Chief Financial Officer
Subject:
title
Conduct a Tax Equity and Financial Responsibility Act public hearing and adopt Resolution No. 2026-03 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:
On February 4, 2025, and continued to February 18, 2025, the City Council conducted the required Tax Equity and Financial Responsibility Act (TEFRA) public hearing for the proposed issuance of tax-exempt revenue bonds by the California Public Finance Authority (CalPFA). Following the public hearing, the City Council approved the TEFRA resolution on February 18, 2025, authorizing the issuance of bonds. The February 18, 2025, Request for Council Action (RCA) is attached for reference. That prior action satisfied the federal public approval requirements at the time and did not create any financial obligation or liability for the City.
Pursuant to Internal Revenue Code Section 147(f) and applicable Treasury Regulations, the public approval obtained through the TEFRA hearing and resolution is valid only for a limited period, during which the tax-exempt bonds must be issued. Under established IRS guidance and standard practice, this period is generally treated as not to exceed twelve months. Because the bonds were not issued within that timeframe, the prior TEFRA approval has expired.
Accordingly, staff is returning this item to the City Council to re-conduct the TEFRA public hearing and adopt a new resolution to reestablish compliance with federal tax requirements and allow the financing to proceed. The proposed action does not modify the project, does not imposed any financial obligation on the City, and does not alter the substantive terms previously, rather it is a procedural action required solely to satisfy federal tax law.
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. 2026-03, “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.
On February 18, 2025, City Council approved a TEFRA resolution following a public hearing. Under federal tax law, TEFRA approvals are valid for 12 months. Because the bonds were not issued within that timeframe, the approval has expired and must be reauthorized. This item is being brought back to the City Council solely to satisfy this procedural requirement and to allow the developer to proceed at a time when financing conditions are more favorable. The proposed action does not change the scope of the project, the financing structure, or create any financial obligation for the City. Prior staff report is included in the attachments.
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. 2026-03, “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. Staff Report 2-18-2025
5. PowerPoint Presentation