REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Oliver Chi, City Manager
PREPARED BY: Ursula Luna-Reynosa, Director of Community Development
Subject:
title
Adopt Resolution No. 2021-76 approving the issuance of Tax-Exempt Bonds for the Huntington Beach Senior Housing Apartments located at 18431 Beach Blvd.
body
Statement of Issue:
The City Council previously approved an Affordable Housing Agreement with Beach Housing Partners, LP (a partnership between Jamboree Housing Corporation - Beach, LLC (a subsidiary of Jamboree Housing Corporation) as Managing General Partner, USA Huntington Beach 687, Inc as Administrative General Partner and US Bancorp Community Development Corporation, Investor Limited Partner) for a 43-unit senior affordable housing project located at 18431 Beach Boulevard. Multiple sources of funding sources have been assembled to finance this development. The last layer of financing includes tax-exempt bonds in an aggregate principal amount not to exceed $20 million and requires City Council approval of the issuance, although the City will neither issue the bonds nor be responsible for their repayment. The federal Tax Equity and Fiscal Responsibility Act (TEFRA) requires that a public hearing be held in connection with the issuance of tax-exempt bonds, and that the local legislative body (the City Council) approve the issuance of the bonds for a development located in its jurisdiction.
Financial Impact:
City approval of the issuance of bonds by CMFA for this development has no financial or budgetary impact.
Recommended Action:
recommendation
A) Conduct the public hearing under the requirements of TEFRA and the Internal Revenue Code of 1986, as amended (the “Code”); and,
B) Adopt Resolution No. 2021-76, “Resolution of the City Council of the City of Huntington Beach Approving California Municipal Finance Authority Issuance of the Multifamily Housing Revenue Bonds in an Aggregate Principal Amount Not To Exceed $20,000,000 for the Purpose of Financing or Refinancing the Acquisition, Construction, Improvement and Equipping of Huntington Beach Senior Housing and Certain Other Matters Relating Thereto.” (Attachment 1)
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Alternative Action(s):
Do not approve the proposed bond issue.
Analysis:
On November 4, 2019, the City Council approved an Acquisition Loan Agreement with Jamboree Housing Corporation (Jamboree) to purchase a 0.78 acre parcel of vacant land located at 18431 Beach Boulevard (the “Property”) to develop a 43-unit senior affordable housing project (the “Project”). On January 19, 2021, the City Council approved an Affordable Housing Agreement with Beach Housing Partners, LP, a subsidiary of Jamboree Housing Corporation, (the “Developer”) setting forth the specific affordable housing terms for the Project, which include the following requirements:
• The Project will be affordable for 60 years,
• 33 units will be affordable to extremely low-income households (those earning less than 30% of the area median income),
• 9 units will be affordable to very low-income households (those earning less than 50% of the area median income), and
• One unit will be an on-site manager’s unit.
As part of the January 19th action, the City’s $3 million acquisition loan was converted to a permanent loan and other funding sources were identified. Jamboree has successfully assembled all necessary funding sources to finance the Project as follows:
|
SOURCES AND USES OF FUNDS |
|
Sources of Funds |
Construction |
Permanent |
|
Conventional Construction Loan to Permanent (bonds & bank) |
$20,900,000 |
$ 3,564,348 |
|
4% Low Income Housing Tax Credit Equity - Federal & State |
$ 3,813,160 |
$12,710,534 |
|
NPLH Funds (State HCD) |
|
$ 5,856,018 |
|
MHSA Funds (County of Orange) |
|
$ 3,603,160 |
|
City of Huntington Beach (HOME & Housing Trust Funds) |
$ 3,000,000 |
$ 3,000,000 |
|
Deferred Costs/ Fees |
$ 1,653,796 |
$ 632,896 |
|
TOTAL |
$29,366,956 |
$29,366,956 |
The public funding sources should be thought of as equity while the tax-exempt bonds serve primarily as the construction loan with a small portion utilized as permanent financing. (The construction costs are covered by $17 million of tax exempt bonds with Union Bank providing the remaining amount.) Tax exempt bonds offer lower interest rates compared to regular bank loan, thus providing cost savings and increased leverage of the public funding sources. The tax exempt bonds require an allocation of bond authority from the State of California’s Debt Limit Allocation Committee (CDLAC). Such allocations of authority are obtained through a competitive application process. Additionally, the federal Tax Equity and Fiscal Responsibility Act (TEFRA) requires that a public hearing be held in connection with the issuance of tax-exempt bonds, and that the local legislative body (the City Council) approve the issuance of the bonds for a development located in its jurisdiction.
The City of Huntington Beach will not issue the bonds for the project, and neither the City of Huntington Beach nor its residents will be responsible for repayment of the bonds. Instead, the California Municipal Finance Authority (CMFA) will issue the bonds. CMFA was established in 2004 as a California Joint Powers Authority to assist local governments, non-profit organizations and businesses with the issuance of taxable and tax-exempt debt aimed at improving the standard of living in California. To date, over 330 municipalities in California, including the City of Huntington Beach, have become members of CMFA. CMFA takes responsibility for reviewing requests for bond financing, ensuring that the proposed financing meets all CMFA guidelines, ensuring the development satisfies the public benefit requirements for tax-exempt bonds, and recommending the development for bond allocation by CDLAC.
The repayment of the bonds will be the sole obligation of the Developer and the affordable housing development. The sources of repayment will be private investor equity from the sale of federal Low-Income Housing Tax Credits and rental revenue from the Project. The total development cost for the Project is approximately $29.4 million, and the attached resolution authorizes up to $20 million of tax-exempt bonds.
In light of the foregoing, and in order to support affordable housing, staff recommends that the City conduct the TEFRA Hearing and adopt the resolution in favor of the issuance of the Bonds by CMFA for the Project.
Environmental Status:
Pursuant to California Environmental Quality Act (CEQA) Guidelines Section 15194, affordable housing projects meeting specific criteria listed in Section 15192 and 15194 of the CEQA Guidelines are exempt. The Project meets the criteria listed in the above-mentioned sections and is therefore exempt.
Strategic Plan Goal:
Economic Development & Housing
Attachment(s):
1. Resolution No. 2021-76, “Resolution of the City Council of the City of Huntington Beach Approving California Municipal Finance Authority Issuance of the Multifamily Housing Revenue Bonds in an Aggregate Principal Amount Not To Exceed $20,000,000 for the Purpose of Financing or Refinancing the Acquisition, Construction, Improvement and Equipping of Huntington Beach Senior Housing and Certain Other Matters Relating Thereto.”