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HomeMy WebLinkAbout2007/08/07 Item 15 ITEM TITLE: SUBMITTED BY: REVIEWED BY: CITY COUNCIL AGENDA STATEMENT AUGUST 7, 2007, Item-L:L PUBLIC HEARING: CITY COUNCIL CONSIDERATION OF THE ISSUANCE OF TAX EXEMPT OBLIGATIONS WITH RESPECT TO THE PROPOSED REFINANCE AND REHABILITATION OF EXISTING AFFORDABLE UNITS AT PALOMAR APARTMENTS. RESOLUTION OF THE CITY OF CHULA VISTA APPROVING THE ISSUANCE, SALE AND DELIVERY OF MOL TIF AMIL Y HOUSING REVENUE BONDS BY THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY FOR THE PURPOSE OF REFINANCE AND REHABILITATION OF EXISTING AFFORDABLE UNIT.S.. AT PALOMAR APARTMENTS. I\n~ ACTING COMMUNJT.X *~ELOPMENT DIRECTOR ~\\ CITY MANAGER . IIlfJ r ASSISTANT CITY AGER C, r 4/5THS VOTE: YES D NO ~ BACKGROUND Volunteers of America (VOA), a nation-wide nonprofit organization, is the owner of the affordable apartment complex located at 171 Palomar Street (Attachment 1). The Palomar Apartments consist of 168 units (l, 2 and 3 bedrooms) mostly restricted for very low income households below fifty percent (50%) of the area median income. VOA is looking to refmance the project to conduct minor rehabilitation of the project and keep rents restricted. They have requested that the California Statewide Communities Development Authority (CSCDA) issue multifamily housing revenue bonds in an amount not to exceed $12,000,000. The CSCDA is a joint exercise of powers authority consisting of numerous California cities, counties and special districts, including the City of Chula Vista. CSCDA, pursuant to its Amended and Restated Joint Exercise of Powers Agreement, is authorized to assist in the financing of facilities for affordable housing. However, under the terms of the Agreement, CSCDA may not approve a financing unless the governing body of the Program Participant in whose jurisdiction the project is located (or to be located) approves the project and it's financing. 15-1 AUGUST 7, 2007, Item~ Page 2 of 4 In order to initiate this fInancing request, the City of Chula Vista must: (I) conduct a public hearing (Tax and Equity Fiscal Responsibility Act or TEFRA hearing) on the proposed fInancing and; (2) approve CSCDA's issuance of indebtedness. Therefore, although CSCDA will be the issuer of the tax-exempt obligation for the Volunteers of America the fInancing cannot proceed without the approval of the City of Chula Vista. These flnancings are structured so that neither CSCDA nor the relevant jurisdiction has any fInancial liability. Furthermore, Section 147(f) of the Internal Revenue Code of 1986 requires that the proposed fInancing be approved by a governmental unit having jurisdiction over the area in which the facility to be fmanced is located. A fInancing will be treated as having been approved by a governmental unit if "the applicable elected representative" of such governmental unit approves such issue after a public hearing following reasonable public notice. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed actIvIty for compliance with the California Environmental Quality Act (CEQA) and has determined that there is no possibility that the activity may have a signifIcant effect on the environment; therefore, pursuant to Section IS061(b)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary. RECOMMENDATION That the City Council conduct the required public hearing regarding CSCDA's intent to issue tax exempt bond obligations for the refInance and rehabilitation of Palomar Apartments and that the City Council adopt a resolution approving the issuance, sale and delivery of multifamily revenue bonds by CSCDA to help fInance the project. BOARDS/COMMISSION RECOMMENDATION Not Applicable DISCUSSION The ProPosed Proiect The Volunteers of America currently owns and operates the Palomar Apartment project located at 171 Palomar St. The project is an existing 168 unit affordable complex originally fInanced through the Department of Housing and Urban Development (HUD). The project is thirty-fIve years old and in need of some minor rehabilitation to ensure continued long term use and viability. The owner can refmance the property using bond fInancing and tax credits to pull enough money out to COVer the rehabilitation costs. Income and Rent Restrictions For the bond funding, Section 142 (d) of the Internal Revenue Services Code, requires a minimum of twenty percent of the rental units in the Project to be available for 15-2 AUGUST 7, 2007, Item~ Page 3 of3 occupancy by persons or families whose income does not exceed 50 percent of the median income for the San Diego Primary Metropolitan Statistical Area, or alternatively, at least 40 percent of the rental units are required to be available for occupancy by persons or families whose income does not exceed 60 percent of the area median income (AMI). In each case, the units are to be made available at affordable rents established by the applicable State law. It is proposed that all 168 units will be affordable to and restricted for occupancy by low income households. A total of 138 units will be affordable for very low income households at 50 percent of AMI, which is currently $35,100 a year for a family of four. The remaining 29 units are eligible for occupancy by households up to 80 percent of AMI, by terms of the current HUD Use Agreement. While the targeting has not been finalized for these 29 units, the sponsor anticipates that the units would be restricted to low income households at 60 percent of AMI or less, which is currently $42,120 year for a family of four. The restricted rents will be based upon HUD income limits established for the current fiscal year. Unit No. of Target Income Current Proposed Description Units Group Rent Rent I Bd/I Ba 13 50% AMI $462-$517 $633 I Bd/I Ba 3 60% AMI $517 $813 2 Bd/I Ba 85 50% AMI $527-$590 $758 2 Bd/I Ba 19 60% AMI $590 $911 3 Bd/2 Ba 40 50% AMI $564-$631 $874 3 Bd/2 Ba 7 60% AMI $631 $1,007 Managers' units I N/A N/A N/A It is proposed that the income and rent restrictions for Palomar Apartments will be maintained for a period not less than fifty-five years, extending the afford ability restrictions past the 2013 expiration of the current Section 236 mortgage. The income and rent restrictions outlined above are to be incorporated into the Regulatory Agreements for the bonds, which will be recorded against the property . To ensure no displacement of residents would occur, the residents will be eligible for enhanced Section 8 vouchers upon payoff of the existing FHA mortgage. Compliance with the income and rent restrictions will be subject annually to a regulatory audit and annual tax credit certification. Compliance with strict property management policies and procedures will ensure that income and rent restrictions will be maintained for the full 55-year compliance period. Proposed Financing ofProiect The owner will be using Tax Exempt Multi-Family Revenue Bonds and Low Income Housing Tax Credit financing to support the majority of the estimated $22 million cost of refinancing and rehabilitating the project. VOA has requested that CSCDA consider the issuance of up to $12 million in private activity bonds. VOA will also apply for 15-3 AUGUST 7, 2007, Item~ Page 4 of 4 approximately $5.7 million in Low Income Housing Tax Credits. The Bonds and Tax Credits would cover 76 percent of the estimated $22 million cost. Developer Equity makes up the difference. DECISION MAKER CONFLICT Staff has reviewed the property holdings of the City Council and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. FISCAL IMPACT The proceeds of the bonds will provide acquisition and construction funds for the developer at a lower cost than funds borrowed in a conventional bank loan. The Developer has requested that the CSCDA issue multifamily housing revenue bonds in an aggregate principal amount not to exceed $12,000,000 to provide refmance and rehabilitation financing for the 168 unit residential development. The bonds would be tax exempt private activity bonds for the purposes of the Internal Revenue Code and, as such, require the approval of the elected body of the governmental entity having jurisdiction over the area where the project to be fmanced is located. Neither the City nor the Agency would be under any obligation to repay the bond indebtedness or to incur any costs related to the issuance of the bonds. ATTACHMENTS Attachment 1- Project Location Map Prepared by: Amanda Mills, Housing Manager, Community Development Department 15-4 \~\ \ --- '\ 'i. \ .." RESOLUTION NO. RESOLUTION OF THE CITY OF CHULA VISTA APPROVING THE ISSUANCE, SALE AND DELIVERY OF MULTIFAMILY HOUSING REVENUE BONDS BY THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY FOR THE PURPOSE OF REFINANCE AND REHABILITATION OF EXISTING AFFORDABLE UNITS AT PALOMAR APARTMENTS WHEREAS, the California Statewide Cornmunities Development Authority (the "Authority") is authorized pursuant to the provisions of California Government Code Section 6500 et seq. and the terms of an Amended and Restated Joint Exercise of Powers Agreement, dated as of June I, 1988 (the "Agreement"), among certain local agencies throughout the State of California, including the City of Chula Vista (the "City"), to issue revenue bonds in accordance with Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code for the purpose of financing multifamily rental housing projects; and WHEREAS, Volunteers of America or related entities, has requested that the Authority adopt a plan of fmancing providing for the issuance of multifamily housing revenue bonds in one or more series issued from time to time, including bonds issued to refund such revenue bonds in one or more series from time to time, and at no time to exceed $12,000,000 in outstanding aggregate principal amount (the "Bonds"), to refinance the acquisition and rehabilitation of a 168-unit multifamily rental housing project, located at 171 Palomar Street, Chula Vista, California, and generally known as Palomar Apartments (the "Project"); and WHEREAS, the Bonds or a portion thereof will be "private activity bonds" for purposes of the Internal Revenue Code of 1986 (the "Code"); and WHEREAS, pursuant to Section 147(f) of the Code, prior to their issuance, private activity bonds are required to be approved by the "applicable elected representative" of the governmental units on whose behalf such bonds are expected to be issued and by a governmental unit having jurisdiction over the entire area in which any facility financed by such bonds is to be located, after a public hearing held following reasonable public notice; and WHEREAS, the members of the City Council (the "Council") are the applicable elected representatives of the City; and WHEREAS, there has been published, at least 14 days prior to the date hereof, in a newspaper of general circulation within the City, a notice that a public hearing regarding the Bonds would be held on a date specified in such notice; and WHEREAS, such public hearing was conducted on such date, at which time an opportunity was provided to interested parties to present arguments both for and against the issuance of the Bonds; and 15-6 WHEREAS, it is intended that this resolution shall constitute the approval of the issuance of the Bonds required by Section 147(1) of the Code and Section 9 of the Agreement; NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Chula Vista as follows: 1. That it finds and declares that the above recitals are true and correct. 2. That it approves the issuance, sale, and delivery of multifamily Housing Revenue Bonds by the California Statewide Communities Development Authority for the purpose of refmance and rehabilitation of existing affordable units at Palomar Apartments. 3. That it intends that this Resolution constitute approval of the issuance of the Bonds by the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is located, in accordance with Section 147(1) of the Code and Section 9 of the Agreement. 4. That it authorizes the City Manager to execute all agreements and documents necessary for the issuance, sale, and delivery of the Bonds for the financing of the Palomar Apartments. 5. That it directs the City Clerk to forward a certified copy of this Resolution and a copy of the affidavit of publication of the hearing notice to: Justin Cooper, Esq. Orrick, Herrington & Sutcliffe LLP 405 Howard Street San Francisco, California 94105 Presented by Approved as to form by ,~tL~ Ann Hix Ann Moore City Attorney Acting Director of Community Development J:\ArtomeyIRESO\COMM DEV\PALOMAR TEFRA 8-7-07.doc 15-7