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HomeMy WebLinkAboutStaff Report 6.D 07/15/2019Agenda Item #6.D wap, -�85$ DATE: July 15, 2019 TO: Honorable Mayor and Members of the City Council through City Manager ,;)2 FROM: Sue Castellucci, Housing Administrator SUBJECT: Resolution of the City Council of the City of Petaluma Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority in an Aggregate Principal Amount not to Exceed $13,000,000 to Finance the Acquisition and Rehabilitation of Rental Housing Facility for the Benefit of Old Elm Partners II, L.P. RECOMMENDATION It is recommended that the City Council adopt the attached Resolution of The City Council of the City of Petaluma Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority in an Aggregate Principal Amount not to Exceed $13,000,000 to Finance the Acquisition and Rehabilitation of a Rental Housing Facility for the Benefit of Old Elm Partners II, L.P. BACKGROUND Old Elm Village Apartments is an acquisition/rehabilitation project that was built in 2001 by Burbank Housing and is located at 359 West Payran Street, Petaluma, CA. The project provides affordable housing to a community of low-income families, and individuals with special needs. The project comprises of nine studios, 22 one -bedroom units, 12 two-bedroom units, 38 three- bedroom units, and 6 four-bedroom units along with a community building. The residential units are located in two-story townhomes and two 3 -story "gate buildings" at the property entrance facing Payran Street. The gate buildings also include two ground -floor commercial spaces currently occupied by the Petaluma Police Department and non-profit childcare center. Proposed rehabilitation includes accessibility improvements; energy efficiency improvements; new entry doors; new floor coverings; exterior painting; new kitchen appliances; plumbing, HVAC, and electrical upgrades; and landscaping improvements. The financing of this project will result in preserving affordable housing for low-income households in the City of Petaluma for another 55 years. Agenda Review: City Attorney Finance Director City Manager The development and support of low-income work -force housing is one of the highest priorities of the City's 2015-2023 Housing Element, 2015-2020 Consolidated Plan, and 2007 PCDC Implementation Plan. DISCUSSION The recommended action is necessary to complete the financing plan to allow start of the rehabilitation of Old Elm Apartments in Fall 2019. Burbank Housing Development Corporation is recommending a financial strategy similar to that utilized in financing the development when it was built. A new partnership, Old Elm Partners II, LP, will be formed which will acquire, rehabilitate and refinance the Project and will be financed with a combination of 4% federal tax credits issued by the State of California through the Low Income Housing Tax Credit(LIHTC) program and tax-exempt bonds, and will be subject to affordability restrictions for a term of an additional 55 years commencing upon completion of the rehabilitation, i.e., through 2075. The City's affordability restrictions, which keep the property affordable to low income households, associated with existing City funding expire in 2032. Burbank Housing Development Corporation, as Sponsor of the Old Elm Partners II, LP, has requested that the California Municipal Finance Agency (CMFA) issue bonds for the project. The City has been a member of that Joint Powers Authority since January 2007. The City's membership in CMFA bears with it no cost or other financing obligations but serves as a public acknowledgement by the City of the project financing. There are a series of actions necessary to accomplish this transaction: (1) The Internal Revenue Code of 1986 requires that the City Council conduct a public hearing known as a TEFRA hearing (Tax Equity Fiscal Reform Act) to authorize the issuance by another agency of tax-exempt housing revenue bonds. The TEFRA hearing is simply an opportunity for all interested persons to speak or to submit written comments concerning the proposal to issue debt and the nature or location of the proposed project. (2) A resolution by the City Council approving the issuance of multi -family revenue bonds is required in the application for bond allocation. The resolution does not commit, approve or constitute any other action or funding for the project by the City. (3) Following the adoption of the resolution, CMFA will proceed with the submission to the California Debt Limit Allocation Committee (CDLAC) of an application for "private activity bond" allocation for the project. PUBLIC OUTREACH A public notice was published in the Argus Courier on June 27, 2019 announcing a public hearing to be held with respect to the proposed issuance by the California Municipal finance Authority of its revenue bonds not to exceed $13,000,000. The proceeds of the bonds will be used to finance the acquisition and rehabilitation of Old Elm Village, an 87 -unit low income housing community. 2 FINANCIAL IMPACTS: The City will not be a party to the bond financing documents. The debt will not be secured by any form of taxation or by any obligation of either the City or CMFA; neither would the debt represent or constitute a general obligation of either the City or CMFA. Pursuant to the governing California statutes and the JPA Agreement, a member of CMFA is not responsible for the repayment of obligations incurred by CMFA. The debt will be payable solely from amounts received pursuant to the terms and provisions of financing agreements to be executed by . Burbank Housing. In the financing documents the developer will also provide comprehensive indemnification to CMFA and its members, including the City. ATTACHMENTS Resolution ATTACHMENT #1 RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA APPROVING THE ISSUANCE OF REVENUE BONDS BY THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $13,000,000 TO FINANCE THE ACQUISITION AND REHABILITATION OF A RENTAL HOUSING FACILITY FOR THE BENEFIT OF OLD ELM PARTNERS II, L.P. WHEREAS, Burbank Housing Development Corporation (the "Sponsor"), on behalf of Old Elm Partners II, L.P., a Califoinia limited partnership, or another ownership entity to be established by the Sponsor or by an affiliate thereof (the "Borrower"), has requested that the California Municipal Finance Authority (the "Authority") issue one or more series of revenue bonds in an aggregate principal amount not to exceed $13,000,000 (the "Bonds") for the acquisition, rehabilitation, improvement and equipping of an 87 -unit rental housing facility for low- income persons and families) (the "Project"), to be owned and operated by the Borrower and to be located at 359 West Payran Street in the City of Petaluma, California (the "City"); and WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986 (the "Code"), the issuance of the Bonds by the Authority must be approved by the City because the Project is located within the territorial limits of the City; and WHEREAS, the City Council of the City of Petaluma (the "City Council") is the elected legislative body of the City and is one of the "applicable elected representatives" required to approve the issuance of the Bonds under Section 147(f) of the Code; and WHEREAS, the Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirement of Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the "Agreement"), among certain local agencies, including the City; and WHEREAS, pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the Bonds by the Authority; NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Petaluma, as follows: Section 1. Recitals. The foregoing recitals are true and correct. Section 2. Approval. The City Council hereby approves the issuance of the Bonds by the Authority. It is the purpose and intent of the City Council that this resolution constitutes approval of the issuance of the Bonds by the Authority, for the purposes of (a) Section 147(f) of the Code, by the applicable elected representative of the governmental unit having jurisdiction 11 over the area in which the Project is located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement. Section 3. Other Actions. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things to execute and deliver any and all documents which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby. Section 4. Certified Copy. The Clerk shall forward a certified copy of this Resolution and an originally executed Agreement to: Ronald E. Lee, Esq. Jones Hall, APLC 475 Sansome Street, Suite 1700 San Francisco, CA 94111 Section S. Effectiveness. This resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED by the City Council of the City of Petaluma this day of )2019. 5