City Council Meeting: October 14, 2008

Agenda Item: 1-F

To:                   Mayor and City Council

 

From:              Andy Agle, Director of Housing and Economic Development

 

Subject:          Tax-Exempt Bonds for Civic Center Affordable Housing

 

 

Recommended Action

Staff recommends that the City Council adopt a resolution approving the issuance of tax-exempt bonds by the California Statewide Communities Development Authority (CSCDA) to assist in the financing of 160 affordable housing units in the Civic Center Village (Village).

 

 

Executive Summary

The City Council and Redevelopment Agency have recently approved the project design and business terms for the development of the Civic Center Village, which includes 160 affordable residences with public and private financing.  One of the sources of funding, tax-exempt bonds, requires City Council approval of the issuance, although the City will neither issue the bonds nor be responsible for their repayment.  Tax-exempt bonds offer lower interest rates compared to regular bank loans, thus providing cost savings and increased leveraging of City housing trust funds.

 

 

Background

The Civic Center Village property comprises approximately 3.7 acres and will enhance the Civic Center area with 324 residences (including 160 that will be affordable to low-income households, including families and artists), public open space, an extension of Olympic Drive, public art and sustainable design.  The City Council approved the Development Agreement for the Civic Center Village on May 13, 2008 and the Redevelopment Agency approved the Disposition and Development Agreement on June 10, 2008. 

 

In conjunction with the Village developer, Related/Santa Monica Village LLC (Related), staff has identified tax-exempt bonds as an appropriate financing mechanism for the affordable housing component of the Village (160 units).  Tax-exempt bond financing requires 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 (City Council) approve the issuance of the bonds for a development located in its jurisdiction.

 

Discussion

The City of Santa Monica will not issue the bonds for the Village, and neither the City of Santa Monica nor its residents will be responsible for repayment of the bonds.  Instead, with City Council approval, CSCDA will issue the bonds. 

 

Established in 1987 as a California Joint Powers Authority, CSCDA is a public agency jointly sponsored by the League of California Cities and the California State Association of Counties.  It offers a broad range of tax-exempt financing programs to assist local agencies in achieving economic, financial and social goals.  CSCDA takes responsibility for reviewing proposed bond financing, ensuring that the proposed financing meets all CSCDA 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 Village affordable housing development.  The sources of repayment are private investor equity from the sale of federal low-income housing tax credits, and rental revenue from the Village.  The total development cost for the Village affordable housing is projected to be approximately $62.5 million.  The attached resolution authorizes up to $36 million of tax-exempt bonds.  Related anticipates submitting an application to CDLAC in early 2009 seeking tax-exempt bond financing authority for the Village.  Most of the bond financing would serve as short-term construction financing, with approximately $5.2 million serving as permanent financing.  This financing structure also facilitates an award of federal Low Income Housing Tax Credits (tax credits) conditioned upon issuance of the tax-exempt bonds.  The tax credits are sold to a professional investor and the proceeds of the sale of the credits will be used to provide funding to construct the development and to repay the construction portion of the tax-exempt bond.

 

Financial Impacts & Budget Actions

City approval of the issuance of bonds by CSCDA for this development has no financial or budgetary impact.

 

Prepared by:

Jim Kemper, Housing Administrator

 

 

Approved:

 

Forwarded to Council:

 

 

 

 

 

 

Andy Agle, Director,

Housing and Economic Development

 

P. Lamont Ewell

City Manager