City Council Meeting: June 14, 2011

Agenda Item: 8-C

 

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 the attached 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

Tax-exempt bonds are one of the sources of financing for the 160 affordable units at the Civic Center Village development.On October 14, 2008, City Council adopted a resolution for the issuance of tax-exempt bonds by CSCDA.The original resolution is no longer valid due to the length of time that has elapsed since its original adoption.An updated resolution, demonstrating City Councilís approval of the issuance, is required by CSCDA.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 Village property comprises approximately 3.7 acres and will enhance the Civic Center area with 318 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.The Redevelopment Agency approved the Disposition and Development Agreement on June 10, 2008 and approved a First Amendment to the Disposition and Development Agreement on July 1, 2010.

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 total development cost for the Village affordable housing is projected to be approximately $63 million.The attached resolution authorizes issuance of up to $50 million in tax-exempt bonds.Related anticipates submitting an application to CDLAC seeking tax-exempt bond financing authority for the Village in the coming weeks.Most of the bond financing will be short-term construction financing, with approximately $7 million serving as permanent financing.This financing structure facilitates an award of federal Low Income Housing Tax Credits (tax credits) conditioned upon issuance of the bonds.Proceeds from the sale of tax credits to a professional investor will be used to provide funding to construct the development and to repay the construction portion of the tax-exempt bonds.Rental revenue from the Village will be used to repay the permanent portion.Repayment will be the sole obligation of Related and the City has no obligation to repay the bonds in the event of a default.

 

Financial Impacts & Budget Actions

City approval of the issuance of bonds by CSCDA for this development has no financial or budgetary impact.Not issuing the bonds will disqualify the development from receiving its Multifamily Housing Program funds and Low Income Housing Tax Credits.

 

Prepared by:

 

Lisa Luboff, Senior Development Analyst

 

Approved:

 

Forwarded to Council:

 

 

 

 

 

 

Andy Agle, Director

Housing and Economic Development

 

Rod Gould

City Manager

 

 

 

Attachment A:††† Resolution Approving the Issuance of Bonds by CSCDA for the Purpose of Financing a Multifamily Affordable Housing Development