REPORT TO THE CITY COUNCIL
September 25, 2014
FROM: KAREN M. BRADLEY, Assistant Controller
Finance Department
BY: PHILLIP HARDCASTLE, Principal Accountant-Debt Administration
Finance Department
SUBJECT
Title
TEFRA Hearing as required by Section 147(f) of the Internal Revenue Code of 1986 to hear and consider information concerning the proposed issuance of revenue bonds by the California Statewide Communities Development Authority to finance the acquisition and rehabilitation of a 150-unit multifamily low income residential rental project, commonly known as Kearney Cooley Plaza
*RESOLUTION - Approving the issuance by the California Statewide Communities Development Authority of multifamily housing revenue bonds in the aggregate principal amount not to exceed $11 million for the Kearney Cooley Plaza project
Body
RECOMMENDATION
Staff recommends that the Council first hold the public hearing and then upon conclusion adopt the accompanying resolution approving the issuance of multifamily low income housing revenue bonds (the "Bonds") by the California Statewide Communities Development Authority (the "CSCDA") on behalf of Fresno Kearney Cooley, LP, a California limited partnership (the "Applicant") in the aggregate principal amount not to exceed $11 million.
EXECUTIVE SUMMARY
The Applicant is requesting that the City Council adopt a resolution for the issuance of multifamily low income housing revenue bonds in an amount not to exceed $11 million by the CSCDA for the purpose of financing the acquisition and rehabilitation of a 150-unit multifamily low income residential housing facility to be located in the City (the "Project"). The purpose of the resolution is to allow the financing to meet a requirement of the Internal Revenue Code of 1986. The adoption of this resolution is the first step in the process of financing the proposed Project. Prior to the issuance of bonds, the Project must receive a "private activity bond cap" allocation from the California Debt Limit Allocation Committee ("CDLAC") and CSCDA must adopt a resolution approving the execution and delivery of certain bond documents which reflect the terms of the bonds.
The new tax exempt obligations will be issued by the CSCDA. Because the Project is located within the jurisdiction of the City, the City Council must hold a public hearing under the provisions of the Tax Equity and Financial Responsibility Act ("TEFRA") within Section 147(f) of the Internal Revenue Code to receive any public testimony regarding the project before it considers authorizing the issuance of bonds for this purpose. Should the City authorize the issuance of bonds, the City of Fresno would have no obligation or liability associated with the financing of these projects.
BACKGROUND
The City has received a request by the Applicant to hold a public hearing regarding a proposed bond issuance for the purpose of financing the Project, which is located at 720 West Hawes Avenue, Fresno, California. The Project consists of 148 units restricted for occupancy by tenants whose income does not exceed 60% of the Area Median Income (the "AMI"), and two units designated as Management Units. The Project construction consists of 37 one- and two-story wood frame buildings, resides on approximately 11.39 acres and includes a community center, three laundry rooms, three tot lots and ample green space. Upon conclusion of the public hearing, the City is being requested to authorize the CSCDA to proceed with the issuance of the Bonds in an aggregate principal amount not to exceed $11,000,000.
The CSCDA, a joint exercise of powers authority consisting of numerous California cities, counties and special districts, including the City of Fresno, is authorized to assist in the financing and refinancing of multifamily housing facilities. In order to initiate such a financing, the member participant of the CSCDA in which the proposed facilities will be located must (1) conduct a public hearing and (2) approve the CSCDA's issuance of indebtedness. Although the CSCDA will be the issuer of the tax-exempt obligations for the Applicant, the financing cannot proceed without the City of Fresno's approval.
As the appropriate elected public body with jurisdiction over the Project, the City Council must hold a public hearing under the provisions of TEFRA to receive any public testimony regarding the Project before the Council considers authorizing the issuance of the Bonds for this purpose. The Bonds will be limited obligations of the Issuer, payable only from loan repayments to be made by the Applicant to the Issuers from certain funds and accounts established by or pursuant to the bond indenture(s) under which the Bonds will be issued. The Bonds will not constitute a debt or liability to the City.
The purpose of this staff report is to facilitate the Applicant's request for holding the hearing. The attached resolution, if approved by the Council, will provide authorization to the Issuers to issue tax-exempt obligations on behalf of the Applicant in an amount not to exceed $11 million.
The first subject item calls for the Council to hold a TEFRA hearing. This Act requires the local legislative body of a proposed project to notice and conduct a public hearing. The Council will need to hold this hearing and call for any public testimony regarding the proposed project financing. As announced in the published notice, this hearing is simply an opportunity for all interested persons to speak or submit written comments concerning the proposal to issue the Bonds and the nature or location of the Project. There is no obligation on the part of the City Council to respond to any specific comments made or submitted, and no written testimony as of this date has been received. The second subject item would need to be adopted in order for the financing to proceed.
ENVIRONMENTAL FINDINGS
This item is not a project of the City of Fresno and as such, for purposes of this hearing, the California Environmental Quality Act requirements are not applicable.
LOCAL PREFERENCE
Local preference was not considered because this resolution does not include a bid or award of a construction or service contract.
FISCAL IMPACT
The City has no obligation or liability associated with this financing. The City's membership in the CSCDA bears with it no cost or other financing obligation, but serves as a public acknowledgement by the host jurisdiction of the project financing. As set forth in Section 9 of the Amended and Restated Joint Exercise of Powers Agreement of CSCDA (the "JPA Agreement"), the Bonds will not constitute an indebtedness or obligation of, and will not be secured by any form of taxation, nor involve a pledge of the good faith and credit of the City. The Bonds will be limited obligations of the Issuer payable only from loan repayments to be made to the Issuer from certain funds and accounts established by or pursuant to the bond indenture(s) under which the Bonds will be issued. The Issuer has no taxing power and the issuance of the Bonds will not obligate the State of California or any political subdivision of the State to levy or pledge any form of taxation for the Bonds or to make any appropriation for the payment of the Bonds.
Attachment: Resolution