DATE: November 6, 2024
TO: Honorable Mayor and City Councilmembers
FROM: Housing and Neighborhood Services Department
TITLE: APPROVAL OF ISSUANCE OF TAX-EXEMPT MULTIFAMILY HOUSING REVENUE BONDS BY THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY TO BENEFIT MIRKA EL CAMINO REAL LP, AN AFFORDABLE HOUSING DEVELOPER
RECOMMENDATION
title
Staff recommends that the City Council adopt a resolution approving a plan of finance, including the issuance of revenue bonds by the California Municipal Finance Authority, in an aggregate principal amount not to exceed $45,000,000, to finance and refinance the acquisition, construction, development and equipping of a 111-unit qualified residential rental project (the “Project”) to be owned and operated by the Borrower and located at 2136 South El Camino Real within the City of Oceanside, California (the “City”).
body
BACKGROUND AND ANALYSIS
The California Municipal Finance Authority (“CMFA”), a joint exercise of powers authority and public entity of the State of California, has received a request from Mirka El Camino Real, LP, a California limited partnership, or another ownership entity created by its managing general partner, MirKa Investments, LLC, a California limited liability company (such limited partnership or other entity being referred to herein as the “Borrower”) to serve as the conduit bond issuer of tax exempt private activity bonds. The bonds, (the “Bonds”), would be issued in an aggregate amount not to exceed $45,000,000 to finance and refinance the acquisition, construction, development and equipping of a 111-unit qualified residential rental project to be owned and operated by the Borrower located at 2136 South El Camino Real (Attachment 2). The Project will have a mix of two and three-bedroom units affordable for various income levels from extremely low- to low-income households (Attachment 3). An application was submitted by the Borrower in April 2024 to the California Debt Limit Allocation Committee (CDLAC), the State bonding authority, and for the companion tax credits. Subsequently, on August 6, 2024, the Project was awarded an allocation of tax-exempt bonds. The bond allocation and tax credit contributions will be used to substantially finance the Project.
The City is requested to execute a resolution approving the issuance of the Bonds (a “TEFRA Approval”) by the CMFA for the benefit of Borrower, to provide for the financing of the Project, such approval being solely for the purposes of satisfying the requirements of the Code and the California Government Code Section 6500 (and following). As described later in this staff report, the City’s participation in the issuance of these state bonds will not impact the City's appropriation limits and will not constitute any type of indebtedness by the City.
In compliance with Section 147(f) of the Internal Revenue Code of 1986, reflecting the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), a public hearing (the “TEFRA hearing”) must be held to provide the public an opportunity to comment on the use of the tax-exempt funds to finance the Project. Reasonable notice of the TEFRA Hearing to members of the community must be published by the agency conducting the hearing seven days prior to. Although the CMFA will issue the bonds, in order for all or a portion of the Bonds to qualify as tax-exempt bonds, Section 147(f) of the Code requires that the applicable elected representative of the governmental unit hosting the Project must provide its approval of the issuance of the Bonds for the financing of the Project following the close of the TEFRA hearing.
On Friday, October 11, 2024, a notice was published in the San Diego Union Tribune, a newspaper of general circulation in the City of Oceanside, informing the public that a public hearing would be held by the City Council on Wednesday, October 23, 2024 at 6:00 p.m. This public hearing allows for an opportunity for the public to provide comments regarding the issuance of the Bonds and the Project for which Bond funds will be allocated. Following the public comment period and hearing, the City Council will consider approving the issuance, sale, and delivery of the Bonds by the CMFA.
Once the City Council adopts the required resolution, no other participation of the City of Oceanside in the bond financing will be required.
§ The debt issued that is financed by the bonds is not debt of the City of Oceanside. All repayment of debt is the strict obligation of the borrower.
§ All monitoring and administrative actions related to this issuance are the responsibility of the CMFA.
§ The City’s participation in the issuance of these state bonds will not impact the City's appropriation limits and will not constitute any type of indebtedness by the City.
Project Financing
The Borrower has secured all financing for the project and is ready to proceed with construction. Total project costs are estimated at $56 million. Additionally, on June 26, 2024, the City Council approved a funding award of a maximum of $6 million and 50 Project Based Vouchers in financing to assist with the development of the Project once the major sources of bond and tax credit financing have been secured.
Although the project can only issue and use the bond amount that has been allocated by the state, this TEFRA action will approve a bond amount not to exceed $45 million. By approving an amount in excess of what the project has been allocated, the Project is able to request supplemental bond allocation due to unforeseen increases in construction costs without the need for an additional TEFRA hearing and approval of issuance of bonds. The borrower has asked the CMFA to issue tax-exempt facility bonds for its qualified residential rental project in accordance with Section 142(a)(7) of the Internal Revenue Code.
The CMFA was created on January 1, 2004, pursuant to a joint exercise of powers agreement to promote economic, cultural and community development, through the financing of economic development and charitable activities throughout California. To date, over 350 municipalities, including the City of Oceanside, have become members of the CMFA.
The CMFA was formed to assist local governments, non-profit organizations, and businesses with the issuance of taxable and tax-exempt bonds aimed at improving the standard of living in California. The CMFA’s representatives and its Board of Directors have considerable experience in bond financings.
FISCAL IMPACT
As noted above, the City will have no financial, legal, liability or responsibility for the project or the repayment of the bonds for the financing of the project. There is no fiscal impact to the City of Oceanside for the California Municipal Finance Authority to issue the bonds for the Project. The CMFA shares a portion of the issuance fees it receives with its member communities when it issues bonds. The City’s minor administrative and staff costs to prepare the reports and related documents required by the borrower and the CMFA will be reimbursed to the City through a small portion of the bond issuance fee.
COMMISSION OR COMMITTEE REPORT
On May 9, 2024, the Housing Commission, by a vote of 9-0, expressed its support of the Project with its recommendation that the City Council and Community Development Commission conditionally approve financial assistance and an allocation of Project Based Vouchers for the Project.
CITY ATTORNEY’S ANALYSIS
The supporting documents have been reviewed and approved as to form by the City Attorney.
end
Prepared by: Leilani Hines, Housing and Neighborhood Services Department
Submitted by: Jonathan Borrego, City Manager
ATTACHMENTS:
1. Staff Report
2. Location Map
3. Unit Mix by Income level
4. Resolution