It is recommended that the
City Council:
1.
Hold
the TEFRA Hearing for the issuance of up to $11,000,000 in tax-exempt
multifamily housing revenue bonds for the Betty Anne Gardens Apartments Housing
Development located at 945 & 955 North King Road.
2.
Adopt
a resolution certifying that the TEFRA Hearing was held in accordance with
applicable federal regulations.
Betty Anne Gardens is a
proposed family rental development of 76 units consisting of one, two and
three-bedroom units located at 945 & 955 North King Road. The development sponsor, First Community
Housing, a California nonprofit corporation, or its designated partnership (the “Sponsor”), plans
to fund the Development with the proceeds of up to $11,000,000 of tax-exempt
multifamily housing revenue bonds (the “Bonds”). The terms of the City’s $3,426,000 acquisition and predevelopment
loan (the“Acquisition/Predevelopment Loan”) were approved by the City Council
on September 4, 2000. Business terms
for a construction/permanent loan for this project will be considered by the
City Council at its October 2, 2001 meeting.
Federal law regulating the
use of tax-exempt multifamily bond financing requires that 20% of the project’s
units must be made available to very low-income households (those earning 50%
or less of the area median income) for the period that the bonds are
outstanding. Federal law does not place
affordability restrictions on the remaining units. The units set aside for very low-income households must remain
affordable for a period of not less than 15 years and must be indistinguishable
from other units in size, location and amenities.
The Development will be 100% affordable with not less than 20%
of the units reserved for very low-income families (earning no more than 50% of
area median income). The income
restrictions on the units will be in place for 55 years.
Under federal regulations
for cost recovery, reimbursement of expenditures with bond proceeds can only
occur if the City adopts an official resolution of intent to issue bonds. This resolution may apply to expenditures
made within 60 days prior to the adoption of the resolution and, in general,
the reimbursement must be made no later than three years after the original
expenditure. The resolution of intent
must describe the project and state the maximum principal amount of obligations
expected to be issued for the project.
The federal tax law, known as the Tax Equity and Fiscal Responsibility Act of 1986 (“TEFRA”), requires that multifamily housing projects funded with tax-exempt bond proceeds be approved at a noticed public hearing, called a “TEFRA hearing.” These hearings provide interested individuals or parties the opportunity to testify on any matters related to such potential bond issues, including the nature and location of the project.
The adoption of the inducement resolution, expressing the City Council’s intent to issue tax-exempt multifamily revenue bonds, and the holding of a TEFRA hearing enable the City to provide the necessary documentation for submitting applications to the California Debt Limit Allocation Committee (CDLAC). On October 2, 2001 the City Council is expected to adopt an inducement resolution for the project, approve the submission of the application to CDLAC, and authorize the Director of Housing to negotiate and execute the Deposit and Escrow Agreement with the Sponsor. The original TEFRA notice included a bond size not to exceed $10,000,000. Since the developer has requested an increase in the bond size amount to $11,000,000, the City is required to re-notice and hold a new TEFRA hearing for the revised bond issuance amount scheduled for October 16, 2001.
LEGAL ISSUES
Affordability restrictions for a term of 55 years have been recorded against the property to ensure that the units remain affordable to low and very low-income households.
PUBLIC OUTREACH
A TEFRA Hearing is a method of notifying the community of the City’s intent to issue tax-exempt private activity bonds for this project. The public hearing notice will be published on or about September 28, 2001 in the San Jose Mercury News, announcing the time and location of the public hearing. In addition to the noticed TEFRA, the development has been the subject of noticed public hearings before the City Council, Planning Commission and the Director of Planning, Building and Code Enforcement.
The Bonds will be tax-exempt secured solely by the Development’s revenues and any credit enhancement. The Sponsor has also requested a loan from the City. Proposed terms for a Construction/Permanent loan for the project is on the City Council’s October 2, 2001 agenda.
COORDINATION
This report has been coordinated with the Office of the City Attorney.
SCOTT P. JOHNSON
Director, Finance Department
LESLYE CORSIGLIA
Acting
Director, Housing Department