It is recommended that the
City Council take the following actions regarding the Valley Palms Apartments
Housing Development (the “Development”):
1.
Hold
the TEFRA Hearing for the issuance of up to $35,000,000 in tax-exempt
multifamily housing revenue bonds by the California Statewide Community
Development Authority (CSCDA) for the acquisition and rehabilitation of a
354-unit housing project located at 2155 to 2245 Lanai Avenue; and
2.
Adopt
a resolution certifying that the TEFRA Hearing was held in accordance with
applicable federal regulations.
The Valley Palms Apartments housing development (the “Development”) is an existing 354-unit project, located at 2155 and 2245 Lanai Avenue San Jose, California. The Development sponsor, KDF Communities, or its designated partnership, (the “Sponsor”), plans to fund the acquisition and rehabilitation of this multi-family Development with the proceeds of up to $35,000,000 of tax-exempt multifamily housing revenue bonds. The Sponsor has submitted an application to California Statewide Community Development Authority (CSCDA) requesting that they issue bonds for this development. CSCDA has requested that the City hold the TEFRA hearing for this bond issue.
The Development consists of 28 two-story buildings. The project is situated on 14.0 acres
and there are 25.3 units per acre. It
includes 24 one-bedroom units, 232 two-bedroom units, and 98 two-bedroom
townhouses. All units have either a
balcony or patio. The amenities include
two pools, two laundry buildings, a playground and a basketball court.
CSCDA was established in 1988 under the California Government Code as a Statewide Joint Powers Authority to provide local governments and private industry access to tax-exempt low-interest financing to achieve public benefit goals. To date, CSDCA has issued more than $11 billion in tax-exempt debt.
Federal law regulating the
use of tax-exempt multifamily bond financing requires that: (1) 20% of the
project’s units be made available to very low-income households (those earning
50% or less of the Area Median Income), or (2) 40% of the project’s units be
made available to low-income households (those earning 60% 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
10% of the units reserved for very low-income households (those earning no more
than 50% of Area Median Income) and 90% of the units reserved for low-income
households (those earning no more than 60% of Area Median Income).
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 resolution certifying that a TEFRA hearing was held will enable the City to provide to CSCDA the necessary documentation to complete its application to the California Debt Limit Allocation Committee (CDLAC) by the October 4, 2001 deadline.
LEGAL ISSUES
A Regulatory Agreement between CSCDA and the Sponsor will be executed to ensure continued affordability of the low- and very low-income units.
PUBLIC OUTREACH
The TEFRA Hearing to be held as part of the action items on the October 16, 2001 Council Agenda is a method of notifying the community of the City’s intent to approve the issuance of tax-exempt private activity bonds by CSCDA 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.
The TEFRA hearing will have no fiscal impact on the City. There are no City funds in this project. The bonds issued by CSCDA will be tax-exempt secured solely by the Development’s revenues and any credit enhancement.
COORDINATION
This report has been coordinated with the Office of the City Attorney.
SCOTT P. JOHNSON
DIRECTOR, FINANCE DEPARTMENT
LESLYE CORSIGLIA
ACTIKNG DIRECTOR, HOUSING DEPARTMENT