Report Prepared by: Leah Brown, Management Analyst, Development Services
Title
SUBJECT: Public Hearing Pursuant to the Tax Equity and Fiscal Responsibility Act (TEFRA) and Adoption of Resolution Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority in an Aggregate Principal Amount not to Exceed $50,000,000 for the Purpose of Financing and Refinancing the Acquisition, Construction, Development, and Equipping of a 108-Unit Qualified Residential Property at 1808 Parsons Avenue, an Affordable Housing Project
REPORT IN BRIEF
Requests the City Council to conduct a TEFRA Public Hearing and consider adopting a resolution approving the issuance of Revenue Bonds by the California Municipal Finance Authority (CMFA) in an aggregate amount not to exceed $50,000,000 on behalf of Visionary Home Builders of California, Inc. for the purpose of financing or refinancing the acquisition, construction, improvement, and equipping the Bella Vista 108-unit Affordable Housing Project. The City will not have any financial or legal obligations for the tax-exempt status of the bonds, the debt service on the bonds, or for any other matter related to the proposed bonds.
RECOMMENDATION
City Council - Adopt a motion:
A. Adopting Resolution 2024-102, a Resolution of the City Council of the City of Merced, California, approving a Plan of Finance including the issuance of Revenue Bonds by California Municipal Finance Authority to finance and refinance a qualified residential rental project for the benefit Of VHB Bella Vista, LLC, and certain other matters relating thereto and,
B. Authorizing the City Manager to execute all necessary documents.
Body
ALTERNATIVES
1. Approve as recommended by staff; or,
2. Approve, subject to other than recommended by staff (identify specific findings and/or conditions amended to be addressed in City Council motion); or,
3. Deny; or,
4. Refer to City Staff for reconsideration of specific items to be addressed in City Council motion; or,
5. Continue to a future City Council meeting (date and time to be specified in City Council motion).
AUTHORITY
City of Merced Charter, Section 200; Section 147(f) of the Internal Revenue Code of 1986; and, California Government Code Section 6500, et. seq. (Joint Powers Agreements).
CITY COUNCIL PRIORITIES
As provided for in the 2024-25 Adopted Budget and the Council’s ProHousing Policies.
DISCUSSION
The Borrower requested that the CMFA serve as the municipal issuer of the Bonds, in an aggregate principal amount not to exceed $50,000,000 (the “Bonds”) of tax-exempt revenue bonds. The proceeds of the Bonds will be used to finance and refinance the acquisition, construction, development and equipping of Bella Vista, a 108-unit qualified residential rental project (the “Project”) to be owned and operated by the Borrower (Visionary Home Builders of California, Inc.) and located at 1808 Parsons Avenue within the City of Merced, California (the “City”).
In order for the Bonds to qualify as tax-exempt bonds, the City of Merced must conduct a public hearing (the “TEFRA Hearing”) providing for the members of the community an opportunity to speak in favor of or against the use of tax-exempt bonds for the financing of the Project. Prior to such TEFRA Hearing, reasonable notice must be provided to the members of the community. Following the close of the TEFRA Hearing, an “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.
CALIFORNIA MUNICIPAL FINANCE AUTHORITY:
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 200 municipalities have become members of 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.
The City of Merced's past history with conducting TEFRA hearings for bonds includes the issuance of a $12 million bond for the Gateway Terrace II, $10 million bond to Merced Gateway Investors, LP for the Gateway Terrace multifamily apartments in 2012; the issuance of a $10 million bond to Merced Pacific Associates for the Woodbridge multi-family apartments on Highway 59 near Olive Avenue in 2009; and issuance of a $157 million bond on behalf of Catholic Healthcare West in 2007.
IMPACT ON CITY RESOURCES
The Bonds to be issued by the CMFA for the Project will be the sole responsibility of the Borrower, and the City will have no financial, legal, moral obligation, liability or responsibility for the Project or the repayment of the Bonds for the financing of the Project. All financing documents with respect to the issuance of the Bonds will contain clear disclaimers that the Bonds are not obligations of the City or the State of California but are to be paid for solely from funds provided by the Borrower.
The Board of Directors of the California Foundation for Stronger Communities, a California non-profit public benefit corporation (the “Foundation”), acts as the Board of Directors for the CMFA. Through its conduit issuance activities, the CMFA shares a portion of the issuance fees it receives with its member communities and donates a portion of these issuance fees to the Foundation for the support of local charities. With respect to the City of Merced, it is expected that that a portion of the issuance fee attributable to the City will be granted by the CMFA to the general fund of the City. Such grant may be used for any lawful purpose of the City.
ATTACHMENTS
1. Resolution 2024-102
2. Request from CMFA