Item Coversheet

Agenda Item - 4.a.


City of Garden Grove


INTER-DEPARTMENT MEMORANDUM

To:Lisa L. Kim

From:Ursula Luna-Reynosa
Dept.:City Manager 

Dept.: Economic Development and Housing 
Subject:

Adoption of a Resolution approving the issuance of bonds by the California Municipal Finance Authority as conduit financing for the Garden Brook Senior Village Project located at 10080 and 10180 Garden Grove Boulevard, Garden Grove. (Action Item)

Date:9/12/2023

OBJECTIVE

The purpose of this report is to request the City Council conduct a Public Hearing under the requirements of TEFRA and the Internal Revenue Code of 1986, as amended (the “Code”), regarding the adoption of a resolution approving the issuance of the Bonds by the California Municipal Finance Authority (CMFA) for the benefit of the Garden Grove Pacific Associates, a California Limited Partnership (the “Borrower”) or a partnership created by Pacific West Communities, Inc. (the “Developer”), consisting at least of the Developer or a related person to the Developer and one or more limited partners. This Public Hearing and resolution are solely for the purposes of satisfying the requirements of TEFRA, the Code, and the California Government Code Section 6500 (and following).

BACKGROUND

The Borrower has requested that the CMFA serve as the municipal issuer to  adopt a plan of financing providing for the issuance of one or more series of revenue bonds issued in an aggregate principal amount not to exceed $150,000,000 (the “Bonds”) for the acquisition, construction, improvement and equipping of a 394-unit senior multifamily rental housing project located at 10080 and 10180 Garden Grove Boulevard, Garden Grove, California, generally known as Garden Brook Senior Village (the “Project”).

 

In order for all or a portion of the Bonds to qualify as tax-exempt bonds, the City of Garden Grove 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.

 

A TEFRA hearing was held and a resolution approved for this financing on November 14, 2017. The maturity date is now being extended and pursuant to federal law, a “technical re-issuance” of the bonds is required along with a TEFRA Hearing and new resolution considered.  The lease up of the property was significantly longer than originally anticipated due to a burst water pipe that impacted half of the building and delayed opening. The bond maturity date being extended will provide some flexibility in managing cash flows and spread out the repayment obligations over a longer period of time to reduce immediate financial strain and improve the project's feasibility.

DISCUSSION

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 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 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.

FINANCIAL IMPACT

There is no financial impact to the City as the proposed conduit debt will be the sole responsibility of the Borrower, both financially and legally. 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 Garden Grove, $27,000 was allocated by the CMFA to the City's General Fund in 2018 when the original financing closed.

RECOMMENDATION

It is recommended that the City Council:

 

  • Conduct a public hearing, accept and consider comments and any oral and written testimony regarding the adoption of a Resolution approving the  issuance of the bonds by CMFA; and

 

  • Adopt the attached Resolution in favor of the issuance of the bonds by CMFA.

 

 

 

 

By:    Monica Covarrubias

         Sr. Project Manager




ATTACHMENTS:
DescriptionUpload DateTypeFile Name
TEFRA Resolution8/30/2023Resolution9-12-23_TEFRA_Resolution_-_Garden_Brook_Senior_Village_4128-8806-5039_4.pdf
TEFRA Public Hearing Notice8/30/2023Notice9-12-23_TEFRA_Final_Public_Notice_-_Garden_Brook_Senior_Village_4128-8806-5039_4(2).pdf