HomeMy WebLinkAboutConduct a Tax and Equity Fiscal Responsibility Act ("TEFRA") / �1JEG6LE/Z,E' Q?,�T of
_ City of Huntington Beach
File #: 19-625 MEETING DATE: 6/3/2019
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Lori Ann Farrell Harrison, Interim City Manager
PREPARED BY: Kellee Fritzal, Deputy Director of Economic Development
Subiect:
Conduct a Tax and Equity Fiscal Responsibility Act ("TEFRA") public hearing and adopt
Resolution No. 2019-39 approving the issuance by the California Statewide Communities
Development Authority ("CDCDA") of Multifamily Housing Revenue Bonds in an amount not
to exceed $28,000,000 for Hermosa Vista Apartments, located at 15363 & 15425 Goldenwest
St., with no City obligations
Statement of Issue:
The City Council is asked to conduct a public hearing under the Tax and Equity Responsibility Act
("TEFRA") in connection with the proposed issuance of tax-exempt bonds by the California Statewide
Communities Development Authority ("CSCDA") to issue Multifamily Housing Revenue Bonds for the
Hermosa Vista Apartments, an existing 88-unit apartment complex located at 15363 & 15425
Goldenwest Street (the "Project'), in an aggregate amount no to exceed $28,000,000 (the "Bonds").
The Bond proceeds will be used by the Borrower for the purpose of re-financing the acquisition,
rehabilitation, improvement, and equipping of the multifamily housing rental project.
Financial Impact:
There is no fiscal impact to the City. The Bonds will be issued as limited obligations of CSCDA,
payable solely from revenues and receipts derived from a loan to be made by CSCDA to the
Borrower with the Bond proceeds. The City bears no liability with respect to the issuance of the
Bonds. Further, the City is not a party to any of the financing documents related to the Bond
issuance and is not named in any of the disclosure documents describing the Bonds or the proposed
financing.
Recommended Action:
A) Conduct a public hearing under the requirements of TEFRA and the Internal Revenue Code of
1986, as amended ("IRS Code"), in consideration of the issuance of tax-exempt bond financing
by the California Statewide Communities Development Authority for the benefit of Hermosa
2019 LP, to provide financing for the acquisition, rehabilitation, improvement, and equipping of
an 88-unit multifamily rental housing project generally known as Hermosa Vista Apartments,
City of Huntington Beach Page 1 of 3 Printed on 5/30/2019
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File #: 19-625 MEETING DATE: 6/3/2019
and;
B) Adopt Resolution No. 2019-39 "A Resolution of the City Council of the City of Huntington Beach
Approving the Issuance by the California Statewide Communities Development Authority of
Multifamily Housing Revenue Bonds for Hermosa Vista Apartments."
Alternative Action(s):
Do not approve the issuance of the bonds and direct staff as necessary.
Analysis:
Hermosa Vista is an existing 88-unit affordable housing rental project. In 2003, the City assisted in
the acquisition of the site, using Redevelopment Agency funds, HOME funds and tax credits. The
owner, Hermosa 2019 LP, has requested the City to authorize the application for the tax-exempt
bonds.
The proceeds of the Bonds will be used for the purpose of making a loan to the Borrower, to enable
the Borrower to re-finance the acquisition, rehabilitation, improvement and equipping of the housing
rental project located at 15363 & 15425 Goldenwest Street (the "Project"), which will continued to be
owned and operated by Hermosa 2019 LP.
In order for all or a portion of the Bonds to qualify as tax-exempt bonds, the City of Huntington Beach
("City") must conduct a public hearing (the "TEFRA Hearing") providing 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. Adoption of the resolution is solely for the purposes of satisfying the
requirements of the Tax Equity and Fiscal Responsibility Act (TEFRA), the IRS Code and the
California Government Code Section 6500 (and following). 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 public notice was
published on May 23, 2019.
CSCDA is a joint powers authority sponsored by the League of California Cities ("League") and the
California State Association of Counties ("CSAC"). CSCDA was created by the League and CSAC in
1988 to enable local government and eligible private entities access to low-cost, tax-exempt financing
for projects that provide a tangible public benefit, contribute to social and economic growth and
improve the overall quality of life in local communities throughout California. CSCDA is comprised of
more than 530 members, including the City of Huntington Beach. CSCDA has issued more than $60
billion through 1,600 plus financings since 1988 and consistently ranks in the top 10 of more than
3,000 nationwide public issuers of tax-exempt debt, as measured by annual issuance amount.
Environmental Status:
Not applicable
Strategic Plan Goal:
Non-Applicable - Administrative Item
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File #: 19-625 MEETING DATE: 6/3/2019
Attachment(s):
1. Resolution No. 2019-39, "A Resolution of the City Council of the City of Huntington Beach
Approving the Issuance by the California Statewide Communities Development Authority of
Multifamily Housing Revenue Bonds for Hermosa Vista Apartments."
City of Huntington Beach Page 3 of 3 Printed on 5/30/2019
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RESOLUTION NO. 2019-39
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
APPROVING THE ISSUANCE BY THE CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY OF MULTIFAMILY HOUSING REVENUE BONDS FOR
HERMOSA VISTA APARTMENTS
WHEREAS, the California Statewide Communities Development Authority (the
"Authority") is authorized pursuant to the provisions of California Government Code Section 6500
et seq. and the terms of an Amended and Restated Joint Exercise of Powers Agreement, dated as of
June 1, 1988 (the "Agreement"), among certain local agencies throughout the State of California,
including the City of Huntington Beach (the "City"), to issue revenue bonds in accordance with
Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code for the purpose of
financing multifamily rental housing projects; and
WHEREAS, Hermosa 2019 LP or a partnership of which KDF Communities LLC (the
"Developer") or a related person to the Developer is the general partner, has requested that the
Authority adopt a plan of financing providing for the issuance of exempt facility bonds for a
qualified residential rental project pursuant to Section 142(a)(7) of the Internal Revenue Code of
1986 (the "Code") in one or more series issued from time to time, including bonds issued to refund
such exempt facility bonds in one or more series from time to time, and at no time to exceed
$28,000,000 in outstanding aggregate principal amount(the"Bonds"), to finance or refinance the
acquisition, rehabilitation and development of a 88-unit multifamily rental housing project
located at 15363 & 15425 Goldenwest Street, Huntington Beach, California(the "Project"); and
WHEREAS, pursuant to Section 147(f) of the Code, prior to their issuance, private activity
bonds are required to be approved by the "applicable elected representative" of the governmental
units on whose behalf such bonds are expected to be issued and by a governmental unit having
jurisdiction over the entire area in which any facility financed by such bonds is to be located, after a
public hearing held following reasonable public notice; and
WHEREAS, the members of this City Council (this "City Council") are the applicable
elected representatives of the City; and
WHEREAS, there has been published, at least 7 days prior to the date hereof, in a
newspaper of general circulation within the City, a notice that a public hearing regarding the Bonds
would be held on a date specified in such notice; and
WHEREAS, such public hearing was conducted on such date, at which time an opportunity
was provided to interested parties to present arguments both for and against the issuance of the
Bonds; and
WHEREAS, the Authority is also requesting that the City Council approve the issuance
of any refunding bonds hereafter issued by the Authority for the purpose of refinancing the
Bonds which financed the Project (the "Refunding Bonds"), but only in such cases where federal
tax laws would not require additional consideration or approval by the City Council; and
19-7644/204265 1
Resolution No. 2019-39
WHEREAS, it is intended that this resolution shall constitute the approval of the issuance of
the Bonds required by Section 147(f) of the Code and Section 9 of the Agreement;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
HUNTINGTON BEACH AS FOLLOWS:
Section 1. The above recitals are true and correct.
Section 2. The City Council hereby approves the issuance of the Bonds and the
Refunding Bonds by the Authority. It is the purpose and intent of the City Council that this
resolution constitute approval of the Bonds for the purposes of(a) Section 147(f) of the Code and
(b) Section 9 of the Agreement.
Section 3. The officers of the City are hereby authorized and directed, jointly and
severally, to do any and all things and to execute and deliver any and all documents that they deem
necessary or advisable in order to carry out, give effect to and comply with the terms and intent of
this resolution and the financing approved hereby.
Section 4. This resolution shall take effect immediately upon its passage.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the 3rd day of June , 2019.
Mayor
REVIEWED AND APPROVED: INITIATED AND APPROVED:
a - Z---
VA4
City Manager D u- y Director of Eer omic Development
APPROVED AS TO FORM:
Cit Attorney kw
19-7644/204265 2
Res. No. 2019-39
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, ROBIN ESTANISLAU the duly elected, qualified City Clerk of the
City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do
hereby certify that the whole number of members of the City Council of the City of
Huntington Beach is seven; that the foregoing resolution was passed and adopted
by the affirmative vote of at least a majority of all the members of said City Council
at a Regular meeting thereof held on June 3, 2019 by the following vote:
AYES: Brenden, Carr, Semeta, Peterson, Posey, Hardy
NOES: None
ABSENT: None
OUT OF
ROOM: Delgleize
RECUSE: None
City C er and ex-officio Clerk of the
City Council of the City of
Huntington Beach, California
0-
orrick
May 28, 2019 Orrick,Herrington&Sutcliffe LLP
The Orrick Building
405 Howard Street
San Francisco,CA 94105-2669
+1 415 773 5700
orrick.com
Dahle Bulosan
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Re: California Statewide Communities Development Authority
Ladies and Gentlemen:
The California Statewide Communities Development Authority ("CSCDA") is a joint exercise
of powers authority created under the California Joint Powers Act (California Government
Code Section 6500 and following) (the "Act"). Pursuant to the Act and an Amended and
Restated Joint Powers Agreement among a number of cities, counties and special districts
within the State of California (the "Agreement"), CSCDA is authorized to issue revenue bonds
and certificates of participation for the benefit of conduit borrowers.
CSCDA issues bonds on behalf of the CSCDA member (the "Program Participant") in whose
jurisdiction the projects are to be located, in this case, the City of Huntington Beach(the "City").
Pursuant to Section 9 of the Agreement, CSCDA may not issue bonds or other forms of
indebtedness unless the governing body of the Program Participant approves their issuance.
Furthermore, Section 147(f) of the Internal Revenue Code of 1986 requires that the proposed
financing be approved by a governmental unit having jurisdiction over the area in which the
facility to be financed is located. A financing will be treated as having been approved by a
governmental unit if"the applicable elected representative"of such governmental unit(in this
case,the City Council) approves such issue after a public hearing following reasonable public
notice of such hearing. Thereafter, pursuant to applicable state law, the bonds are issued as
limited obligations of CSCDA, not of the City, payable solely out of the revenues and receipts
derived from the applicable project or the loans made by CSCDA to the respective borrower with
the proceeds of the bonds.
Specifically, Section 8 of the Agreement provides that "[t]he Bonds, together with the interest
and premium, if any, thereon, shall not be deemed to constitute a debt of any Program
Participant—or pledge of the faith and credit of the Program Participants...Neither the Program
Participants nor...shall be obligated to pay the principal of, premium, if any, or interest on the
orrick.
Page 2
Bonds, or other costs incidental thereto..." (emphasis added) The Agreement also expressly
provides that CSCDA is a public entity separate and apart from the Program Participants, and
"[i]ts debts, liabilities and obligations do not constitute debts, liabilities or obligations of any
parry to [the] Agreement."'
Accordingly, the bonds issued for the projects will be indebtedness of CSCDA, and the City
will not be asked to approve or execute any of the financing documents. Moreover, the
disclosure prepared for the bonds will not have any information regarding the City and will not
include the City's name, other than with respect to where the projects are located. The
documents will be made available for your review if you would like to receive copies.
In order to further limit CSCDA's financial liability and that of its Program Participants,
CSCDA requires that in connection with the loan of bond proceeds to a borrower, such
borrower must indemnify CSCDA and the applicable Program Participant (the City) from all
losses, damages, claims, actions, liabilities, costs and expenses of any conceivable nature, kind
or character relating to the applicable bonds and project. In this case, such indemnification will
include the City. We call attention, however, to the fact that such obligation may be subject to
bankruptcy, insolvency, reorganization, arrangement and other laws relating to or affecting
creditors' rights, to the application of equitable principles, to the exercise of judicial discretion
in appropriate cases and to possible limitations on legal remedies.
I have provided you this letter at the request of Jon Penkower, CSCDA Managing Director. Do
not hesitate to contact me if you have further questions with respect to this matter.
Sincerely yours,
/s/Justin S. Cooper
i See Cal. Government Code Section 6508.1. "...the debts,liabilities,and obligations of the agency shall be
debts,liabilities,and obligations of the parties to the agreement unless the agreement specifies otherwise."
Los An-geles Times
MEDIA G R 0 U P
Sold To:
Orrick-Herrington &Sutcliffe LLP-C000301203
405 Howard St
San Francisco,CA 94105
Bill To:
Orrick-Herrington &Sutcliffe LLP-C000301203
405 Howard St
San Francisco,CA 94105
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Bleach,Califotrri 1 0649 Alientiota_City Clerk-
MY CLERK
CITY,, DIbIc TLNGT01N BEACH,
6290167-Newport Harbor News Press Combined With Daily Pilot
Page 2 of 2
Los Anneles Times
PROOF OF PUBLICATION
(2015.5 C.C.P.)
STATE OF CALIFORNIA
County of Orange
I am a citizen of the United States and a resident of the County
aforesaid; I am over the age of eighteen years, and not a party to or
interested in the action for which the attached notice was published.
I am a principal clerk of the Newport Harbor News Press Combined With
Daily Pilot, which was adjudged a newspaper of general circulation on June
19,1952,Cases A24831 for the City of Newport Beach,County of Orange,
and State of California. Attached to this Affidavit is a true and complete
copy as was printed and published on the following date(s):
May 23,2019
I certify (or declare) under penalty of perjury
that the foregoing is true and correct.
Dated at Fountain Valley, California
on this 28th day of May,2019.
Amn"'4a,
Aaron Kalman
1050 Talbert Avenue,Suite 300 W.
Fountain Valley,CA 92708
6290167-Newport Harbor News Press Combined With Daily Pilot
Page 1 of 2
Estanislau, Robin
From: Sommerhauser, Lauren <Iommerhauser@orrick.com>
Sent: Tuesday, May 28, 2019 3:54 PM
To: Fritzal, Kellee
Cc: Hamill, James; Penkower, Jon; Vigliotta, Mike; Estanislau, Robin; Garcia, Gilbert; Bulosan,
Dahle
Subject: RE: City of Huntington Beach-TEFRA Requests
Yes it does.
From: Fritzal, Kellee<KFritzal@surfcity-hb.org>
Sent:Tuesday, May 28, 2019 3:52 PM
To:Sommerhauser, Lauren<Iommerha use r@orrick.com>
Cc: Hamill,James<jhamill@cscda.org>; Penkower,Jon <j pen kower@cscda.org>;Vigliotta, Mike<MVigliotta@surfcity-
hb.org>; Estanislau, Robin<Robin.Estanislau@surfcity-hb.org>; Garcia, Gilbert<gilbert.garcia@surfcity-hb.org>; Bulosan,
Dahle<DBulosan@surfcity-hb.org>
Subject: Re: City of Huntington Beach-TEFRA Requests
Does this meet all legal requirements
Sent from my iPhone
On May 28, 2019, at 3:45 PM, Sommerhauser, Lauren<Iommerha use r@orrick.com>wrote:
Hi Kellee, attached are the proofs of publication.
From: Fritzal, Kellee<-KFritzal@surfcity-hb.org>
Sent:Tuesday, May 28, 2019 3:34 PM
To: Penkower,Jon <ienkower@cscda.org>
Cc:Sommerhauser, Lauren<Iommerhauser@orrick.com>; Hamill,James<ihamill@cscda.org>
Subject: RE: City of Huntington Beach-TEFRA Requests
When and where were the public notices published,we need an Orange County newspaper
From:Jon Penkower<ienkower@cscda.org>
Sent:Tuesday, May 28,2019 3:06 PM
To: Bulosan, Dahle<DBulosan@surfcity-hb.org>; Rief,Sunny<Sunny.Rief surfcity-hb.org>
Cc: Fritzal, Kellee<KFritzal@surfcity-hb.org>; Lauren Sommerhauser<Iommerhauser@orrick.com>;
James Hamill<ihamill@cscda.org>
Subject: RE: City of Huntington Beach-TEFRA Requests
Orrick has sent most cities a "no liability" letter. Do you have one on file? We last did a TEFRA for
Huntington Villa Yorba Apartments a couple of years ago. I have.asked that they resend as soon as
possible.
From: Bulosan, Dahle<DBulosan@surfcity-hb.org>
Sent:Tuesday, May 28, 2019 3:04 PM
To: Rief, Sunny<Sunny.Rief@surfcity-hb.org>
Cc:Jon Penkower<ienkower@cscda.org>; Fritzal, Kellee<KFritzal@surfcity-hb.org>; Lauren
1
Sommerhauser<Iommerhauser@orrick.com>;James Hamill<ihamill cscda.org>
Subject: Re: City of Huntington Beach-TEFRA Requests
Thanks Jon! Would it be possible to expedite for today. We are finalizing out council report today.
Thanks,
Dahle
On May 28, 2019, at 2:48 PM, Rief,Sunny<Sunny.Rief@surfcity-hb.org>wrote:
Thank you Jon!
Sunny Rief,CPA,CFE
Project Manager
Finance Department
City of Huntington Beach
2000 Main Street
Huntington Beach,CA 92648
Phone:(714)536-5907
Fax:(714)536-5934
sunny.rief@surfcity-hb.org
From:Jon Penkower<ienkower@cscda.org>
Sent:Tuesday, May 28, 2019 2:46 PM
To: Bulosan, Dahle<DBulosan@surfcity-hb.org>; Fritzal, Kellee<KFritzal@surfcity-
hb.org>; Rief,Sunny<Sunny.Rief @surfcity-hb.org>
Cc: Lauren Sommerhauser<Iommerha use r@orrick.com>;James Hamill
<iha mill @cscda.org>
Subject: RE: City of Huntington Beach-TEFRA Requests
Hi Dahle,
We'll see if Orrick can send you a memo confirming your request. Thanks.
Jon Penkower
Managing Director
1700 North Broadway,Suite 405
Walnut Creek, CA 94596
Direct (925) 476-5887
Cell (415) 939-8484
<image004.png>
www.cscda.org
<i mage006.j pg><i m age008.j pg>
From: Bulosan, Dahle<DBulosan@surfcity-hb.org>
Sent:Tuesday, May 28, 2019 2:16 PM
To: Fritzal, Kellee<KFritzal@surfcity-hb.org>;Jon Penkower<ipenkower@cscda.org>;
Rief, Sunny<Sunny.Rief@surfcity-hb.org>
Cc: Lauren Sommerhauser<Iommerhauser@orrick.com>;James Hamill
2
<iha mil l cscda.org>
Subject: RE: City of Huntington Beach-TEFRA Requests
Hi Jon,
Just to clarify. We would like documentation showing that the City of Huntington Beach
has no financial obligation with both the $30 million Huntington Point Apartment and
$28 million Hermosa Vista Apartment bonds.
Thanks,
Dahle Bulosan, CPA
Finance Manager—Accounting
Finance Department
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Phone: (714)536-5648
dbulosan&surfcity-hb.org
From: Fritzal, Kellee<KFritzal@surfcity-hb.org>
Sent:Tuesday, May 28, 2019 2:09 PM
To:Jon Penkower<ipenkower@cscda.org>; Rief,Sunny<Sunny.Rief surfcity-hb.org>
Cc: Bulosan, Dahle<DBulosan@surfcity-hb.org>; Lauren Sommerhauser
<Iommerhauser@orrick.com>;James Hamill <Lhamill@cscda.org>
Subject: RE: City of Huntington Beach-TEFRA Requests
Please send the proof of purchase, Finance is questioning.
From:Jon Penkower<jpenkower@cscda.org>
Sent:Tuesday, May 28, 2019 1:53 PM
To: Rief, Sunny<Sunny.Rief@surfcity-hb.org>
Cc: Bulosan, Dahle<DBulosan@surfcity-hb.org>; Fritzal, Kellee<KFritzal@surfcity
hb.org>; Lauren Sommerhauser<Iommerhauser@orrick.com>;James Hamill
<*ha mill @cscda.org>
Subject: RE: City of Huntington Beach-TEFRA Requests
Hi Sunny,
It was good speaking with you. We should have the notice publication affidavits any
minute and by copy I'll ask Lauren to send them to you as well. My colleague James
Hamill will attend the TEFRA hearings on behalf of CSCDA and both Mark Hyatt and Chris
Burns will be there from KDF. Pursuant to our discussion,the attorneys haven't begun
drafting any bond documents yet but we'd be happy to share them with you once that
process has commenced. The projects are expecting bond allocation July 17th so I would
imagine documentation would begin shortly thereafter. If you need anything else, please
don't hesitate to contact me. Thanks again for your help.
Jon Penkower
Managing Director
1700 North Broadway,Suite 405
Walnut Creek, CA 94596
Direct(925) 476-5887
3
Cell (415) 939-8484
<image009.png>
www.cscda.org
<rnage010.jpg><image011.jpg>
From: Rief,Sunny<Sunny.Rief@surfcity-hb.org>
Sent:Tuesday, May 28, 2019 1:42 PM
To:Jon Penkower<jpenkower@cscda.org>
Cc: Bulosan, Dahle <DBulosan@surfcity-hb.org>; Fritzal, Kellee <KFritzal@surfcity-
h b.o rg>
Subject: City of Huntington Beach-TEFRA Requests
Hi Jon,
I was given your contact information by Kellee Fritzal. We had a few quick questions
regarding the financing that I was hoping you could answer. Could you please give me a
call at your earliest convenience? My phone number is 714-536-5907.Thank you!
Sunny Rief,CPA,CFE
Project Manager
Finance Department
City of Huntington Beach
2000 Main Street
Huntington Beach,CA 92648
Phone: (714) 536-5907
Fax: (714)536-5934
sunny.rief@surfcity-hb.org
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<Daily Pilot AD#6290023 Proof of Publication.pdf>
<Daily Pilot AD#6290167 Proof of Publication.pdf>
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4
TEFRA Public Hearings
Pegasus School
Huntington Pointe Apartments
Hermosa Vista Apartments
June 3 , 2019
SUPPLEMENTAL
COMMUNICATION
ante:
A.genda Item 64o.: #E" j
Tax and Equity Fiscal
Responsibility Act (TEFRA)
TEFRA is a Federal and State Tax Code, that allows
for the issuance or refinancing of bonds, with a
portion of the bonds to be tax exempt
There is no fiscal impact to the City - the City is a
conduit to allow for the tax exempt financing
Bonds are limited obligations of the Issuance
Organization (both the California Municipal Finance
Authority and the California Statewide Communities
Development Authority)
r Paid solely by the Requestor
No obligation of the City
Not reported on City's financials
Projects
Pegasus School is requesting funding for
construction of a science and technology
building , remodeling school classrooms and
parking improvements and related
expenses
Huntington Pointe and Hermosa Vista
Apartments are existing affordable housing
projects and are requesting bond
refinancing for the acquisition ,
rehabilitation and improvements for the
properties
Public Hearing
To satisfy the Federal and State tax code, the City
is required to:
Conduct tonight' s public hearing under the
requirements of TEFRA and the Internal Revenue
Code of 1986 ;
Adopt the Resolutions approving the issuance of
the Bonds by both the California Municipal
Finance Authority and the California Statewide
Communities Development Authority for the
financing of the projects .
Questions ?