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HomeMy WebLinkAboutStudy Session #1 - California Statewide Communities Developm City of Huntington Beach 11 R, File #: 21-157 MEETING DATE: 2/16/2021 California Statewide Communities Development Authority (CSCDA) presentation on the Statewide Community Infrastructure and Workforce Housing Programs City of Huntington Beach Page 1 of 1 Printed on 2/10/2021 powered 14 LegistarTM y } x o-. f Tr le r/. Statewide Community Infrastructure Program CSCDA A Program of the California Statewi a Communities Development Authorit OEM., Qft rat t6 -� IV- SUPPLEMENTAL COMMUNICATION Meeting Date. Agenda item No W Caw-is?) What is the Statewide Community Infrastructure Program? `- ■ SCIP is a pooled tax exempt financing program which can finance impact fees and public improvements for private developments ■ Any City/County/Special District can participate in SCIP to provide the local agency the means of offering competitive financing to all developers as a turn key solution, minimizing local agency staff time ■ The bonds are issued by the California Statewide Communities Development Authority (CSCDA) which is a Joint Powers Authority sponsored by the League of California Cities and the California State Association of Counties to promote bond programs of public benefit to its members ■ These are 30 year fixed-rate tax-exempt bonds secured by property owner assessments ■ There are typically three issues a year (in the Spring, Fall and end of Year). SCIP has issued over$800 MM in bonds since its inception in 2003 ■ The Program also allows CSCDA to establish Mello-Roos Community Facilities Districts which allow for financing of public improvements and services a 0 0 ' CSCDA Who Uses SCIP? 115 Participating Local Agencies across California with a Growing List of Recurring Developer Clients Participating Local Agencies Alameda,City of Healdsburg Rialto • American Canyon Hercules Richmond Anaheim Hesperia Rio Vista Antioch Hollister Rocklin Bakersfield Imperial,County of Roseville Banning Indian Wells Sac.Area Sewer Dt. Bayshore Sanitary District Indio Sac.Co.Water Agency Blythe Ironhouse San itary Dt. Sac.MUD r115 Total Brentwood Lathrop Sac.Reg].Co.Sanitation Dt Members Butte County Lincoln Sacramento,City of Projects Calistoga Linda Co.Water Dt. Sacramento,County of77 Cathedral City Live Oak San Diego,City ofFinanced Chula Vista Livermore San Diego,County of Citrus Heights Lodi San Juan Bautista Clovis Madera,City of San Luis Obispo,City of • • �Q Coachella Valley Water Dt. Manteca San Luis Obispo,County of Corona Martinez San Marcos Cosumnes CSD Menifee San Mateo,County of �O Cotati Merced,City of Santa Rosa Daly City Millbrae Sonoma,County of Dana Point Mission Springs Water Dt. South Placer MUD QO Davis Morgan Hill South Placer RTA Desert Hot Springs Morro Bay South Placer Water Authority Diablo Water Dt. Murrieta Stockton Dublin Napa,City of Sweetwater Authority O O Dublin San Ramon Svcs.Dt. Napa,County of Thousand Oaks East Contra Costa RFFA Newport Beach Tracy East Palo Alto Norco Truckee Donner PUD Q O Eastern Muni.Water Dt. Oakley Tuolumne,County of El Dorado,County of Oxnard Ukiah El Monte Palm Springs Vacaville Q Elk Grove Patterson Vallejo Fairfield Patterson West Sacramento Folsom Petaluma Woodland Fontana Placer,County of Yuba City Fremont Rainbow Muni Water Dt. Yuba,County of Galt Rancho Cordova Yucaipa Gardena Redding Yucaipa Valley Water Dt. 2 `ICSCDA SCIP Participating Developers L E N N AR `W D•R•HORION® The Home of Everything's Included. BETTER BY DESIGN ,rG��F�i'GGGi-�S �L6Ll' PardeeHomes• M rjt Elliott Homes e age A Tradition of Quality since 1914 kb Where smart solutions live. HoMeS HOME Brookfield �cH�o� ikpulte,3roup tayl orrison . ResidentialAMERICAN HOMES Homas)nspirad by YOU • T17Tovnanian" An 511.1 Homes hem t United • LJPANATTONI' FARALLONl BUZZ OATES NI LR\AIIUNAL 'I>lUN LI CAL �01US. Lewis Group Of Companies ` H o M E s N UVERA THE NEXT GENERATION ■ffl H O M E S [f_] d�covery s,LVERADOq-oll Brothers omes —HOMES- AMERICA'S LUXURY HOME BUILDER ® CORNERSTONE SunCa1 1GII11L Bringing fire•ster Iluality koso C O M M U N I T I E S ;-j v 3 `�CSCDA Program Benefits ■ SCIP provides local agencies a means of offering competitiveLocal Agencies _ ; Effort financing to all developers as a turnkey solution which minimizes local agency staff time • The Program can finance projects which range in size from $500,000 up to $10,000,000 or higher ■ Developers use SCIP for a variety of reasons: O Can be part of the capital mix of debt, equity, public financing Resources Can be Used Elsewhere © Provides off balance sheet/land secured non recourse debt Developers Gain Access t• Capital © Can provide competitive advantages with respect to residential marketing ` O Minimizes carrying cost by enabling developers to more efficiently subdivide and issue debt only for the lots where they are prepared to pull permits ■ SCIP provides diversity to investors and economies of scale to j► its participants which ultimately translates to competitive Project _ interest rates and lower costs • CSCDA What Can be Financed through the Program? `- Eligible FeesD L Fees for infrastructure to be owned by public agency Does not include school, housing, fire, and police fees .■■■. ■■■■■ Eligible Improvements e1e � Improvements identified in the 1913/ 1915 Assessment Act, including but not limited to, are listed below: Street and Roadways Street lighting Tr Parkin Freeway Interchanges g , `, Z Pedestrian Malls Z Landscaping Sidewalks :) Sewer and Pipelines Storm Drainage Z Parks and Parkways Flood Control Bridges and Thoroughfares min Water Supply Bicycle and Pedestrian Trails Gas Supply Open Space and Greenbelts 77 s CSCDA Local Agency Requirements K 0 Must be a Member of CSCDA (no cost to join and CSCDA currently has 532 members) © Adopt SCIP Resolution consenting to use of the SCIP Program (again no cost to join) a) Sample Resolutions and Agreements are contained in the SCIP Manual and proposal by SCIP Legal Counsel © Developers can submit funding applications online but they must be signed by the Local Agency prior to the Public Hearing 0 Will review and verify eligible fees and improvements contained in the Engineer's Report prepared by SCIP © Will execute an acquisition agreement to reimburse developer for public improvements, the form of which is included with the SCIP Resolution 0 Funds will be spent in accordance with federal tax law 0 Approve requisition of funds 6 CSCDA TasksSCIP • ResponsibilitySchedule Pass SCIP Fula `"� Resolution& Local " y Approve Agencies Applications � ` ja� Conduct the C D proceedings �"` ` O�CSCDA BLX Issue Bonds �,1 - Administering _"�,� the District ' o Entitlements Developers an• Local _- - Admin.includes: `: Tax Roll Lot Splits P Fees orof f �'"`�' Rebate Completion ofDevelopers Continuing Improvements !;;; Disclosure +� Foreclosure Bond Payments Developers (Investor Risk) oe� C&C WA T E R FORD PR0PE. RTY CO \IPAVI "MIDDLE INCOME" WORKFORCE HOUSING PROGRAM C CD �sntITAGUE 13u N 1:AC PORT CENTER DRIVE,SUITE 23u NE PORT BEACH,CA 92660 949.529.3530 WWWAVATERFORDCO.CODI PROJECT TEAM ➢ Waterford Property Company"Waterford"is an experienced owner and developer of institutional"Class A"multifamily rental projects throughout the State of California. Since its founding in 2013 Waterford has acquired over$650,000,000 in real estate assets. ➢ Waterford is an expert in the development of affordable housing. Sean Rawson,Co-Owner of Waterford,has developed and has been a principal and owner of over 2,000 affordable residential units during his career. ➢ C&C Development is an experienced owner and developer of affordable housing projects with over 2,000 units in its portfolio MW INAMMMINO ➢ The CSCDA was created in 1988 by the League of California Cities and California State Association of Counties,under California's Joint Exercise of Powers Act, to provide California's local governments with an effective tool for the timely financing of community based public benefits projects. ➢ Huntington Beach is currently a member of CSCDA. ➢ The CSCDA has 533 member cities as well as counties and special districts throughout California. CSCDA helps local governments build community infrastructure,provide affordable housing,create jobs and provide access to quality healthcare. CSCDA has issued over$63 billion in bonds for local governments throughout California. ➢ Goldman Sachs is an expert in municipal bond offerings for public infrastructure and housing projects. ➢ Goldman Sachs will be the lead investment banker and underwriter for the project. Page 2 CRISIS, CAUSE, SOLUTION ➢ Our nurses,teachers,librarians,bank tellers, first responders and civil servants earn above"very low" and"low"income households,yet are still priced out of the communities they serve ➢ The ripple effects of these housing shortfalls include congestion,pollution,crime,homelessness,health issues,poor student performance and social unrest and dislocation ➢ The effects of the dislocation of "middle income"employees is harmful to California employers,as they may have positions that go unfilled cost impacts of workers commutes. ➢ Restrictive land use policies ➢ Organized Not In My Back Yard(NIMBY) policies ➢ Record construction costs ➢ Widening income inequality ➢ Insufficient housing choices ➢ Nonexistent middle-income housing supply ➢ Preserve Existing Tenant Population ➢ Create "Middle Income"Housing with no public subsidies and no equity investments ➢ Restrict Annual rent increased to 4% ➢ Impose"Middle Income"Regulatory Agreements Page 3 TARGET DEMOGRAPHIC ➢ California has a significant shortage of available workforce housing for the"Missing Middle".These are individuals and families that earn too much to qualify for traditional affordable housing,but not enough to afford the market rate rents within the communities they work and serve. ➢ Workforce housing(also known as moderate-income housing) is housing for individuals and families earning between 80% and 120%of the Area Median Income (AMI). ➢ Typically, the "Missing Middle"is the most difficult segment of the population to provide housing for because the rents are not low enough to make projects eligible for government subsidies,but the rents are still too low to justify the construction costs. V14, ,� `"!` x " 77 i Page 4 OVERVIEW OF WORKFORCE HOUSING PROGRAM ➢ CSCDA and its Projects Administrator(Waterford/C&C) acquires new or existing rental multifamily communities and records a regulatory agreement restricting rents to the property between 80%and 120%AMI ➢ All properties are financed through CSCDA tax exempt governmental bonds ➢ The City enters into a Public Benefits Agreement whereby the City (along with the County and School District) receives all surplus revenue upon the sale of the property. ➢ CSCDA and its Projects Administrator(Waterford/C&C)plan to acquire Class A existing multifamily properties in core supply- constrained markets targeted to the"Missing Middle"while maintaining their Class A/luxury designation ➢ All properties will be professionally managed and be operated as if there is no"income restriction"in place ➢ Since all residual cash flow will be used to pay down the outstanding balance and because the local government is the ultimate financial beneficiary to all developed equity in the asset,Waterford/C&C and its team will have ample capital to reinvest back into the property and guarantee that all properties are operated in a Class A manner. 4a , f r -,t CHARTFLOW / 1 :A California Cit� _Joins CSGI�_1 Cominunitt• Itnpro��cmc:nt .luthorin� (the. Page 6 "_luthorit�"). CS{;I�.� acyuires a market-rate irniltifamih- project in that Citt� {;ti{:I7 � finances the prc�pert}' ��itl� municipal bands {:SCD.� limits the rents to $�°'o to 120°0 ���II households \\ ;�<<rtord/C&(� and its best in class asset mana�;cinc:nt team operates the propert�- and acts as the Project .ldministrator PUBLIC BENEFITS TO CITY ➢ Since 2012 the cost to build Class A luxury apartments has risen nearly 40% ➢ In order to make Class A luxury projects financially feasible developers have continued to increase rents at record levels increasing nearly 27%in the last 8 years. ➢ In urban areas where developable land is scarce and higher density construction is required the only way to make multifamily projects viable is to utilize Low Income Housing Tax Credits (LIHTC) for"low"and"very low"income households or build project that target households earning in excess of 120%ANTI ➢ Under the Public Benefit Agreement,the City,at its sole discretion,may force a sale of the property between Year 15 and Year 30 (the end of the life) of the bonds,and the City,along with other taxing agencies (including the County and School District)would receive the net sale proceeds. ➢ All properties are financed through the issuance of tax-exempt bonds and have no equity partners which means that after paying off the bond payments upon a sale,all excess sales proceeds go to the City and other taxing agencies. ➢ Cities can provide much needed"middle income"housing without using financial resources to build it ➢ Cities will reap large financial windfalls starting in Year 15 and can be accessed at their discretion ➢ Cities will ensure that all properties in the program are operated to highest standards and best practices because all excess cash flow after servicing the bonds will be invested back into the asset Page 7 CITY CONTROL E -M ➢ Assets are owned by CSCDA and Waterford/C&C is the Project Administrator ➢ Waterford/C&C will oversee all operations of the asset and maintain the business plan in conjunction with its property manager ➢ Restrict occupancy to moderate income households or lower(80%-120%AMI) ➢ Limit annual rent increases to a maximum of four percent(49/6) annually ➢ Prevent displacement of existing residents that do not meet income eligibility requirements ➢ CSCDA shall provide annual reports to the City regarding the status of its acquisition, financing and operation of property ➢ City is allowed to review and audit all financials for the property ➢ The City,at its sole discretion,may force a sale of the asset of the property between Year 15 and Year 30 ➢ The project is financed through the issuance of limited obligation bonds;bonds issued will be indebtedness solely for the Authority,and payable from revenues of the project. ➢ No financial expenditures,liabilities,or obligations are created by joining the Authority or executing the public benefit agreement. Page 8 Case Study #1 ➢ The subject property is a 216 unit recently constructed luxury multifamily community ➢ Project Overview: ➢ Completion:2020 ➢ Total Units:216 ➢ Property Type: "Class A"Multifamily Community ➢ Unit Mix: Studios-15, 1B/1b-100,2B/2b-94 and 3B/2b-7 ➢ Amenities:Luxury 4 Y r. Page 9 CASE STUDY #1 ➢ The acquisition of the subject property will be financed through the issuance of tax-exempt bonds ➢ Upon the acquisition of the property,CSCDA will restrict the rents to the following income categories: • Households earning less than 80%of the Area Median Income (AMI) • Households earning between 81%and 100%of the AMI • Households earning between 101%and 120%of the AMI ➢ Upon the acquisition of the property,existing tenants will not be displaced ➢ Maximum allowable rents for each income category will not exceed 35%of the respective income limit for Orange County, adjusted for household size,as published annually by HUD and utilized by the California Tax Credit Allocation Comrnittee ➢ Existing tenants who qualify will be granted income restricted rents at the time that their lease expires ➢ Rent increases will be subject to a 4%cap on rent increases annually Total Roonis Total Units Market Rent AMI Rent D• Rents DISCOLInt to Market 0 BR 15 $ 2,450 $ 2,301 $ 2,149 12.29% 1 BR 100 $ 2,750 $ 2,628 $ 2,437 11.38% 2 BR 94 $ 3,700 $ 2,951 $ 2,951 20.24% 3 BR 7 $ 5,275 $ 3,284 $ 3,284 37.74% 216 $ 3,224 $ 2,767 $ 2,668 17.25% Page 10 ,.� CASE STUDY #1 (Continued) ➢ The Year 1 rent savings will be$1,441,000 and will be a 17%decrease over current market rents.The%difference between market rents and income restricted rents will increase year over year due to the rent caps put in place. ➢ The subject property will be kept in its current"Class A"condition.The Proforma has $1,400,000 of "excess"capital funded through the bond issuance for on-site maintenance in addition to$300 per unit in annual"Op-ex"reserves and will grow at 2.5%annually and will increase to$700 per unit starting in year 11 ➢ Five Key Beneficial Reasons that Time is of the Essence: • Interest Rates: Municipal Bond Interest Rates are near all-time lows • COVID-19: Renters throughout the nation are experiencing economic hardships which has led to rent decreases in"Class N'multifamily assets.By doing these projects now,Cities can lock in lower rents for their residents • Economic Stimulus:Turning the project into"moderate"income housing provides renters with increased"discretionary"spending to put back into the local economy • Market Dynamics:There is currently less competition to buy"Class A"assets than Pre-Covid;this environment will be short-term r7ft rr�s Page 11 CASE STUDY #1 (Continued) ➢ The property is assessed at$110,923,530. Based on a 1%property tax rate the annual taxes generated from the property are $1,178,675. Assuming a 16% share it is estimated that the City receives approximately$262,000 annually from the property. ➢ Over a 30-year period the City will forgo approximately$9,665,000 in total tax revenue but make $166,000,000 in net proceeds at the end of Year 30. ➢ Starting in Year 15,per the Public Benefit Agreement(PBA), the City can dictate if the project is sold,re-financed or continues to operate"as-is". ➢ Below is a financial analysis showing that assuming a 4% cap rate reversion analysis the City will be due$166,159,642 in Year 30 if the asset is sold. If the City chooses not to sell the asset it will be the beneficiary of all"cash flow"once the bonds are paid off. Exite Cap Rate 4.00% Exit Cap Rate 5.00% Year 3 Year Exit NOI $12,612,559 $12,612,559 Total Tax Roll $2,363,649 2 363 649 Adjusted NOI $10,248,910 $10,248,910 Sale Proceeds $256,222,744 $204,978,195 Senior Debt Service Reserve $5,397,360 $5,397,360 Series A -$45,732,739 -$45,732,739 Series B -$5,397.360 -$5,397,360 Surplus Proceeds $230,490,OOS $1S9,24S,456 Other Taxing Entities $34,959,137 $34,959,137 City Property Tax $9,665,751 $9,665,7S3 Total Voted Indebtedness $9,371,226 $9,371,226 Net Surplus Proceeds $200,824,254 $149,579,705 Net Surplus Proceeds to City $166,159,642 $114,915,093 City Equity Multiple 1 18.19 12.89 Page 12 NEXT STEPS ➢ City Council adopts one single resolution ➢ City acknowledges CSCDA's issuance of bonds for eligible projects ➢ City agrees to receive surplus revenue ➢ The City incurs no fees,costs,liability or administrative responsibilities in connection with the program or individual programs MUNINION -0 ➢ CSCDA/Waterford views this socially beneficial and financially beneficial structure as a true partnership with the City of Huntington Beach ➢ CSCDA/Waterford are active participants and investors in the Cities where they do business ➢ CSCDA/Waterford is excited about the opportunity to reinvest in this beautiful transcendent property and become long term partners with the City �i All W Page 13 WATERFORD C&C P R u P e R t 1 c u Ai r \ v � 130 NEWPORT CENTER DRIVE,SL.HT"230 NEWPORT BEACH,CA 92660 949.529.3530 \1 ERFORDCO.COAI Contact Information SEAN RAWSON JOHN DRACHIIIAN PHIL CHRISTIAN YASIIAAR AMIN Co-Founder Co-Founder Vicc President PARTNER 949.529.3534 949.529.3535 949.329.3532 949.529.3533 smNson(aWAterfordcoximi jdrachman!uwaterfordco.com pchristiawa\caterfordco.rnm �amin(awaterfixdcoxcom