Item 22 - Approve the Tax Equity Fiscal Responsibility Act (TEFRA) Resolution Hearing for 1108 N. Harbor

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Tax Equity Fiscal Responsibility Act (TEFRA) Resolution Hearing for Estrella Springs May 6, 2025 Page 2 DISCUSSION The Borrower has requested the City of Santa Ana (City) to conduct a Tax Equity and Fiscal Responsibility Act (TEFRA) hearing. The tax-exempt bonds to be issued are the sole responsibility of the Borrower. The City bears no financial or legal liability for the project or bond repayment and incurs no indebtedness. Additionally, the City was provided a draft resolution, a draft notice, a draft staff report, and a TEFRA Hearing Fee of $1,011 was required per the City's Miscellaneous Fee Schedule for the City to conduct the TEFRA hearing. A TEFRA hearing is a public hearing required by the Internal Revenue Service (IRS) for certain types of tax-exempt bond issuances, particularly those involving private activity bonds (PABs) or bonds issued by nonprofit organizations. The hearing is mandated under the Tax Equity and Fiscal Responsibility Act of 1982 and is a prerequisite for the interest on these bonds to be excluded from gross income for federal tax purposes. The primary purpose of a TEFRA hearing is to provide the public with an opportunity to comment on the proposed use of tax-exempt bond proceeds. This process ensures transparency and accountability in the allocation of public financial benefits, such as tax exemption, to private projects or nonprofit borrowers. Project Description A TEFRA hearing for this Project was already held and a TEFRA Resolution was approved on March 2, 2021. The Project is the adaptive reuse and rehabilitation of a Budget Inn Motel to create Permanent Supportive Housing studios for 89 formerly homeless veterans and those living with a mental health diagnosis. The Project has completed construction and is ready to convert from construction financing to permanent financing. The Developer now has a need to increase the permanent bond amount. This simply means that less of the bonds than originally anticipated will be paid off and will be left outstanding upon conversion to permanent financing. Since this is happening outside of the three-year plan of finance window, this triggers a technical reissuance of the Bonds, which requires an additional TEFRA hearing. The proceeds of the Bonds were used to finance or refinance the acquisition, construction, improvement, and equipping of the Project. The Borrower has requested that the CMFA participate in the issuance of one or more series of tax-exempt revenue bonds, pursuant to a single plan of financing, in a maximum aggregate principal amount of $30,000,000 (the "Bonds"). These funds are intended to finance or refinance the acquisition, construction, improvement, and equipping of the Project. However, for any portion of the Bonds to qualify as tax-exempt, a public hearing (the "TEFRA Hearing") must be conducted that allows community members the opportunity to voice their opinions regarding the use of tax-exempt bonds for the Project's financing.