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HomeMy WebLinkAboutCC 10-06-2026 Item No. 11 Tax and Equity Fiscal Responsibility Act (TEFRA) for The Rise Block 5_Desk ItemCC 10-06-2026 #11 Block 5 Vallco TEFRA Baker Tilly Desk Item COMMUNITY DEVELOPMENT DEPARTMENT CITY HALL 10300 TORRE AVENUE • CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3200 CUPERTINO.GOV CITY COUNCIL DESK ITEM Meeting: October 6, 2026 Agenda Item #11 Subject Tax and Equity Fiscal Responsibility Act (TEFRA) public hearing and approval of conduit financing for The RISE Block 5 Apartments Project Recommended Action 1. Conduct the public hearing under the requirements of the Tax and Equity Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended (the “Code”). 2. Adopt Resolution No. 26-___ approving the issuance of the Bonds by the California Municipal Finance Authority (CMFA) for the benefit of Eden Housing, Inc., a California nonprofit public benefit corporation (the “Developer”), on behalf of a limited partnership or another ownership entity to be formed by the Developer or an affiliate of the Developer (such limited partnership or other ownership entity being referred to herein as the “Borrower”), to provide for the financing of the Project, such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code and the California Government Code Section 6500 (and following). The resolution will also authorize the Mayor or designee to execute the Joint Exercise of Powers Agreement with the CMFA. Background: Staff’s responses to questions received from councilmembers are shown in italics. Q1: What environmental information concerning the Block 5 parcel was disclosed by Eden Housing and/or Vallco Property Owner, LLC to CDLAC/CTCAC in connection with the CA-26-515 application? Staff response: Tab 12 of the attachments to the CTCAC/CDLAC application discloses that the master developer has enrolled in a Santa Clara County Department of Environmental Health site cleanup program and indicates that a Vapor Intrusion Mitigation System (VIMS) will be installed. The developer indicates that the purpose of the separate environmental disclosure box on the CTCAC/CDLAC application is to list environmental remediation items that will be using tax credit funding. In the case of the Block 5: Eden Housing does not plan to use tax credit funding for soil remediation or vapor intrusion mitigation, as the master developer for the RISE project, Vallco Property Owner, LLC, has or will be funding these costs. Q2: Did the state application include a Phase I or Phase II Environmental Site Assessment, soil/toxic reports, PCB reports, or other environmental due-diligence materials including SCCDEH oversight materials? Staff response: No, see above in answer #1. The master developer for the RISE project, Vallco Property Owner, LLC, will be responsible for these items. They are not included in the Block 5 tax credit funding costs. Q3: Was Santa Clara County Environmental Health’s involvement in the site’s remediation disclosed to the state, CMFA, and the bond purchaser? Staff response: Yes, in Tab 12 of the attachments of the CTCAC application, Eden Housing disclosed that the master developer, Vallco Property Owner, LLC, has enrolled in a Santa Clara County Department of Environmental Health site cleanup program and will install a vapor intrusion mitigation system. CMFA also received this disclosure as a joint applicant of the CTCAC/CDLAC application. However, CMFA is not a reviewer of environmental remediation actions and only acts as an intermediate bond issuer for tax-exempt bonds in connection with tax credit projects. Site remediation is unrelated to CMFA’s role. Environmental issues have also been disclosed to the purchaser, Chase Bank. Q4: What environmental information did Eden provide to CMFA in connection with CMFA Resolution 25-478 and the proposed bond financing? Staff response: Environmental reports were not provided to CMFA because CMFA is not a reviewer of environmental remediation actions and only acts as an intermediate bond issuer for tax-exempt bonds in connection with tax credit projects. Site remediation is unrelated to CMFA’s role. However, CMFA was a joint-applicant to CTCAC/CDLAC along with Eden Housing and is aware of environmental remediation actions in connection with the site. Q5: Does the City’s staff have copies of any of those environmental disclosures or reports, and if so, can they be provided to Council before Tuesday or should we postpone the item? Staff response: Environmental reports are not relevant to this item, however, the Phase I or Phase II Environmental Site Assessment, soil/toxic reports, PCB reports, and other similar environmental clearances are publicly available on the Geotracker website and can currently be viewed by Council. Review of soil remediation and the VIMS system will be completed by Santa Clara County Department of Environmental Health, and City staff will be confirming that clearance is completed as part of the building permit approval. Q6: Are there outstanding remediation obligations, environmental restrictions, indemnities, or potential remediation costs associated with the Block 5 parcel that could affect the acquisition or financing? Staff response: We do not believe so, see above in answer #1 and answer #4. Q7: Most importantly, is there any indication that material environmental information known about the property was omitted or inaccurately characterized in the state, CMFA, or TEFRA financing process? How was this established? Staff response: No, CMFA is not a reviewer of environmental remediation actions and only acts as an intermediate bond issuer for tax-exempt bonds in connection with tax credit projects. Site remediation is unrelated to CMFA’s role, as well as the TEFRA process. However, in Tab 12 of the attachments of the CTCAC/CDLAC application, Eden Housing disclosed to CTCAC and to CMFA as a joint-applicant that the master developer has enrolled in a Santa Clara County Department of Environmental Health site cleanup program and will install a vapor intrusion mitigation system (VIMS). Q8: Please share the application for 4% LIHTC and CMFA bonds submitted to the state by the developer which demonstrates that the contamination has been disclosed Staff response: The main application submittal of CA-26-515 is electronically posted and available for viewing on the CTCAC website. The attachments, including Tab 12, are available for viewing upon request to the CTCAC office. Q9: SHPCO is not the signatory on the project, rather an employee of ADIA, can you explain this? Staff response: It appears that the Abu Dhabi Investment Authority (“ADIA”) has an ownership stake in the project; however, details are not readily available. Q10: The affordability shown in the second attachment is very different from what the city has accepted, can you explain the discrepancy? Staff response: The affordability level shown on the second attachment is for households earning 30%-70% of the area median income, which is classified as very-low or low-income households, consistent with the affordability levels for the project. Q11: The city allegedly issued a building permit for Block 5, is this correct? Staff response: The City has not issued a building permit for Block 5. Q12: What is the status of the VIMS and the deed restriction for Block 5? Staff response: As the oversight agency for soil remediation, the County Department of Environmental Health (DEH) reviewed and approved the Vapor Intrusion Mitigation System (VIMS) on September 16, 2026, and will determine and implement any necessary deed restrictions for the property. The building permit application for the VIMS was received and routed for plan review on September 29, 2026. If approved, the VIMS plans and supporting documentation will be incorporated into the permit plan set for Block 5 prior to building permit issuance. The City's review is limited to ensuring compliance with applicable building, mechanical, plumbing, and electrical code requirements associated with the system. The County DEH will continue to oversee the environmental aspects of the VIMS, including installation monitoring, quality control testing, and long-term reporting and compliance requirements. Q13: Where is the site plan for Block 5 showing the building massing and basic information for the public to see? Staff response: The site plan for the entire site, including Block 5, can be found on the city’s website Vallco/The Rise site plan. Q14: Did the developer/design professional elect not to provide a site plan or massing diagram for public distribution under Government Code § 65103.5? If so, please explain how the City is applying the statutory provision that deems permission granted for the City to copy and distribute the architectural drawings in that circumstance. If the City believes that the statute nevertheless prevents publication of the submitted architectural materials, please identify the specific statutory provision supporting that conclusion. Staff response: A site plan for the project that includes all buildings is available on the city’s website Vallco/The Rise site plan. Q15: Please provide a public-facing site plan and/or massing diagram showing, at a minimum: the location and general outline of each proposed building; building heights and/or number of stories; building footprints; setbacks; streets and surrounding public rights-of-way; and major open-space areas and other information necessary to understand the project’s overall massing. Staff response: A site plan for all buildings onsite is available on the city’s website (Vallco/The Rise site plan). The city is in contact with the developer and has requested more detailed plans and will make those available in the future. Q16: City obligations and exposure: Could staff clarify whether this structure creates any direct or contingent obligations for the City—including financial, legal, environmental, or indemnification obligations—under scenarios such as borrower default, incomplete construction, or financing restructuring? Staff response: The debt to be issued by the California Municipal Finance Authority (CMFA) will be the sole responsibility of the Borrower. The City will have no financial or legal obligations or responsibilities regarding the repayment of the debt, regardless of default, incomplete construction, environmental condition or remediation, financial restructuring, or any other similar event. All financing documents will carry disclaimers that the loan is not an obligation of the City. The City will also bear no costs in the issuance of the proposed debt. Q17: CMFA membership: Why is Cupertino being asked to become a member of CMFA for this transaction, and what, if any, ongoing obligations would the City have after this bond issuance? Staff response: The CMFA is a joint powers authority formed to assist local governments, non- profit organizations, and businesses with the issuance of both taxable and tax-exempt debt. To authorize the CMFA to issue the bonds on the City’s behalf it must become a member of the CMFA JPA. There will be no ongoing obligations for the City after bond issuance. Q18: Financing structure: Could staff provide a high-level description of the project’s financing structure and sources of capital, including how the CMFA bonds relate t o construction financing, permanent financing, tax-credit equity, City funding, and other sources? Staff response: For Construction Financing: Tax-credit equity will be $7,355,886 out of a total of $176,265, 927. For Permanent Financing: Tax Credit Equity will be $75,898,855 out of a total $200,035,551. The remaining sources of both financing costs come mostly from private loans. At least 50% of tax credit equity will be backed by bonds issued by the CMFA. There is no City funding provided in the Block 5 Vallco. Q19: Environmental and remediation exposure: Given the separate remediation issues at The RISE site, would participation in CMFA or approval of these bonds affect the City’s environmental or remediation exposure in any way? Staff response: Environmental issues are not relevant to this item. Site remediation is unrelated to CMFA’s role, as well as the TEFRA process. CMFA only acts as an intermediate bond issuer for tax-exempt bonds in connection with tax credit projects. Q20: Public benefit and oversight: What specific public benefit does CMFA financing provide for this project, and what continuing oversight, if any, would the City have after the bonds are issued? Staff response: There are no costs associated with membership in the CMFA and the City will have no financial liability associated with its membership in the CMFA. In addition, participation by the City in the CMFA will not impact the City’s appropriations limits, nor will it constitute any type of indebtedness by the City. Through issuance activities, the CMFA shares a portion of the issuance fees it receives with its member communities. The City of Cupertino will receive 25% of the issuance fee, which may be used for any lawful purpose of the City.