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Report regarding conducting a public hearing under the Tax and Equity Fiscal Responsibility Act in connection with the proposed issuance of revenue bonds by the California Municipal Finance Authority to finance Rotary Gardens at 500 Linden Avenue. (Mike Noce, Housing Manager)
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RECOMMENDATION
Staff recommends that the City Council take the following actions.
1) Conduct a 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”), in connection with the proposed issuance of revenue bonds by the California Municipal Finance Authority (“CMFA”), a joint exercise of powers authority and public entity of the State of California, in an amount not to exceed $30,000,000, (the “Bonds”), to finance and refinance the acquisition, development, construction and equipping of an 80-unit affordable housing project (the “Project”) to be owned and operated by Rotary Gardens, L.P. (the “Borrower”), and to be located at 500 Linden Avenue within the City of South San Francisco, California (the “City”).
2) Adopt the associated resolution approving the issuance of the Bonds by the CMFA for the benefit of 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.
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BACKGROUND
The South San Francisco Rotary Club, in partnership with Beacon Development, proposed an affordable housing development at the Liberty Bank site located at 500 and 522 Linden (the Development). The two-phase Development, known as Rotary Gardens, was approved ministerially on July 2, 2025 - each standing 6 stories or approximately 75 feet tall. The senior building at 500 Linden includes 80 units, and the family building at 522 Linden will contain 64 units.
Both phases have received funding commitments from the City; however, the senior building at 500 Linden Avenue, being the first phase, has more funding secured to initiate the Development and is thus the focus of the TEFRA Hearing. To date, the City has committed approximately $9.6 million in value to the first phase (senior building) at 500 Linden Avenue, herein referred to as the Project. The City’s commitment includes roughly $8.4 million from affordable housing funds, the majority from the Commercial Linkage Fee Fund (Fund 823) and a portion of State-funded Permanent Local Housing Allocation (PLHA), in addition to an impact fee reduction approved by City Council on January 14, 2026, valued at approximately $1.2 million. The Project has also received a considerable amount of funding from the County of San Mateo’s Affordable Housing Fund of approximately $17.8 million. Rotary Gardens, LP is the single-purpose entity owner of the Project and recognized by CMFA as the Borrower benefiting from the issuance of bonds. The bonds to be issued through the CMFA also represent a significant source of financing for the Project.
The Borrower requested that the CMFA serve as the municipal issuer of the Bonds in an aggregate principal amount not to exceed $30,000,000 (the “Bonds”) of tax-exempt revenue bonds. The proceeds of the Bonds will be used to finance and refinance the acquisition, development, construction, and equipping of the Project to be owned and operated by the Borrower and to be located at 500 Linden Avenue within the City of South San Francisco, California (the “City”).
In order for the Bonds to qualify as tax-exempt bonds, the City of South San Francisco must conduct a public hearing (the “TEFRA Hearing”) providing 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. Before such TEFRA Hearing, reasonable notice must be provided to members of the community. The TEFRA Hearing for 500 Linden Avenue was posted in the San Mateo Daily Journal before the hearing date, in accordance with applicable legal notice requirements. 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. The City Council is the elected legislative body for South San Francisco and is an “applicable elected representative” for the purposes of Section 147(f) of the Code.
California Municipal Finance Authority
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 City of South San Francisco is a member of CMFA.
FISCAL IMPACT
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.
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 South San Francisco, it is expected that that a portion of the issuance fee attributable to the City will be granted by the CMFA to the General Fund of the City. Such grant may be used for any lawful purpose of the City.
RELATIONSHIP TO CITY COUNCIL PRIORITIES ACTION PLAN
Adopting the associated resolution directly supports the Housing and Supportive Services major focus area of the City Council Priority Action Plan for 2026. A key strategy identified by City Council within this focus area is to encourage a balanced housing supply, including rental, ownership, and workforce housing. By supporting CMFA financing requirements for the benefit of the Rotary Gardens project, the City continues to further its support of increasing the development of affordable housing units.
CONCLUSION
In light of the foregoing, and in order to support affordable housing, staff recommends that the City Council conduct the TEFRA Hearing and adopt the resolution in favor of the issuance of the Bonds by the CMFA.