REPORT TO COUNCIL
SUBJECT
Title
Hold a Tax Equity and Fiscal Responsibility Act (TEFRA) Hearing and Adopt a Resolution Related to the Proposed Issuance of Tax-Exempt Bonds for the Development of a 123-unit Affordable Rental Housing Project at 245 W. Weddell Drive in Sunnyvale
Report
BACKGROUND
Since 2000, the property located at 245 W. Weddell Drive (the “Property”) has operated as an affordable housing development known as Orchard Gardens. In 2021, the City approved a proposed project to redevelop the Property to add affordable housing units (the “Project”). Since 2024, the Santa Clara County Housing Authority (SCCHA), a public housing authority (a type of government agency that operates independently from the County of Santa Clara), has assumed all operations and development activities for the Project.
City Council has approved the following two prior conditional funding awards for the Project as part of the City’s biennial Notice of Funding Availability for Housing Mitigation Fund (HMF) and Low and Moderate Income Housing Asset Fund (LMIHAF):
• February 25, 2020: $7.5 million in HMF and LMIHAF (RTC No. 20-0115); and
• September 21, 2022: $2.5 million in HMF (RTC No. 22-0817).
These awards bring the City’s total funding commitment to the Project to $10 million.
EXISTING POLICY
2023-2031 Housing Element
GOAL H-2: Assist in the provision of affordable housing to meet the diverse needs of Sunnyvale’s lower- and moderate-income households.
Policy H-2.1: Leverage local financial assistance with other sources of funding and identify new funding sources for affordable housing to maximize the number of affordable units and to reach the deepest level of affordability.
Policy H-2.12: Support collaborative partnerships with non-profit organizations, affordable housing builders, and for-profit developers to gain greater access to various sources of affordable housing funds.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment. The development project was reviewed pursuant to CEQA to assess its potential environmental impacts during the planning entitlement phase. On November 8, 2021 (RTC No. 21-1007), the Planning Commission approved a Special Development Permit for the Project and approved the CEQA determination that the Project is consistent with the development density in the City’s General Plan evaluated in the certified Land Use and Transportation Element Environmental Impact Report and no additional environmental review is required pursuant to CEQA Guidelines Section 15183 and Public Resources Code Section 21083.3.
DISCUSSION
The City has received a request to hold a TEFRA hearing to secure tax-exempt bond financing for the development of the Project. Under the Internal Revenue Code, the governing body of the jurisdiction where the Project is located must conduct a public hearing and adopt a resolution approving the issuance of tax-exempt revenue bonds in order for those bonds to qualify for federal and state tax exemptions. A draft resolution fulfilling this requirement is included as Attachment 1.
245 Weddell Project
Led by SCCHA, the Project consists of the rehabilitation and new construction of a 123-unit affordable housing development at 245 W. Weddell Drive. SCCHA will demolish an existing 32-unit building, renovate a 30-unit building, and build a new 93-unit building on site. The resulting development will provide a net increase of 61 affordable housing units, including 31 permanent supportive housing units.
Before SCCHA’s involvement, the nonprofit affordable housing developer First Community Housing (FCH) owned and operated the Property. FCH began initial plans for the Project and secured the $10 million in conditional funding from the City but were fiscally unable to move forward with the project. In November 2024, SCCHA entered into a Management Services Agreement with FCH and assumed all operations and development activities related to the Project. At construction commencement, 245 Weddell LP (the “Borrower”), a limited partnership overseen by SCCHA, will acquire the Property and own and operate the Project.
In May 2026, SCCHA secured an award of tax-exempt bonds through the California Debt Limit Allocation Committee. This award allowed the project to achieve full financing and advance towards construction.
California Municipal Finance Authority
SCCHA selected the California Municipal Finance Authority (CMFA) as the bond issuer for the Project. CMFA is a joint powers authority and public entity of the State of California, formed in 2004 to assist local governments, nonprofit organizations, and businesses with issuing taxable and tax-exempt bonds. Over 350 municipalities, including the City, are members of CMFA.
If the resolution is approved, CMFA will issue tax-exempt bonds not to exceed $70 million. Bond proceeds will be loaned to the Borrower to finance the acquisition, construction, and rehabilitation of the Project.
FISCAL IMPACT
There is no fiscal impact to the City as a result of bonds issued by CMFA. The bonds will be the sole responsibility of the Borrower, and the City will have no financial, legal, or moral obligation, liability, or responsibility for the Project or the repayment of the bonds for the financing of the Project. All financing documents will carry disclaimers that the loan is not an obligation of the City. The City will also bear no costs of issuing the proposed debt.
CMFA debts, liabilities, and obligations do not constitute debts, liabilities, or obligations to the City or the Borrower. 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 California Foundation for Stronger Communities to support local charities. With respect to the City of Sunnyvale, CMFA is expected to grant a portion of the issuance fee attributable to the City to the City's General Fund. CMFA estimates the City’s portion of the issuance fee to be approximately $20,000. Such grant may be used for any lawful purpose of the City.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the City Hall reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
The TEFRA-required public notice was published in the Sunnyvale Sun newspaper on September 4, 2026, to meet the seven-day noticing requirement.
ALTERNATIVES
1. Conduct a public hearing pursuant to the Tax Equity and Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended, and adopt the Resolution (Attachment 1 to the report) approving the issuance of the Bonds by the California Municipal Finance Authority for the benefit of 245 Weddell LP, to provide for the financing of the Project, such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Internal Revenue Code and the California Government Code Section 6500 (and following).
2. Conduct a public hearing pursuant to the Tax Equity and Fiscal Responsibility Act and the Internal Revenue Code of 1986, as amended, and do not approve the resolution and provide other direction to staff.
STAFF RECOMMENDATION
Recommendation
Alternative 1: Conduct a public hearing pursuant to the Tax Equity and Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended, and adopt the Resolution (Attachment 1 to the report) approving the issuance of the Bonds by the California Municipal Finance Authority for the benefit of 245 Weddell LP, to provide for the financing of the Project, such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Internal Revenue Code and the California Government Code Section 6500 (and following).
JUSTIFICATION FOR RECOMMENDATION
The public hearing and adoption of the resolution are solely for the purpose of satisfying the requirements of TEFRA and the Internal Revenue Code and will have no negative fiscal impact on the City. The issuance of the bonds will enable the project to advance towards construction commencement in fall 2026, bringing 123 units of much-needed affordable and permanent supportive housing to Sunnyvale.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $500 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
_X_ Other permit, license, or entitlement for use
___ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract*
___ Labor or personal employment contract
___ Contract under $50,000 or non-fiscal
___ Contract between public agencies
___ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: Ryan Dyson, Housing Specialist II
Reviewed by: Amanda Sztoltz, Housing Officer
Reviewed by: Trudi Ryan, Director, Community Development
Reviewed by: Dennis Jaw, Assistant Director of Finance
Reviewed by: Matt Paulin, Director of Finance
Reviewed by: Connie Verceles, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. Draft Resolution Approving the Issuance of Revenue Bonds