Council deadlocks on conduit tax‑exempt financing for Hillcrest project after heated safety and traffic debate

City staff opened a TEFRA (tax‑exempt conduit financing) public hearing April 14 for three related affordable‑housing projects. The first hearing concerned Hillcrest Summit Apartments, a developer request for the California Municipal Finance Authority (CMFA) to serve as conduit issuer for tax‑exempt revenue bonds not to exceed $50 million.

Nathan Sinclair (associate planner) explained the purpose of TEFRA is to allow the hosting jurisdiction to hold the required public hearing for tax‑exempt bond issuance; Sinclair noted the city would have no repayment obligation and that all financing documents would disclaim city liability. Jared Suzuki of the CMFA reiterated that the city’s action would be strictly about the financing.

The discussion turned contentious as councilmembers questioned project siting, traffic circulation and public safety. Mayor Pro Tem Freitas said the proposed four‑story building surrounding an existing gas station and car wash posed risks and called the design and ingress/egress "a failure" for circulation, arguing the project had been administratively approved under the commercial infill housing (CIH) overlay without returning to council for design review. "I think this project is horrible," Freitas said, criticizing the proximity to a 24/7 convenience site and the ingress/egress configuration onto Hillcrest and Shattuck.

Developer representatives and the CMFA said the hearing was limited to financing and that zoning and prior entitlements allowed the design; Tommy Atley, an assistant development manager for Standard Communities working on a linked project (Buchanan Crossing), said both projects were time‑sensitive, bound to lender and tax‑credit deadlines, and that failing the TEFRA could render the deals infeasible. "If we don't get the TEFRA hearing, we can't close on the project," Atley said, warning that dirt‑handling and contractor pricing tie multiple project sites together.

Council voted on the Hillcrest TEFRA motion; the measure failed with two yes, two no and one abstention (Councilmember Torres Walker abstained). The tie and abstention left council unable to adopt the requested TEFRA approval for Hillcrest that evening.

Why it matters: The vote highlights a tension between state housing laws and local control. Councilmembers said the CIH overlay's administrative approvals leave limited council discretion on design and siting for qualifying sites, while developers and bond issuers said timely TEFRA approvals are essential to secure tax credits and keep projects financially viable. If a jurisdiction declines to host the TEFRA hearing, the conduit issuer can seek another host and developers warned that delays risk both Hillcrest and the linked Buchanan Crossing project.

What the transcript shows: Council expressed substantive, documented concerns about safety, traffic, parking and neighborhood impacts; staff and CMFA repeatedly cautioned that the action before council was financing only and not a rehearing of planning approvals. The developer said the projects would include low‑income units (including 30% AMI units) and resident services; opponents at the Buchanan hearing raised questions about the balance of AMI levels and whether project economics favored 60% AMI units over deeper affordability.

Next steps: With the TEFRA motion failing on Hillcrest, the financing path for both linked projects is uncertain; developers may pursue alternative conduit hosts or revise capital stacks. Council did not adopt the financing resolution for Hillcrest that night; the Buchanan discussion continued as council considered the related financing request.