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HomeMy WebLinkAbout03-13-2012 ph3 tefra 1550 madonnacounci ljacenaa uepont Meeting Date 3-13-1 2 h Numbe r CITY OF SAN LUIS OBISP O FROM : Charles Bourbeau, Director of Finance & Information Technolog y Derek Johnson, Community Development Directo r SUBJECT :CONDUIT FINANCING REQUEST FROM VITUS DEVELOPMENT LL C AND THE CALIFORNIA MUNICIPAL FINANCING AUTHORITY FO R ACQUISITION AND REHABILITATION OF A 120-UNI T MULTIFAMILY HOUSING RESIDENTIAL FACILITY AT 155 0 MADONNA ROAD RECOMMENDATIO N Conduct a public hearing under the Tax and Equity Fiscal Responsibility Act (TEFRA ) of 1986 and Section 147(f) of the Internal Revenue Code . 2 . Adopt a resolution allowing the California Municipal Finance Authority (CMFA),o n behalf of Vitus Development LLC, to issue tax exempt bonds to assist in financing th e rehabilitation of a 120-unit multifamily housing residential facility . DISCUSSIO N Overview The CMFA has requested that the City conduct a public hearing and approve the CMFA's issuance of up to $15,000,000 of tax-exempt revenue bonds . The proceeds of the Bonds will b e provided to the borrower to assist in the financing of the acquisition, rehabilitation an d development of a 120-unit multifamily rental housing development commonly known as th e Madonna Road Apartments and located at 1550 Madonna Road, San Luis Obispo, California. The borrower and owner of the project is expected to be Vitus Development LLC or any limite d partnership or limited liability company established by Vitus Group, Inc . There is no liability o n the part of the City for the bonds . The bonds will be repaid from revenues the borrower receive s from the project . In order for all or a portion of the bonds to qualify as tax-exempt bonds,a public "TEFRA " hearing must be conducted providing members of the community an opportunity to speak i n favor of,or against, the use of tax-exempt bonds for the financing of the project .Following th e close of the TEFRA Hearing, an elected body of the governmental unit hosting the Project mus t provide its approval of the issuance of the bonds for the financing of the Project . Project Summary The 1550 Madonna Road property is currently owned by the United Brotherhood o f Carpenters and Joiners of America .The property is approximately 7 acres in size an d includes 120 residential apartment units . The project was constructed in 1971 and has been Conduit Financing Request : Vitus development LLC and CMFA for 1550 Madonna Road Page2 deed-restricted as affordable housing under a HUD Section 236 loan since occupancy . This loan comes to maturity on March 2, 2012, and the property owners have decided to sell th e property. Vitus Group, Inc ., an affordable housing developer, has entered into a purchas e agreement with the owners . This is a positive outcome since there were several market rat e developers that bid on the property. Vitus Group plans to maintain the 120 units as affordabl e to low and very-low income households earning 50-60% of area median income within th e County. Documents provided by Vitus reflect the planned investment of $4 .8 million i n improvements to the property, a substantial portion of the total cost of acquiring an d rehabilitating the facility . 2 . The City may receive an Affordable Housing Fund request from Vitus Group in the future t o help fund the project's needed rehabilitation work . Upon receipt of the request, staff will carefully analyze and evaluate the proposal for consistency with the City's Affordabl e Housing Fund award criteria and determine whether a grant or loan is the appropriate fundin g mechanism . A thorough evaluation of the project's pro-forma will be conducted to ensur e that any Affordable Housing Fund award would further the goals of the Affordable Housin g Program, consistent with General Plan policy . The City's approval of the issuance of the Bonds does not constitute an approval of an y permits or other approvals that must be obtained by the developer for a project of this nature . 4 . The City's action is consistent with Housing Element Policy 2 .12 1 which provides that th e City will actively work with affordable housing providers with the issuance of bonds, such a s TEFRA conduit financing . No City Liability for the Financin g There is no City liability in approving this "conduit" financing . The bonds will be issued by th e CMFA and annual debt service payments will be the sole responsibility of the Borrower. The City will have no financial, legal, or moral obligation, liability or responsibility for the project or for the repayment of the bonds . All financing documents with respect to the issuance of th e bonds will contain clear disclaimers that they are not obligations of the City or the State o f California, but are to be repaid solely from funds provided by the Borrower . Outside of holdin g this hearing and adopting the required resolution, no other participation or activity of the Cit y with respect to the bonds will be required . City's Conduit Financing Policy and Past Experience with Conduit Housing Bond s While the Council is not obligated to approve this request, it is consistent with the City's polic y for conduit financing . The City has approved six "conduit" housing bond issues in the past a s '2 .12 Assist with the issuance of bonds, tax credit financing, loan underwriting or other financial tools to help develop or preserve affordable units through various programs , including, but not limited to : (1) below-market financing through the SLO Count y Housing Trust Fund and (2) subsidized mortgages for extremely low, very-low, low- an d moderate income persons and first-time home buyers, and (3) self-help or "sweat equity " homeowner housing . PH3 2 Conduit Financing Request : Vitus development LLC and CMFA for 1550 Madonna Road Page3 reflected in the following summary . There have been no financial difficulties with any of these bond issues . 1 1985.168-unit apartment development on Southwood Drive (refinanced in 1993). 2.1998 .30-unit development (all "affordable" for seniors and persons with disabilities) o n Brizzolara Street . 3.1999 .122-unit apartment development by the De Vaul Ranch Company, of which 26 unit s will be affordable—24 for "very-low" and 2 for "moderate" income households . 4.2002 .19-unit seniors apartment development at 433 Pacific Street (Pacific and Carmel). 5.2005 .40 affordable one-bedroom units for seniors as wellas one manager's unit in an existing historic single-family residence at 2005 Johnson Avenue ("Del Rio Terrace"). 6.2009 and 2011 .8-unit housing project at 1468 East Foothill Boulevard for the Universit y Board of the Santa Barbara Presbytery. Next Step s The Council's approval of the attached resolution does not immediately result in the issuance o f bonds. In order to complete the purchase and to rehabilitate the 40-year old apartment units , Vitus Group, Inc . is applying to the California Debt Limit Allocation Committee (CDLAC) fo r tax exempt bonds . The approved resolution will assist in obtaining the needed allocation . After the TEFRA Public Hearing, adoption of the Resolution, and approvals by CDLAC and th e U .S . Department of Housing and Urban Development (HUD), the CMFA Board will approve th e issuance of tax-exempt bonds for the project at a future CMFA board meeting . There will be no further actions relative to the bond issuance required by the City . FISCAL IMPACT As noted there are no adverse fiscal impacts associated with this financing . Other than th e administrative time expended to prepare, review, and publish the related documents, there is n o direct expenditure for this action . Through its conduit issuance activities, the CMFA shares a portion of the issuance fees it receives with its member communities . The City may expect t o receive approximately $9,000 to be granted by the CMFA to the general fund of the City . Suc h grant may be used for any lawful purpose of the City . ALTERNATIVE S 1 Do not approve the requested financing .As there is no liability for repayment of th e bonds by the City, and given the public benefit of the underlying project, and the sharing o f the issuance fee, this option is not recommended . PH3-3 Conduit Financing Request : Vitus development LLC and CMFA for 1550 Madonna Road Page4 2 .Defer consideration of the request .Due to the time requirements for this financing, thi s option is not recommended . ATTACHMENT Resolution allowing the CMFA to issue tax-exempt bonds "T :\Council Agenda Reports\2012\2012-03-13\TEFRA Madonna Rd" PH3-4 Attachmen t RESOLUTION NO . (2012 Series ) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISP O APPROVING THE ISSUANCE OF BONDS BY THE CALIFORNIA MUNICIPAL FINANC E AUTHORITY FOR THE PURPOSE OF FINANCING A HOUSING DEVELOPMENT FO R VITUS DEVELOPMENT LLC AND CERTAIN OTHER MATTERS RELATING THERET O WHEREAS,pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code o f the State of California (the "Act"), certain public agencies (the "Members") have entered into a Joint Exercise of Powers Agreement, effective on January 1, 2004 (the "Agreement")in order t o form the California Municipal Finance Authority (the "Authority"), for the purpose of promotin g economic, cultural and community development, and in order to exercise any powers common t o the Members, including the issuance of bonds, notes or other evidences of indebtedness ; and WHEREAS,the City of San Luis Obispo (the "City"), had determined that it was in th e public interest and for the public benefit that the City become a Member of the Authority i n order to facilitate the promotion of economic, cultural and community development activities i n the City, including the financing of projects therefor by the Authority ; an d WHEREAS,the California Municipal Finance Authority (the "Authority") is authorize d to issue and sell revenue bonds for the purpose, among others, of financing or refinancing th e construction of capital projects ; an d WHEREAS,Vitus Development LLC and/or Vitus Group Inc .(the "Borrower") ha s requested that the Authority issue and sell revenue bonds in the maximum principal amount o f $15,000,000 (the "Bonds") for the purpose of making a loan to the Borrower, to enable th e Borrower to finance the costs of acquiring, rehabilitating, and developing a 120-unit multifamil y housing residential facility located at 1550 Madonna Road, San Luis Obispo, California (th e "Project"); and WHEREAS,in order for the interest on the Bonds to be tax-exempt, Section 147(f) o f the Internal Revenue Code of 1986, as amended (the "Code"), requires that an "applicabl e elected representative" with respect to the Authority hold a public hearing on the issuance of th e Bonds and approve the issuance of the Bonds following such hearing; an d WHEREAS,the Authority has determined that the Council is an "applicable electe d representative" for purposes of holding such hearing ; and WHEREAS,notice of such public hearing has been duly given as required by the Code , and the Council has heretofore held such public hearing at which all interested persons wer e given an opportunity to be heard on all matters relative to the financing or refinancing of th e Project and the Authority's issuance of the Bonds therefor ; an d WHEREAS,it is in the public interest and for the public benefit that the Council approv e the issuance of the Bonds by the Authority for the aforesaid purposes ; NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Lui s Obispo as follows PH3_- 5 Resolution No . (2012 Series ) Page 2 Attachmen t Section 1 . The Council hereby approves the issuance of the Bonds by the Authority for th e purpose of providing funds to make a loan to the Borrower to enable the Borrower to finance o r refinance the Project . It is the purpose and intent of the City Council that this resolutio n constitute approval of the issuance of the Bonds by the Authority, for the purposes of (a) Sectio n 147(f) of the Internal Revenue Code by the applicable elected representative of the governmenta l unit having jurisdiction over the area in which the Project is to be located, in accordance wit h said Section 147(f). Section 2 . The issuance of the Bonds shall be subject to the approval of the Authority of al l financing documents relating thereto to which the Authority is a party . The City shall have n o responsibility or liability whatsoever with respect to the Bonds . The Bonds will be paid entirel y from repayments by the Borrower . Neither the full faith and credit nor the taxing power, if any , of the City, the Authority and its members, the State of California (the "State") or any othe r political corporation, subdivision or agency of the State is pledged to the payment of th e principal of, premium, if any, or interest with respect to the Bonds, nor shall the City, th e Authority and its members, the State, or any other political corporation, subdivision or agency o f the State be liable or obligated to pay the principal of, premium, if any, or interest with respect t o the Bonds . Section 3 .The adoption of this Resolution shall not obligate the City or any departmen t thereof to (i) provide any financing to acquire or construct the Project or any refinancing of th e Project ; (ii) approve any application or request for or take any other action in connection wit h any planning approval, permit or other action necessary for the acquisition, rehabilitation o r operation of the Project ; (iii) make any contribution or advance any funds whatsoever to th e Authority ; or (iv) take any further action with respect to the Authority or its membership therein . Section 4 .The Mayor, the Clerk and all other proper officers and officials Ofthe City ar e hereby authorized and directed to execute such other agreements, documents and certificates, an d to perform such other acts and deeds, as may be necessary or convenient to effect the purposes o f this Resolution and the transactions herein authorized . Section 5 . The Clerk shall forward a certified copy of this to the Authority in care of it s counsel : Harriet M . Welch, Esq . Squire, Sanders LLP . 555 South Flower St ., Suite 310 0 Los Angeles, CA 90071-230 0 Section 6 . This resolution shall take effect immediately upon its passage . PH3 0 Resolution No . (2012 Series ) Page 3 Attachment _ Upon motion of , seconded by and on the following roll call vote : AYES : NOES : ABSENT : the foregoing resolution was adopted on March 13, 2012 . Jan Howell Marx, Mayor ATTEST : Elaina Cano, City Clerk APPROVED AS TO FORM : /S/ J . Christine Dietrick J . Christine Dietrick, City Attorne y 1672526 .1 Page intentionally lef t blank .