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HomeMy WebLinkAbout05/06/2003, PH1 - HOUSING AUTHORITY REQUEST FOR CONDUIT FINANCING council MwmgD , 5-6-03 acEnda nepoRt 1�N.,b� CITY O F SAN LUIS OBI S P O FROM: Bill Statler, Director of Finance SUBJECT: HOUSING AUTHORITY REQUEST FOR CONDUIT FINANCING CAO RECOMMENDATION Adopt a resolution allowing the Housing Authority to issue tax-exempt bonds to assist in financing their Del Rio Terrace senior apartment project. DISCUSSION Overview As set forth in Attachment 1, the Housing Authority is requesting that the City approve their borrowing up to $4 million to assist in financing their Del Rio Terrace senior apartment project at 2005 Johnson Avenue. The project includes forty affordable one-bedroom units for seniors as well as one manager's unit in an existing historic single-family residence on the site, which will be rehabilitated as part of the project. The Housing Authority plans to help fund construction of the project using tax-exempt bonds. Even though there is no financial participation (or liability, direct or indirect) by the City in this project, Council approval of the borrowing is required under federal regulations for tax-exempt bond financing. City Planning Approvals The project has received all of its discretionary approvals from the City: 1. The Council approved a density bonus for the project on January 7, 2003. 2. The Architectural Review Commission (ARC) approved the project on February 3, 2003. Normally, this would have been the final discretionary approval for this project; however, the ARC's approval was appealed to the Council.. On March 18, 2003, the Council denied the appeal, completing the review process for this project. In summary, the project complies with all zoning and land use requirements. Moreover, it will help achieve General Plan housing .goals by providing affordable housing for low-income seniors. City's Conduit Financing Policy While the Council is not obligated to approve this request, it would be consistent with General Plan housing policies and with past City actions. There is no City liability in approving this Housing Authority Request for Conduit Financing Page 2 "conduit" financing. Under the City's debt financing and management policies (Attachment 2), consideration of a request for conduit financing is generally a two-step process: 1. First asking the Council if they are interested in considering the request, and establishing the ground rules for evaluating it. 2. And then returning with the results of this evaluation, and recommending approval of appropriate financing documents if warranted. This two-step approach ensures that the issues are clear for both the City and applicant, and that key policy questions are answered. However, due to timing constraints, the Housing Authority has requested that these issues be addressed in one meeting on May 6, 2003. Given the close and ongoing working relationship that the City has with the Housing Authority, and the project's benefits in meeting the City's adopted housing goals, we believe a "one-step" process will adequately address the City's criteria for assisting with conduit financings, summarized as follows: 1. The City's bond counsel will review the terms of the financing, and render an opinion that there will be no liability to the City in issuing the bonds on behalf of the applicant (or in this case, allowing the applicant—the Housing Authority—to issue bonds on their own behalf). 2. There is a clearly articulated public purpose in providing the conduit financing. 3. The applicant is capable of achieving this public purpose. The City's bond counsel (Jones Hall) opinion providing assurance that there will be no liability to the City in allowing the Housing Authority to issue these bonds is provided in Attachment 3. As discussed above, we believe there is a clearly articulated public purpose in providing the requested conduit financing to the Housing Authority, and that it is capable of achieving this public purpose. City's Past Experience with Conduit Housing Bonds The City has approved four "conduit" housing bond issues in the past on behalf of the Housing Authority: 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) on Brizzolara Street. 3. 1999. 122-unit apartment development by the De Vaul Ranch Company, of which 26 units will be affordable-24 for "very-low" and 2 for "moderate" income households. In this case, the Housing Authority is not developer, but will loan the funds to the De Vaul Ranch Company. This funding has not yet occurred. �-a C C Housing Authority Request for Conduit Financing Page 3 4. 2002. 19-unit seniors apartment development at 433 Pacific Street (Pacific and Carmel). This project was recently completed. There have been no financial difficulties with any of these bond issues. City's Role in this Process Why are we involved? Under federal laws allowing for the issuance of tax-exempt housing bonds, an elected legislative body must approve these types of bonds (the "applicable elected representative"). For the Housing Authority, this means the City of San Luis Obispo. The City's approval of the attached resolution does not immediately result in the issuance of bonds; this will be subject to subsequent approval of formal bond documents by the Housing Authority. However, the City's approval is required before this next step can take place. CONCURRENCES The Community Development Department concurs with this request. FISCAL IMPACT There are no adverse fiscal impacts associated with this financing. As noted above, the City has no liability—directly or indirectly—for this financing. The cost of the Jones Hall opinion (time and materials, not to exceed $1,000) will be paid from the bond proceeds. ALTERNATIVES 1. Do not approve the requested financing. Given the clear relationship between the purpose of this financing and the City's adopted housing goals, this option is not recommended. 2. Defer consideration of the request. Due to the time requirements for this financing, this option is not recommended. ATTACHMENTS 1. Request from the Housing Authority for conduit financing 2. City's conduit financing policy (excerpt from the 2001-03 Financial Plan) 3. Opinion from the City's bond counsel on our liability for this project 4. Resolution allowing the Housing Authority to issue tax-exempt bonds to assist in financing their Del Rio Terrace senior apartments project H:Housing Authority Conduit Financing Request/Del Rio Terrace Apartments/Agenda Report AttachmentLO �-- Lnleo�u xowina o..oenxrtua Housing Authority 487 Leff Street Post Office Box 1289 San Luis Obispo CA 93406-1289 of the City of (805) 543-4478 fax (805) 543-4992 San Luis Obispo Executive Directonsecretary MEMORANDUM George J.Moylan April 21,2003 TO: Bill Statler,Director of Finance, City of San Luis Obispo FROM: George J. Moylan, Housing Authority of the City of San Luis Obispo SUBJECT: Bond Financing 2005 Johnson Avenue This is a follow-up to our telephone conversation of last Friday as well as contact you have had with Atty. Paul Thimmig of Quint and Thimmig, LLP. On April 8, 2003 the Housing Authority of the City of San Luis Obispo adopted their Resolution No. 806 (2003), Relating to the Borrowing of Funds for the Purpose of Financing the Construction of a Multi-Family Residential Rental Housing Facility by the Johnson DRT Associates, a California Limited Partnership. The managing general partner of the Johnson DRT(Del Rio Terrace) Associates is the San Luis Obispo Non-Profit Housing Corporation (SLONP) our 501 ( c ) (3) non-profit affiliate. As with all developments involving(SLONP)the Housing Authority of the City of San Luis Obispo will serve as managing agent for the Partnership. This same format has been used in the development of our other five tax-credit developments built within the City over the last 15 years. To refresh your memory those developments are: 4035 Poinsettia Street; Marvin Gardens; Ironbark Apartments; Brizzolara Street Apartments; and 433 Pacific Street, known as Carmel Street Apartments. Two of the five members of the Board of Directors of San Luis Obispo Non-Profit Housing Corporation are also members of the Commission of the Housing Authority of the City of San Luis Obispo as appointed by the Mayor of the City with the consent of the full Council. Carmel Street Apartments was opened for occupancy in February of this year and was subject to a similar TEFRA hearing before the City Council on Tuesday, October 16, 2001. The circumstances at that time are virtually identical to the ones existing today. SLONP was the managing general partner in a limited partnership; the Housing Authority was the managing agent for the development; all City approvals for the development had been granted; tax credits were being sought for the development from the California Debt r-4 Attachment and one two bedroom manager's unit that will be on the second floor of the restored and relocated Hathway House. The first floor of that building will be used as a community room. A total of five buildings, including the Hathway House, will comprise the development with the other four buildings being two and three story buildings interconnected by two elevators thus making all but one of the 40 units fully handicapped accessible. Total construction cost is expected to be in the neighborhood of$6 million to be paid for from the proceeds of the bond as well as the tax-credits sold through syndication. Previous city approvals include: a density bonus from the City Council; Cultural Heritage Committee approval to move the historically significant Hathway house from its present location towards the center of the development where it can better serve its intended usage; and the Architectural Review Commission. The decision of the ARC was appealed to the City Council but on March 18th the Council voted to deny the appeal. As with prior developments with bonding arrangements similar to this, i.e. Brizzolara Street and Cannel Street Apartments, the City has no legal, financial or moral obligation or responsibility with respect to the Loan or any other aspect of this tax-exempt financing. If there are any other concerns or questions please call me at 597-5302 or contact me via my email, gmoylan(@haslo.org George cc: Lee Price, City Clerk Atty. Paul Thimmig - Attechrnent 2- POLICIES AND OBJEC ONES BUDGET AND FISCAL POLICIES case basis before initiating foreclosure applicant, and that key policy questions are proceedings. answered. 11. Disclosure to Bondholders. In general, 3. The workscope necessary to address these each property owner who accounts for more issues will vary from request to request, and than 10% of the annual debt service or will have to be determined on a case-by-case bonded indebtedness must provide ongoing basis. Additionally, the City should disclosure information annually as described generally be fully reimbursed for our costs under SEC Rule 15(c)-12. in evaluating the request; however, this should also be determined on a case-by-case 12. Disclosure to Prospective Purchasers. Full basis. disclosure about outstanding balances and annual payments should be made by the HUMAN RESOURCE MANAGEMENT seller to prospective buyers at the time that the buyer bids on the property. It should not be deferred to after the buyer has made the A. Regular Staffing decision to purchase: When appropriate, applicants or property owners may be 1. The budget will fully appropriate the required to provide the with a resources needed for authorized regular discIGsure pl staffing and will limit programs to the regular staffing authorized. F. Conduit Financings 2. Regular employees will be the core work 1. The City will consider requests for conduit force and the preferred means of staffing financing on a case-by-case basis using the ongoing, year-round program activities that following criteria: should be performed by full-time City employees rather than independent a. The City's bond counsel will review the contractors. The City will strive to provide terms of the financing, and render an competitive compensation and benefit opinion that there will be no liability to schedules for its authorized regular work the City in issuing the bonds on behalf force. Each regular employee will: of the applicant. b. There is a clearly articulated public a. Fill an authorized regular position. purpose in providing the conduit b. Be assigned to an appropriate bargaining financing. unit. c. The applicant is capable of achieving c. Receive salary and benefits consistent this public purpose. with labor agreements or other compensation plans. 2. This means that the review of requests for conduit financing will generally be a two- 3. To manage the growth of the regular work step process: first asking the Council if they force and overall staffing costs, the City will are interested in considering the request, and follow these procedures: establishing the ground rules for evaluating it; and then returning with the results of this a. The Council will authorize all regular evaluation, and recommending approval of positions. appropriate financing documents if warranted. This two-step approach ensures that the issues are clear for both the City and B-20 ' 04/23/03 14:18 FAX 415 391 5791 JONES HALL 19002 Attachment 3 JONE s HALL A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW CHART nv F.ADAMS B60CALIFORNIASTREET STEPHEN R.CASALEGCIO EIGHTEENTH FLOOR THOMAS A.DOW"V /�/� SAN FRANCISCO.CA 94 OS DAVID T.FAMA ,April 23,200'3 SCOTT R.FHRGUSON THI.ffi'HONS ANDREW C.HALL JA (415)091-5780 COURTNEY L JONES FAZ51HU n WH.LIAM J.KADI (4161 OBS-6784 WII.LIAM H.MADISON .STEPHEN O.Mnr muix HENNET111 JONES.RETIRB.D DAVM J.037ER DAVID A.WALTON HOMEPAGE http://W .Jonehz11.c= JULIE A.W UNDERLICH William C.Statler Director of Finance City of San Luis Obispo 990 Palm Street San Luis Obispo,CA 93401 Re: City Council Approval of Housing Project for San Luis Obispo Non-Profit Housing Corporation - Del Rio Terrace Senior Apartment Project Dear Bill: You have asked us to review the request made to the City Council on behalf of the Housing Authority of the City of San Luis Obispo (the "Authority") to adopt a resolution which approves the financing of a 41-unit residential rental housing project for seniors to be located at to be located at 2005 Johnson Avenue in the City (the "Project"). The Project will be constructed by Johnson DRT Associates, a California limited partnership, of which the San Luis Obispo Non-Profit Housing Corporation is the sole general partner. We have reviewed the proposed Resolution and have had discussions with Mr. Paul Thimmig of the law firm of Quint &Thimmig LLP,which will act as bond counsel to the Authority in connection with this financing. Based on our review, we can advise you that (1) the approval by the City Council is required under applicable federal tax law in order for the Project to be financed on a tax-exempt basis, and (2) the adoption of the Resolution by the City Council will not cause the City to incur any financial obligations with respect to the financing of the Project. Indeed, the City will not be a party to any of the legal documents relating to the financing. Based on the financing structure as it has been described to us and as it is described in the proposed Resolution, we concur with the statement made by Mr. Thimmig(in his letter to you of April 22) that the City will have no legal, financial or moral obligation or responsibility with respect to the financing of the Project. Please let me know if we can be of any further help in this matter. y�u�rs,"'dam' �Q Arles F.Adams ' � ` Attachment RESOLUTION NO. (2003 SERIES) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING THE ISSUANCE OF BONDS BY THE HOUSING AUTHORITY OF THE CITY OF SAN LUIS OBISPO FOR THE PURPOSE OF PROVIDING FINANCING FOR A RESIDENTIAL RENTAL HOUSING FACILITY SPONSORED BY THE SAN LUIS OBISPO NON-PROFIT HOUSING CORPORATION— DEL RIO TERRACE APARTMENTS WHEREAS, the Housing Authority of the City of San Luis Obispo (the "Authority") is authorized by Chapter 1 of Part 2 of Division 24 of the Health and Safety Code of the State of California, as amended (the "Law"), to issue bonds to finance housing developments as specified in the Law; and WHEREAS, the San Luis Obispo Non-Profit Housing Corporation, a California nonprofit public benefit corporation (the "Corporation") has requested that the Authority use its powers under the Law to issue bonds (the "Bonds") and use the proceeds of the Bonds to make a loan (the "Project Loan") to Johnson DRT Associates, a California limited partnership (the "Borrower") of which the Corporation is the sole general partner, to enable the Borrower to finance the acquisition and construction of a 40-unit residential rental housing facility for seniors and one manager's unit to be located at 2005 Johnson Avenue in the City of San Luis Obispo (the "Project"); and WHEREAS, a portion of the housing units in the Project will be rented to persons and families of very low income as required by the Law and the Internal Revenue Code of 1986, as amended (the "Code"); and WHEREAS, the Bonds will be considered to be "qualified exempt facility bonds" under Section 142(a) of the Code, and Section 147(f) of the Code requires that the "applicable elected representative" with respect to the Authority approve the issuance of the Bonds by the Authority following the holding of a public hearing with respect thereto; and WHEREAS, the Authority has determined that the Council of the City is the "applicable elected representative" to approve the issuance of the Bonds by the Authority; and WHEREAS, the City will not be a party to any of the agreements or other documents relating to the financing of the Project, and neither the financing of the Project nor the issuance of the Bonds will impose any legal, financial or moral obligation upon the City with respect to the financing of the Project;and WHEREAS, notice of said 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 were given an opportunity to be heard on all matters relative to the location, construction, operation and financing of the Project and the Authority's issuance of the Bonds and the Authority's loan of the proceeds thereof to the Borrower; and i -8 :J Attachmentj. Resolution No. (2003 Series) Page 2 WHEREAS, it is consistent with the General Plan, in the public interest and for the public benefit that the Council approve the issuance of the Bonds and the Project Loan for the aforesaid purposes. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo, as follows: Section 1. The Council of the City of San Luis Obispo hereby approves the issuance of the Bonds by the Authority under the Law and the Code in the amount of approximately four million dollars ($4,000,000) for the purpose of providing funds to make the Project Loan to the Borrower to enable the Borrower to finance the acquisition and construction of the Project. Section 2. This Resolution shall take effect immediately upon its adoption. On motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted on May 6, 2003, Mayor David F. Romero ATTEST: Lee Price, City Clerk APPROVED AS TO FORM: Trujillo, Interim City Attorney �' l