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HomeMy WebLinkAboutph1tefracarmelstapts433pacificst FROM: Derek Johnson, Community Development Director Prepared By: Tyler Corey, Housing Programs Manager SUBJECT: REQUEST FROM THE HOUSING AUTHORITY OF THE CITY OF SAN LUIS OBISPO REGARDIN G A NINETEEN UNIT SENIOR RENTAL HOUSING PROJECT LOCATED AT 433 PACIFIC STREET KNOWN AS THE CARMEL STREET APARTMENTS RECOMMENDATION 1. Conduct a public hearing under the Tax and Equity Fiscal Responsibility Act (TEFRA) of 1982 and pursuant to the requirements of the Internal Revenue Code of 1986. 2. Adopt a resolution allowing the reissuance of multifamily housing revenue bonds by the Housing Authority of the City of San Luis Obispo for the Carmel Street Apartments located at 433 Pacific Street. DISCUSSION Background The Housing Authority of the City of San Luis Obispo (the “Authority”) is requesting that the Council hold a public hearing regarding the reissuance of tax-exempt bonds that financed the construction of the Carmel Street Apartments located at 433 Pacific Street. Although there is no financial participation (or liability, direct or indirect) by the City in approving the reissuance of this “conduit” financing, Council conduct of a public hearing and approval of the reissuance is required under federal regulations for tax-exempt financing. Project Summary 1. Carmel Street Apartments is a 19 unit affordable rental apartment facility for seniors located at 433 Pacific Street (the “Project”). The Project is owned by Carmel Street Associates, a California limited partnership (the “Borrower”), of which the San Luis Obispo Non-Profit Housing Corporation (a nonprofit corporation established by the Authority) is the general partner. 2. The construction of the Project was financed with the proceeds of a $1,550,000 bond (the “Bonds”) issued by the Authority on April 4, 2002. The Bonds were purchased by First Bank of San Luis Obispo (“FBSLO”). Through a series of bank mergers and acquisitions, the Bonds are now owned by Union Bank, N.A. Meeting Date Item Number 12-10-13 PH1 - 1 Conduit Reissuance Request: Housing Authority of the City of San Luis Obispo Page 2 3. In order for the interest on the Bonds to be tax-exempt, on October 16, 2001, the Council conducted a public hearing regarding the financing of the Project under the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), and pursuant to the requirements of the Internal Revenue Code of 1986. Council adopted Resolution No. 9238 (2001 Series) approving the issuance of the Bonds by the Authority to finance the Project (Attachment 1). 4. Union Bank, N.A., the current owner of the Bonds, has now agreed to lower the interest rate on the Bonds from 6.80% to 4.50%, which modification to the terms of the Bonds will result in a “reissuance” of the Bonds for federal tax purposes. The reissuance of the Bonds requires that the Council hold a TEFRA public hearing regarding the reissuance and to adopt a resolution approving the reissuance by the Authority of the Bonds, in order to maintain the tax-exempt status of the interest on the Bonds. No City Liability for the Financing There is no City liability in approving the reissuance of conduit financing. The bonds are payable solely from the payments by the Borrower on a loan made to it (the “Borrower Loan”) by the Authority from the proceeds of the Bonds. The rental payments by tenants in the Project are the source of revenue used by the Borrower to repay the Borrower Loan. The City has no financial, legal, or moral obligation, liability or responsibility for the Project or for the repayment of the Bonds or the repayment of the Borrower Loan. The documents for the Bonds clearly provide that the Bonds are payable solely from payments on the Borrower Loan made by the Borrower. Outside of holding this hearing and adopting the required resolution, no other participation or activity of the City with respect to the bonds will be required. City’s Conduit Financing Policy While the Council is not obligated to approve this request, it would be consistent with past City actions regarding the Project. Under the City’s debt financing and management policies, 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 was completed in 2001 when the Council conducted the original TEFRA hearing for the Bonds and adopted Resolution No. 9328 (2001 Series) approving the issuance of the Bonds by the Authority to finance the Project (Attachment 1). City’s Past Experience with Conduit Housing Bonds The City has approved seven “conduit” housing bond issues in the past as reflected in the following summary. There have been no financial difficulties with any of these bond issues. PH1 - 2 Conduit Reissuance Request: Housing Authority of the City of San Luis Obispo Page 3 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. 4. 2002. 19-unit seniors apartment development at 433 Pacific Street (Pacific and Carmel). 5. 2005. 40 affordable one-bedroom units for seniors as well as 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 University Board of the Santa Barbara Presbytery. 7. 2012. 120-unit apartment project affordable to low and very-low income households located at 1550 Madonna Road. Next Steps After the TEFRA public hearing and adoption of the Resolution of the Council approving the reissuance of the Bonds, the Authority, the Borrower and Union Bank, N.A. will enter into documents reducing the interest rate on the Bonds from 6.80% to 4.50%. There will be no further actions required by the City. FISCAL IMPACT There are no fiscal impacts to the City associated with this matter. As noted above, the City has no liability, directly or indirectly, for the financing. ALTERNATIVES 1. Do not approve the reissuance of bonds by the Authority. Given the approvals that the Project has already received from the City and the lack of any liability for repayment of the Bonds by the City, this option is not recommended. 2. Defer consideration of the request. Due to the savings in interest costs resulting from the reissuance of the Bonds, this option is not recommended. ATTACHMENT 1. Council Resolution No. 9238 (2001 Series) 2. Draft Council Resolution approving the reissuance of bonds by the Authority T:\Council Agenda Reports\2013\2013-12-10\TEFRA Hearing for Carmel St. (Johnson-Corey)\PH1 - TEFRA Hearing for Carmel Street Apartments.docx PH1 - 3 Attachment 1 PH1 - 4 Attachment 1 PH1 - 5 Attachment 2 RESOLUTION NO. XXXX-13 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING THE REISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS BY THE HOUSING AUTHORITY OF THE CITY OF SAN LUIS OBISPO FOR THE CARMEL STREET APARTMENTS LOCATED AT 433 PACIFIC STREET 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 multifamily rental housing facilities located within the area of operation of the Authority; and WHEREAS, on April 4, 2002, the Authority issued $1,550,000 principal amount of its Housing Authority of the City of San Luis Obispo Multifamily Housing Revenue Bonds (Carmel Street Apartments), Series 2002A (the “Bonds”) pursuant to an Indenture of Trust, dated as of April 1, 2002 (the “Indenture”), between the Authority and First Bank of San Luis Obispo, as the then bondowner representative; and WHEREAS, the Authority loaned the proceeds of the Bonds (the “Loan”) to Carmel Street Associates, a California limited partnership (the “Borrower”) pursuant to a Loan Agreement, dated as of April 1, 2002 (the “Loan Agreement”), between the Authority and the Borrower; and WHEREAS, the Borrower used the proceeds of the Loan to finance the acquisition and construction of 19 units of multifamily rental housing known as Carmel Street Apartments (the “Project”), located at 433 Pacific Street in the City of San Luis Obispo (the “City”); and WHEREAS, the Bonds are considered to be “qualified exempt facility bonds” under Section 142(a) of the Internal Revenue Code of 1986, as amended (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 determined that the Council of the City was the “applicable elected representative” to approve the issuance of the Bonds by the Authority and on October 16, 2001, the Council held a public hearing regarding issuance of the Bonds and adopted Resolution No. 9238 (2001 Series) approving the issuance of the Bonds by the Authority for the purpose of providing financing to the Borrower for the Project; and WHEREAS, the City is not a party to any of the agreements or other documents relating to the Bonds or the financing of the Project, and neither the financing of the Project nor the Bonds impose any legal, financial or moral obligation upon the City with respect to the financing of the Project; and PH1 - 6 Attachment 2 WHEREAS, Union Bank, N.A. (the “Bank”), has succeeded to the interests of the bondowner representative under the Indenture and is the current owner of the Bonds; and WHEREAS, the Bank has agreed to allow modifications to be made to the Indenture and the Loan Agreement to lower the interest rate on the Bonds and on the Loan, but such modifications will, under the Code, cause a “reissuance” of the Bonds; and WHEREAS, in order to maintain the tax-exempt status of the interest on the Bonds paid by the Authority to the Bank, prior to the modification of the Indenture and the Loan Agreement, the Authority needs the Council to approve the reissuance of the Bonds following a public hearing on the matter; and WHEREAS, notice of the required public hearing has been duly given as required by the Code, and the Council has heretofore held the public hearing at which all interested persons were given an opportunity to be heard on all matters relative to the reissuance of the Bonds and the ownership and operation of the Project; and WHEREAS, it is in the public interest and for the public benefit that the Council approve the reissuance of the Bonds for the aforesaid purposes. BE IT RESOLVED, by the City Council of the City of San Luis Obispo as follows: Section 1. Action. The Council of the City of San Luis Obispo hereby approves the reissuance of the Bonds by the Authority for purposes of the Code. This resolution shall take effect immediately upon its adoption. Upon motion of , seconded by , and on the following vote: AYES: NOES: ABSENT: The foregoing resolution was passed and adopted this 10th day of December, 2013. ____________________________________ Mayor Jan Marx ATTEST: ____________________________________ Anthony J. Mejia City Clerk PH1 - 7 Attachment 2 APPROVED AS TO FORM: _____________________________________ Christine Dietrick City Attorney PH1 - 8