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HomeMy WebLinkAbout10/16/2001, PH 1 - HOUSING AUTHORITY REQUEST FOR CONDUIT FINANCING n Meering D.x council LA ac En as Report rem umher�/7 ' C I TY O F SAN L U IS O B I 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 Pacific Street senior apartments project. DISCUSSION Overview As set forth in Attachment 1, the Housing Authority is requesting that the City approve their borrowing $2 million to assist in financing their senior apartment project at 433 Pacific Street (Pacific and Carmel). The Housing Authority plans to help fund construction of the project using tax-exempt bonds. Council approval is required under federal regulations for tax-exempt bond financing. This project will create 19, affordable one-bedroom units for seniors. In March 2000, the Council approved $300,000 in Community Development Block Grant funds to help purchase this site. The project complies with all zoning and land use requirements, and was approved by the Architectural Review Commission in April 2000. The project will help achieve General Plan housing goals by providing affordable housing for low-income senior citizens. 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 "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 prior to November 1, 2001. Council Agenda Report—Housing Authority Request for Conduit Financing Page 2 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 they are capable of achieving this public purpose. City's Past Experience with Conduit Housing Bonds The City has approved three "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. There have been no financial difficulties with the 1985 or 1998 issues; bonds for the De Vaul development have not yet been issued. City's Role in this Process Why are we involved? Under federal laws allowing for the issuance of tax-exempt housing bonds, the legislative body of a general-purpose government must approve these types of bonds. This means approval by cities (or counties in the case of unincorporated areas). /—Z Council Agenda Report—Housing Authority Request for Conduit Financing Page 3 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 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 Pacific Street senior apartments project H:Housing Authority Conduit Financing Request/Pacific Senior Units/Agenda Report /-3 Attachment �- LDISLO EQVIINQ OE.OIITVNRIES 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 Director-Secretary George J.Moylan MEMORANDUM September 24,2001 T0: Bill Statler, Director of Finance, City of San Luis Obispo 2 � FROM: George J. Moylan,Housing Authority of the City of San Luis Obispo /V a SUBJECT: Bond Financing 433 Pacific Street: Received a voice mail from Atty. Thimmig indicating that he had talked with you and you accepted his explanation for doing business as proposed and that he will have his former partner, who is apparently the City's bond counsel,write a letter to you and the City approving the transaction. As we discussed here is some background on the 433 Pacific Street development. It is indeed a 19 one-bedroom unit development being built on a never occupied piece of land at the comer of Pacific and Carmel Streets. As with our other tax credit developments,Poinsettia Street, Brizzolara Street, Pismo-Buchon, Marvin Gardens, and Ironbark it will be built via a limited partnership with our non-profit affiliate, San Luis Obispo Non-Profit Housing Corporation as the General Partner. SLONP is a 501 (c) (3) corporation with a five member Board of Directors. Two of those Directors are members of the Commission of the Housing Authority of the City of San Luis Obispo as appointed by the Mayor with the consent of the City Council. The Housing Authority serves as the managing agent for all of the non-profit's developments. The development itself will be an elevator serviced two-story building with the 19 units and a community room. It will be occupied by those persons 62 years of age and older. Except for final building department review of plans and specifications the development has received all required City approvals with the Architectural Review Commission giving final approval on April 20, 2000. It should also be noted that the City committed $300,000 in Community Development Block Grant funds to the acquisition of the site via an Agreement between the City and SLONP entered into on March 17, 2000. Those funds were from 1996 and 1997 CDBG funding round amendments as approved by the Board of Supervisors on September 7, 1999. Those funds have been received and expended by as to acquire the property. In the summer of 2000 we applied for 9%tax credits on the units with the California Tax Credit Allocation Committee. And although we qualified for all available points in that agency's scoring competition we did not qualify for so-called bonus points because the site was not in a revitalization district. Thus we were not funded. Since no funding was available to us the development has been held in abeyance. However, recently the California Debt Limit Allocation Committee made$150 million available for residential multi-family construction in a third funding round they have scheduled for this year. That funding carries with it the so-called 4%tax credit with it and has an application date of October 6`h. Our bond counsel, our tax-credit attorney and we are in the process of finalizing that application. In addition to filing the application we must have a TEFRA hearing and action by the City Council prior to November 6t'. As with prior similar actions taken by the City on our behalf in approving similar bonds 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. /—J 4 ttachment POLICIES AND OBJEG i IVES BUDGET AND FISCAL POLICIES and special taxes payments collected on the F. Conduit Financings tax roll should generally not exceed 2%. 1. The City will consider requests for conduit 8. Benefit Apportionment. Assessments and financing on a case-by-case basis using the special taxes will be apportioned according following criteria: to a formula that is clear, understandable, equitable and reasonably related to the a. The City's bond counsel will review the benefit received by—or burden attributed terms of the financing, and render an to—each parcel with respect to its financed opinion that there will be no liability to improvement. Any annual escalation factor the City in issuing the bonds on behalf should generally not exceed 2%. of the applicant. 9. Special Tax District Administration. In the b. There is a clearly articulated public case of Mello-Roos or similar special tax purpose in providing the conduit districts, the total maximum annual tax financing. should not exceed 110% of annual debt c. The applicant is capable of achieving service. The rate and method of this public purpose. apportionment should include a back-up tax in the event of significant changes from the 2. This means that the review of requests for initial development plan, and should include conduit financing will generally be a two- procedures for prepayments. step process: first asking the Council if they are interested in considering the request, and 10. Foreclosure Covenants. In managing establishing the ground rules for evaluating administrative costs, the City will establish it; and then returning with the results of this minimum delinquency amounts per owner, evaluation, and recommending approval of and for the district as a whole, on a case-by- appropriate financing documents if case basis before initiating foreclosure warranted. This two-step approach ensures proceedings. that the issues are clear for both the City and applicant, and that key policy questions are 11. Disclosure to Bondholders. In general, answered. each property owner who accounts for more than 10% of the annual debt service or 3. The workscope necessary to address these bonded indebtedness must provide ongoing issues will vary from request to request, and disclosure information annually as described will have to be determined on a case-by- under SEC Rule 15(c)-12. case basis. Additionally, the City should generally be fully reimbursed for our costs 12. Disclosure to Prospective Purchasers. Full in evaluating the request; however, this disclosure about outstanding balances and should also be determined on a case-by-case annual payments should be made by the basis. seller to prospective buyers at the time that the buyer bids on the property. It should not HUMAN RESOURCE MANAGEMENT be deferred to after the buyer has made the decision to purchase. When appropriate, applicants or property owners may be A. Regular Staffing required to provide the City with a disclosure plan. 1. The budget will fully appropriate the resources needed for authorized regular B-20 1-4 Attachment3 JONES HALL A PROFESSIONAL LAW CORPORATION ATTORNTEN-S AT LAW CHARLES F.ADAMS 660 CALD°ORNIA STREET STEPHEN R.CASALEGGIO EIGHTEENTH FLOOR THOMAS A DOWNEY SAN FRANCISCO,CA 94.108 DAVID T FNMA SCOTT R.FERGUSON October 1,2001 TELEPHONE ANDREW C.HALL.JR, (413)391-5780 COURTNEY L JONES F CS1141i E WILLIAM J.HADI (415)391-5784 WU I IAM R.MADISON STEPHEN G.MELIKIAN HOMEPAGE hup://w .ihhw.com DAVID J.OSTEH e-mail:cadamsajhhw.com DAVID A.WALTON AEh-NETH L JONES,OF GOL'NSII. 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 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 19-unit residential rental housing project for seniors to be located at 433 Pacific Street (the "Project"). The Project will be constructed by the San Luis Obispo Non-Profit Housing Corporation (the "Corporation"). 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. In particular, we have been assured by Mr. Thimmig that 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, we concur with Mr. Thimmig's statements (in his letter to you of February 14, 2001) that the City will have no legal, financial or moral obligation or responsibility with respect to the financing of the Project. We have suggested that the Resolution include a recital to this effect, so that the matter is part of the public record,and Mr.Thimmig has agreed to this suggestion. Please let me know if we can be of any further help in this matter. Ns .A yos, /-7 Attachment. . RESOLUTION NO. (2001 SERIES) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING THE BORROWING OF FUNDS 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 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 make loans for housing purposes specified in the Law; and WHEREAS, the San Luis Obispo Non-Profit Hosing Corporation, a California nonprofit public benefit corporation (the "Corporation") has requested that the Authority use its powers under the Law to borrow monies (the "Housing Authority Loan") for the purpose of having the Authority make a loan (the "Project Loan") to a 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 19 unit residential rental housing facility for seniors to be located at 433 Pacific Street 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 instrument (the "Bond") evidencing the Housing Authority Loan will be considered to be a "qualified exempt facility bond" 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 borrowing consisting of the Housing Authority Loan evidenced by the Bond 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 Housing Authority Loan and the Bond; 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 Bond 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 City 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, operation and financing of the Project and the Authority's borrowing consisting of the Housing Authority Loan evidenced by the Bond, and the Authority's loan of the proceeds thereof to the Borrower; and /-p 1 Resolution No. (2001 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 Loan and the Bond 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 Housing Authority Loan and the issuance of the Bond by the Authority under the Law and the Code for approximately two million dollars ($2,000,000) 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 October 16, 2001. Mayor Allen Settle ATTEST: Lee Price, City Clerk APPROVED AS TO FORM: J G. orglen, ity Attorney �-9