HomeMy WebLinkAbout10/16/2001, PH 1 - HOUSING AUTHORITY REQUEST FOR CONDUIT FINANCING n
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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
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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,
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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
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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
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