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HomeMy WebLinkAbout2016-05-04 PACKET 09.B. Cottage J Grove ��er� Pride and Qro�P�rity Me�t C i ty C o u n c i I PUBLIc HEa�vGs Acfion Request Form 9.8. Meeting Date 5/4/2016 Department Finance Title of Request City of Cottage Grove Multifamily Housing Revenue Note Series 2016 Staff Recommendation Adopt Resolution 2016-096 regarding issuance of Revenue Obligations to finance a Multifamily Housing Development in the City and related actions ATTACH MENTS: Description Type Upload Date Memo 4/28/16 Cover Memo 4/27/2016 Housing program Backup Material 4/27/2016 Resolution Housing Revenue Obligations Resolution 4/27/2016 Cottage � Grove �here Pride and PCOSPerity Meet To: Mayor and City Council Members Charlene Stevens, City Administrator From: Robin Roland, Finance Director Date: April 28, 2016 Subject: Public Hearing: City of Cottage Grove, Multifamily Housing Revenue Note (Cottage Grove Senior Apartments Project), Series 2016 INTRODUCTION Under State Statute Chapter 262C, the City of Cottage Grove has the authority to provide for the issuance of revenue bonds to provide funds to finance multifamily housing developments located within the City. DISCUSSION Cottage Grove Leased Housing Associates I, LLLP, has proposed that the City issue its revenue obligations, in one or more series, as taxable or tax-exempt obligations in an estimated aggregate principal amount not to exceed $25,000,000, for the benefit of the Borrower for the purposes of financing the acquisition, construction, and equipping of an approximately 184-unit senior housing facility and functionally related facilities with underground parkin�g to be located on East Point Douglas Road South near the intersection of Highway 61 and 80t Street. The Project will be owned and operated by the Borrower. As a condition to the issuance of the debt, the City must adopt a housing program providing the information required by Section 462C.03, subdivision 1 a. A copy of the housing program is included in this packet. The City Council called for this public hearing at their meeting April 6, 2016 and published the required appropriate notice. The City Council will take testimony regarding the housing program and the request to grant preliminary approval to the issuance of the Notes to finance the multifamily rental housing development referred to in the Housing Program. Preliminary approval will authorize the submission of an application to the office of Minnesota Management & Budget for an allocation of bonding authority with respect to the Notes to finance the Project. ACTION REQUESTED Adopt the attached resolution approving the proposed housing program and granting preliminary approval to the issuance of the Notes subject to the receipt of allocation by the bonding authority. Council will consider final approval of bond documents and financing considerations after said bonding authority at the State is allocated. CITY OF COTTAGE GROVE,MINNESOTA HOUSING PROGRAM FOR A MULTIFAMILY HOUSING DEVELOPMENT Pursuant to Minnesota Statutes, Chapter 462C, as amended (the "Housing Act"), the City of Cottage Grove, Minnesota (the "City") is authorized to develop and administer programs to finance the acquisition, construction, and equipping of multifamily senior housing developments under the circumstances and within the limitations set forth in the Housing Act. Section 462C.07 of the Housing Act provides that such programs for multifamily housing developments may be financed by revenue bonds issued by the City. The City has received a proposal from Cottage Grove Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership (the `Borrower"), that the City approve a program providing for the acquisition, construction and equipping of an approximately 184-unit senior housing facility and functionally related facilities with underground parking to be located on East Point Douglas Road South near the intersection of Highway 61 and 80t'' Street in the City (the "Project"). The acquisition, construction, and equipping of the Project is to be funded in part through the issuance by the City of one or more series of revenues bonds, to be issued as taxable or tax-exempt obligations, in the approximate aggregate principal amount of $25,000,000, the proceeds of which will be loaned to the Borrower. It is expected that a portion of the dwelling units of the Project will be subject to occupancy limits imposed by federal income tax law and regulations such that only persons and families within designated income limits will be permitted to occupy such units. The City, in establishing this multifamily housing program (the "Program"), has considered the information contained in the City's comprehensive plan. The Project will be acquired and constructed in accordance with the requirements of Section 462C.05, subdivisions 1 and 2 of the Housing Act. Section A. Definitions. The following terms used in this Program shall have the following meanings, respectively: `Bonds" shall mean one or more series of conduit revenue bonds or other obligations to be issued by the City in the principal amount of appro�mately$25,000,000 to finance the Project. `Borrower" shall mean Cottage Grove Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership, or another affiliated entity to be formed. "City" shall mean the City of Cottage Grove, Minnesota. "Code" shall mean the Internal Revenue Code of 1986,as amended, and the Treasury Regulations promulgated thereunder. "Housing Act" shall mean Minnesota Statutes, Chapter 462C, as currently in effect and as the same may be from time to time amended. "Housing Unit" shall mean any one of the dwelling units financed with the Bonds,each located in the Project, occupied by one person or family, and containing complete living facilities. "Land" shall mean the real property upon which the Project is situated. 478130v1 JAE CT160-166 "Program" shall mean this housing program for the financing of the Project pursuant to the Housing Act. "Project" shall mean the multifamily senior housing facility comprised of approximately 184 units and functionally related facilities with underground parking to be located on East Point Douglas Road South near the intersection of Highway 61 and 80t''Street in the City. "Qualified Project Period" shall mean the period beginning on the first day on which ten percent (10%) of the Housing Units are occupied following the acquisition and construction of the Project with the proceeds of the Bonds and shall end on the latest of the following. (i) the date which is fifteen (15) years after the date on which at least fifty percent (50%) of the Housing Units in the Project are first occupied; or (ii) the first day on which no principal of the Bonds is outstanding and no other tax-exempt private activity bond issued with respect to the Project is outstanding; or (iii) the termination date of any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937, including the initial term and any renewal thereof. Section B. Pro�ram for Financin�the Project. It is proposed that the City establish this Program to provide financing for the acquisition, construction, and equipping of the Project at a cost and upon such other terms and conditions as are set forth herein and as may be agreed upon in writing between the City, the initial purchaser(s) of the Bonds, and the Borrower. The City expects to issue the Bonds as soon as the terms of the Bonds have been agreed upon by the City, the Borrower, and the initial purchaser(s) of the Bonds. The proceeds of the Bonds will be loaned by the City to the Borrower to finance the acquisition, construction, and equipping of the Project, to fund required reserves, to pay interest on the Bonds during the construction of the Project, and to pay a portion of the costs of issuing the Bonds. It is anticipated that the Bonds will have a maturity of appro�mately forty (40) years or less, will be issued in one or more series, and bear interest at a variable rate or at fixed rates consistent with the market at the time of issuance. The City will hire no additional staff for the administration of the Program. Insofar as the City will be contracting with underwriters, purchasers, legal counsel, bond counsel, trustees, fiscal agents, and others, all of whom will be reimbursed from bond proceeds and revenues generated by the Program, no administrative costs will be paid from the City's budget with respect to this Program. The Bonds will not be general obligations of the City but will be issued as conduit revenue bonds to be paid only from loan repayments by the Borrower and revenues generated by the property pledged to the payment thereof, which may include additional security such as additional collateral,insurance, or a letter of credit. Section C. Standards and Requirements Relatin� to the Financin� of the Project Pursuant to the Pro._�. The following standards and requirements shall apply with respect to the operation of the Proj ect by the Borrower pursuant to this Program: (1) Substantially all of the proceeds of the sale of the Bonds will be applied to the acquisition, construction, and equipping of the Project, the payment of a portion of the costs of issuing the Bonds, the payment of interest on the Bonds during the construction of the Project, and the funding of any required reserves. The proceeds of the Bonds will be made available to the Borrower pursuant to the terms of one or more loan agreements (or other revenue agreements) which will include certain covenants to be made by the Borrower to the City regarding the use of proceeds and the character and use ofthe Project. 478130v1 JAE CT160-166 2 (2) The Project qualifies as a "multifamily housing development," within the meaning of the Housing Act, since it is comprised of one or more buildings located on contiguous parcels,the Housing Units of which are rented to persons or families for use as residences. (3) The Borrower, and any subsequent owner ofthe Project,will not arbitrarily reject an application from a proposed tenant because of race, color, creed, religion, national origin, sex, marital status, or status with regard to public assistance or disability. (4) At least forty percent (40%) of the Housing Units will be held for occupancy by families or individuals with gross income not in excess of si�ty percent (60%) of inedian family income, adjusted for family size. This set aside will satisfy the low-income occupancy requirements of Section 462C.05, subdivision 2 of the Housing Act. (5) From the commencement of the Qualified Project Period, all Housing Units shall be occupied by at least one person who is at least 55 years of age at the time of initial occupancy. Section D. Evidence of Compliance. The City may require from the Borrower at or before the issuance of the Bonds evidence satisfactory to the City of compliance with the standards and requirements for the financing established by the City, as set forth herein; and in connection therewith, the City or its representatives may inspect the relevant books and records of the Borrower in order to confirm such ability, intention and compliance. In addition, the City may periodically require certification from either the Borrower or such other person deemed necessary concerning compliance with various aspects of this Program. Section E. Issuance of Bonds. To finance the Program, the City will by resolution authorize, issue, and sell the Bonds in an aggregate principal amount of approximately $25,000,000. The Bonds will be issued pursuant to Section 462C.07, subdivision 1 of the Housing Act, and will be payable primarily from the revenues of the Project. If the costs of the Project, including capitalized interest, costs of issuance of the Bonds, and required reserve funds, exceed or are expected to exceed the principal amount of the Bonds,the Borrower will contribute to the Project the difference between the total costs of the Project and the principal amount of the Bonds available to finance the Project. The costs of the Project may change between the date of preparation of this Program and the date of issuance of the Bonds. The Bonds are expected to be issued in spring or summer of 2016. Section F. Severabilitv. The provisions of this Program are severable and if any of its provisions, sentences, clauses, or paragraphs shall be held unconstitutional, contrary to statute, exceeding the authority of the City, or otherwise illegal or inoperative by any court of competent jurisdiction, the decision of such court shall not affect or impair any of the remaining provisions. Section G. Amendment. The City shall not amend this Program, while Bonds authorized hereby are outstanding,to the detriment of the holders of such Bonds. Section H. State Ceilin�. (1) An application for an allocation of a portion of the annual volume cap for private activity bonds to be issued to provide "qualified residential rental projects," within the meaning of Sections 142(a)(7) and 142(d) of the Internal Revenue Code of 1986, as amended (the "Code"),will be made to the office of Minnesota Management&Budget,pursuant to Section 146 of the Code and Minnesota Statutes, Chapter 474A, as amended(the "Allocation Act"). 478130v1 JAE CT160-166 3 (2) Pursuant to the terms and requirements of the Allocation Act: (i)the Proj ect will meet the requirements of Section 142(d) of the Code regarding the incomes of the occupants of the Proj ect; and (ii)the maximum rent for at least twenty percent(20%) of the Housing Units will not exceed the area fair market rent or exception fair market rents for e�sting housing, if applicable, as established by the United States Department of Housing and Urban Development. (3) Prior to the issuance of the Bonds, the Borrower will enter into an agreement with the City that specifies the maximum rental rates of the rent-restricted units in the Project and the income levels of the residents of the Project occupying the income-restricted Housing Units. Such rental rates and income levels must be within the limitations established in accordance with the preceding paragraph (2). The Borrower will be required to annually certify to the City over the term of the agreement that the rental rates for the rent-restricted units are within the limitations under the preceding paragraph (2). The City may request individual certification of the income of residents of the income-restricted units of the Project. The office of Minnesota Management & Budget may request from the City a copy of the annual certification prepared by the Borrower. The office of Minnesota Management & Budget may require the City to request individual certification of all residents of the income-restricted units of the Project. (4) The City will monitor Project compliance with the rental rate and income level requirements established under the preceding paragraph (2). The City may issue an order of noncompliance if the Project is found by the City to be out of compliance with the rental-rate or income-level requirements established under the preceding paragraph (2). The Borrower shall pay a penalty to the City equal to one-half of one percent (0.5%) of the total amount of tax- exempt Bonds issued under the Allocation Act for the Project if the City issues an order of noncompliance. For each additional year the Project is out of compliance, the annual penalty must be increased by one-half of one percent(0.5%)of the principal amount of tax-exempt Bonds issued under the Housing Act for the Project. The City may waive insubstantial violations. (5) The City will enter into an agreement with the Borrower with a term of at least fifteen (15) years in order to ensure that the Project satisfies the requirements of this Program, Section 142(d) of the Code,the Housing Act,and the Allocation Act. Section L Citv's Declaration of Restrictive Covenants. In addition to the Regulatory Agreement, the City will also enter into a Declaration of Restrictive Covenants with the Borrower which will have a term of thirty (30) years. The Declaration of Restrictive Covenant requires that at least forty percent (40%) of the Housing Units within the Project be occupied or held vacant and available for occupancy by Qualifying Tenants. Qualifying Tenants means those persons and families who are determined from time to time by the Developer to have combined adjusted income that does not exceed sixty percent (60%) of the Minneapolis-St. Paul metropolitan statistical area median income for the applicable calendar year. In addition, the Declaration of Restrictive Covenants requires that the maximum gross rent for all Housing Units occupied by Qualifying Tenants must not exceed thirty percent (30%) of the imputed income limitation applicable to the Housing Unit, all in accordance with Section 42 of the Code. 478130v1 JAE CT160-166 4 CITY OF COTTAGE GROVE,MINNESOTA RESOLUTION NO. RESOLUTION REGARDING THE ISSUANCE OF REVENUE OBLIGATIONS TO FINANCE A MULTIFAMILY HOUSING DEVELOPMENT IN THE CITY AND TAKING ACTIONS RELATED THERETO BE TT RESOLVED by the City Council ofthe City of Cottage Grove, Minnesota(the "City"), as follows: Section 1. Recitals. 1.01. Pursuant to Minnesota Statutes, Chapter 462C, as amended (the "Act"), the City is authorized to carry out the public purposes described in the Act by providing for the issuance of revenue bonds to provide funds to finance multifamily housing developments located within the City. 1.02. Cottage Grove Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership, or any of its affiliates (collectively, the `Borrower"), has proposed that the City issue its revenue obligations, in one or more series, as taxable or tax-exempt obligations (the "Notes"), in an estimated aggregate principal amount not to exceed $25,000,000, for the benefit of the Borrower for the purposes of(i) financing the acquisition, construction, and equipping of an approximately 184-unit senior housing facility and functionally related facilities with underground parking to be located on East Point Douglas Road South near the intersection of Highway 61 and 80t'' Street in the City (the "Project"); (ii) funding one or more reserve funds to secure the timely payment of the Notes, if necessary; (iii) financing capitalized interest during the construction of the Project, if necessary; and (iv) paying the costs of issuance of the Notes. The Project will be owned and operated by the Borrower. 1.03. As a condition to the issuance of the Notes, the City must adopt a housing program providing the information required by Section 462C.03, subdivision la of the Act (the "Housing Program"). The City Council must also grant preliminary approval to the issuance of the Notes to finance the multifamily rental housing development referred to in the Housing Program and authorize the submission of an application to the office of Minnesota Management & Budget for an allocation of bonding authority with respect to the Notes to finance the Project. 1.04. Under Section 147(fl of the Internal Revenue Code of 1986, as amended (the "Code"), prior to the issuance of the Notes,the City Council must conduct a public hearing after one publication of notice in a newspaper circulating generally in the City at least fourteen (14) days before the hearing. Under Section 462C.04, subdivision 2 of the Act, a public hearing must be held on the housing program after one publication of notice in a newspaper circulating generally in the City at least fifteen (15) days before the hearing. 1.05. Under Section 146 of the Code, the Notes must receive an allocation of the bonding authority of the State of Minnesota. An application for such an allocation must be made pursuant to the requirements of Minnesota Statutes, Chapter 474A,as amended (the "Allocation Act"). 1.06. On the date hereof, the City Council conducted a public hearing on the Project and the issuance of the Notes. Notice of the hearing (the "Public Notice") was published as required by Section 462C.04, subdivision 2 of the Act and Section 147(fl of the Code. The Public Notice provided a general, functional description of the Project, as well as the maximum aggregate principal amount of the obligations to be issued for the purposes referenced therein, the identity of the initial owner, operator, or 4�s�9��i JaE cTi6o-i66 manager of the Project, and the location of the Project. The Public Notice was published in the South Washington County Bulletin, the official newspaper of and a newspaper circulating generally in the City, on April 13, 2016, a date at least fifteen (15) days before a meeting of the City Council on May 4, 2016. At the public hearing, a reasonable opportunity was provided for interested individuals to express their views,both orally and in writing, on the Project and the proposed issuance of the Notes. Section 2. Preliminary Findin�s. The City Council hereby reaffirms its preliminary findings made in the resolution adopted by the City Council on April 6, 2016. The Notes will be special, limited obligations of the City payable solely from the revenues pledged to the payment thereof, will not be a general or moral obligation of the City, and will not be secured by or payable from revenues derived from any exercise of the taxing powers of the City. Section 3. Housin._�._�. The Housing Program, in the form substantially on file with the City, is hereby approved. Section 4. Preliminarv A�roval. The City Council hereby provides preliminary approval to the issuance of the Notes in the estimated principal amount not to exceed $25,000,000 to finance all or a portion of the costs of the Project pursuant to the Housing Program of the City, subject to: (i) receipt of allocation of bonding authority from the office of Minnesota Management & Budget; (ii)final approval following the preparation of bond documents; and (iII) final determination by the City Council that the financing of the Project and the issuance of the Notes are in the best interests of the City. Section 5. Costs. The Borrower will pay the administrative fees of the City and pay, or, upon demand, reimburse the City for payment of, any and all costs incurred by the City in connection with the Project and the issuance of the Notes,whether or not the Notes are issued. Section 6. Commitment Conditional. The adoption of this resolution does not constitute a guarantee or a firm commitment that the City will issue the Notes as requested by the Borrower. If, as a result of information made available to or obtained by the City during its review of the Project, it appears that the Project or the issuance of Notes to finance the costs thereof is not in the public interest or is inconsistent with the purposes of the Act, the City reserves the right to decline to give final approval to the issuance of the Notes. The City also retains the right, in its sole discretion, to withdraw from participation and accordingly not issue the Notes should the City Council, at any time prior to the issuance thereof, determine that it is in the best interests of the City not to issue the Notes or should the parties to the transaction be unable to reach agreement as to the terms and conditions of any of the documents for the transaction. Section 7. Effective Date. This resolution shall be in full force and effect from and after its passage. Approved by the City Council of the City of Cottage Grove, Minnesota this 4t''day of May, 2016. Mayor ATTEST: City Clerk 4�s�9��i JaE cTi6o-i66 2