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99-1072�RtG1I�AL Council File # � q" �� a Green Sheet # � �� RESOLUTION SAINT PAUL, MINNESOTA Presented By Referzed To Committee: Date 1 2 3 4 5 6 � 10 11 12 13 14 RECITING A PROPOSAL FOR FINANCING A MULTI-FAMILY RENTAL HOUSING DEVELOPMENT PROJECT, APPROVING A HOUSING PROGRAM THEREFOR AND AUTHORIZING THE HOUSING AND REDEVELOPMENT AUTHORITY TO EXERCISE THE POWERS GRANTED IN MINNESOTA STATUTES, SECTIONS 462C.01 TO 462C.08 (a) WHEREAS, Minnesota Statutes, Chapter 462C (the "Act"), confers upon cities, or housing and redevelopment authorities authorized by ordinance to exercise on behalf of a city the powers conferred by the Act, the power to issue revenue bonds to finance a program for the purposes of planning, administering making or purchasin multifamily housing city; and g loans with respect to one or more developments within the boundaries of the 15 (b) WHEREAS, on July 14, 1998, the Housing and 16 Redevelopment Authority of the City of Saint Paul (the "HRA") 17 issued its Multifamily Housing Revenue Bonds, Series 1998A and 18 Series 1998B (Ilampden Square Project) in the aggregate principal 19 amount of $2,925,000 (collective, the "Series 1998 Bonds") to 20 finance the acquisition and rehabilitation of an existing low and 21 moderate income housing project located at 2333 Long Avenue by 22 Bool Partners Limited Partnership, a Minnesota limited 23 partnership (the '�Company°) (the "Project"); and 24 (c; WHEREAS, the Company has requested that the HRA issue 25 its revenue bonds to provide funds for a current refunding o£ the 26 Series 1998 Bonds, and to issue additional tax exempt revenue 27 bonds in the maximum principal amount of $900,000 (the 28 "Additional Tax Exempt Bonds") and taxable revenue bonds in the 29 maximum principal amount of $500,000 (the "Additional Taxable 30 Bonds") to provide additional funds to rehabilitate the Project; 31 and 32 (d) WHEREAS, the Series 1998 Bonds, the Additional Tax 33 Exempt Bonds and the Additional Taxable Bonds are hereinafter 34 collectively referred to as the "Bonds"; and �� 1093817.1 qq-to��-- 1 (e) WHEREAS, the proposal for the financing of the Project 2 by the issuance of the Bonds is described and set forth in a 3 Aousing Program (the "Housing Program") presented to the City 4 Council on this date; and 5 (f) WHEREAS, the City and the HRA previously allocated 6 $2,925,000 of the City's 1997 entitlement bonding authority, 7 carried forward to 1998, to the Project and the Series 1998 8 Bonds, and it is necessary that the Additional Tax Exempt Bonds 9 receive an allocation of the City's 1999 entitlement bonding 10 authority; and 11 (g) WHEREAS, the Company's proposal calls for the IIRA to 12 loan the proceeds realized upon the sale of the Bonds to the 13 Company pursuant to a revenue agreement wherein the Company will 14 be obligated to make payments at the times and in the amounts 15 sufficient to provide for the prompt payment of principal of, 16 premium, if any, and interest on the Bonds and all costs and 17 expenses of the HRA, incident to the issuance and sale of the 18 Bonds; and 19 (h) WHEREAS, the City desires to encourage the development 20 of housing facilities designed for occupancy primarily by persons 21 of low and moderate income, and the Project will assist the City 22 in achieving these objectives; and 23 (i) WHEREAS, a public hearing on the Housing Program and 24 Project was held on November 3, 1999, following duly published 25 notice, at which time all persons that desired to speak were 26 heard: 27 NOW, THEREFORE, BE IT RESOLVED by the City Council of the 28 City of Saint Paul, Minnesota, as follows: 29 1. Housina Program; Authorization of HRA. The City hereby 30 approves the Housing Program for the financing of the Project by 31 the issuance of the Bonds and, pursuant to Section 72 of the 32 Saint Paul Administrative Code, authorizes the HRA to exercise 33 the powers granted in Minnesota Statutes, Sections 462C.01 to 34 462C.08. 35 2. Bondincx Authority. The City hereby allocates $900,000 36 of its 1999 entitlement allocation under Minnesota Statutes, 37 Chapter 474A, of volume limit for the issuance of Additional Tax- 38 Exempt Bonds to be issued by the HRA. The foregoing allocation 39 of the City's entitlement and entitlement-transfer bonding 40 authority is an aspect of the City's delegation of powers to the 41 HRA under the Act and under this resolution. 42 3. Scope o£ Approval. Nothing in this resolution shall be 43 construed to require the City or HRA to approve any element of 44 the Project or the issuance of the Bonds, nor shall this 1093817.1 2 qg-�o�1a- 5 6 7 8 9 l0 ll 12 13 14 15 16 17 18 19 20 21 22 reaolution be conetrued ae vesting in the Company any cauee o£ action againet the City or HRA arieing from any failure or refueal by the City or HRA to approve the Project or iseue the Bonds. 4. �gP��ai L•'�m�ted Obl�ga 'one. Nothing in thie reeolution or the documente prepared pursuant hereto ehall authorize the expenditure of any municipal funde on the Houaing Program or Bonde other than the revenues derived from the Project or otherwise granted to the City or HRA for this purpose. The Bonda ahall not constitute a charge, lien or encumbrance, legal or equitable, upon any property or funda of the C1ty or HRA except the revenue and proceeds pledged to the payment thereof, nor ahall the City or HRA be aubject to any direct liability thereon. The holdere of the Bonde ehall never have the right to compel any exerciee of the taxing power of the City or ARA to pay the outetanding principal on the Honde or the interest thereon, or to enforce paymente thereon againet any property of the City or HRA. The Bonda shall recite in eubetance that the Bonde, including the interest thereon, are payable solely from the revenuea and proceede pledged to Che payment thereo£. The 8onde ehall not conatitute a general obligation of the City or HRA within the meaning of any conetitutional or statuCory provieion. by �apsrtmm�i ot: . �r - By: � Fortn Adopted by Council: Oate �� Adaptlon Certlflad by Councll Secretsry By: A4P By: 3o93i1?.1 � GREEN SHEET �,. � /�/�/9� l��t b (�`c. d�eari�� TOTAL # OF SIGNATURE �� l�i— l0`19- No102962 ��. ❑� �,,.,,�„ � �o u °��tQ�«� ❑.�,�,� ❑.,�.t,�.a �-�� ❑ (CL1P ALL LOCATiONS FOR SIGNATURE� :IION RC-0UESl� S f� �"� �' � L� �� LQ2LC�.C�� l' n'✓*^ v�� r GF�.� G`4V` / ��p , � ., �� /� P T /,� rr C'L °�v`.vJ%�'C� /`//'cil�[y. !�h U�✓6'�Pi� �1 / S S (1 -2 �� 7I �c•�•_ `IF �P�i�rn,�,�.�t �,�ds�� s� vuv �--- 7- ��/ /'�ve�.,u,,. �s �. /a�� .�� , a PLANNING COMMISSION CIB COMMITfEE C � S RVI�E CAMMISSION � ��a�� YES NO Vias th"n peieoNfirm euer been a dlY emPlaYee9 v�s � Ooec Mis P��rtn P� a slall not norma�NP� �Y �Y curtent ciy' employee� YES NO k tlris Pe��rtn a tarpe4etl veMaR YES NO . INITIATING PROBLEM ISSUE,�� /� (Wtw. W Wfien�. WbY) � _�/ /� y_ f� �i0 f" /� / Y7 dLC-"'y / /� �(� % � r �� "( r li.� riu..- w`-C f�. � Y"� r�� '`�� f�' � � '�� S /%'.r,�,,�r��. � /�r�, a�- � ee �� a-�-- �Gaz.��,y,.' �`�9 7 � �:` ��-, � � '% VANTAGES IP APPR�VED /,� n / (� Y/✓'^' � L/ � j�/ . . ... . ,. ..,. �a �/��1� fI/ � . {� &FM�.. 6��e��' � c Y i- �✓ �/l!! li u� �T" P� � �iu�P�v� G�v2 ��er ,� �� ' .€. `a��ma�i r�y � �" � SOURCE INFORMAliON (IXPWN) CMTrttEVQlUE BUDGE7ED (CIRCLE ON� ACTNITY NUTABER VES NO \ � °�,g - 1 o'i,s.- MULTI-FAMILY RENTAL HOUSING PROGRAM OF THE CITY OF SAINT PAUL, MINNESOTA, AND THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF SAINT PAUL, MINNESOTA November 3, 1999 Proposal: Authority. The Housing and Redevelopment Authority o£ the City of Saint Paul, Minnesota (the "HRA��), proposes to issue revenue bonds and to take other actions in furtherance of the objective of financing the acquisition and rehabilitation of the multi-family rental housing project described herein (this "Program") pursuant to applicable authority conferred upon the HRA by the laws of the State of Minnesota, including without limitation Minnesota Statutes, Chapters 469 and 462C, as the same may be amended from time to time (collectively, the "Act"). Pur,poses. In creating this Program, the City of Saint Paul, Minnesota (the "City"�, and HRA are acting in furtherance of their findings that the preservation of the quality of life in the City is in part dependent upon the maintenance and provision of adequate, decent, safe, sanitary, and affordable housing stock; that accomplishing the goals of this Program is a public purpose and will benefit the residents of the City; that the need exists within the City to provide in a timely fashion additional affordable rental housing to and for the benefit of persons of low and moderate income and their families residing and expected to reside within the City; that there exist or are expected to exist persons and families within the City who are and will be able to benefit from and are in need of the Program; that the Program is necessary in view of the limited resources that may be available to such persons relative to the expenses involved in accomplishing the type of objectives outlined in this Program in the absence of one or more of the forms of assistance described herein or otherwise available pursuant to the Act; and that the City and HRA hereby find that such forms of assistance are often necessary for the benefit of such persons, families, and goals and that, furthermore, the successful implementation of the objectives of the kind described in this Program has been found to provide impetus for the development of other housing in the City, as well as the general development of the City, by other persons who are not the beneficiaries of such governmentally sponsored or assisted activities. Rental Housin�Purposes. More particularly, the City and HRA find that there exists a need for multi-family rental housing, both to provide rental housing for persons of low and moderate income and to assist in freeing up existing owner- occupied housing for purchase by other qualifying individuals and families, which need is not being filled by private enterprise 1091477.1 9.�, ��b`� �" alone due to a variety of factors, including that the cost of new construction of multi-family rental units may in many cases prove economically unfeasible, given the high costs of construction and prevailing area rental levels, and that therefore appropriate levels of public assistance may be helpful and necessary in bridging that gap. General Descrigtion of the Procrram. This Program consists of the financing of the acquisition and rehabilitation of a building (Hampden Square) currently containing a total of 86 multi-family rental housing units (the "Project"). The initial owner of the Project pursuant to the financing will be Bool Partners Limited Partnership, a Minnesota limited partnership. Location. This Program is limited to the Project. The Project is located at 2333 Long Avenue in Saint Paul, Minnesota. Revenue Bonds. The amount of revenue bonds required to finance this Program is approximately $4,325,000. The proceeds will finance the acquisition and rehabilitation of the Project and pay costs of issuing the bonds, and may be used to establish a reserve. Housing Plan. The City and HRA hereby adopt the Comprehensive Housing Plan of the City of Saint Paul as the housing plan relating to the Project. Monitorincr. The Program will be monitored by the HRA. The HRA expects to enter into or continue suitable agreements with necessary parties to ensure consistent compliance with the objectives of this Program, as well as with the requirements of applicable law. Meeting Needs; Methods. The Program will meet the need for rental housing for persons and families of low and moderate incomes by providing units at an affordable rent. The City and HRA believe that this Program will help meet the identified needs under this Program. The specific methods anticipated to be used include the issuance of revenue bonds under the Act to provide feasible financing for various aspects of the Program so undertaken. The HRA will monitor the implementation of this Program pursuant to its loan agreement for the Project. Authorizatiion. The Program is undertaken pursuant to Minnesota Statutes, 5ection 462C.05, Subdivision 2, for units affordable to persons and families of low and moderate income. Limits on Gross Income. The gross income of occupants will be limited in accordance with the requirements of Minnesota Statutes, Chapter 462C, and with the requirements relating to tax-exempt bonds for qualified residential rental projects. iosia��.i 2 ag-1o'l�- Adopted and approved on November 3, 1999, by the City Council of the City of Saint Paul, Minnesota, and on by the Board of Commissioners of The Housing and Redevelopment Authority of the City of Saint Paul, Minnesota. 1091877.1 CITY COUNCIL OF THE CITY OF SAINT PAUL, MINNESOTA REPORT TO THE CITY COLTNCTI. DATE: November 3, 1999 REGARDING PUBLIC IIEARING: Resolution Reciting A Proposal for Financing a Multifamily Rental Housing Development Project, Approving a Housing Program Therefor and Authorizing the Housing and Redevelopment Authority of the City of Saint Paul to Exercise the Powers Granted in Minnesota Statutes, Sections 462C.01 to 462C.08 �,°1-��0`l�- PURPOSE The Housing and Redevelopment Authority of the City of Saint Paul (HRA) has received an application from the Boisclair Corporation for an additional allocation of up to $900,000 in Tas Exempt Revenue Bonds and up to $500,000 in Ta7cable Revenue Bonds together be used, with a previously approved carry over in 1997 tax exempt revenue bond authority of $2,925,000, toward the acquisition and rehabilitation costs of the Hampden Square Apartments located at 2333 Long Avenue. The purpose of this report is to request the City Council to consider adopting the attached preluninary (inducement) resolution which would approve the following: Authorize the Executive Director of the HRA to enter into a Memorandum of Understanding (MOU) with Mr. Robert Boisclair, Boisclair Corporation, to work towards possible issuance of the Bonds. The MOU also stipulates the terms and conditions for issuance of the Bonds should the HRA decide to issue the Bonds; and 2. Authorize the HRA to issue up to $900,000 of t� exempt multifamily rental revenue bonds far the Froject and up to $500,000 in taxable revenue bonds to be used with a refunding of the $2,925,000 in 1997 tax exempt bond autharity; and 3. Approve a Housing Program, a copy of which is attached for financing the project prepared in accordance with the provisions of Minnesota Statutes, Section 462C.03; and 4. Retain Briggs and Morgan as bond counsel and Piper Jaffray, Inc. as investment banker for said Bonds and authorize them to assist in the preparauon and review of necessary documents relating to the Project and Housing Program and consult with the HRA, City Attorney, Owner, and purchasers of the proposed Bonds. Approval of the inducement resolution and execution of the Memorandum of Understanding does not require or obligate the City or I�RA to issue bonds or cause any action against the City or HRA arising from any failure or refusal by the City or HRA to approve the Project or issuance of the Bonds. With respect to the multifamily rental housing bonds, Section 72.04 of Chapter 72 of the City's q4� to'� �-- Administrative Code provides that the HRA be designated to exercise on behalf of the City the powers conferred by the Minnesota Statutes 462C (housing programs and revenue bonds) but only unless dixected and authorized to do so by resolution adopted by the City Council. Thus the reason, this proposal is initiated before the City Council rather than the HRA. The Bonds are not ¢enerai obli�ation bonds, but are special. limited obliearions of the Housing and Redevelopment Authoritv of the City of Saint Paul. Minnesota and shall never consritute an indebtedness, liabilitv, general or moral obligation, or pledge of the faith or credit or taxin� ower of the I3RA. Cit�of Saint Paul, the State of Minnesota, or any aeency or political subdivision thereof, within the meanine of anv constitutional, statuary or charter provision, nor be a charge aeainst their res�ective eeneral assets, credit or taxing owers. BACKGROiJND The HRA approved on July 8, 1998, a resolution authorizing the issuance of $2,925,000 of tax exempt multi-family revenue bonds and the allocation of up to $122,090 in federal low income housing tax credits for this project. The bonds were part of the HRA's annual ta7t exempt authoriry for 1997 and were carried over to 1998 for this project. The carry over of the bonds required that a bond closing occur by July 15, 1998, or the bonds would be lost. The tax credits were avaIlable to tax exempt projects and are not derived from the annual allocation available to the HRA. After the bond closing, the bonds were parked until a purchase of the project would be finalized. However, the State Legislature approved in the eazly part of 1998 a new law, Minn. Stat. Section 471.9997, which required that an owner of a federally subsidized project that prepays its mortgage or terminates a federal subsidy, a tenant nnpact statement must be given to the local governing body 12 months before the termination is to occur. The tenant impact statement must identify the number of units that will no longer be subject to rent restrictions imposed by the federal program, estunated rents to be charged in comparison to rents under the federal program, and actions the owner will take to assist displaced tenants in obtaining other housing. Copies of the statement aze to be provided to the residents of the project, the MHFA, and the Metropolitan CounciL This requirement became effective August 1, 1998, prior to the sale of the project to Boisclair. The City Attorney's Office determined that the bonds could not be taken out of the parked position until the notice period terminated (12 months) or the seller obtained a Declazatory Judgement from the Court that the Hampden Square Project was exempt from the state law. PROPOSAL The Boisclair proposal is similaz to a HUD approved 1997 California model financed with tax exempt revenue bonds and kept the federal Interest Reduction Payment Contract, ("IRP"), in the project. The Interest Reducfion Payment subsidizes the interest rate of the loan. The Boisclair proposal would use the previous 1997 tas exempt revenue bond issue and keep the IRP in the project. The IRP subsidy of the interest bond rate allows project cashflow to amortize about $900,000 in additional tu� exempt bonds. This would allow the level of rehabilitation to raise by approximately $700,000 from its current level of $600,000 to a total of $1.3 million. By keeping �t4 - �o�t �--- the federal IRP in the project the requiremeni for the 12 month period for the state tenant impact statement would not have been required because there is no prepayment of the 236 mortgage. The City Attomey's Office has concuned that the tenant impact statement would not apply because the federal subsidy is remaining in place and not being terminated. In any event the project sale/closing would occur at about the same time the tenant impact statement one yeaz period expires. This proposal would require: 1. The HRA to hold the 236 mortgage. The 236 mortgage would be sold to the HRA by the Federal National Mortgage Association, funds would be provided by the Boisclair Corporation through use of the 1998 revenue bond proceeds. The HUD mortgage insurance would ternunate at transfer. The HRA, as the mortgagee, would receive the remaining 236 Interest Reduction Payments, to approxunately December 2014, which would be used to pay additional bonds used for rehabilitation. HUD has advised that the HRA is eligible to hold the mortgage for this purpose. A participation agreement would be entered into with the trustee for the bonds assigning to the trustee a 100 % participation interest in the Note, Mortgage and the IRP. The HRA and the trustee will agree that the HRA will not have any right or obligation to enforce the Note, Mortgage, except as instructed by the trustee. The HRA is not obli a2 ted to pay any debt created by the bonds. Only the project revenues and the IRP aze the sole revenues for repayment of the bonds. 2. At the end of the bond repayment period the HRA would convey a form of forgiveness of the mortgage to the owner. 3. As mortgagee, the HRA will have mortgage default privileges, but will be required to not exercise those rights in order to insure the IRP subsidy stream. This would be a requirement of FNMA as credit enhancer to maintain the IRP subsidy stream in the event of a default. 4. HUD currently has a Regulatory Agreement that governs the conditions that must be met by the project owners. Because the HRA would be the holder of the mortgage the HRA would have to assume HUD's role through a Regulatory Agreement with the owners of the project. The HRA would be responsible for obtaining the tenant income certifications, monitoring the project's physical condition, and monitoring the management in the event the manager or the owner (Boisclair) should require replacement. The Minnesota Housing Finance Agency (MHFA) has agreed to perform the HUD monitoring functions and all costs will be paid by the project. A condition of MHFA is that the project be willing to accept 17 units of project based Section 8 subsidized units, for 2 and 3 bedroom units, if the Hollman Consent Decree is amended to allow Saint Paul, with City approval, to accept units. The amendment of the Hollman Decree has not occurred and it is not known if it will be amended. MHFA's concern is that use of the project based Section 8 rent subsidy available through the 3 �� - �e n��--- Hollman Consent Decree is not being used and is a valuable resource to assist renters. PROPOSED Il1iPROVEMENTS Because of the use of the Interest Reduction Payment subsidy a larger scale of rehabilitation improvements can be undertaken, totaling $1.3 million. The rehabilitation consists of siding replacement, facia/trim repair and painting, boiler replacement, kitchen cabinets/lighting, roof replacement, landscaping, parking resurfacing, exterior lighting, bathroom plumbing upgrade, replacement of carpet in hallways, sidewalk/concrete repair, recreation upgrade, and playground replacement. Forty-one garages will also be built. PROPOSED PR03ECT FINANCING The proposed project financing sources and uses aze as follows: Sources Uses Tax Exempt Bonds(98) $2,925,000 Acquisifion Ta� Exempt Bonds $ 900,000 Rehab Taxable Bonds $ 500,000 LIHTC $ 967,190 Total $5,292,190 Cost of Issuance Project Reserves Interest,Taxes,Ins. Tenant Relocation Dev. Fee SofrJCont Org/Legal Total $2,346,354 $1,311,000 $ 215,059 $ 215,000 $ 226,401 $ 195,000 $ 485,135 $ 65,000 233 241 $5,292,190 The projecYs proforma is structured to accommodate a 35 year level debt service amortization. The ProjecYs annual income will support a debt servace payment ratio of 115. Operating expenses appearto be reasonable. REPAYMENT CAPACITY The projected appears to have sufficient project annual income to pay operating expenses and debt service. The value of the IRP subsidy appeazs sufficient to repay the $900,000 in additional tas exempt bonds. MANDATED REQUII2EMENTS AND STANDARDS Pursuant to federal law regarding the issuance of tax-exempt multifamily revenue bonds, at a minunum either 20% or 40% of the 86 dwelling units of the project must be specifically reserved far tenants whose incomes are not greater than either 50% or 60% of the median family income as adjusted for family size. Because this project will be participating in the federal Low Income Housing Tax Credit Program 100% of the units wIll be affordable to persons with an income range of 41- 49% of inedian income, therefore the project meets the mandated requirements FEES The HRA is entitled to a non-refundable application fee of $3,500 far a bond request under $1 million. When the Bonds are issued, the HRA will receive an administrative fee at closing equal to 0.5% of the principal amount of the Bonds. On the first anniversary date of the Bonds the HRA `tR-lo�}- will receive an additiona10.5 % fee. Every year thereafter that the Bonds remain outstanding the HI2A will receive an annual administrative fee equal to 0.1 % of the outstanding principal balance of the Bonds. BACKGROUND ON ALLOCATION OF LOW INCOME HOUSING TAX CREDITS Section 42(h)(4) of the Code provides that under certain circumstances projects financed with taY exempt bonds may qualify for Taic Credit that aze exempt from the Tax Credit volume cap. If the HRA approves the issuance and sale of the additional $900,000 of multifamily ta�c exempt revenue bonds for the acquisirion and rehabilitation of the Hampden Square Apartments, the issuance of the bonds qualifies the Project to receive an additional allocation of $46,765 in Low Income Housing Tax Credit exempt from the volume cap limits. In order to qualify for the allocation of Tas Credit, the HRA must make a deteiminarion that the Tas Credit amount to be clauned is not more than is necessary to make the project feasible and viable as a qualified low-income housing project throughout the Tax Credit period. Once the TaY Credit is allocated, the owner must abide by certain rent and 'ulcome restrictions regarding the units for which Tax Credit was received. The Owner has requested tas credits for 100% of the units. BUDGET IMPACT The multifamily taz� exempt revenue bond and the allocation of the low income housing tax credits to the project have no impact on the City or HRA budget. BUSINESS PROFILE The Boisclair Corporation has been in business since 1974. They currently manage 918 rental units in the metro area and have approxunately $4.5 million in annual rental income. ADVERSE LENDING Mr. Boisclair does not l�ave an adverse lending relationship with the HRA or the City of Saint Paul. PUBLIC PURPOSE The following public purposes will be met: 1. The proposed rehabilitation will maintain the value of the project for providing affordable housing, as defined by the federal low income housing tas credit program, in the city. Without bond financing the proposed improvements would not be financially feasible. 2. The Project will continue to be affordable housing as part of the federal Low Income Housing Tax Credit Program. 3. The proposed fmancing and rehabilitation will reasonably assure the long term viability of the Project and an asset to the surrounding neighborhood. SUPPORT The Hampden Square Apartments proposal has received the District 12, St. Anthony Park Community Council's support for the initial $2,925,000 bond request and received their support for the additional $900,000 in tax exempt bonds. The District Council held meetings with the K:\Shazed�Sanchez'I1HSAptsCityCouncil2 5 °tq - lr, � a- surrounding community about the additional bond request and reaction to the use of Hollman Section 8 units at the project was not well received by some of the neighbors. BOND AUTHORITY; ALLOCATION PROCESS The City of Saint Paul received a 1999 entitlement bond allocation from the State of approximately $16,000,000. For the past several yeazs, the entitlement has been used exclusively to issue mortgage revenue bonds or mortgage credit certificates to finance the City's single family mortgage program. Because the Hampton Square Apartments will be owned by a for-profit entity, the proposed additional $900,000 in ta7c exempt bonds will count as part of the City's entitlement bond allocation. However, staff believes that the single family program is amply funded for 1999 and will carry over an allocation of bonds into 2000. Therefore, issuance of rental revenue bonds would not dimiiush the City's single family program. The Taacable Revenue Bonds don not count against the volume cap. Upon adoption of the inducement resolution staff will proceed to fmalize the financing of the proposal for presentation to the HRA and request the IIRA to consider adoption of a resolution to issue and sell revenue bonds to finance the project. SUMMARY If the City Council should decide that they are not interested in pursuing this proposal and the owner does not utilize the current approved bond amount of $2,925,000 then the t� exempt authority would be lost. The HRA could not reuse that tax exempt bond authority. ATTACHIVIENTS City Council Resolution Prepared by: Tom Sanchez PED 266-6617 K:\Shared�SanchezllHSAptsCiTyCouncil2 q 9`- lo��, � I � v ��stot� uuiN� wurt5 � P�Ltul411"� o� � Fs � NoM�s/'P /��n �t°c� �l ° �,wr�s � _ - ��1::. 1�f�•Rcs� ��.OERv/. N��te�p� + �w, ��coM� C(��`� Z ; Sr. A�tT'Noa�y 17�E�s�C� At.CVt�4l.AG ME�t �5�� -- --- ---- ---- -- --�_-- : 3= iN��l� �'��( (� �� -� t�� 6� � T CITY OF SAINT PAUL Norm Coleman, hfayar September 7, 1999 Louis Furtong 2339 Ellis Avenue Saint Paul, Minnesota 55114 Re: Hampden Squaze Apartments Deaz Mr. Furlong: DEPARTMENT OF PLANNING & ECONOMiC DEVELOPMENT Brian S�veeney, Director qQ � �� 25 �Pest Fourth Street Telephone: 657-266-6565 SaintPauLMN55102 Facsimile:65l-228-32G1 Councilmember Jay Benanav has asked me to respond to concems you have raised regarding the Hampden Square Apartment Project. The current Hampden Square Apartment owner has made it very clear that the partnership is pianning to sell this project. The current owner is not concemed if the project remains subsidized or market rate housing. The Boisclair Corporation, when made aware of the availability of this project, decided that this was a good fit to their current portfolio ofprojecTS. They have a good background in owning/managing subsidized housing. If the sale does not occur as subsidized housing, the Boisclair Corporation may decide to convert the project to mazket rate non-subsidized rental housing. We believe that the conversion to mazket rate rental housing is not an acceptable option for the City especially in light of the lack of affordable rental housing opportunities. ��., �"I This project has been in the works for approximately two yeazs and in ��ecember of 1997, after a public heazing before the City Council and later, in July 1998, apprc val by the Housing and Redevelopment Authority, the project was allocated $2,925,000 in tan exempt revenue bonds. Because ihe actual sale of the project did not occur prior to August I, 1998, ^ I998 new state law mandated a one yeaz waiting period before a sale, in which the federal subsidy is terminated, could occur. Under this law the start of the one yeaz period a tenant impact statement, sent to each tenant and filed with the City, must be prepazed by the owner indicating his intent to sell. During this waiting period the Boisclair Corporation determined that it was important to undertake a lazger scale of rehabilitation improvements and that the use of the cunent interest subsidy could be used, similaz to a California rental housing project fmancing mudel approved � � by HUD. It is the request for an additional tax exempt revenue bond allocation from the HItA that precipitated the Boisclair Corporation to ask to update the District Counci] and community. f The initial District Council input for the initial $2,925,000 in tax exempt revenue bond allocation occurred in early 1998. �� '�iv�a� � � `� �tti,evP �� t �.� � , , � a' The Boisclair Corporation agreeing that the project would accept up to twenty (20) percent project based Section 8 units is a condition imposed by the Minnesota Housing Finance Agency, shou2d Hotlman vnits become available, for their participation in the compliance monitoring for this project. It is because of MHFA's experience that HUD has agreed that MHFA would be acceptable for this monitoring function. In order for the project to continue to utilize an interest rate subsidy, currently provided by HUD, HUD requires that the compliance monitoring, for tenant income, buildin� condition and rent levels, be contracted with an experienced agency, substituting for HUD. The proposed project based Section 8 unit subsidy would come from the Hollman Consent settlement in Minneapolis. For the Hampden Square Apartment project to utilize Hollman units The Consent Decree must be amended to allow the units to be located in Saint Paul. This has not occurred or are we awaze that the parties to the lawsuit, the NAACP and Legal Aid in Minneapolis, have agreed to amend the Consent Decree. The Saint Paul Public Housing Agency is monitoring the Holiman Consent Decree and any future action �vill involve their participation. In the matter of the Boisclair Corporation agreeing to not accept any tenant with a Sertion 8 voucher, above the 20%, would be at the least discriminatory and is not condoned by the Ciry. The;; tenant selection criteria must be applied evenly or they would be subject to legal penalties. Finally, the success of any rental housing project relies on the management experience and policies of the owner. The Boisclair Corporation is committed to maintaining a well run affordable rental housing project. I am convinced that the Boisclair Corporation will continualiy work with the community, now and in the future, to have a well managed project. 'i o tuat end I am encouraging you, through the District Council, to work with the Boisclair Corporation and as a City we must work to attain success. Sincerely, �� ._?^"' Brian S eney Director cc; Mayor Coleman Councilmember Benanav Lori Boisclair Tom Harren Tom Sanchez HampdenSqlComLetter �RtG1I�AL Council File # � q" �� a Green Sheet # � �� RESOLUTION SAINT PAUL, MINNESOTA Presented By Referzed To Committee: Date 1 2 3 4 5 6 � 10 11 12 13 14 RECITING A PROPOSAL FOR FINANCING A MULTI-FAMILY RENTAL HOUSING DEVELOPMENT PROJECT, APPROVING A HOUSING PROGRAM THEREFOR AND AUTHORIZING THE HOUSING AND REDEVELOPMENT AUTHORITY TO EXERCISE THE POWERS GRANTED IN MINNESOTA STATUTES, SECTIONS 462C.01 TO 462C.08 (a) WHEREAS, Minnesota Statutes, Chapter 462C (the "Act"), confers upon cities, or housing and redevelopment authorities authorized by ordinance to exercise on behalf of a city the powers conferred by the Act, the power to issue revenue bonds to finance a program for the purposes of planning, administering making or purchasin multifamily housing city; and g loans with respect to one or more developments within the boundaries of the 15 (b) WHEREAS, on July 14, 1998, the Housing and 16 Redevelopment Authority of the City of Saint Paul (the "HRA") 17 issued its Multifamily Housing Revenue Bonds, Series 1998A and 18 Series 1998B (Ilampden Square Project) in the aggregate principal 19 amount of $2,925,000 (collective, the "Series 1998 Bonds") to 20 finance the acquisition and rehabilitation of an existing low and 21 moderate income housing project located at 2333 Long Avenue by 22 Bool Partners Limited Partnership, a Minnesota limited 23 partnership (the '�Company°) (the "Project"); and 24 (c; WHEREAS, the Company has requested that the HRA issue 25 its revenue bonds to provide funds for a current refunding o£ the 26 Series 1998 Bonds, and to issue additional tax exempt revenue 27 bonds in the maximum principal amount of $900,000 (the 28 "Additional Tax Exempt Bonds") and taxable revenue bonds in the 29 maximum principal amount of $500,000 (the "Additional Taxable 30 Bonds") to provide additional funds to rehabilitate the Project; 31 and 32 (d) WHEREAS, the Series 1998 Bonds, the Additional Tax 33 Exempt Bonds and the Additional Taxable Bonds are hereinafter 34 collectively referred to as the "Bonds"; and �� 1093817.1 qq-to��-- 1 (e) WHEREAS, the proposal for the financing of the Project 2 by the issuance of the Bonds is described and set forth in a 3 Aousing Program (the "Housing Program") presented to the City 4 Council on this date; and 5 (f) WHEREAS, the City and the HRA previously allocated 6 $2,925,000 of the City's 1997 entitlement bonding authority, 7 carried forward to 1998, to the Project and the Series 1998 8 Bonds, and it is necessary that the Additional Tax Exempt Bonds 9 receive an allocation of the City's 1999 entitlement bonding 10 authority; and 11 (g) WHEREAS, the Company's proposal calls for the IIRA to 12 loan the proceeds realized upon the sale of the Bonds to the 13 Company pursuant to a revenue agreement wherein the Company will 14 be obligated to make payments at the times and in the amounts 15 sufficient to provide for the prompt payment of principal of, 16 premium, if any, and interest on the Bonds and all costs and 17 expenses of the HRA, incident to the issuance and sale of the 18 Bonds; and 19 (h) WHEREAS, the City desires to encourage the development 20 of housing facilities designed for occupancy primarily by persons 21 of low and moderate income, and the Project will assist the City 22 in achieving these objectives; and 23 (i) WHEREAS, a public hearing on the Housing Program and 24 Project was held on November 3, 1999, following duly published 25 notice, at which time all persons that desired to speak were 26 heard: 27 NOW, THEREFORE, BE IT RESOLVED by the City Council of the 28 City of Saint Paul, Minnesota, as follows: 29 1. Housina Program; Authorization of HRA. The City hereby 30 approves the Housing Program for the financing of the Project by 31 the issuance of the Bonds and, pursuant to Section 72 of the 32 Saint Paul Administrative Code, authorizes the HRA to exercise 33 the powers granted in Minnesota Statutes, Sections 462C.01 to 34 462C.08. 35 2. Bondincx Authority. The City hereby allocates $900,000 36 of its 1999 entitlement allocation under Minnesota Statutes, 37 Chapter 474A, of volume limit for the issuance of Additional Tax- 38 Exempt Bonds to be issued by the HRA. The foregoing allocation 39 of the City's entitlement and entitlement-transfer bonding 40 authority is an aspect of the City's delegation of powers to the 41 HRA under the Act and under this resolution. 42 3. Scope o£ Approval. Nothing in this resolution shall be 43 construed to require the City or HRA to approve any element of 44 the Project or the issuance of the Bonds, nor shall this 1093817.1 2 qg-�o�1a- 5 6 7 8 9 l0 ll 12 13 14 15 16 17 18 19 20 21 22 reaolution be conetrued ae vesting in the Company any cauee o£ action againet the City or HRA arieing from any failure or refueal by the City or HRA to approve the Project or iseue the Bonds. 4. �gP��ai L•'�m�ted Obl�ga 'one. Nothing in thie reeolution or the documente prepared pursuant hereto ehall authorize the expenditure of any municipal funde on the Houaing Program or Bonde other than the revenues derived from the Project or otherwise granted to the City or HRA for this purpose. The Bonda ahall not constitute a charge, lien or encumbrance, legal or equitable, upon any property or funda of the C1ty or HRA except the revenue and proceeds pledged to the payment thereof, nor ahall the City or HRA be aubject to any direct liability thereon. The holdere of the Bonde ehall never have the right to compel any exerciee of the taxing power of the City or ARA to pay the outetanding principal on the Honde or the interest thereon, or to enforce paymente thereon againet any property of the City or HRA. The Bonda shall recite in eubetance that the Bonde, including the interest thereon, are payable solely from the revenuea and proceede pledged to Che payment thereo£. The 8onde ehall not conatitute a general obligation of the City or HRA within the meaning of any conetitutional or statuCory provieion. by �apsrtmm�i ot: . �r - By: � Fortn Adopted by Council: Oate �� Adaptlon Certlflad by Councll Secretsry By: A4P By: 3o93i1?.1 � GREEN SHEET �,. � /�/�/9� l��t b (�`c. d�eari�� TOTAL # OF SIGNATURE �� l�i— l0`19- No102962 ��. ❑� �,,.,,�„ � �o u °��tQ�«� ❑.�,�,� ❑.,�.t,�.a �-�� ❑ (CL1P ALL LOCATiONS FOR SIGNATURE� :IION RC-0UESl� S f� �"� �' � L� �� LQ2LC�.C�� l' n'✓*^ v�� r GF�.� G`4V` / ��p , � ., �� /� P T /,� rr C'L °�v`.vJ%�'C� /`//'cil�[y. !�h U�✓6'�Pi� �1 / S S (1 -2 �� 7I �c•�•_ `IF �P�i�rn,�,�.�t �,�ds�� s� vuv �--- 7- ��/ /'�ve�.,u,,. �s �. /a�� .�� , a PLANNING COMMISSION CIB COMMITfEE C � S RVI�E CAMMISSION � ��a�� YES NO Vias th"n peieoNfirm euer been a dlY emPlaYee9 v�s � Ooec Mis P��rtn P� a slall not norma�NP� �Y �Y curtent ciy' employee� YES NO k tlris Pe��rtn a tarpe4etl veMaR YES NO . INITIATING PROBLEM ISSUE,�� /� (Wtw. W Wfien�. WbY) � _�/ /� y_ f� �i0 f" /� / Y7 dLC-"'y / /� �(� % � r �� "( r li.� riu..- w`-C f�. � Y"� r�� '`�� f�' � � '�� S /%'.r,�,,�r��. � /�r�, a�- � ee �� a-�-- �Gaz.��,y,.' �`�9 7 � �:` ��-, � � '% VANTAGES IP APPR�VED /,� n / (� Y/✓'^' � L/ � j�/ . . ... . ,. ..,. �a �/��1� fI/ � . {� &FM�.. 6��e��' � c Y i- �✓ �/l!! li u� �T" P� � �iu�P�v� G�v2 ��er ,� �� ' .€. `a��ma�i r�y � �" � SOURCE INFORMAliON (IXPWN) CMTrttEVQlUE BUDGE7ED (CIRCLE ON� ACTNITY NUTABER VES NO \ � °�,g - 1 o'i,s.- MULTI-FAMILY RENTAL HOUSING PROGRAM OF THE CITY OF SAINT PAUL, MINNESOTA, AND THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF SAINT PAUL, MINNESOTA November 3, 1999 Proposal: Authority. The Housing and Redevelopment Authority o£ the City of Saint Paul, Minnesota (the "HRA��), proposes to issue revenue bonds and to take other actions in furtherance of the objective of financing the acquisition and rehabilitation of the multi-family rental housing project described herein (this "Program") pursuant to applicable authority conferred upon the HRA by the laws of the State of Minnesota, including without limitation Minnesota Statutes, Chapters 469 and 462C, as the same may be amended from time to time (collectively, the "Act"). Pur,poses. In creating this Program, the City of Saint Paul, Minnesota (the "City"�, and HRA are acting in furtherance of their findings that the preservation of the quality of life in the City is in part dependent upon the maintenance and provision of adequate, decent, safe, sanitary, and affordable housing stock; that accomplishing the goals of this Program is a public purpose and will benefit the residents of the City; that the need exists within the City to provide in a timely fashion additional affordable rental housing to and for the benefit of persons of low and moderate income and their families residing and expected to reside within the City; that there exist or are expected to exist persons and families within the City who are and will be able to benefit from and are in need of the Program; that the Program is necessary in view of the limited resources that may be available to such persons relative to the expenses involved in accomplishing the type of objectives outlined in this Program in the absence of one or more of the forms of assistance described herein or otherwise available pursuant to the Act; and that the City and HRA hereby find that such forms of assistance are often necessary for the benefit of such persons, families, and goals and that, furthermore, the successful implementation of the objectives of the kind described in this Program has been found to provide impetus for the development of other housing in the City, as well as the general development of the City, by other persons who are not the beneficiaries of such governmentally sponsored or assisted activities. Rental Housin�Purposes. More particularly, the City and HRA find that there exists a need for multi-family rental housing, both to provide rental housing for persons of low and moderate income and to assist in freeing up existing owner- occupied housing for purchase by other qualifying individuals and families, which need is not being filled by private enterprise 1091477.1 9.�, ��b`� �" alone due to a variety of factors, including that the cost of new construction of multi-family rental units may in many cases prove economically unfeasible, given the high costs of construction and prevailing area rental levels, and that therefore appropriate levels of public assistance may be helpful and necessary in bridging that gap. General Descrigtion of the Procrram. This Program consists of the financing of the acquisition and rehabilitation of a building (Hampden Square) currently containing a total of 86 multi-family rental housing units (the "Project"). The initial owner of the Project pursuant to the financing will be Bool Partners Limited Partnership, a Minnesota limited partnership. Location. This Program is limited to the Project. The Project is located at 2333 Long Avenue in Saint Paul, Minnesota. Revenue Bonds. The amount of revenue bonds required to finance this Program is approximately $4,325,000. The proceeds will finance the acquisition and rehabilitation of the Project and pay costs of issuing the bonds, and may be used to establish a reserve. Housing Plan. The City and HRA hereby adopt the Comprehensive Housing Plan of the City of Saint Paul as the housing plan relating to the Project. Monitorincr. The Program will be monitored by the HRA. The HRA expects to enter into or continue suitable agreements with necessary parties to ensure consistent compliance with the objectives of this Program, as well as with the requirements of applicable law. Meeting Needs; Methods. The Program will meet the need for rental housing for persons and families of low and moderate incomes by providing units at an affordable rent. The City and HRA believe that this Program will help meet the identified needs under this Program. The specific methods anticipated to be used include the issuance of revenue bonds under the Act to provide feasible financing for various aspects of the Program so undertaken. The HRA will monitor the implementation of this Program pursuant to its loan agreement for the Project. Authorizatiion. The Program is undertaken pursuant to Minnesota Statutes, 5ection 462C.05, Subdivision 2, for units affordable to persons and families of low and moderate income. Limits on Gross Income. The gross income of occupants will be limited in accordance with the requirements of Minnesota Statutes, Chapter 462C, and with the requirements relating to tax-exempt bonds for qualified residential rental projects. iosia��.i 2 ag-1o'l�- Adopted and approved on November 3, 1999, by the City Council of the City of Saint Paul, Minnesota, and on by the Board of Commissioners of The Housing and Redevelopment Authority of the City of Saint Paul, Minnesota. 1091877.1 CITY COUNCIL OF THE CITY OF SAINT PAUL, MINNESOTA REPORT TO THE CITY COLTNCTI. DATE: November 3, 1999 REGARDING PUBLIC IIEARING: Resolution Reciting A Proposal for Financing a Multifamily Rental Housing Development Project, Approving a Housing Program Therefor and Authorizing the Housing and Redevelopment Authority of the City of Saint Paul to Exercise the Powers Granted in Minnesota Statutes, Sections 462C.01 to 462C.08 �,°1-��0`l�- PURPOSE The Housing and Redevelopment Authority of the City of Saint Paul (HRA) has received an application from the Boisclair Corporation for an additional allocation of up to $900,000 in Tas Exempt Revenue Bonds and up to $500,000 in Ta7cable Revenue Bonds together be used, with a previously approved carry over in 1997 tax exempt revenue bond authority of $2,925,000, toward the acquisition and rehabilitation costs of the Hampden Square Apartments located at 2333 Long Avenue. The purpose of this report is to request the City Council to consider adopting the attached preluninary (inducement) resolution which would approve the following: Authorize the Executive Director of the HRA to enter into a Memorandum of Understanding (MOU) with Mr. Robert Boisclair, Boisclair Corporation, to work towards possible issuance of the Bonds. The MOU also stipulates the terms and conditions for issuance of the Bonds should the HRA decide to issue the Bonds; and 2. Authorize the HRA to issue up to $900,000 of t� exempt multifamily rental revenue bonds far the Froject and up to $500,000 in taxable revenue bonds to be used with a refunding of the $2,925,000 in 1997 tax exempt bond autharity; and 3. Approve a Housing Program, a copy of which is attached for financing the project prepared in accordance with the provisions of Minnesota Statutes, Section 462C.03; and 4. Retain Briggs and Morgan as bond counsel and Piper Jaffray, Inc. as investment banker for said Bonds and authorize them to assist in the preparauon and review of necessary documents relating to the Project and Housing Program and consult with the HRA, City Attorney, Owner, and purchasers of the proposed Bonds. Approval of the inducement resolution and execution of the Memorandum of Understanding does not require or obligate the City or I�RA to issue bonds or cause any action against the City or HRA arising from any failure or refusal by the City or HRA to approve the Project or issuance of the Bonds. With respect to the multifamily rental housing bonds, Section 72.04 of Chapter 72 of the City's q4� to'� �-- Administrative Code provides that the HRA be designated to exercise on behalf of the City the powers conferred by the Minnesota Statutes 462C (housing programs and revenue bonds) but only unless dixected and authorized to do so by resolution adopted by the City Council. Thus the reason, this proposal is initiated before the City Council rather than the HRA. The Bonds are not ¢enerai obli�ation bonds, but are special. limited obliearions of the Housing and Redevelopment Authoritv of the City of Saint Paul. Minnesota and shall never consritute an indebtedness, liabilitv, general or moral obligation, or pledge of the faith or credit or taxin� ower of the I3RA. Cit�of Saint Paul, the State of Minnesota, or any aeency or political subdivision thereof, within the meanine of anv constitutional, statuary or charter provision, nor be a charge aeainst their res�ective eeneral assets, credit or taxing owers. BACKGROiJND The HRA approved on July 8, 1998, a resolution authorizing the issuance of $2,925,000 of tax exempt multi-family revenue bonds and the allocation of up to $122,090 in federal low income housing tax credits for this project. The bonds were part of the HRA's annual ta7t exempt authoriry for 1997 and were carried over to 1998 for this project. The carry over of the bonds required that a bond closing occur by July 15, 1998, or the bonds would be lost. The tax credits were avaIlable to tax exempt projects and are not derived from the annual allocation available to the HRA. After the bond closing, the bonds were parked until a purchase of the project would be finalized. However, the State Legislature approved in the eazly part of 1998 a new law, Minn. Stat. Section 471.9997, which required that an owner of a federally subsidized project that prepays its mortgage or terminates a federal subsidy, a tenant nnpact statement must be given to the local governing body 12 months before the termination is to occur. The tenant impact statement must identify the number of units that will no longer be subject to rent restrictions imposed by the federal program, estunated rents to be charged in comparison to rents under the federal program, and actions the owner will take to assist displaced tenants in obtaining other housing. Copies of the statement aze to be provided to the residents of the project, the MHFA, and the Metropolitan CounciL This requirement became effective August 1, 1998, prior to the sale of the project to Boisclair. The City Attorney's Office determined that the bonds could not be taken out of the parked position until the notice period terminated (12 months) or the seller obtained a Declazatory Judgement from the Court that the Hampden Square Project was exempt from the state law. PROPOSAL The Boisclair proposal is similaz to a HUD approved 1997 California model financed with tax exempt revenue bonds and kept the federal Interest Reduction Payment Contract, ("IRP"), in the project. The Interest Reducfion Payment subsidizes the interest rate of the loan. The Boisclair proposal would use the previous 1997 tas exempt revenue bond issue and keep the IRP in the project. The IRP subsidy of the interest bond rate allows project cashflow to amortize about $900,000 in additional tu� exempt bonds. This would allow the level of rehabilitation to raise by approximately $700,000 from its current level of $600,000 to a total of $1.3 million. By keeping �t4 - �o�t �--- the federal IRP in the project the requiremeni for the 12 month period for the state tenant impact statement would not have been required because there is no prepayment of the 236 mortgage. The City Attomey's Office has concuned that the tenant impact statement would not apply because the federal subsidy is remaining in place and not being terminated. In any event the project sale/closing would occur at about the same time the tenant impact statement one yeaz period expires. This proposal would require: 1. The HRA to hold the 236 mortgage. The 236 mortgage would be sold to the HRA by the Federal National Mortgage Association, funds would be provided by the Boisclair Corporation through use of the 1998 revenue bond proceeds. The HUD mortgage insurance would ternunate at transfer. The HRA, as the mortgagee, would receive the remaining 236 Interest Reduction Payments, to approxunately December 2014, which would be used to pay additional bonds used for rehabilitation. HUD has advised that the HRA is eligible to hold the mortgage for this purpose. A participation agreement would be entered into with the trustee for the bonds assigning to the trustee a 100 % participation interest in the Note, Mortgage and the IRP. The HRA and the trustee will agree that the HRA will not have any right or obligation to enforce the Note, Mortgage, except as instructed by the trustee. The HRA is not obli a2 ted to pay any debt created by the bonds. Only the project revenues and the IRP aze the sole revenues for repayment of the bonds. 2. At the end of the bond repayment period the HRA would convey a form of forgiveness of the mortgage to the owner. 3. As mortgagee, the HRA will have mortgage default privileges, but will be required to not exercise those rights in order to insure the IRP subsidy stream. This would be a requirement of FNMA as credit enhancer to maintain the IRP subsidy stream in the event of a default. 4. HUD currently has a Regulatory Agreement that governs the conditions that must be met by the project owners. Because the HRA would be the holder of the mortgage the HRA would have to assume HUD's role through a Regulatory Agreement with the owners of the project. The HRA would be responsible for obtaining the tenant income certifications, monitoring the project's physical condition, and monitoring the management in the event the manager or the owner (Boisclair) should require replacement. The Minnesota Housing Finance Agency (MHFA) has agreed to perform the HUD monitoring functions and all costs will be paid by the project. A condition of MHFA is that the project be willing to accept 17 units of project based Section 8 subsidized units, for 2 and 3 bedroom units, if the Hollman Consent Decree is amended to allow Saint Paul, with City approval, to accept units. The amendment of the Hollman Decree has not occurred and it is not known if it will be amended. MHFA's concern is that use of the project based Section 8 rent subsidy available through the 3 �� - �e n��--- Hollman Consent Decree is not being used and is a valuable resource to assist renters. PROPOSED Il1iPROVEMENTS Because of the use of the Interest Reduction Payment subsidy a larger scale of rehabilitation improvements can be undertaken, totaling $1.3 million. The rehabilitation consists of siding replacement, facia/trim repair and painting, boiler replacement, kitchen cabinets/lighting, roof replacement, landscaping, parking resurfacing, exterior lighting, bathroom plumbing upgrade, replacement of carpet in hallways, sidewalk/concrete repair, recreation upgrade, and playground replacement. Forty-one garages will also be built. PROPOSED PR03ECT FINANCING The proposed project financing sources and uses aze as follows: Sources Uses Tax Exempt Bonds(98) $2,925,000 Acquisifion Ta� Exempt Bonds $ 900,000 Rehab Taxable Bonds $ 500,000 LIHTC $ 967,190 Total $5,292,190 Cost of Issuance Project Reserves Interest,Taxes,Ins. Tenant Relocation Dev. Fee SofrJCont Org/Legal Total $2,346,354 $1,311,000 $ 215,059 $ 215,000 $ 226,401 $ 195,000 $ 485,135 $ 65,000 233 241 $5,292,190 The projecYs proforma is structured to accommodate a 35 year level debt service amortization. The ProjecYs annual income will support a debt servace payment ratio of 115. Operating expenses appearto be reasonable. REPAYMENT CAPACITY The projected appears to have sufficient project annual income to pay operating expenses and debt service. The value of the IRP subsidy appeazs sufficient to repay the $900,000 in additional tas exempt bonds. MANDATED REQUII2EMENTS AND STANDARDS Pursuant to federal law regarding the issuance of tax-exempt multifamily revenue bonds, at a minunum either 20% or 40% of the 86 dwelling units of the project must be specifically reserved far tenants whose incomes are not greater than either 50% or 60% of the median family income as adjusted for family size. Because this project will be participating in the federal Low Income Housing Tax Credit Program 100% of the units wIll be affordable to persons with an income range of 41- 49% of inedian income, therefore the project meets the mandated requirements FEES The HRA is entitled to a non-refundable application fee of $3,500 far a bond request under $1 million. When the Bonds are issued, the HRA will receive an administrative fee at closing equal to 0.5% of the principal amount of the Bonds. On the first anniversary date of the Bonds the HRA `tR-lo�}- will receive an additiona10.5 % fee. Every year thereafter that the Bonds remain outstanding the HI2A will receive an annual administrative fee equal to 0.1 % of the outstanding principal balance of the Bonds. BACKGROUND ON ALLOCATION OF LOW INCOME HOUSING TAX CREDITS Section 42(h)(4) of the Code provides that under certain circumstances projects financed with taY exempt bonds may qualify for Taic Credit that aze exempt from the Tax Credit volume cap. If the HRA approves the issuance and sale of the additional $900,000 of multifamily ta�c exempt revenue bonds for the acquisirion and rehabilitation of the Hampden Square Apartments, the issuance of the bonds qualifies the Project to receive an additional allocation of $46,765 in Low Income Housing Tax Credit exempt from the volume cap limits. In order to qualify for the allocation of Tas Credit, the HRA must make a deteiminarion that the Tas Credit amount to be clauned is not more than is necessary to make the project feasible and viable as a qualified low-income housing project throughout the Tax Credit period. Once the TaY Credit is allocated, the owner must abide by certain rent and 'ulcome restrictions regarding the units for which Tax Credit was received. The Owner has requested tas credits for 100% of the units. BUDGET IMPACT The multifamily taz� exempt revenue bond and the allocation of the low income housing tax credits to the project have no impact on the City or HRA budget. BUSINESS PROFILE The Boisclair Corporation has been in business since 1974. They currently manage 918 rental units in the metro area and have approxunately $4.5 million in annual rental income. ADVERSE LENDING Mr. Boisclair does not l�ave an adverse lending relationship with the HRA or the City of Saint Paul. PUBLIC PURPOSE The following public purposes will be met: 1. The proposed rehabilitation will maintain the value of the project for providing affordable housing, as defined by the federal low income housing tas credit program, in the city. Without bond financing the proposed improvements would not be financially feasible. 2. The Project will continue to be affordable housing as part of the federal Low Income Housing Tax Credit Program. 3. The proposed fmancing and rehabilitation will reasonably assure the long term viability of the Project and an asset to the surrounding neighborhood. SUPPORT The Hampden Square Apartments proposal has received the District 12, St. Anthony Park Community Council's support for the initial $2,925,000 bond request and received their support for the additional $900,000 in tax exempt bonds. The District Council held meetings with the K:\Shazed�Sanchez'I1HSAptsCityCouncil2 5 °tq - lr, � a- surrounding community about the additional bond request and reaction to the use of Hollman Section 8 units at the project was not well received by some of the neighbors. BOND AUTHORITY; ALLOCATION PROCESS The City of Saint Paul received a 1999 entitlement bond allocation from the State of approximately $16,000,000. For the past several yeazs, the entitlement has been used exclusively to issue mortgage revenue bonds or mortgage credit certificates to finance the City's single family mortgage program. Because the Hampton Square Apartments will be owned by a for-profit entity, the proposed additional $900,000 in ta7c exempt bonds will count as part of the City's entitlement bond allocation. However, staff believes that the single family program is amply funded for 1999 and will carry over an allocation of bonds into 2000. Therefore, issuance of rental revenue bonds would not dimiiush the City's single family program. The Taacable Revenue Bonds don not count against the volume cap. Upon adoption of the inducement resolution staff will proceed to fmalize the financing of the proposal for presentation to the HRA and request the IIRA to consider adoption of a resolution to issue and sell revenue bonds to finance the project. SUMMARY If the City Council should decide that they are not interested in pursuing this proposal and the owner does not utilize the current approved bond amount of $2,925,000 then the t� exempt authority would be lost. The HRA could not reuse that tax exempt bond authority. ATTACHIVIENTS City Council Resolution Prepared by: Tom Sanchez PED 266-6617 K:\Shared�SanchezllHSAptsCiTyCouncil2 q 9`- lo��, � I � v ��stot� uuiN� wurt5 � P�Ltul411"� o� � Fs � NoM�s/'P /��n �t°c� �l ° �,wr�s � _ - ��1::. 1�f�•Rcs� ��.OERv/. N��te�p� + �w, ��coM� C(��`� Z ; Sr. A�tT'Noa�y 17�E�s�C� At.CVt�4l.AG ME�t �5�� -- --- ---- ---- -- --�_-- : 3= iN��l� �'��( (� �� -� t�� 6� � T CITY OF SAINT PAUL Norm Coleman, hfayar September 7, 1999 Louis Furtong 2339 Ellis Avenue Saint Paul, Minnesota 55114 Re: Hampden Squaze Apartments Deaz Mr. Furlong: DEPARTMENT OF PLANNING & ECONOMiC DEVELOPMENT Brian S�veeney, Director qQ � �� 25 �Pest Fourth Street Telephone: 657-266-6565 SaintPauLMN55102 Facsimile:65l-228-32G1 Councilmember Jay Benanav has asked me to respond to concems you have raised regarding the Hampden Square Apartment Project. The current Hampden Square Apartment owner has made it very clear that the partnership is pianning to sell this project. The current owner is not concemed if the project remains subsidized or market rate housing. The Boisclair Corporation, when made aware of the availability of this project, decided that this was a good fit to their current portfolio ofprojecTS. They have a good background in owning/managing subsidized housing. If the sale does not occur as subsidized housing, the Boisclair Corporation may decide to convert the project to mazket rate non-subsidized rental housing. We believe that the conversion to mazket rate rental housing is not an acceptable option for the City especially in light of the lack of affordable rental housing opportunities. ��., �"I This project has been in the works for approximately two yeazs and in ��ecember of 1997, after a public heazing before the City Council and later, in July 1998, apprc val by the Housing and Redevelopment Authority, the project was allocated $2,925,000 in tan exempt revenue bonds. Because ihe actual sale of the project did not occur prior to August I, 1998, ^ I998 new state law mandated a one yeaz waiting period before a sale, in which the federal subsidy is terminated, could occur. Under this law the start of the one yeaz period a tenant impact statement, sent to each tenant and filed with the City, must be prepazed by the owner indicating his intent to sell. During this waiting period the Boisclair Corporation determined that it was important to undertake a lazger scale of rehabilitation improvements and that the use of the cunent interest subsidy could be used, similaz to a California rental housing project fmancing mudel approved � � by HUD. It is the request for an additional tax exempt revenue bond allocation from the HItA that precipitated the Boisclair Corporation to ask to update the District Counci] and community. f The initial District Council input for the initial $2,925,000 in tax exempt revenue bond allocation occurred in early 1998. �� '�iv�a� � � `� �tti,evP �� t �.� � , , � a' The Boisclair Corporation agreeing that the project would accept up to twenty (20) percent project based Section 8 units is a condition imposed by the Minnesota Housing Finance Agency, shou2d Hotlman vnits become available, for their participation in the compliance monitoring for this project. It is because of MHFA's experience that HUD has agreed that MHFA would be acceptable for this monitoring function. In order for the project to continue to utilize an interest rate subsidy, currently provided by HUD, HUD requires that the compliance monitoring, for tenant income, buildin� condition and rent levels, be contracted with an experienced agency, substituting for HUD. The proposed project based Section 8 unit subsidy would come from the Hollman Consent settlement in Minneapolis. For the Hampden Square Apartment project to utilize Hollman units The Consent Decree must be amended to allow the units to be located in Saint Paul. This has not occurred or are we awaze that the parties to the lawsuit, the NAACP and Legal Aid in Minneapolis, have agreed to amend the Consent Decree. The Saint Paul Public Housing Agency is monitoring the Holiman Consent Decree and any future action �vill involve their participation. In the matter of the Boisclair Corporation agreeing to not accept any tenant with a Sertion 8 voucher, above the 20%, would be at the least discriminatory and is not condoned by the Ciry. The;; tenant selection criteria must be applied evenly or they would be subject to legal penalties. Finally, the success of any rental housing project relies on the management experience and policies of the owner. The Boisclair Corporation is committed to maintaining a well run affordable rental housing project. I am convinced that the Boisclair Corporation will continualiy work with the community, now and in the future, to have a well managed project. 'i o tuat end I am encouraging you, through the District Council, to work with the Boisclair Corporation and as a City we must work to attain success. Sincerely, �� ._?^"' Brian S eney Director cc; Mayor Coleman Councilmember Benanav Lori Boisclair Tom Harren Tom Sanchez HampdenSqlComLetter �RtG1I�AL Council File # � q" �� a Green Sheet # � �� RESOLUTION SAINT PAUL, MINNESOTA Presented By Referzed To Committee: Date 1 2 3 4 5 6 � 10 11 12 13 14 RECITING A PROPOSAL FOR FINANCING A MULTI-FAMILY RENTAL HOUSING DEVELOPMENT PROJECT, APPROVING A HOUSING PROGRAM THEREFOR AND AUTHORIZING THE HOUSING AND REDEVELOPMENT AUTHORITY TO EXERCISE THE POWERS GRANTED IN MINNESOTA STATUTES, SECTIONS 462C.01 TO 462C.08 (a) WHEREAS, Minnesota Statutes, Chapter 462C (the "Act"), confers upon cities, or housing and redevelopment authorities authorized by ordinance to exercise on behalf of a city the powers conferred by the Act, the power to issue revenue bonds to finance a program for the purposes of planning, administering making or purchasin multifamily housing city; and g loans with respect to one or more developments within the boundaries of the 15 (b) WHEREAS, on July 14, 1998, the Housing and 16 Redevelopment Authority of the City of Saint Paul (the "HRA") 17 issued its Multifamily Housing Revenue Bonds, Series 1998A and 18 Series 1998B (Ilampden Square Project) in the aggregate principal 19 amount of $2,925,000 (collective, the "Series 1998 Bonds") to 20 finance the acquisition and rehabilitation of an existing low and 21 moderate income housing project located at 2333 Long Avenue by 22 Bool Partners Limited Partnership, a Minnesota limited 23 partnership (the '�Company°) (the "Project"); and 24 (c; WHEREAS, the Company has requested that the HRA issue 25 its revenue bonds to provide funds for a current refunding o£ the 26 Series 1998 Bonds, and to issue additional tax exempt revenue 27 bonds in the maximum principal amount of $900,000 (the 28 "Additional Tax Exempt Bonds") and taxable revenue bonds in the 29 maximum principal amount of $500,000 (the "Additional Taxable 30 Bonds") to provide additional funds to rehabilitate the Project; 31 and 32 (d) WHEREAS, the Series 1998 Bonds, the Additional Tax 33 Exempt Bonds and the Additional Taxable Bonds are hereinafter 34 collectively referred to as the "Bonds"; and �� 1093817.1 qq-to��-- 1 (e) WHEREAS, the proposal for the financing of the Project 2 by the issuance of the Bonds is described and set forth in a 3 Aousing Program (the "Housing Program") presented to the City 4 Council on this date; and 5 (f) WHEREAS, the City and the HRA previously allocated 6 $2,925,000 of the City's 1997 entitlement bonding authority, 7 carried forward to 1998, to the Project and the Series 1998 8 Bonds, and it is necessary that the Additional Tax Exempt Bonds 9 receive an allocation of the City's 1999 entitlement bonding 10 authority; and 11 (g) WHEREAS, the Company's proposal calls for the IIRA to 12 loan the proceeds realized upon the sale of the Bonds to the 13 Company pursuant to a revenue agreement wherein the Company will 14 be obligated to make payments at the times and in the amounts 15 sufficient to provide for the prompt payment of principal of, 16 premium, if any, and interest on the Bonds and all costs and 17 expenses of the HRA, incident to the issuance and sale of the 18 Bonds; and 19 (h) WHEREAS, the City desires to encourage the development 20 of housing facilities designed for occupancy primarily by persons 21 of low and moderate income, and the Project will assist the City 22 in achieving these objectives; and 23 (i) WHEREAS, a public hearing on the Housing Program and 24 Project was held on November 3, 1999, following duly published 25 notice, at which time all persons that desired to speak were 26 heard: 27 NOW, THEREFORE, BE IT RESOLVED by the City Council of the 28 City of Saint Paul, Minnesota, as follows: 29 1. Housina Program; Authorization of HRA. The City hereby 30 approves the Housing Program for the financing of the Project by 31 the issuance of the Bonds and, pursuant to Section 72 of the 32 Saint Paul Administrative Code, authorizes the HRA to exercise 33 the powers granted in Minnesota Statutes, Sections 462C.01 to 34 462C.08. 35 2. Bondincx Authority. The City hereby allocates $900,000 36 of its 1999 entitlement allocation under Minnesota Statutes, 37 Chapter 474A, of volume limit for the issuance of Additional Tax- 38 Exempt Bonds to be issued by the HRA. The foregoing allocation 39 of the City's entitlement and entitlement-transfer bonding 40 authority is an aspect of the City's delegation of powers to the 41 HRA under the Act and under this resolution. 42 3. Scope o£ Approval. Nothing in this resolution shall be 43 construed to require the City or HRA to approve any element of 44 the Project or the issuance of the Bonds, nor shall this 1093817.1 2 qg-�o�1a- 5 6 7 8 9 l0 ll 12 13 14 15 16 17 18 19 20 21 22 reaolution be conetrued ae vesting in the Company any cauee o£ action againet the City or HRA arieing from any failure or refueal by the City or HRA to approve the Project or iseue the Bonds. 4. �gP��ai L•'�m�ted Obl�ga 'one. Nothing in thie reeolution or the documente prepared pursuant hereto ehall authorize the expenditure of any municipal funde on the Houaing Program or Bonde other than the revenues derived from the Project or otherwise granted to the City or HRA for this purpose. The Bonda ahall not constitute a charge, lien or encumbrance, legal or equitable, upon any property or funda of the C1ty or HRA except the revenue and proceeds pledged to the payment thereof, nor ahall the City or HRA be aubject to any direct liability thereon. The holdere of the Bonde ehall never have the right to compel any exerciee of the taxing power of the City or ARA to pay the outetanding principal on the Honde or the interest thereon, or to enforce paymente thereon againet any property of the City or HRA. The Bonda shall recite in eubetance that the Bonde, including the interest thereon, are payable solely from the revenuea and proceede pledged to Che payment thereo£. The 8onde ehall not conatitute a general obligation of the City or HRA within the meaning of any conetitutional or statuCory provieion. by �apsrtmm�i ot: . �r - By: � Fortn Adopted by Council: Oate �� Adaptlon Certlflad by Councll Secretsry By: A4P By: 3o93i1?.1 � GREEN SHEET �,. � /�/�/9� l��t b (�`c. d�eari�� TOTAL # OF SIGNATURE �� l�i— l0`19- No102962 ��. ❑� �,,.,,�„ � �o u °��tQ�«� ❑.�,�,� ❑.,�.t,�.a �-�� ❑ (CL1P ALL LOCATiONS FOR SIGNATURE� :IION RC-0UESl� S f� �"� �' � L� �� LQ2LC�.C�� l' n'✓*^ v�� r GF�.� G`4V` / ��p , � ., �� /� P T /,� rr C'L °�v`.vJ%�'C� /`//'cil�[y. !�h U�✓6'�Pi� �1 / S S (1 -2 �� 7I �c•�•_ `IF �P�i�rn,�,�.�t �,�ds�� s� vuv �--- 7- ��/ /'�ve�.,u,,. �s �. /a�� .�� , a PLANNING COMMISSION CIB COMMITfEE C � S RVI�E CAMMISSION � ��a�� YES NO Vias th"n peieoNfirm euer been a dlY emPlaYee9 v�s � Ooec Mis P��rtn P� a slall not norma�NP� �Y �Y curtent ciy' employee� YES NO k tlris Pe��rtn a tarpe4etl veMaR YES NO . INITIATING PROBLEM ISSUE,�� /� (Wtw. W Wfien�. WbY) � _�/ /� y_ f� �i0 f" /� / Y7 dLC-"'y / /� �(� % � r �� "( r li.� riu..- w`-C f�. � Y"� r�� '`�� f�' � � '�� S /%'.r,�,,�r��. � /�r�, a�- � ee �� a-�-- �Gaz.��,y,.' �`�9 7 � �:` ��-, � � '% VANTAGES IP APPR�VED /,� n / (� Y/✓'^' � L/ � j�/ . . ... . ,. ..,. �a �/��1� fI/ � . {� &FM�.. 6��e��' � c Y i- �✓ �/l!! li u� �T" P� � �iu�P�v� G�v2 ��er ,� �� ' .€. `a��ma�i r�y � �" � SOURCE INFORMAliON (IXPWN) CMTrttEVQlUE BUDGE7ED (CIRCLE ON� ACTNITY NUTABER VES NO \ � °�,g - 1 o'i,s.- MULTI-FAMILY RENTAL HOUSING PROGRAM OF THE CITY OF SAINT PAUL, MINNESOTA, AND THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF SAINT PAUL, MINNESOTA November 3, 1999 Proposal: Authority. The Housing and Redevelopment Authority o£ the City of Saint Paul, Minnesota (the "HRA��), proposes to issue revenue bonds and to take other actions in furtherance of the objective of financing the acquisition and rehabilitation of the multi-family rental housing project described herein (this "Program") pursuant to applicable authority conferred upon the HRA by the laws of the State of Minnesota, including without limitation Minnesota Statutes, Chapters 469 and 462C, as the same may be amended from time to time (collectively, the "Act"). Pur,poses. In creating this Program, the City of Saint Paul, Minnesota (the "City"�, and HRA are acting in furtherance of their findings that the preservation of the quality of life in the City is in part dependent upon the maintenance and provision of adequate, decent, safe, sanitary, and affordable housing stock; that accomplishing the goals of this Program is a public purpose and will benefit the residents of the City; that the need exists within the City to provide in a timely fashion additional affordable rental housing to and for the benefit of persons of low and moderate income and their families residing and expected to reside within the City; that there exist or are expected to exist persons and families within the City who are and will be able to benefit from and are in need of the Program; that the Program is necessary in view of the limited resources that may be available to such persons relative to the expenses involved in accomplishing the type of objectives outlined in this Program in the absence of one or more of the forms of assistance described herein or otherwise available pursuant to the Act; and that the City and HRA hereby find that such forms of assistance are often necessary for the benefit of such persons, families, and goals and that, furthermore, the successful implementation of the objectives of the kind described in this Program has been found to provide impetus for the development of other housing in the City, as well as the general development of the City, by other persons who are not the beneficiaries of such governmentally sponsored or assisted activities. Rental Housin�Purposes. More particularly, the City and HRA find that there exists a need for multi-family rental housing, both to provide rental housing for persons of low and moderate income and to assist in freeing up existing owner- occupied housing for purchase by other qualifying individuals and families, which need is not being filled by private enterprise 1091477.1 9.�, ��b`� �" alone due to a variety of factors, including that the cost of new construction of multi-family rental units may in many cases prove economically unfeasible, given the high costs of construction and prevailing area rental levels, and that therefore appropriate levels of public assistance may be helpful and necessary in bridging that gap. General Descrigtion of the Procrram. This Program consists of the financing of the acquisition and rehabilitation of a building (Hampden Square) currently containing a total of 86 multi-family rental housing units (the "Project"). The initial owner of the Project pursuant to the financing will be Bool Partners Limited Partnership, a Minnesota limited partnership. Location. This Program is limited to the Project. The Project is located at 2333 Long Avenue in Saint Paul, Minnesota. Revenue Bonds. The amount of revenue bonds required to finance this Program is approximately $4,325,000. The proceeds will finance the acquisition and rehabilitation of the Project and pay costs of issuing the bonds, and may be used to establish a reserve. Housing Plan. The City and HRA hereby adopt the Comprehensive Housing Plan of the City of Saint Paul as the housing plan relating to the Project. Monitorincr. The Program will be monitored by the HRA. The HRA expects to enter into or continue suitable agreements with necessary parties to ensure consistent compliance with the objectives of this Program, as well as with the requirements of applicable law. Meeting Needs; Methods. The Program will meet the need for rental housing for persons and families of low and moderate incomes by providing units at an affordable rent. The City and HRA believe that this Program will help meet the identified needs under this Program. The specific methods anticipated to be used include the issuance of revenue bonds under the Act to provide feasible financing for various aspects of the Program so undertaken. The HRA will monitor the implementation of this Program pursuant to its loan agreement for the Project. Authorizatiion. The Program is undertaken pursuant to Minnesota Statutes, 5ection 462C.05, Subdivision 2, for units affordable to persons and families of low and moderate income. Limits on Gross Income. The gross income of occupants will be limited in accordance with the requirements of Minnesota Statutes, Chapter 462C, and with the requirements relating to tax-exempt bonds for qualified residential rental projects. iosia��.i 2 ag-1o'l�- Adopted and approved on November 3, 1999, by the City Council of the City of Saint Paul, Minnesota, and on by the Board of Commissioners of The Housing and Redevelopment Authority of the City of Saint Paul, Minnesota. 1091877.1 CITY COUNCIL OF THE CITY OF SAINT PAUL, MINNESOTA REPORT TO THE CITY COLTNCTI. DATE: November 3, 1999 REGARDING PUBLIC IIEARING: Resolution Reciting A Proposal for Financing a Multifamily Rental Housing Development Project, Approving a Housing Program Therefor and Authorizing the Housing and Redevelopment Authority of the City of Saint Paul to Exercise the Powers Granted in Minnesota Statutes, Sections 462C.01 to 462C.08 �,°1-��0`l�- PURPOSE The Housing and Redevelopment Authority of the City of Saint Paul (HRA) has received an application from the Boisclair Corporation for an additional allocation of up to $900,000 in Tas Exempt Revenue Bonds and up to $500,000 in Ta7cable Revenue Bonds together be used, with a previously approved carry over in 1997 tax exempt revenue bond authority of $2,925,000, toward the acquisition and rehabilitation costs of the Hampden Square Apartments located at 2333 Long Avenue. The purpose of this report is to request the City Council to consider adopting the attached preluninary (inducement) resolution which would approve the following: Authorize the Executive Director of the HRA to enter into a Memorandum of Understanding (MOU) with Mr. Robert Boisclair, Boisclair Corporation, to work towards possible issuance of the Bonds. The MOU also stipulates the terms and conditions for issuance of the Bonds should the HRA decide to issue the Bonds; and 2. Authorize the HRA to issue up to $900,000 of t� exempt multifamily rental revenue bonds far the Froject and up to $500,000 in taxable revenue bonds to be used with a refunding of the $2,925,000 in 1997 tax exempt bond autharity; and 3. Approve a Housing Program, a copy of which is attached for financing the project prepared in accordance with the provisions of Minnesota Statutes, Section 462C.03; and 4. Retain Briggs and Morgan as bond counsel and Piper Jaffray, Inc. as investment banker for said Bonds and authorize them to assist in the preparauon and review of necessary documents relating to the Project and Housing Program and consult with the HRA, City Attorney, Owner, and purchasers of the proposed Bonds. Approval of the inducement resolution and execution of the Memorandum of Understanding does not require or obligate the City or I�RA to issue bonds or cause any action against the City or HRA arising from any failure or refusal by the City or HRA to approve the Project or issuance of the Bonds. With respect to the multifamily rental housing bonds, Section 72.04 of Chapter 72 of the City's q4� to'� �-- Administrative Code provides that the HRA be designated to exercise on behalf of the City the powers conferred by the Minnesota Statutes 462C (housing programs and revenue bonds) but only unless dixected and authorized to do so by resolution adopted by the City Council. Thus the reason, this proposal is initiated before the City Council rather than the HRA. The Bonds are not ¢enerai obli�ation bonds, but are special. limited obliearions of the Housing and Redevelopment Authoritv of the City of Saint Paul. Minnesota and shall never consritute an indebtedness, liabilitv, general or moral obligation, or pledge of the faith or credit or taxin� ower of the I3RA. Cit�of Saint Paul, the State of Minnesota, or any aeency or political subdivision thereof, within the meanine of anv constitutional, statuary or charter provision, nor be a charge aeainst their res�ective eeneral assets, credit or taxing owers. BACKGROiJND The HRA approved on July 8, 1998, a resolution authorizing the issuance of $2,925,000 of tax exempt multi-family revenue bonds and the allocation of up to $122,090 in federal low income housing tax credits for this project. The bonds were part of the HRA's annual ta7t exempt authoriry for 1997 and were carried over to 1998 for this project. The carry over of the bonds required that a bond closing occur by July 15, 1998, or the bonds would be lost. The tax credits were avaIlable to tax exempt projects and are not derived from the annual allocation available to the HRA. After the bond closing, the bonds were parked until a purchase of the project would be finalized. However, the State Legislature approved in the eazly part of 1998 a new law, Minn. Stat. Section 471.9997, which required that an owner of a federally subsidized project that prepays its mortgage or terminates a federal subsidy, a tenant nnpact statement must be given to the local governing body 12 months before the termination is to occur. The tenant impact statement must identify the number of units that will no longer be subject to rent restrictions imposed by the federal program, estunated rents to be charged in comparison to rents under the federal program, and actions the owner will take to assist displaced tenants in obtaining other housing. Copies of the statement aze to be provided to the residents of the project, the MHFA, and the Metropolitan CounciL This requirement became effective August 1, 1998, prior to the sale of the project to Boisclair. The City Attorney's Office determined that the bonds could not be taken out of the parked position until the notice period terminated (12 months) or the seller obtained a Declazatory Judgement from the Court that the Hampden Square Project was exempt from the state law. PROPOSAL The Boisclair proposal is similaz to a HUD approved 1997 California model financed with tax exempt revenue bonds and kept the federal Interest Reduction Payment Contract, ("IRP"), in the project. The Interest Reducfion Payment subsidizes the interest rate of the loan. The Boisclair proposal would use the previous 1997 tas exempt revenue bond issue and keep the IRP in the project. The IRP subsidy of the interest bond rate allows project cashflow to amortize about $900,000 in additional tu� exempt bonds. This would allow the level of rehabilitation to raise by approximately $700,000 from its current level of $600,000 to a total of $1.3 million. By keeping �t4 - �o�t �--- the federal IRP in the project the requiremeni for the 12 month period for the state tenant impact statement would not have been required because there is no prepayment of the 236 mortgage. The City Attomey's Office has concuned that the tenant impact statement would not apply because the federal subsidy is remaining in place and not being terminated. In any event the project sale/closing would occur at about the same time the tenant impact statement one yeaz period expires. This proposal would require: 1. The HRA to hold the 236 mortgage. The 236 mortgage would be sold to the HRA by the Federal National Mortgage Association, funds would be provided by the Boisclair Corporation through use of the 1998 revenue bond proceeds. The HUD mortgage insurance would ternunate at transfer. The HRA, as the mortgagee, would receive the remaining 236 Interest Reduction Payments, to approxunately December 2014, which would be used to pay additional bonds used for rehabilitation. HUD has advised that the HRA is eligible to hold the mortgage for this purpose. A participation agreement would be entered into with the trustee for the bonds assigning to the trustee a 100 % participation interest in the Note, Mortgage and the IRP. The HRA and the trustee will agree that the HRA will not have any right or obligation to enforce the Note, Mortgage, except as instructed by the trustee. The HRA is not obli a2 ted to pay any debt created by the bonds. Only the project revenues and the IRP aze the sole revenues for repayment of the bonds. 2. At the end of the bond repayment period the HRA would convey a form of forgiveness of the mortgage to the owner. 3. As mortgagee, the HRA will have mortgage default privileges, but will be required to not exercise those rights in order to insure the IRP subsidy stream. This would be a requirement of FNMA as credit enhancer to maintain the IRP subsidy stream in the event of a default. 4. HUD currently has a Regulatory Agreement that governs the conditions that must be met by the project owners. Because the HRA would be the holder of the mortgage the HRA would have to assume HUD's role through a Regulatory Agreement with the owners of the project. The HRA would be responsible for obtaining the tenant income certifications, monitoring the project's physical condition, and monitoring the management in the event the manager or the owner (Boisclair) should require replacement. The Minnesota Housing Finance Agency (MHFA) has agreed to perform the HUD monitoring functions and all costs will be paid by the project. A condition of MHFA is that the project be willing to accept 17 units of project based Section 8 subsidized units, for 2 and 3 bedroom units, if the Hollman Consent Decree is amended to allow Saint Paul, with City approval, to accept units. The amendment of the Hollman Decree has not occurred and it is not known if it will be amended. MHFA's concern is that use of the project based Section 8 rent subsidy available through the 3 �� - �e n��--- Hollman Consent Decree is not being used and is a valuable resource to assist renters. PROPOSED Il1iPROVEMENTS Because of the use of the Interest Reduction Payment subsidy a larger scale of rehabilitation improvements can be undertaken, totaling $1.3 million. The rehabilitation consists of siding replacement, facia/trim repair and painting, boiler replacement, kitchen cabinets/lighting, roof replacement, landscaping, parking resurfacing, exterior lighting, bathroom plumbing upgrade, replacement of carpet in hallways, sidewalk/concrete repair, recreation upgrade, and playground replacement. Forty-one garages will also be built. PROPOSED PR03ECT FINANCING The proposed project financing sources and uses aze as follows: Sources Uses Tax Exempt Bonds(98) $2,925,000 Acquisifion Ta� Exempt Bonds $ 900,000 Rehab Taxable Bonds $ 500,000 LIHTC $ 967,190 Total $5,292,190 Cost of Issuance Project Reserves Interest,Taxes,Ins. Tenant Relocation Dev. Fee SofrJCont Org/Legal Total $2,346,354 $1,311,000 $ 215,059 $ 215,000 $ 226,401 $ 195,000 $ 485,135 $ 65,000 233 241 $5,292,190 The projecYs proforma is structured to accommodate a 35 year level debt service amortization. The ProjecYs annual income will support a debt servace payment ratio of 115. Operating expenses appearto be reasonable. REPAYMENT CAPACITY The projected appears to have sufficient project annual income to pay operating expenses and debt service. The value of the IRP subsidy appeazs sufficient to repay the $900,000 in additional tas exempt bonds. MANDATED REQUII2EMENTS AND STANDARDS Pursuant to federal law regarding the issuance of tax-exempt multifamily revenue bonds, at a minunum either 20% or 40% of the 86 dwelling units of the project must be specifically reserved far tenants whose incomes are not greater than either 50% or 60% of the median family income as adjusted for family size. Because this project will be participating in the federal Low Income Housing Tax Credit Program 100% of the units wIll be affordable to persons with an income range of 41- 49% of inedian income, therefore the project meets the mandated requirements FEES The HRA is entitled to a non-refundable application fee of $3,500 far a bond request under $1 million. When the Bonds are issued, the HRA will receive an administrative fee at closing equal to 0.5% of the principal amount of the Bonds. On the first anniversary date of the Bonds the HRA `tR-lo�}- will receive an additiona10.5 % fee. Every year thereafter that the Bonds remain outstanding the HI2A will receive an annual administrative fee equal to 0.1 % of the outstanding principal balance of the Bonds. BACKGROUND ON ALLOCATION OF LOW INCOME HOUSING TAX CREDITS Section 42(h)(4) of the Code provides that under certain circumstances projects financed with taY exempt bonds may qualify for Taic Credit that aze exempt from the Tax Credit volume cap. If the HRA approves the issuance and sale of the additional $900,000 of multifamily ta�c exempt revenue bonds for the acquisirion and rehabilitation of the Hampden Square Apartments, the issuance of the bonds qualifies the Project to receive an additional allocation of $46,765 in Low Income Housing Tax Credit exempt from the volume cap limits. In order to qualify for the allocation of Tas Credit, the HRA must make a deteiminarion that the Tas Credit amount to be clauned is not more than is necessary to make the project feasible and viable as a qualified low-income housing project throughout the Tax Credit period. Once the TaY Credit is allocated, the owner must abide by certain rent and 'ulcome restrictions regarding the units for which Tax Credit was received. The Owner has requested tas credits for 100% of the units. BUDGET IMPACT The multifamily taz� exempt revenue bond and the allocation of the low income housing tax credits to the project have no impact on the City or HRA budget. BUSINESS PROFILE The Boisclair Corporation has been in business since 1974. They currently manage 918 rental units in the metro area and have approxunately $4.5 million in annual rental income. ADVERSE LENDING Mr. Boisclair does not l�ave an adverse lending relationship with the HRA or the City of Saint Paul. PUBLIC PURPOSE The following public purposes will be met: 1. The proposed rehabilitation will maintain the value of the project for providing affordable housing, as defined by the federal low income housing tas credit program, in the city. Without bond financing the proposed improvements would not be financially feasible. 2. The Project will continue to be affordable housing as part of the federal Low Income Housing Tax Credit Program. 3. The proposed fmancing and rehabilitation will reasonably assure the long term viability of the Project and an asset to the surrounding neighborhood. SUPPORT The Hampden Square Apartments proposal has received the District 12, St. Anthony Park Community Council's support for the initial $2,925,000 bond request and received their support for the additional $900,000 in tax exempt bonds. The District Council held meetings with the K:\Shazed�Sanchez'I1HSAptsCityCouncil2 5 °tq - lr, � a- surrounding community about the additional bond request and reaction to the use of Hollman Section 8 units at the project was not well received by some of the neighbors. BOND AUTHORITY; ALLOCATION PROCESS The City of Saint Paul received a 1999 entitlement bond allocation from the State of approximately $16,000,000. For the past several yeazs, the entitlement has been used exclusively to issue mortgage revenue bonds or mortgage credit certificates to finance the City's single family mortgage program. Because the Hampton Square Apartments will be owned by a for-profit entity, the proposed additional $900,000 in ta7c exempt bonds will count as part of the City's entitlement bond allocation. However, staff believes that the single family program is amply funded for 1999 and will carry over an allocation of bonds into 2000. Therefore, issuance of rental revenue bonds would not dimiiush the City's single family program. The Taacable Revenue Bonds don not count against the volume cap. Upon adoption of the inducement resolution staff will proceed to fmalize the financing of the proposal for presentation to the HRA and request the IIRA to consider adoption of a resolution to issue and sell revenue bonds to finance the project. SUMMARY If the City Council should decide that they are not interested in pursuing this proposal and the owner does not utilize the current approved bond amount of $2,925,000 then the t� exempt authority would be lost. The HRA could not reuse that tax exempt bond authority. ATTACHIVIENTS City Council Resolution Prepared by: Tom Sanchez PED 266-6617 K:\Shared�SanchezllHSAptsCiTyCouncil2 q 9`- lo��, � I � v ��stot� uuiN� wurt5 � P�Ltul411"� o� � Fs � NoM�s/'P /��n �t°c� �l ° �,wr�s � _ - ��1::. 1�f�•Rcs� ��.OERv/. N��te�p� + �w, ��coM� C(��`� Z ; Sr. A�tT'Noa�y 17�E�s�C� At.CVt�4l.AG ME�t �5�� -- --- ---- ---- -- --�_-- : 3= iN��l� �'��( (� �� -� t�� 6� � T CITY OF SAINT PAUL Norm Coleman, hfayar September 7, 1999 Louis Furtong 2339 Ellis Avenue Saint Paul, Minnesota 55114 Re: Hampden Squaze Apartments Deaz Mr. Furlong: DEPARTMENT OF PLANNING & ECONOMiC DEVELOPMENT Brian S�veeney, Director qQ � �� 25 �Pest Fourth Street Telephone: 657-266-6565 SaintPauLMN55102 Facsimile:65l-228-32G1 Councilmember Jay Benanav has asked me to respond to concems you have raised regarding the Hampden Square Apartment Project. The current Hampden Square Apartment owner has made it very clear that the partnership is pianning to sell this project. The current owner is not concemed if the project remains subsidized or market rate housing. The Boisclair Corporation, when made aware of the availability of this project, decided that this was a good fit to their current portfolio ofprojecTS. They have a good background in owning/managing subsidized housing. If the sale does not occur as subsidized housing, the Boisclair Corporation may decide to convert the project to mazket rate non-subsidized rental housing. We believe that the conversion to mazket rate rental housing is not an acceptable option for the City especially in light of the lack of affordable rental housing opportunities. ��., �"I This project has been in the works for approximately two yeazs and in ��ecember of 1997, after a public heazing before the City Council and later, in July 1998, apprc val by the Housing and Redevelopment Authority, the project was allocated $2,925,000 in tan exempt revenue bonds. Because ihe actual sale of the project did not occur prior to August I, 1998, ^ I998 new state law mandated a one yeaz waiting period before a sale, in which the federal subsidy is terminated, could occur. Under this law the start of the one yeaz period a tenant impact statement, sent to each tenant and filed with the City, must be prepazed by the owner indicating his intent to sell. During this waiting period the Boisclair Corporation determined that it was important to undertake a lazger scale of rehabilitation improvements and that the use of the cunent interest subsidy could be used, similaz to a California rental housing project fmancing mudel approved � � by HUD. It is the request for an additional tax exempt revenue bond allocation from the HItA that precipitated the Boisclair Corporation to ask to update the District Counci] and community. f The initial District Council input for the initial $2,925,000 in tax exempt revenue bond allocation occurred in early 1998. �� '�iv�a� � � `� �tti,evP �� t �.� � , , � a' The Boisclair Corporation agreeing that the project would accept up to twenty (20) percent project based Section 8 units is a condition imposed by the Minnesota Housing Finance Agency, shou2d Hotlman vnits become available, for their participation in the compliance monitoring for this project. It is because of MHFA's experience that HUD has agreed that MHFA would be acceptable for this monitoring function. In order for the project to continue to utilize an interest rate subsidy, currently provided by HUD, HUD requires that the compliance monitoring, for tenant income, buildin� condition and rent levels, be contracted with an experienced agency, substituting for HUD. The proposed project based Section 8 unit subsidy would come from the Hollman Consent settlement in Minneapolis. For the Hampden Square Apartment project to utilize Hollman units The Consent Decree must be amended to allow the units to be located in Saint Paul. This has not occurred or are we awaze that the parties to the lawsuit, the NAACP and Legal Aid in Minneapolis, have agreed to amend the Consent Decree. The Saint Paul Public Housing Agency is monitoring the Holiman Consent Decree and any future action �vill involve their participation. In the matter of the Boisclair Corporation agreeing to not accept any tenant with a Sertion 8 voucher, above the 20%, would be at the least discriminatory and is not condoned by the Ciry. The;; tenant selection criteria must be applied evenly or they would be subject to legal penalties. Finally, the success of any rental housing project relies on the management experience and policies of the owner. The Boisclair Corporation is committed to maintaining a well run affordable rental housing project. I am convinced that the Boisclair Corporation will continualiy work with the community, now and in the future, to have a well managed project. 'i o tuat end I am encouraging you, through the District Council, to work with the Boisclair Corporation and as a City we must work to attain success. Sincerely, �� ._?^"' Brian S eney Director cc; Mayor Coleman Councilmember Benanav Lori Boisclair Tom Harren Tom Sanchez HampdenSqlComLetter