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99-973Council File # qq '�� 3 �� Green Sheet # � 0 e�1. q S� RESOLUTION CITY OF S�IN� PAUL. MINNESOTA ��' Presented By Referred To Committee: Date 1 RECI`ITNG A PROPOSAL FOR FINANCING 2 A NICJLTI-FAMILY RENTAL HOUSING DEVELOPMENT PROJECT, 3 APPROVING A HOUSING PROGRAM THEREFOR AND AUTHORIZING 4 THE HOUSING AND REDEVELOPMENT AUTHORITY TO 5 EXERCISE THE POWERS GRANTED IN 6 MINNESOTA STATUTES, SECTIONS 462C.01 TO 462C.08 7 (a) WHEREAS, Minnesota Statutes, Chapter 462C (the "Act"), confers upon cities, 8 or housing and redevelopment authorities authorized by ordinance to exercise on behalf of a city 9 the powers conferred by the Act, the power to issue revenue bonds to finance a program for the 10 purposes of plauniug, administering, making or purchasing loans with respect to one or more 11 multifamily housing developments within the boundaries of the city; and 12 (b) WHEREAS, The Housing and Redevelopment Authority of the City of Saint 13 Paul, Minnesota (the "I3RA"), has received from Skyline Tower of Saint Paul Limited 14 Partnerslup, a Minnesota limited partnership (the "Company"), a proposal that the HRA 15 undertake a program (as described and set forth in a writing befare this meeting, the "Housing i 6 Program") to finance a Project hereinafter described, through the issuance of revenue bonds or 17 obligations in one or more series (collectively, the "Bonds") pursuant to the Act; and 18 (c) WHEREAS, up to $20,500,000 of the Bonds or other obligafions may be issued, 19 $10,000,000 taY-exempt from enuUement bonding authority of the City of 5aint Paul, Minnesota 20 (the °CiTy"), $5,000,000 initially tasable but reissued as tax exempt from bonding authority 21 described below, and $5,500,000 in the form of the sale of a participation interest by the HRA in 22 an e�sting mortgage loan to be purchased by the HRA; and 23 (d) WI�REAS, the HRA will finance the Housing Program and issue the Bonds 24 jointly with The Ramsey County Housing & Redevelopment Authority, Minnesota (the "Ramse}� 2 5 County HRA"), which will apply for $5,000,000 of bonding authority for tax-exempt private 2 6 activity bonds in order to provide more tas-exempt financing than the City and I IRA are willing 27 to provide, and the City has on duly 7, 1999, approved the undeitakin.g of the Project by the 28 Ramsey County HRA; and 1088230.1 , :. °lq-R'13 1 (e) VJHEREAS, if the Ramsey County HRA. does not procure sufFicient bonding 2 authority in January, 200Q, from the housing pool, the Minnesota Housing Finance Agency will 3 make it available for the Bonds for the Project up to $5,000,000 pursuant to a"Bond Allocation 4 Transfer Agreement' ; and 5 (fl WHEREAS, the Project to be financed by the Bonds is the acquisition and 6 rehabilitation of a 506 unit low-income housing facility located at 1247 St. Anthony Avenue in 7 the City, and will result in the provision of addifional rental housing facilities for persons of low 8 or moderate income within the community; and 9 (g) WIIEREAS, the Company's proposal calls for the HRA and Ramsey County l0 HRA, indirecfly through the use of proceeds of the Bonds to acquire GNMA Securities, to loan 11 the proceeds realized upon the sale of the Bonds to the Company pursuant to a revenue 12 agreement or agreements wherein the Company will be obligated to make payments at the times 13 and in the amounts sufficient to provide for the prompt payment of principal of, premium, if any, 14 and interest on the Bonds and all costs and expenses of the HRA, Ramsey County HRA, City and 15 Ramsey County, Minnesota, incident to the issuance and sale of the Bonds; and 16 (h) WHEREAS, the City desires to encourage the development of housing facilities 17 designed for occupancy primazily by persons of low and moderate income, and the Project will 18 assist the City in achieving these objectives; and i 9 (i) WHEREAS, a public hearing on the Housing Program and Project was held on 2 0 October 6, 1999, following duly published notice, at which 6me all persons that desired to speak 21 were heard: 22 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Saint Paul, 23 Minnesota, as follows: 24 1. HousingProgram: Authorizafion of HRA. The City hereby approves the Housing 25 Program for the financing of the Project by the issuance of the Bonds and, pursuant to Section 72 2 6 of the Saint Paul Administrative Code, authorizes the HRA to exercise the powers granted in 27 Minnesota Statutes, Sections 462C.01 to 462C.08, both directly and jointly with the Ramsey 28 County IIRA. 29 2. Bonding Authoritv. The City hereby allocates $10,000,000 of its 1999 3 0 entitlement allocation under Miiuiesota Statutes, Chapter 474A, of volume limit for the issuance 31 of tas-exempt private activity bonds to the Bonds to be issued by the HRA jointly with the 3 2 Ramsey County HRA. In addition, the Mayor and Clerk are hereby authorized and directed to 3 3 execute the Bond Allocation Transfer Agreement in the form before this meeting, with such 34 changes thereto, modifications thereof and completions thereto as they shall deem necessary or iosszso.i 2 ORIG{NAL 9q•`t�t3 1 desirable. This allocation of the City's entitlement and entitlement-transfer bonding authority is 2 an aspect of the City's delegafion of powers to the HRA under the Act and under this resolution. 3 3. Sco en of A op roval. Nothing in this resolution shall be construed to require the 4 City or HRA to approve any element of the Project or the issuance of the Bonds, nor shall this 5 resolution be construed as vesting in the Company any cause of action against the City or HRA 6 arising from any failure or refusal by the City or HRA to appmve the Project or issue the Bonds. 7 4. �ecial Limited Oblieafions. Nothing in this resolution or the documents 8 prepazed pursuant hereto shall authorize the expenditure of any municipal funds on the Housing 9 Program or Bonds other than the revenues derived from the Project or othenvise granted to the 10 City or HRA for this purpose. The Bonds shall not consritute a chazge, lien or encumbrance, 11 legal or equitable, upon any properry or funds of the City or HRA except the revenue and 12 proceeds pledged to the payment thereof, nor sha11 the City or HRA be subject to any direct 13 liability thereon. The holders of the Bonds shall never haue the right to compel any exercise of 14 the taxing power of the City or HRA to pay the outstanding principal on the Bonds or the interest 15 thereon, or to enforce payments thereon against any property of the City or IIRA. The Bonds 16 shall recite in substance that the Bonds, including the interest thereon, are payabie solely from 17 the revenues and proceeds pledged to the payment thereof. The Bonds shall not constitute a 18 general obligation of the City or HRA within the meaniug of any constitutional or statutory 19 provision. Adopted by Council: Date �� Adoption Certified by Council Secrefary By: Appi By: 1068230.1 Requested by De artment of: � I�W gy�,9�+r� ar�F�°� �� Form App v d Ci rn By: Appro ayor for Su mission to Council By: .-�? � T,� S��cGieZ Z�6-te�i� � �� D�f�. � 1 � q 9 pv b l�`L t�e.�tr►`►�T TOTAL � OF SIGNATURE PAGES � GREEN SHEET �� _��- � ,.� 9°1-q� 3 N i ��4�, Q �.,.�„ °� '�� Q �� ❑ �.,�,�. ❑ ..�.,�,,,�,� �WYORI�ARfiMRI� ❑ (CL1P ALL LOCATIONS FOR SIGNATURE� �iorr REQUES�o 7i-/��, v�f�u�e �d ��/ �� rl�t Gc //� es d�d7`i v�-� �'^'�P�ar� K� G. �Pirfiowr.e /3v��1 r ife � f�UUp �`n l�ro� ,-�-,. U✓ Li, �i4� �r,`!�w//.� w- ;�� i ��o Sa`ri, d�Jo i- �0�4'S D,-- p�'ldi�' OfJ'/iS%.f'�e'ir9 �� iSsZCGJI�� J�+ti G�� O I�47 �• ��z�z��" "'� ��* PLANNING CAMMISSION CIB COMM[TTEE CNIL �ERVICF�,CQMMISSION TY� `f'f qc�.tr , s. i; � �-� IF IF Fias this ParsoMrm evExv.orked unde� a canhact tor Mis department9 vES NO Hae this PefsaNfirm e�er 6een a cilY emPbYee? YES NO Daes this P��rtn 7oasess a sidll not riamellYP� M�Y wmrR aYY emWoYee? YES Nb Is �hiB P�rtn a fargMed ventloYl YES NO `� a.s b vH f��g�-fx«�a`� �� P�, ___ f Sli/�s,�!= is .��v`�t�'�� yr�J�cf �u�%I � �'/ ,�, AMOUNTOFTR/WSACTIONS � �� v U477 1630URCE TG[x c�,r7iu- (.�1N�'�_ ��. �V.� i'v�,,�Yd (/� d�J �'f ! 5--- �.�' f�`" `z'• cosrmEVexue euocsErEO tuac� u+Ef „�:n ACiN1iY NUIMBER T�adi/< f3z�i S, //Y!' U� icw� iHFOnMnnor� �ow rn � ° o� 6 �`�iX ��-�,u�rr t�o. �l u �e f�v.-F- c. ;� s�!/ ��r�f H,� .� J.u�'f F�esea:*ch ^�nter � ;�_ .•�.. �w,.. �q-a�� CITY COUNCIL OF THE CITY OF SA1NT PAUL, MINNESOTA REPORT TO THE CITY COLJNCIL DATE: Qctober 6, 1999 REGARDING: PUBLIC HEARING - Resolufion Reciting a Proposal for Financing a Multi-fanuly Rentai 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 CTranted in Minnesota Statutes, Sections 462C.01 to 462C.08 PURPOSE The Housing and Redevelopment Authority of the City of Saint Paul (HRA) has received an application from CommonBond Investment Corporation, a subsidiary of CommonBond Communities, requesting the HRA to participate in the financing of the acquisition and rehabilitation of the Skyline Tower Apartments (Project) located at 1247 St. Anthony Avenue, in District 13. The financing would include: 1.The " Bonds" a. $10,000,000 of TaY Exempt Multifamily Revenue Bonds. b. $ 5,000,000 in Taxable Multifamily Revenue Bonds, to be replaced in yeaz 2000 by either bonds obtained by Ramsey County HRA or MHFA. 2. Acquisition of 236 Mortgage: a. $ 5,500,000 obtained by selling a 100% participation interest in the 236 Mortgage to a financial institution. b. HRA becoming mortgagee. 3. Low Income Housing TaY Credits, $9,127,000, for special use with tax exempt bonds. The proposed financing structure would involve the participation of the Ramsey County HRA through a Joint �'owers Agreement with the HRA. - `I'he purpose of this report is to request the City Council to consider adopting the attached preliminary (inducement) resolution which would approve the following: Authorize the Executive Director of the HRA to enter into a Memorandum of Understanding (MOU) with CommonBond Investment Corporation to work towazd possible issuance of the Bonds. The MOU also stipulates the tezms and conditions for issuance of the Bonds should the HRA decide to issue the Bonds; and 2. Authorize HRA to issue, jointly with Ramsey County HRA, up to $10,000,000 of Tax Exempt Multifamily Revenue Bonds, up to $5,000,000 in Taxable Revenue Bonds, and approval for up to $5,000,000 in Tax Exempt Revenue Bonds (available in year 2000) to replace the Taxable Revenue Bonds issued in 1999; and 3. Authorize City staff to prepare a Housing Program for financing the Project prepared in 1 � � -a� � accordance with the provisions of Minnesota Statutes, section 462C.03; and 4. Retain Briggs & Morgan as bond counsel and Piper Jaffray, Inc. as investrnent banker for said Bonds, authorize them to assist in the prepazation and review of necessary documents relating to the Project and Housing Program and consult with the HRA, City Attomey, Owner, and purchasers of the proposed Bonds. Apnroval of the inducement resolution and execution of the Memorandum of Understandine does not require or obliQafe the Citv or HRA to issue bonds or cause anY action against the Citv or HRA arisingfrom anv failure or refusal bv the Citv or HRA to a�prove the project or issuance of the Bonds. With respect to multifamily housing bonds, Section 72.04 of Chapter 72 of the City's Administrative Code provides that the HRA be designated to exercise on behalf of the City the powers conferred by Minnesota Statutes 462C (housing programs and revenue bonds) but only unless directed 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. CommonBond Investment Corporation has obtained a purchase agreement for the property that requires sale by February 15, 2000. BACKGROUND Several monYhs ago representatives from the CommonBond Communities visited with City Council members to advise that CommonBond Communities was actively pursuing the purchase of the Skyline Tower Project located at 1247 St. Anthony Avenue, from its current owner Skyline Towers Company (a limited partnership), with Sentinel Hoidings Company as the managing general partner. Sentinel Iulanagement Company, a whoily owned subsidiary of Sentinel Holdings Company, manages the project. The Skyline Tower Apartrnents is a federally subsidized (Ht3B Section 236 Program) affordable rental housing project built in 1971, containing 506 units. Skyline Towets is approximately 90% project based Section 8 assisted which limits tenants rent payments to no more than 30% of income. The unit mix is comprised of 46 efficiencies, 322 one-bedroom and 138 two-bedroom units. There are 22 units on each of the 23 floors. At the end of 1998 the average annuai household income was under $10,000. Over half of the households are on public assistance or receive social security benefits and about half work part-time. About 70% aze East African immigrants or African-American; 20% are Southeast Asian and less than 10% are white. Over 70% of households are female headed. There are approximately 300 children and less than 50 residents over 65 years of age. PROPOSAL The proposal would be to acquire and rehabilitate the project units and construct a 2 story Advantage Center. The Advantage Center would provide services to help tenants obtain education and cazeer development to improve their economic potential. The Advanta�e Center builds on the current work done by Model Cities of St. Paul and would continue that relationship. Major rehabilitation items include sprinkler system, plumbing, corridor ventilation, doors, painting, exterior siding work, and 2 �l�-�'l3 appliances. CommonBond Investment, a subsidiary of CommonBond Communities, would be the managing general partner of the partnership to be formed to own the project. The PED Director has met with the CommonBond Communities and has agreed that he would support a$10,000,000 ta�c exempt request to the HR.A if Ramsey County would aa ee to pursue a tax exempt bond application for $5,000,000, to the state unified pool administered by the Minnesota Bepartment of Finance. After receiving approval from the City Council, the Ramsey County Boazd held a public hearing on July 27, 1999, and approved the submission of an application for tax exempt bonds. The application for funding would occur in 3anuary 2000. PROPOSED PROJECT FINANCING The proposed Skyline Tower Apartment project financing would use tax exempt revenue bonds, taxable revenue bonds, subordinate financing and low income housing tax credits that are special for tax exempt bonds and are not out of the City's annuai allocation. The proposed Sources and Uses aze as follows: sa�rces City Tar Exempt Bonds Taxahle bonds Subordinate 2nd Mor[gage 4%Tax Credi[s Assumed HUD loan Total $10,000,OD0 $ ] 3,039,000 5,000,000* 14,000,000 5,500,000"* Architect Fee I25,000 9,127,000 ReplacementReserve 500,000 920.000 Bond Costs 512,000 $30,547,000 Mortgage Banker Fee 307,500 Interim Interest 467,850 HUD Mort. Ins. 205,000 HUD Inspect. Fee 102,500 HUD AQplication Fee 61,500 HRA Fee 105,000 DeveluperFee•** I,OOQ000 Title and recording 57,150 - . - __ - -�— - -- - - --- Surveyinglotherfees 25,000 LOC/bond premium � - 15,000 Legai/organizationa4 7,500 Mortgage Banker legal 17,500 Professional Reporiz 5_000 Total $30,547,000 ' The Taxabie bonds w�ill be replaced by [ac exempt bonds allocated to Ramsey County HRA from the State pool or MHFA from their year 2000 ailocation. '* The Subordina[e 2nd Mortgage is the current 236 Mortgage, the acquisition of which was paid from proceeds paid [o the HRA by a financial institution for a 100% participation interest in that 236 mortgaee. •*'The Developer Fee is within the guide established by the adopted resolution of the City CounciC "The lessor of $8,500 per uni[ or 10% of totat developmeni cost less the cost of acquisition for Ihe first 30 units of a rehabilitation project. The lessor of $6,375 per unit or 10%of total development cost less the cost of acquisition for units 31 [o I i0 of a rehabilitation project." The financing structure is modeled after a successful 1997 California project financing which received HUD approval. HUD has indicated they aze very interested in the Skyline Tower project. In order to "model" the California deal and obtain HtTD approval it is proposed that the HRA purchase the Uses Acquisition Rehabilitation t�:\SAV CHEZ'I�SkylineTo« crCiryCounciLRp•� a�-q�� existing 236 Mortgage, not prepay the loan, and then cancel the current FHA insurance. This wili allow the 236 mortgage to become a subordinated debt obligation secured by the project. New mortgage documents will be prepared and a new agreement for Interest Reduction Payments ("IRP") will be entered into among the new project owner (limited partnership), the St. Paul HRA and HUD. By the HRA holding the mort�age the federal IRP, which HUD provides to the Project to lower the interest rate to 1%, remains with the project. HCTD requires that a local jurisdiction must hold the mortgage when the HL7D insurance is terminated in order for the IRP to remain in place. The retention of this IRP funding stream, to pay subordinate debt, is key to this project. To accomplish the purchase of the 236 Mortgage the HRA will enter into a Participation Agreement with a financial institution for a 100% participation interest in the 236 Mortgage from the HRA. The HRA will use the proceeds from the participation interest to acquire the 236 Mortgage. The HRA will become the mortgagee of record and under the Participation Agreement the powers of the mortgagee will be exercised by the participation financiai institution. The New Mortgage Loan will be insured by FHA under Section 221(d) (4) and the 236 Mortgage will be subordinated to the New Mortgage Loan financed by the bond proceeds. The Minnesota Housing Finance Agency has indicated they would be interested in providing the services of annual property inspection, renUbudget review and tenant certification, functions which HLTD currentiy performs but which HUD cannot perform with the termination of FHA insurance. The details of this agreement will be completed soon. All costs will be paid by the project. At no time will the Project become an obligation of the City or HRA, the Project revenues are the sole source of �avment for the Bonds and subordinate debt. RAMSEY COUNTY PARTICIPATION The City does not have sufficient tax exempt revenue bond authority available for 1999. The participation by Ramsey County HRA would be in their application to the Minnesota Department of Pinance, pursuant to Minn. Stat., Ch. 474A, for an allocarion of revenue bond authority from a limited pool of revenue bonds. The City as a suballocator cannot submit an application for revenue bonds from this pool unless ail tax exempt authority for 1999 has been used, which will not occur. The City Council considered and approved at their July 7, 1999, meeting a resolution, pursuant to Minn. Stat., Secs. 462C.01 and 496.004, that authorized Ramsey County to undertake and finance the project through the issuance of tax exempt revenue bonds. This authorization by the City Council was required prior to the Ramsey County Board's considezation of an application to the Minnesota Department of Finance. The Ramsey County Board at their duly 27, 1999, public heazing approved an application for submission to the Minnesota Department of Finance for this project. This action bv Ramsev Coun is �roject saecific and would not occur if the CitX had sufficient tax exemnt revenue bond authoritv. Because the application will be made in 3anuary 2000, the Ramsey County HRA must be designated as a co-issuer in the 1999 sale of bonds to assure that any amount of bonds allocated can be substituted for the taxable bonds without further County action.. [If Ramsey County is not successful in obtaining all or a portion of the $5,000,000 in bond authority from the State Pool, then the Minnesota Housing Financing Agency has taken Board action to make available up to $5,000,000 in yeaz 2000 taY exempt authority. The MHFA's taY exempt authority can only be made 1:'�S.ANCHEZiISkylineTowerCityCouncil.Rp 7 � a`� -�� available to the Saint Paul HRA.] Minnesota Statutes, Section 471.59 ("Joint Powers AcY') provides that two or more govemmental units, by agreement through resolutions apgroved by their governing bodies, may joindy exercise any power common to the contracting parties, and may provide for the exercise of such power by one of the participating governmental uniu on behalf of the other participating uniu. It is proposed that the Saint Paul HRA be the Proposed Issuer. FEES A non-refundable $5,000 application fee has been submitted by CommonBond Investment Corporation. Should the Bonds be issued, the HRA wili receive an administrative fee at ciosing equal to 0.5% of the principal balance of the Bonds. On the first anniversary date of the Bonds the HRA will receive an additional 0.5% fee. Every yeaz thereafter that the Bonds remain outstanding the HRA will receive an annual administrative fee equal to .O1 % of the outstanding principal balance of the Bonds. BUSINESS PROFILE The CommonBond Investment Corporation is a wholly owned subsidiary of CommonBond Communities and owns general partner interests in housing limited partnerships for CommonBond Communities sponsored projects. CommonBond Communities is a 501 (c) (3) not -for-profit corporation and has been in business for over 20 years. CommonBond Services is a 501 (c) (3) not - for-profit corporation which provides Advantage Center services to residents of CommonBond sponsored housing projects. CommonBond Housing is a 501 (c) (3) not -for-profit corporation which provides management to CommonBond sponsored housing projects. They currently own or manage 2,363 rental units in the Twin Cities that are affordable to low income tenants. ADVERSE LENDING The CommonBond Investment Corporation does not have an adverse lending relationship with the City. In 1998 the GommonBond Investment Corporation was given HRA financing assistance to undertake the acquisition and rehabilitation of the Cathedral Hill Homes (Selby-Dayton Apartments), which is nearing completion. REPAYMENT CAPACTTY The project appears to have sufficient project annual income to pay operating expenses and debt service. The annual revenues and operating expenses appeaz reasonable based on the audited financial reports obtained from the current owner, Skyline Towers Company (a limited partnership). SUPPORT The Lexington-Hamline Community Council supports the proposal. PUBLIC PURPOSE The following public purposes will be met: The acquisition of the 236 Mortgage is a necessary part of the Project financing ti�at aliows the f::\$ANCHEZ'I�SkylineTo�cerCin�Council.Rpt2 5 °�`�- f � preservation of affordable housing units and continues the project based Section 8 assistance which subsidizes the rent payments of low income Saint Paul residents. 2. The proposed financing and rehabilitation will reasonably assure the long tertn viability of the Project as an asset to the surrounding neighborhood of affordable housing stock. BOND AUTHORITY: ALLOCATION PROCESS The City of Saint Paul received a 1999 entitlement bond allocation from the State of approximately $16,048,000. For the past several yeus, a lazge part of 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 Skyline Tower Apartments will be owned by a for-profit entity, the proposed bond amount of $10,000,000 will count as part of the City's entitlement bond aliocation. However, staff believes that the single family mortgage program is amply funded for 1999. Therefore, issuance of rental revenue Bonds would not diminish the City's single family mortgage program. The Taxable Revenue Bonds do not impact the City's entitlement. The strategy and timing of committing the City's entitlement allocation between the mortgage revenue bond program and this proposai will be worked out by staff between the time the inducement resolution is approved by the City Council and the time the issuance of the Bonds would be approved by the HRA. Upon adoption of the inducement resolution PED will proceed to prepare a housing program to finance ' the proposed pro}ect. Purthermore, PED will present to the HRA Boazd of Commissioners a report � detailing the financing of the Projeci and request the HRA to consider adoption of a resolution to issue and sell revenue Bonds to finance the project and enter into a Joint Powers Agreement with Ramsey County HRA. — --- -_-_ - - - -- rTfii'A�HNiEN'I'S - - City Council Resolution Prepared by: Tom Sanchez PED Project Manager 266-6617 1:'`.SA?�'CHEZ"IISk} IineTowerCin CounciLRpt� Council File # qq '�� 3 �� Green Sheet # � 0 e�1. q S� RESOLUTION CITY OF S�IN� PAUL. MINNESOTA ��' Presented By Referred To Committee: Date 1 RECI`ITNG A PROPOSAL FOR FINANCING 2 A NICJLTI-FAMILY RENTAL HOUSING DEVELOPMENT PROJECT, 3 APPROVING A HOUSING PROGRAM THEREFOR AND AUTHORIZING 4 THE HOUSING AND REDEVELOPMENT AUTHORITY TO 5 EXERCISE THE POWERS GRANTED IN 6 MINNESOTA STATUTES, SECTIONS 462C.01 TO 462C.08 7 (a) WHEREAS, Minnesota Statutes, Chapter 462C (the "Act"), confers upon cities, 8 or housing and redevelopment authorities authorized by ordinance to exercise on behalf of a city 9 the powers conferred by the Act, the power to issue revenue bonds to finance a program for the 10 purposes of plauniug, administering, making or purchasing loans with respect to one or more 11 multifamily housing developments within the boundaries of the city; and 12 (b) WHEREAS, The Housing and Redevelopment Authority of the City of Saint 13 Paul, Minnesota (the "I3RA"), has received from Skyline Tower of Saint Paul Limited 14 Partnerslup, a Minnesota limited partnership (the "Company"), a proposal that the HRA 15 undertake a program (as described and set forth in a writing befare this meeting, the "Housing i 6 Program") to finance a Project hereinafter described, through the issuance of revenue bonds or 17 obligations in one or more series (collectively, the "Bonds") pursuant to the Act; and 18 (c) WHEREAS, up to $20,500,000 of the Bonds or other obligafions may be issued, 19 $10,000,000 taY-exempt from enuUement bonding authority of the City of 5aint Paul, Minnesota 20 (the °CiTy"), $5,000,000 initially tasable but reissued as tax exempt from bonding authority 21 described below, and $5,500,000 in the form of the sale of a participation interest by the HRA in 22 an e�sting mortgage loan to be purchased by the HRA; and 23 (d) WI�REAS, the HRA will finance the Housing Program and issue the Bonds 24 jointly with The Ramsey County Housing & Redevelopment Authority, Minnesota (the "Ramse}� 2 5 County HRA"), which will apply for $5,000,000 of bonding authority for tax-exempt private 2 6 activity bonds in order to provide more tas-exempt financing than the City and I IRA are willing 27 to provide, and the City has on duly 7, 1999, approved the undeitakin.g of the Project by the 28 Ramsey County HRA; and 1088230.1 , :. °lq-R'13 1 (e) VJHEREAS, if the Ramsey County HRA. does not procure sufFicient bonding 2 authority in January, 200Q, from the housing pool, the Minnesota Housing Finance Agency will 3 make it available for the Bonds for the Project up to $5,000,000 pursuant to a"Bond Allocation 4 Transfer Agreement' ; and 5 (fl WHEREAS, the Project to be financed by the Bonds is the acquisition and 6 rehabilitation of a 506 unit low-income housing facility located at 1247 St. Anthony Avenue in 7 the City, and will result in the provision of addifional rental housing facilities for persons of low 8 or moderate income within the community; and 9 (g) WIIEREAS, the Company's proposal calls for the HRA and Ramsey County l0 HRA, indirecfly through the use of proceeds of the Bonds to acquire GNMA Securities, to loan 11 the proceeds realized upon the sale of the Bonds to the Company pursuant to a revenue 12 agreement or agreements wherein the Company will be obligated to make payments at the times 13 and in the amounts sufficient to provide for the prompt payment of principal of, premium, if any, 14 and interest on the Bonds and all costs and expenses of the HRA, Ramsey County HRA, City and 15 Ramsey County, Minnesota, incident to the issuance and sale of the Bonds; and 16 (h) WHEREAS, the City desires to encourage the development of housing facilities 17 designed for occupancy primazily by persons of low and moderate income, and the Project will 18 assist the City in achieving these objectives; and i 9 (i) WHEREAS, a public hearing on the Housing Program and Project was held on 2 0 October 6, 1999, following duly published notice, at which 6me all persons that desired to speak 21 were heard: 22 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Saint Paul, 23 Minnesota, as follows: 24 1. HousingProgram: Authorizafion of HRA. The City hereby approves the Housing 25 Program for the financing of the Project by the issuance of the Bonds and, pursuant to Section 72 2 6 of the Saint Paul Administrative Code, authorizes the HRA to exercise the powers granted in 27 Minnesota Statutes, Sections 462C.01 to 462C.08, both directly and jointly with the Ramsey 28 County IIRA. 29 2. Bonding Authoritv. The City hereby allocates $10,000,000 of its 1999 3 0 entitlement allocation under Miiuiesota Statutes, Chapter 474A, of volume limit for the issuance 31 of tas-exempt private activity bonds to the Bonds to be issued by the HRA jointly with the 3 2 Ramsey County HRA. In addition, the Mayor and Clerk are hereby authorized and directed to 3 3 execute the Bond Allocation Transfer Agreement in the form before this meeting, with such 34 changes thereto, modifications thereof and completions thereto as they shall deem necessary or iosszso.i 2 ORIG{NAL 9q•`t�t3 1 desirable. This allocation of the City's entitlement and entitlement-transfer bonding authority is 2 an aspect of the City's delegafion of powers to the HRA under the Act and under this resolution. 3 3. Sco en of A op roval. Nothing in this resolution shall be construed to require the 4 City or HRA to approve any element of the Project or the issuance of the Bonds, nor shall this 5 resolution be construed as vesting in the Company any cause of action against the City or HRA 6 arising from any failure or refusal by the City or HRA to appmve the Project or issue the Bonds. 7 4. �ecial Limited Oblieafions. Nothing in this resolution or the documents 8 prepazed pursuant hereto shall authorize the expenditure of any municipal funds on the Housing 9 Program or Bonds other than the revenues derived from the Project or othenvise granted to the 10 City or HRA for this purpose. The Bonds shall not consritute a chazge, lien or encumbrance, 11 legal or equitable, upon any properry or funds of the City or HRA except the revenue and 12 proceeds pledged to the payment thereof, nor sha11 the City or HRA be subject to any direct 13 liability thereon. The holders of the Bonds shall never haue the right to compel any exercise of 14 the taxing power of the City or HRA to pay the outstanding principal on the Bonds or the interest 15 thereon, or to enforce payments thereon against any property of the City or IIRA. The Bonds 16 shall recite in substance that the Bonds, including the interest thereon, are payabie solely from 17 the revenues and proceeds pledged to the payment thereof. The Bonds shall not constitute a 18 general obligation of the City or HRA within the meaniug of any constitutional or statutory 19 provision. Adopted by Council: Date �� Adoption Certified by Council Secrefary By: Appi By: 1068230.1 Requested by De artment of: � I�W gy�,9�+r� ar�F�°� �� Form App v d Ci rn By: Appro ayor for Su mission to Council By: .-�? � T,� S��cGieZ Z�6-te�i� � �� D�f�. � 1 � q 9 pv b l�`L t�e.�tr►`►�T TOTAL � OF SIGNATURE PAGES � GREEN SHEET �� _��- � ,.� 9°1-q� 3 N i ��4�, Q �.,.�„ °� '�� Q �� ❑ �.,�,�. ❑ ..�.,�,,,�,� �WYORI�ARfiMRI� ❑ (CL1P ALL LOCATIONS FOR SIGNATURE� �iorr REQUES�o 7i-/��, v�f�u�e �d ��/ �� rl�t Gc //� es d�d7`i v�-� �'^'�P�ar� K� G. �Pirfiowr.e /3v��1 r ife � f�UUp �`n l�ro� ,-�-,. U✓ Li, �i4� �r,`!�w//.� w- ;�� i ��o Sa`ri, d�Jo i- �0�4'S D,-- p�'ldi�' OfJ'/iS%.f'�e'ir9 �� iSsZCGJI�� J�+ti G�� O I�47 �• ��z�z��" "'� ��* PLANNING CAMMISSION CIB COMM[TTEE CNIL �ERVICF�,CQMMISSION TY� `f'f qc�.tr , s. i; � �-� IF IF Fias this ParsoMrm evExv.orked unde� a canhact tor Mis department9 vES NO Hae this PefsaNfirm e�er 6een a cilY emPbYee? YES NO Daes this P��rtn 7oasess a sidll not riamellYP� M�Y wmrR aYY emWoYee? YES Nb Is �hiB P�rtn a fargMed ventloYl YES NO `� a.s b vH f��g�-fx«�a`� �� P�, ___ f Sli/�s,�!= is .��v`�t�'�� yr�J�cf �u�%I � �'/ ,�, AMOUNTOFTR/WSACTIONS � �� v U477 1630URCE TG[x c�,r7iu- (.�1N�'�_ ��. �V.� i'v�,,�Yd (/� d�J �'f ! 5--- �.�' f�`" `z'• cosrmEVexue euocsErEO tuac� u+Ef „�:n ACiN1iY NUIMBER T�adi/< f3z�i S, //Y!' U� icw� iHFOnMnnor� �ow rn � ° o� 6 �`�iX ��-�,u�rr t�o. �l u �e f�v.-F- c. ;� s�!/ ��r�f H,� .� J.u�'f F�esea:*ch ^�nter � ;�_ .•�.. �w,.. �q-a�� CITY COUNCIL OF THE CITY OF SA1NT PAUL, MINNESOTA REPORT TO THE CITY COLJNCIL DATE: Qctober 6, 1999 REGARDING: PUBLIC HEARING - Resolufion Reciting a Proposal for Financing a Multi-fanuly Rentai 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 CTranted in Minnesota Statutes, Sections 462C.01 to 462C.08 PURPOSE The Housing and Redevelopment Authority of the City of Saint Paul (HRA) has received an application from CommonBond Investment Corporation, a subsidiary of CommonBond Communities, requesting the HRA to participate in the financing of the acquisition and rehabilitation of the Skyline Tower Apartments (Project) located at 1247 St. Anthony Avenue, in District 13. The financing would include: 1.The " Bonds" a. $10,000,000 of TaY Exempt Multifamily Revenue Bonds. b. $ 5,000,000 in Taxable Multifamily Revenue Bonds, to be replaced in yeaz 2000 by either bonds obtained by Ramsey County HRA or MHFA. 2. Acquisition of 236 Mortgage: a. $ 5,500,000 obtained by selling a 100% participation interest in the 236 Mortgage to a financial institution. b. HRA becoming mortgagee. 3. Low Income Housing TaY Credits, $9,127,000, for special use with tax exempt bonds. The proposed financing structure would involve the participation of the Ramsey County HRA through a Joint �'owers Agreement with the HRA. - `I'he purpose of this report is to request the City Council to consider adopting the attached preliminary (inducement) resolution which would approve the following: Authorize the Executive Director of the HRA to enter into a Memorandum of Understanding (MOU) with CommonBond Investment Corporation to work towazd possible issuance of the Bonds. The MOU also stipulates the tezms and conditions for issuance of the Bonds should the HRA decide to issue the Bonds; and 2. Authorize HRA to issue, jointly with Ramsey County HRA, up to $10,000,000 of Tax Exempt Multifamily Revenue Bonds, up to $5,000,000 in Taxable Revenue Bonds, and approval for up to $5,000,000 in Tax Exempt Revenue Bonds (available in year 2000) to replace the Taxable Revenue Bonds issued in 1999; and 3. Authorize City staff to prepare a Housing Program for financing the Project prepared in 1 � � -a� � accordance with the provisions of Minnesota Statutes, section 462C.03; and 4. Retain Briggs & Morgan as bond counsel and Piper Jaffray, Inc. as investrnent banker for said Bonds, authorize them to assist in the prepazation and review of necessary documents relating to the Project and Housing Program and consult with the HRA, City Attomey, Owner, and purchasers of the proposed Bonds. Apnroval of the inducement resolution and execution of the Memorandum of Understandine does not require or obliQafe the Citv or HRA to issue bonds or cause anY action against the Citv or HRA arisingfrom anv failure or refusal bv the Citv or HRA to a�prove the project or issuance of the Bonds. With respect to multifamily housing bonds, Section 72.04 of Chapter 72 of the City's Administrative Code provides that the HRA be designated to exercise on behalf of the City the powers conferred by Minnesota Statutes 462C (housing programs and revenue bonds) but only unless directed 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. CommonBond Investment Corporation has obtained a purchase agreement for the property that requires sale by February 15, 2000. BACKGROUND Several monYhs ago representatives from the CommonBond Communities visited with City Council members to advise that CommonBond Communities was actively pursuing the purchase of the Skyline Tower Project located at 1247 St. Anthony Avenue, from its current owner Skyline Towers Company (a limited partnership), with Sentinel Hoidings Company as the managing general partner. Sentinel Iulanagement Company, a whoily owned subsidiary of Sentinel Holdings Company, manages the project. The Skyline Tower Apartrnents is a federally subsidized (Ht3B Section 236 Program) affordable rental housing project built in 1971, containing 506 units. Skyline Towets is approximately 90% project based Section 8 assisted which limits tenants rent payments to no more than 30% of income. The unit mix is comprised of 46 efficiencies, 322 one-bedroom and 138 two-bedroom units. There are 22 units on each of the 23 floors. At the end of 1998 the average annuai household income was under $10,000. Over half of the households are on public assistance or receive social security benefits and about half work part-time. About 70% aze East African immigrants or African-American; 20% are Southeast Asian and less than 10% are white. Over 70% of households are female headed. There are approximately 300 children and less than 50 residents over 65 years of age. PROPOSAL The proposal would be to acquire and rehabilitate the project units and construct a 2 story Advantage Center. The Advantage Center would provide services to help tenants obtain education and cazeer development to improve their economic potential. The Advanta�e Center builds on the current work done by Model Cities of St. Paul and would continue that relationship. Major rehabilitation items include sprinkler system, plumbing, corridor ventilation, doors, painting, exterior siding work, and 2 �l�-�'l3 appliances. CommonBond Investment, a subsidiary of CommonBond Communities, would be the managing general partner of the partnership to be formed to own the project. The PED Director has met with the CommonBond Communities and has agreed that he would support a$10,000,000 ta�c exempt request to the HR.A if Ramsey County would aa ee to pursue a tax exempt bond application for $5,000,000, to the state unified pool administered by the Minnesota Bepartment of Finance. After receiving approval from the City Council, the Ramsey County Boazd held a public hearing on July 27, 1999, and approved the submission of an application for tax exempt bonds. The application for funding would occur in 3anuary 2000. PROPOSED PROJECT FINANCING The proposed Skyline Tower Apartment project financing would use tax exempt revenue bonds, taxable revenue bonds, subordinate financing and low income housing tax credits that are special for tax exempt bonds and are not out of the City's annuai allocation. The proposed Sources and Uses aze as follows: sa�rces City Tar Exempt Bonds Taxahle bonds Subordinate 2nd Mor[gage 4%Tax Credi[s Assumed HUD loan Total $10,000,OD0 $ ] 3,039,000 5,000,000* 14,000,000 5,500,000"* Architect Fee I25,000 9,127,000 ReplacementReserve 500,000 920.000 Bond Costs 512,000 $30,547,000 Mortgage Banker Fee 307,500 Interim Interest 467,850 HUD Mort. Ins. 205,000 HUD Inspect. Fee 102,500 HUD AQplication Fee 61,500 HRA Fee 105,000 DeveluperFee•** I,OOQ000 Title and recording 57,150 - . - __ - -�— - -- - - --- Surveyinglotherfees 25,000 LOC/bond premium � - 15,000 Legai/organizationa4 7,500 Mortgage Banker legal 17,500 Professional Reporiz 5_000 Total $30,547,000 ' The Taxabie bonds w�ill be replaced by [ac exempt bonds allocated to Ramsey County HRA from the State pool or MHFA from their year 2000 ailocation. '* The Subordina[e 2nd Mortgage is the current 236 Mortgage, the acquisition of which was paid from proceeds paid [o the HRA by a financial institution for a 100% participation interest in that 236 mortgaee. •*'The Developer Fee is within the guide established by the adopted resolution of the City CounciC "The lessor of $8,500 per uni[ or 10% of totat developmeni cost less the cost of acquisition for Ihe first 30 units of a rehabilitation project. The lessor of $6,375 per unit or 10%of total development cost less the cost of acquisition for units 31 [o I i0 of a rehabilitation project." The financing structure is modeled after a successful 1997 California project financing which received HUD approval. HUD has indicated they aze very interested in the Skyline Tower project. In order to "model" the California deal and obtain HtTD approval it is proposed that the HRA purchase the Uses Acquisition Rehabilitation t�:\SAV CHEZ'I�SkylineTo« crCiryCounciLRp•� a�-q�� existing 236 Mortgage, not prepay the loan, and then cancel the current FHA insurance. This wili allow the 236 mortgage to become a subordinated debt obligation secured by the project. New mortgage documents will be prepared and a new agreement for Interest Reduction Payments ("IRP") will be entered into among the new project owner (limited partnership), the St. Paul HRA and HUD. By the HRA holding the mort�age the federal IRP, which HUD provides to the Project to lower the interest rate to 1%, remains with the project. HCTD requires that a local jurisdiction must hold the mortgage when the HL7D insurance is terminated in order for the IRP to remain in place. The retention of this IRP funding stream, to pay subordinate debt, is key to this project. To accomplish the purchase of the 236 Mortgage the HRA will enter into a Participation Agreement with a financial institution for a 100% participation interest in the 236 Mortgage from the HRA. The HRA will use the proceeds from the participation interest to acquire the 236 Mortgage. The HRA will become the mortgagee of record and under the Participation Agreement the powers of the mortgagee will be exercised by the participation financiai institution. The New Mortgage Loan will be insured by FHA under Section 221(d) (4) and the 236 Mortgage will be subordinated to the New Mortgage Loan financed by the bond proceeds. The Minnesota Housing Finance Agency has indicated they would be interested in providing the services of annual property inspection, renUbudget review and tenant certification, functions which HLTD currentiy performs but which HUD cannot perform with the termination of FHA insurance. The details of this agreement will be completed soon. All costs will be paid by the project. At no time will the Project become an obligation of the City or HRA, the Project revenues are the sole source of �avment for the Bonds and subordinate debt. RAMSEY COUNTY PARTICIPATION The City does not have sufficient tax exempt revenue bond authority available for 1999. The participation by Ramsey County HRA would be in their application to the Minnesota Department of Pinance, pursuant to Minn. Stat., Ch. 474A, for an allocarion of revenue bond authority from a limited pool of revenue bonds. The City as a suballocator cannot submit an application for revenue bonds from this pool unless ail tax exempt authority for 1999 has been used, which will not occur. The City Council considered and approved at their July 7, 1999, meeting a resolution, pursuant to Minn. Stat., Secs. 462C.01 and 496.004, that authorized Ramsey County to undertake and finance the project through the issuance of tax exempt revenue bonds. This authorization by the City Council was required prior to the Ramsey County Board's considezation of an application to the Minnesota Department of Finance. The Ramsey County Board at their duly 27, 1999, public heazing approved an application for submission to the Minnesota Department of Finance for this project. This action bv Ramsev Coun is �roject saecific and would not occur if the CitX had sufficient tax exemnt revenue bond authoritv. Because the application will be made in 3anuary 2000, the Ramsey County HRA must be designated as a co-issuer in the 1999 sale of bonds to assure that any amount of bonds allocated can be substituted for the taxable bonds without further County action.. [If Ramsey County is not successful in obtaining all or a portion of the $5,000,000 in bond authority from the State Pool, then the Minnesota Housing Financing Agency has taken Board action to make available up to $5,000,000 in yeaz 2000 taY exempt authority. The MHFA's taY exempt authority can only be made 1:'�S.ANCHEZiISkylineTowerCityCouncil.Rp 7 � a`� -�� available to the Saint Paul HRA.] Minnesota Statutes, Section 471.59 ("Joint Powers AcY') provides that two or more govemmental units, by agreement through resolutions apgroved by their governing bodies, may joindy exercise any power common to the contracting parties, and may provide for the exercise of such power by one of the participating governmental uniu on behalf of the other participating uniu. It is proposed that the Saint Paul HRA be the Proposed Issuer. FEES A non-refundable $5,000 application fee has been submitted by CommonBond Investment Corporation. Should the Bonds be issued, the HRA wili receive an administrative fee at ciosing equal to 0.5% of the principal balance of the Bonds. On the first anniversary date of the Bonds the HRA will receive an additional 0.5% fee. Every yeaz thereafter that the Bonds remain outstanding the HRA will receive an annual administrative fee equal to .O1 % of the outstanding principal balance of the Bonds. BUSINESS PROFILE The CommonBond Investment Corporation is a wholly owned subsidiary of CommonBond Communities and owns general partner interests in housing limited partnerships for CommonBond Communities sponsored projects. CommonBond Communities is a 501 (c) (3) not -for-profit corporation and has been in business for over 20 years. CommonBond Services is a 501 (c) (3) not - for-profit corporation which provides Advantage Center services to residents of CommonBond sponsored housing projects. CommonBond Housing is a 501 (c) (3) not -for-profit corporation which provides management to CommonBond sponsored housing projects. They currently own or manage 2,363 rental units in the Twin Cities that are affordable to low income tenants. ADVERSE LENDING The CommonBond Investment Corporation does not have an adverse lending relationship with the City. In 1998 the GommonBond Investment Corporation was given HRA financing assistance to undertake the acquisition and rehabilitation of the Cathedral Hill Homes (Selby-Dayton Apartments), which is nearing completion. REPAYMENT CAPACTTY The project appears to have sufficient project annual income to pay operating expenses and debt service. The annual revenues and operating expenses appeaz reasonable based on the audited financial reports obtained from the current owner, Skyline Towers Company (a limited partnership). SUPPORT The Lexington-Hamline Community Council supports the proposal. PUBLIC PURPOSE The following public purposes will be met: The acquisition of the 236 Mortgage is a necessary part of the Project financing ti�at aliows the f::\$ANCHEZ'I�SkylineTo�cerCin�Council.Rpt2 5 °�`�- f � preservation of affordable housing units and continues the project based Section 8 assistance which subsidizes the rent payments of low income Saint Paul residents. 2. The proposed financing and rehabilitation will reasonably assure the long tertn viability of the Project as an asset to the surrounding neighborhood of affordable housing stock. BOND AUTHORITY: ALLOCATION PROCESS The City of Saint Paul received a 1999 entitlement bond allocation from the State of approximately $16,048,000. For the past several yeus, a lazge part of 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 Skyline Tower Apartments will be owned by a for-profit entity, the proposed bond amount of $10,000,000 will count as part of the City's entitlement bond aliocation. However, staff believes that the single family mortgage program is amply funded for 1999. Therefore, issuance of rental revenue Bonds would not diminish the City's single family mortgage program. The Taxable Revenue Bonds do not impact the City's entitlement. The strategy and timing of committing the City's entitlement allocation between the mortgage revenue bond program and this proposai will be worked out by staff between the time the inducement resolution is approved by the City Council and the time the issuance of the Bonds would be approved by the HRA. Upon adoption of the inducement resolution PED will proceed to prepare a housing program to finance ' the proposed pro}ect. Purthermore, PED will present to the HRA Boazd of Commissioners a report � detailing the financing of the Projeci and request the HRA to consider adoption of a resolution to issue and sell revenue Bonds to finance the project and enter into a Joint Powers Agreement with Ramsey County HRA. — --- -_-_ - - - -- rTfii'A�HNiEN'I'S - - City Council Resolution Prepared by: Tom Sanchez PED Project Manager 266-6617 1:'`.SA?�'CHEZ"IISk} IineTowerCin CounciLRpt� Council File # qq '�� 3 �� Green Sheet # � 0 e�1. q S� RESOLUTION CITY OF S�IN� PAUL. MINNESOTA ��' Presented By Referred To Committee: Date 1 RECI`ITNG A PROPOSAL FOR FINANCING 2 A NICJLTI-FAMILY RENTAL HOUSING DEVELOPMENT PROJECT, 3 APPROVING A HOUSING PROGRAM THEREFOR AND AUTHORIZING 4 THE HOUSING AND REDEVELOPMENT AUTHORITY TO 5 EXERCISE THE POWERS GRANTED IN 6 MINNESOTA STATUTES, SECTIONS 462C.01 TO 462C.08 7 (a) WHEREAS, Minnesota Statutes, Chapter 462C (the "Act"), confers upon cities, 8 or housing and redevelopment authorities authorized by ordinance to exercise on behalf of a city 9 the powers conferred by the Act, the power to issue revenue bonds to finance a program for the 10 purposes of plauniug, administering, making or purchasing loans with respect to one or more 11 multifamily housing developments within the boundaries of the city; and 12 (b) WHEREAS, The Housing and Redevelopment Authority of the City of Saint 13 Paul, Minnesota (the "I3RA"), has received from Skyline Tower of Saint Paul Limited 14 Partnerslup, a Minnesota limited partnership (the "Company"), a proposal that the HRA 15 undertake a program (as described and set forth in a writing befare this meeting, the "Housing i 6 Program") to finance a Project hereinafter described, through the issuance of revenue bonds or 17 obligations in one or more series (collectively, the "Bonds") pursuant to the Act; and 18 (c) WHEREAS, up to $20,500,000 of the Bonds or other obligafions may be issued, 19 $10,000,000 taY-exempt from enuUement bonding authority of the City of 5aint Paul, Minnesota 20 (the °CiTy"), $5,000,000 initially tasable but reissued as tax exempt from bonding authority 21 described below, and $5,500,000 in the form of the sale of a participation interest by the HRA in 22 an e�sting mortgage loan to be purchased by the HRA; and 23 (d) WI�REAS, the HRA will finance the Housing Program and issue the Bonds 24 jointly with The Ramsey County Housing & Redevelopment Authority, Minnesota (the "Ramse}� 2 5 County HRA"), which will apply for $5,000,000 of bonding authority for tax-exempt private 2 6 activity bonds in order to provide more tas-exempt financing than the City and I IRA are willing 27 to provide, and the City has on duly 7, 1999, approved the undeitakin.g of the Project by the 28 Ramsey County HRA; and 1088230.1 , :. °lq-R'13 1 (e) VJHEREAS, if the Ramsey County HRA. does not procure sufFicient bonding 2 authority in January, 200Q, from the housing pool, the Minnesota Housing Finance Agency will 3 make it available for the Bonds for the Project up to $5,000,000 pursuant to a"Bond Allocation 4 Transfer Agreement' ; and 5 (fl WHEREAS, the Project to be financed by the Bonds is the acquisition and 6 rehabilitation of a 506 unit low-income housing facility located at 1247 St. Anthony Avenue in 7 the City, and will result in the provision of addifional rental housing facilities for persons of low 8 or moderate income within the community; and 9 (g) WIIEREAS, the Company's proposal calls for the HRA and Ramsey County l0 HRA, indirecfly through the use of proceeds of the Bonds to acquire GNMA Securities, to loan 11 the proceeds realized upon the sale of the Bonds to the Company pursuant to a revenue 12 agreement or agreements wherein the Company will be obligated to make payments at the times 13 and in the amounts sufficient to provide for the prompt payment of principal of, premium, if any, 14 and interest on the Bonds and all costs and expenses of the HRA, Ramsey County HRA, City and 15 Ramsey County, Minnesota, incident to the issuance and sale of the Bonds; and 16 (h) WHEREAS, the City desires to encourage the development of housing facilities 17 designed for occupancy primazily by persons of low and moderate income, and the Project will 18 assist the City in achieving these objectives; and i 9 (i) WHEREAS, a public hearing on the Housing Program and Project was held on 2 0 October 6, 1999, following duly published notice, at which 6me all persons that desired to speak 21 were heard: 22 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Saint Paul, 23 Minnesota, as follows: 24 1. HousingProgram: Authorizafion of HRA. The City hereby approves the Housing 25 Program for the financing of the Project by the issuance of the Bonds and, pursuant to Section 72 2 6 of the Saint Paul Administrative Code, authorizes the HRA to exercise the powers granted in 27 Minnesota Statutes, Sections 462C.01 to 462C.08, both directly and jointly with the Ramsey 28 County IIRA. 29 2. Bonding Authoritv. The City hereby allocates $10,000,000 of its 1999 3 0 entitlement allocation under Miiuiesota Statutes, Chapter 474A, of volume limit for the issuance 31 of tas-exempt private activity bonds to the Bonds to be issued by the HRA jointly with the 3 2 Ramsey County HRA. In addition, the Mayor and Clerk are hereby authorized and directed to 3 3 execute the Bond Allocation Transfer Agreement in the form before this meeting, with such 34 changes thereto, modifications thereof and completions thereto as they shall deem necessary or iosszso.i 2 ORIG{NAL 9q•`t�t3 1 desirable. This allocation of the City's entitlement and entitlement-transfer bonding authority is 2 an aspect of the City's delegafion of powers to the HRA under the Act and under this resolution. 3 3. Sco en of A op roval. Nothing in this resolution shall be construed to require the 4 City or HRA to approve any element of the Project or the issuance of the Bonds, nor shall this 5 resolution be construed as vesting in the Company any cause of action against the City or HRA 6 arising from any failure or refusal by the City or HRA to appmve the Project or issue the Bonds. 7 4. �ecial Limited Oblieafions. Nothing in this resolution or the documents 8 prepazed pursuant hereto shall authorize the expenditure of any municipal funds on the Housing 9 Program or Bonds other than the revenues derived from the Project or othenvise granted to the 10 City or HRA for this purpose. The Bonds shall not consritute a chazge, lien or encumbrance, 11 legal or equitable, upon any properry or funds of the City or HRA except the revenue and 12 proceeds pledged to the payment thereof, nor sha11 the City or HRA be subject to any direct 13 liability thereon. The holders of the Bonds shall never haue the right to compel any exercise of 14 the taxing power of the City or HRA to pay the outstanding principal on the Bonds or the interest 15 thereon, or to enforce payments thereon against any property of the City or IIRA. The Bonds 16 shall recite in substance that the Bonds, including the interest thereon, are payabie solely from 17 the revenues and proceeds pledged to the payment thereof. The Bonds shall not constitute a 18 general obligation of the City or HRA within the meaniug of any constitutional or statutory 19 provision. Adopted by Council: Date �� Adoption Certified by Council Secrefary By: Appi By: 1068230.1 Requested by De artment of: � I�W gy�,9�+r� ar�F�°� �� Form App v d Ci rn By: Appro ayor for Su mission to Council By: .-�? � T,� S��cGieZ Z�6-te�i� � �� D�f�. � 1 � q 9 pv b l�`L t�e.�tr►`►�T TOTAL � OF SIGNATURE PAGES � GREEN SHEET �� _��- � ,.� 9°1-q� 3 N i ��4�, Q �.,.�„ °� '�� Q �� ❑ �.,�,�. ❑ ..�.,�,,,�,� �WYORI�ARfiMRI� ❑ (CL1P ALL LOCATIONS FOR SIGNATURE� �iorr REQUES�o 7i-/��, v�f�u�e �d ��/ �� rl�t Gc //� es d�d7`i v�-� �'^'�P�ar� K� G. �Pirfiowr.e /3v��1 r ife � f�UUp �`n l�ro� ,-�-,. U✓ Li, �i4� �r,`!�w//.� w- ;�� i ��o Sa`ri, d�Jo i- �0�4'S D,-- p�'ldi�' OfJ'/iS%.f'�e'ir9 �� iSsZCGJI�� J�+ti G�� O I�47 �• ��z�z��" "'� ��* PLANNING CAMMISSION CIB COMM[TTEE CNIL �ERVICF�,CQMMISSION TY� `f'f qc�.tr , s. i; � �-� IF IF Fias this ParsoMrm evExv.orked unde� a canhact tor Mis department9 vES NO Hae this PefsaNfirm e�er 6een a cilY emPbYee? YES NO Daes this P��rtn 7oasess a sidll not riamellYP� M�Y wmrR aYY emWoYee? YES Nb Is �hiB P�rtn a fargMed ventloYl YES NO `� a.s b vH f��g�-fx«�a`� �� P�, ___ f Sli/�s,�!= is .��v`�t�'�� yr�J�cf �u�%I � �'/ ,�, AMOUNTOFTR/WSACTIONS � �� v U477 1630URCE TG[x c�,r7iu- (.�1N�'�_ ��. �V.� i'v�,,�Yd (/� d�J �'f ! 5--- �.�' f�`" `z'• cosrmEVexue euocsErEO tuac� u+Ef „�:n ACiN1iY NUIMBER T�adi/< f3z�i S, //Y!' U� icw� iHFOnMnnor� �ow rn � ° o� 6 �`�iX ��-�,u�rr t�o. �l u �e f�v.-F- c. ;� s�!/ ��r�f H,� .� J.u�'f F�esea:*ch ^�nter � ;�_ .•�.. �w,.. �q-a�� CITY COUNCIL OF THE CITY OF SA1NT PAUL, MINNESOTA REPORT TO THE CITY COLJNCIL DATE: Qctober 6, 1999 REGARDING: PUBLIC HEARING - Resolufion Reciting a Proposal for Financing a Multi-fanuly Rentai 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 CTranted in Minnesota Statutes, Sections 462C.01 to 462C.08 PURPOSE The Housing and Redevelopment Authority of the City of Saint Paul (HRA) has received an application from CommonBond Investment Corporation, a subsidiary of CommonBond Communities, requesting the HRA to participate in the financing of the acquisition and rehabilitation of the Skyline Tower Apartments (Project) located at 1247 St. Anthony Avenue, in District 13. The financing would include: 1.The " Bonds" a. $10,000,000 of TaY Exempt Multifamily Revenue Bonds. b. $ 5,000,000 in Taxable Multifamily Revenue Bonds, to be replaced in yeaz 2000 by either bonds obtained by Ramsey County HRA or MHFA. 2. Acquisition of 236 Mortgage: a. $ 5,500,000 obtained by selling a 100% participation interest in the 236 Mortgage to a financial institution. b. HRA becoming mortgagee. 3. Low Income Housing TaY Credits, $9,127,000, for special use with tax exempt bonds. The proposed financing structure would involve the participation of the Ramsey County HRA through a Joint �'owers Agreement with the HRA. - `I'he purpose of this report is to request the City Council to consider adopting the attached preliminary (inducement) resolution which would approve the following: Authorize the Executive Director of the HRA to enter into a Memorandum of Understanding (MOU) with CommonBond Investment Corporation to work towazd possible issuance of the Bonds. The MOU also stipulates the tezms and conditions for issuance of the Bonds should the HRA decide to issue the Bonds; and 2. Authorize HRA to issue, jointly with Ramsey County HRA, up to $10,000,000 of Tax Exempt Multifamily Revenue Bonds, up to $5,000,000 in Taxable Revenue Bonds, and approval for up to $5,000,000 in Tax Exempt Revenue Bonds (available in year 2000) to replace the Taxable Revenue Bonds issued in 1999; and 3. Authorize City staff to prepare a Housing Program for financing the Project prepared in 1 � � -a� � accordance with the provisions of Minnesota Statutes, section 462C.03; and 4. Retain Briggs & Morgan as bond counsel and Piper Jaffray, Inc. as investrnent banker for said Bonds, authorize them to assist in the prepazation and review of necessary documents relating to the Project and Housing Program and consult with the HRA, City Attomey, Owner, and purchasers of the proposed Bonds. Apnroval of the inducement resolution and execution of the Memorandum of Understandine does not require or obliQafe the Citv or HRA to issue bonds or cause anY action against the Citv or HRA arisingfrom anv failure or refusal bv the Citv or HRA to a�prove the project or issuance of the Bonds. With respect to multifamily housing bonds, Section 72.04 of Chapter 72 of the City's Administrative Code provides that the HRA be designated to exercise on behalf of the City the powers conferred by Minnesota Statutes 462C (housing programs and revenue bonds) but only unless directed 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. CommonBond Investment Corporation has obtained a purchase agreement for the property that requires sale by February 15, 2000. BACKGROUND Several monYhs ago representatives from the CommonBond Communities visited with City Council members to advise that CommonBond Communities was actively pursuing the purchase of the Skyline Tower Project located at 1247 St. Anthony Avenue, from its current owner Skyline Towers Company (a limited partnership), with Sentinel Hoidings Company as the managing general partner. Sentinel Iulanagement Company, a whoily owned subsidiary of Sentinel Holdings Company, manages the project. The Skyline Tower Apartrnents is a federally subsidized (Ht3B Section 236 Program) affordable rental housing project built in 1971, containing 506 units. Skyline Towets is approximately 90% project based Section 8 assisted which limits tenants rent payments to no more than 30% of income. The unit mix is comprised of 46 efficiencies, 322 one-bedroom and 138 two-bedroom units. There are 22 units on each of the 23 floors. At the end of 1998 the average annuai household income was under $10,000. Over half of the households are on public assistance or receive social security benefits and about half work part-time. About 70% aze East African immigrants or African-American; 20% are Southeast Asian and less than 10% are white. Over 70% of households are female headed. There are approximately 300 children and less than 50 residents over 65 years of age. PROPOSAL The proposal would be to acquire and rehabilitate the project units and construct a 2 story Advantage Center. The Advantage Center would provide services to help tenants obtain education and cazeer development to improve their economic potential. The Advanta�e Center builds on the current work done by Model Cities of St. Paul and would continue that relationship. Major rehabilitation items include sprinkler system, plumbing, corridor ventilation, doors, painting, exterior siding work, and 2 �l�-�'l3 appliances. CommonBond Investment, a subsidiary of CommonBond Communities, would be the managing general partner of the partnership to be formed to own the project. The PED Director has met with the CommonBond Communities and has agreed that he would support a$10,000,000 ta�c exempt request to the HR.A if Ramsey County would aa ee to pursue a tax exempt bond application for $5,000,000, to the state unified pool administered by the Minnesota Bepartment of Finance. After receiving approval from the City Council, the Ramsey County Boazd held a public hearing on July 27, 1999, and approved the submission of an application for tax exempt bonds. The application for funding would occur in 3anuary 2000. PROPOSED PROJECT FINANCING The proposed Skyline Tower Apartment project financing would use tax exempt revenue bonds, taxable revenue bonds, subordinate financing and low income housing tax credits that are special for tax exempt bonds and are not out of the City's annuai allocation. The proposed Sources and Uses aze as follows: sa�rces City Tar Exempt Bonds Taxahle bonds Subordinate 2nd Mor[gage 4%Tax Credi[s Assumed HUD loan Total $10,000,OD0 $ ] 3,039,000 5,000,000* 14,000,000 5,500,000"* Architect Fee I25,000 9,127,000 ReplacementReserve 500,000 920.000 Bond Costs 512,000 $30,547,000 Mortgage Banker Fee 307,500 Interim Interest 467,850 HUD Mort. Ins. 205,000 HUD Inspect. Fee 102,500 HUD AQplication Fee 61,500 HRA Fee 105,000 DeveluperFee•** I,OOQ000 Title and recording 57,150 - . - __ - -�— - -- - - --- Surveyinglotherfees 25,000 LOC/bond premium � - 15,000 Legai/organizationa4 7,500 Mortgage Banker legal 17,500 Professional Reporiz 5_000 Total $30,547,000 ' The Taxabie bonds w�ill be replaced by [ac exempt bonds allocated to Ramsey County HRA from the State pool or MHFA from their year 2000 ailocation. '* The Subordina[e 2nd Mortgage is the current 236 Mortgage, the acquisition of which was paid from proceeds paid [o the HRA by a financial institution for a 100% participation interest in that 236 mortgaee. •*'The Developer Fee is within the guide established by the adopted resolution of the City CounciC "The lessor of $8,500 per uni[ or 10% of totat developmeni cost less the cost of acquisition for Ihe first 30 units of a rehabilitation project. The lessor of $6,375 per unit or 10%of total development cost less the cost of acquisition for units 31 [o I i0 of a rehabilitation project." The financing structure is modeled after a successful 1997 California project financing which received HUD approval. HUD has indicated they aze very interested in the Skyline Tower project. In order to "model" the California deal and obtain HtTD approval it is proposed that the HRA purchase the Uses Acquisition Rehabilitation t�:\SAV CHEZ'I�SkylineTo« crCiryCounciLRp•� a�-q�� existing 236 Mortgage, not prepay the loan, and then cancel the current FHA insurance. This wili allow the 236 mortgage to become a subordinated debt obligation secured by the project. New mortgage documents will be prepared and a new agreement for Interest Reduction Payments ("IRP") will be entered into among the new project owner (limited partnership), the St. Paul HRA and HUD. By the HRA holding the mort�age the federal IRP, which HUD provides to the Project to lower the interest rate to 1%, remains with the project. HCTD requires that a local jurisdiction must hold the mortgage when the HL7D insurance is terminated in order for the IRP to remain in place. The retention of this IRP funding stream, to pay subordinate debt, is key to this project. To accomplish the purchase of the 236 Mortgage the HRA will enter into a Participation Agreement with a financial institution for a 100% participation interest in the 236 Mortgage from the HRA. The HRA will use the proceeds from the participation interest to acquire the 236 Mortgage. The HRA will become the mortgagee of record and under the Participation Agreement the powers of the mortgagee will be exercised by the participation financiai institution. The New Mortgage Loan will be insured by FHA under Section 221(d) (4) and the 236 Mortgage will be subordinated to the New Mortgage Loan financed by the bond proceeds. The Minnesota Housing Finance Agency has indicated they would be interested in providing the services of annual property inspection, renUbudget review and tenant certification, functions which HLTD currentiy performs but which HUD cannot perform with the termination of FHA insurance. The details of this agreement will be completed soon. All costs will be paid by the project. At no time will the Project become an obligation of the City or HRA, the Project revenues are the sole source of �avment for the Bonds and subordinate debt. RAMSEY COUNTY PARTICIPATION The City does not have sufficient tax exempt revenue bond authority available for 1999. The participation by Ramsey County HRA would be in their application to the Minnesota Department of Pinance, pursuant to Minn. Stat., Ch. 474A, for an allocarion of revenue bond authority from a limited pool of revenue bonds. The City as a suballocator cannot submit an application for revenue bonds from this pool unless ail tax exempt authority for 1999 has been used, which will not occur. The City Council considered and approved at their July 7, 1999, meeting a resolution, pursuant to Minn. Stat., Secs. 462C.01 and 496.004, that authorized Ramsey County to undertake and finance the project through the issuance of tax exempt revenue bonds. This authorization by the City Council was required prior to the Ramsey County Board's considezation of an application to the Minnesota Department of Finance. The Ramsey County Board at their duly 27, 1999, public heazing approved an application for submission to the Minnesota Department of Finance for this project. This action bv Ramsev Coun is �roject saecific and would not occur if the CitX had sufficient tax exemnt revenue bond authoritv. Because the application will be made in 3anuary 2000, the Ramsey County HRA must be designated as a co-issuer in the 1999 sale of bonds to assure that any amount of bonds allocated can be substituted for the taxable bonds without further County action.. [If Ramsey County is not successful in obtaining all or a portion of the $5,000,000 in bond authority from the State Pool, then the Minnesota Housing Financing Agency has taken Board action to make available up to $5,000,000 in yeaz 2000 taY exempt authority. The MHFA's taY exempt authority can only be made 1:'�S.ANCHEZiISkylineTowerCityCouncil.Rp 7 � a`� -�� available to the Saint Paul HRA.] Minnesota Statutes, Section 471.59 ("Joint Powers AcY') provides that two or more govemmental units, by agreement through resolutions apgroved by their governing bodies, may joindy exercise any power common to the contracting parties, and may provide for the exercise of such power by one of the participating governmental uniu on behalf of the other participating uniu. It is proposed that the Saint Paul HRA be the Proposed Issuer. FEES A non-refundable $5,000 application fee has been submitted by CommonBond Investment Corporation. Should the Bonds be issued, the HRA wili receive an administrative fee at ciosing equal to 0.5% of the principal balance of the Bonds. On the first anniversary date of the Bonds the HRA will receive an additional 0.5% fee. Every yeaz thereafter that the Bonds remain outstanding the HRA will receive an annual administrative fee equal to .O1 % of the outstanding principal balance of the Bonds. BUSINESS PROFILE The CommonBond Investment Corporation is a wholly owned subsidiary of CommonBond Communities and owns general partner interests in housing limited partnerships for CommonBond Communities sponsored projects. CommonBond Communities is a 501 (c) (3) not -for-profit corporation and has been in business for over 20 years. CommonBond Services is a 501 (c) (3) not - for-profit corporation which provides Advantage Center services to residents of CommonBond sponsored housing projects. CommonBond Housing is a 501 (c) (3) not -for-profit corporation which provides management to CommonBond sponsored housing projects. They currently own or manage 2,363 rental units in the Twin Cities that are affordable to low income tenants. ADVERSE LENDING The CommonBond Investment Corporation does not have an adverse lending relationship with the City. In 1998 the GommonBond Investment Corporation was given HRA financing assistance to undertake the acquisition and rehabilitation of the Cathedral Hill Homes (Selby-Dayton Apartments), which is nearing completion. REPAYMENT CAPACTTY The project appears to have sufficient project annual income to pay operating expenses and debt service. The annual revenues and operating expenses appeaz reasonable based on the audited financial reports obtained from the current owner, Skyline Towers Company (a limited partnership). SUPPORT The Lexington-Hamline Community Council supports the proposal. PUBLIC PURPOSE The following public purposes will be met: The acquisition of the 236 Mortgage is a necessary part of the Project financing ti�at aliows the f::\$ANCHEZ'I�SkylineTo�cerCin�Council.Rpt2 5 °�`�- f � preservation of affordable housing units and continues the project based Section 8 assistance which subsidizes the rent payments of low income Saint Paul residents. 2. The proposed financing and rehabilitation will reasonably assure the long tertn viability of the Project as an asset to the surrounding neighborhood of affordable housing stock. BOND AUTHORITY: ALLOCATION PROCESS The City of Saint Paul received a 1999 entitlement bond allocation from the State of approximately $16,048,000. For the past several yeus, a lazge part of 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 Skyline Tower Apartments will be owned by a for-profit entity, the proposed bond amount of $10,000,000 will count as part of the City's entitlement bond aliocation. However, staff believes that the single family mortgage program is amply funded for 1999. Therefore, issuance of rental revenue Bonds would not diminish the City's single family mortgage program. The Taxable Revenue Bonds do not impact the City's entitlement. The strategy and timing of committing the City's entitlement allocation between the mortgage revenue bond program and this proposai will be worked out by staff between the time the inducement resolution is approved by the City Council and the time the issuance of the Bonds would be approved by the HRA. Upon adoption of the inducement resolution PED will proceed to prepare a housing program to finance ' the proposed pro}ect. Purthermore, PED will present to the HRA Boazd of Commissioners a report � detailing the financing of the Projeci and request the HRA to consider adoption of a resolution to issue and sell revenue Bonds to finance the project and enter into a Joint Powers Agreement with Ramsey County HRA. — --- -_-_ - - - -- rTfii'A�HNiEN'I'S - - City Council Resolution Prepared by: Tom Sanchez PED Project Manager 266-6617 1:'`.SA?�'CHEZ"IISk} IineTowerCin CounciLRpt�