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HomeMy WebLinkAboutStaff Report 6.A 08/06/2012 A dp'Ite n/#6 A �p LU R7-G Ian DATE: August 6, 2012 TO: Honorable Mayor and Members of the City Council through City Manager FROM: Bonne Gaebler, Housing Administrator\19U - SUBJECT: Resolution of the City Of Petaluma city Council Approving the Issuance by the California Municipal Finance Agency of Multifamily Housing Revenue Bonds for the Purpose of Financing the Rehabilitation and Resyndication of Round Walk Village Apartments. Resolution of the City Of Petaluma City Council Approving An Amendment and Assignment of the 1995 City HOME Loan. RECOMMENDATION It is recommended that the Petaluma City Council Adopt Resolutions Approving the Issuance of Multifamily Housing Revenue Bonds by the California Municipal.Finance Agency for the Purpose of Financing the Rehabilitation and Resyndication of Round Walk Village Apartments; and, Approving An Amendment, an Assignment and Assumption Agreement, and a Subordination Agreement in connection with the 1995-City HOME Loan. BACKGROUND Round Walk Village is a 129-unit affordable work-force housing rental apartment community, located'at 745 North McDowell Boulevard. Round Walk Village was developed by Burbank Housing Development-Corporation in 1995 and, as can anticipated with-a community of this age and population (485 residents, 230 of whom are kids!), the property requires rehabilitation and/or modernization including, but not limited to (1) replacement of all windows; (2) replacement of all water heaters; (3) replacement of the roofs; (4) installation-of improved ventilation; (5) concrete and pavement repair; and (6) installation of a photovoltaic system_ The property requires a financial update as well. A new partnership will be formed(j.e:, a- resyndication) to provide,funding for the rehabilitation and also to secure more favorable financing. Burbank is recommending using low-income housing tax credits and tax exempt bonds to secure.a new loan on the property with a lower interest rate: An additional piece'of the refinance involves one of the original loans on the project, a City of Petaluma HOME loan in the amount of$930,567 with an annually compounded interest rate of 6 'h percent. Included in the financial update is a request that the high interest rate on the 1995 Agenda,Review: City Attorney 1 ! l Finance Director City Manager City of Petaluma HOME loan be adjusted,down to the'Applicable Federal Rate at the time of the close of construction financing (late 2012). The Applicable Federal Rate for July is 2.30%. DISCUSSION The goal of the requested City Council action is to complete the financing plan to allow the start of rehabilitation of Round Walk Village in late 2012. Upon completion of the rehabilitation project, the permanent financing structure is expected to include: • Tax Exempt Bonds $5,667,000 • Seller Take='Back financing $3,852,115 • Tax Credit equity $7,380,714 • Existing City of Petaluma HOME loan $1,861,807(principal +accrued interest) • Income from operations through 2013 $444,534 • Deferred Developer Fee $390,091 • Developer Equity $739 • Total project cost of $19,597,000 The developer has requested that the California Municipal Finance Agency (CMFA) issue bonds for the project. The City has been a member of that Joint Powers Agreement since January 2007. There are a series of actions necessary to accomplish this transaction: (1) The Internal Revenue Code of 1986 requires that the City Council conduct a public hearing known as a TEFRA hearing (Tax Equity Fiscal Reform Act) to authorize the issuance by another agency of tax exempt housing revenue,bonds. The TEFRA hearing is simply an opportunity for all interested per"sons to speak or to submit written comments concerning the proposal to issue debt and the nature or location of the proposed project. (2) The City HOME loan document dated July 1'8, 1995 will be modified to show an adjusted interest rate equal to the Applicable Federai,Rate atthe°time of close of construction financing. The loan will remain a 55-year, deferred payment, transaction. (3) Adopt a resolution approving the issuance of multi-family revenue bonds, required in the application for bond allocation. .(4) Following the adoption of the resolution, CMFA Will proceed with the submission to the California Debt.Limit,Allocation Committee (CDLAC) of an application for"private activity bond" allocation for the project. Financial Impacts: The City's membership in CMFA bears with it.no cosfor other financing obligations, but serves as a public;acknowledgement by the City of the project.financing. The City will not be a party to the bond financing documents. The debt will not be secured by any form of taxation or by any obligation of either the City or CMFA; neither would the debt 2 represent or constitute a general obligation of either the Cityor>CM'FA. Pursuant to the governing California statutes and the WA Agreement,a member CMFA:is-not responsible for -the repayment of obligations incurred by CMFA. The,:debt`will be payable solely from amounts received pursuant to the terms and provisions of financing agreements to be executed by Burbank Housing. In the financing documents the developer will also provide comprehensive indemnification to CMFA and its members, including the City. The City will be amending the 1995 HOME loan documents to reduce the interest rate and increase the loan term, and will subordinate its Loan to construction and permanent financing for the Project. In addition, the City will consent to an Assignment and Assumption Agreement between Burbank and the new partnership. ATTACHMENTS 1. Resolution Approving the Issuance of Bonds 2. Resolution Approving an Amendment and Assumption 3 ATTACHMENT 1. RESOLUTION NO. CITY OF PETALUMA RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA APPROVING THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS FOR THE PURPOSE OF FINANCING THE ACQUISITION AND REHABILITATION OF ROUND WALK VILLAGE APARTMENTS WHEREAS, the California_Municipal:Finance Authority (the 'Authority") is authorized by the laws of the State of California (the"Law") to execute and deliver multifamily housing revenue obligations for the purpose of financing the rehabilitation of multifamily residential rental facilities located within the area of operation of the Authority which are to be occupied by very low and low income tenants; and WHEREAS, Round Walk Village Partners2, LP, a California limited partnership, or such other limited liability company or limited partnership related thereto or formed by Burbank Housing Development Corporation, (the "borrower) has requested the Authority to issue and deliver multifamily housing revenue obligations in the anticipated principal amount of $15,000,000 (the "Obligation"), the proceeds of which,may only be used for the purpose of financing the rehabilitation of a 129-unit multifamily residential rental facility commonly known as Round Walk Village located at 745 No. McDowell Blvd. in the City of Petaluma, California (the "Project"); and WHEREAS, the Obligations which are expected to be issued and delivered to finance the rehabilitation of the Project would be considered "qualified exempt facility bonds" under Section 142(a) of the Internal Revenue Code of 1976, as amended (the "Code'), and Section 147(1) of;the:Code-requires,that the "applicable elected representatives" with respect to the jurisdiction in which the Project is located hold a public hearing on the issuance and delivery of the Obligations; and WHEREAS, the City Council of the City of Petaluma as the "applicable elected representatives" to hold said public hearing, duly noticed and held said public hearing on August 6, 2012, at which time all those interested in commenting with respect to the proposed financing of the Project were heard. 4 • NOW, THEREFORE;.BE IT RESOLVED as follows: I. The City Council hereby finds and determines that the foregoing recitals are true and correct. 2. For purposes of the;requirements of the Code only, the City Council hereby approves the proposed financing of the Project by the authority with,the proceeds of the Obligations. 3. The issuance and delivery of the Obligations shall.be=subject to the approval of and execution by the Authority of,all financing documents relating thereto to which the Authority is a party and`:subject to the sale of the Obligations by the Authority. 4. The adoption of the Resolution is solely for the purpose of meeting the requirements of the Code and shall not>be construed in any other manner,_neither the City nor its staff having fully reviewed.or considered the financial feasibility of the Project or the expected financing or operation of the Project with regards to anyState of California statutory requirements, and such adoption shall not obligate (i) the City to provide financing to the borrower for the acquisition and rehabilitation of the Project or to issue the Obligations for purposes of such financing; or (ii) the City, or any department of the City, to approve any application or request for, or take any other action in connection with, any environmental, General Plan, zoning or other permit or other action necessary for the acquisition,rehabilitation, development or operation of the Project. 5. The City Clerk of the City shall forward a certified copy of this Resolution and.a copy of the affidavit of publication of the public hearing notice to: Thomas A. Downey The.Orrick Building Orrick, Herrington & Sutcliffe, LLP 405 Howard Street San Francisco, CA 94105 6. This resolution shall take effect upon its adoption. PASSED AND ADOPTED this 6th day of August, 2012 by the following roll call vote: 5 ATTACHMENT 2 RESOLUTION NO. CITY OF PETALUMA RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA APPROVING AN AMENDMENT TO HOME LOAN DOCUMENTS, AN ASSIGNMENT AND ASSUMPTION AGREEMENT, AND A SUBORDINATION AGREEMENT IN CONNECTION WITH THE 1995 CITY HOME LOAN FROM BURBANK HOUSING COMMUNITIES CORPORATION TO ROUND WALK VILLAGE 2 PARTNERS, L.P. WHEREAS. the City of Petaluma ("City") provided a loan of HOME funds in the amount of$930,567, pursuant to loan documents executed in July 1995 (the HOME Loan Documents), for the development of an affordable rental housing development known as Round Walk Village (the Project"); and WHEREAS, Burbank I-lousing Communities Corporation (-MCC") is the current owner of the Project and has entered into a purchase agreement to sell the Project to Round Walk Village 2 Partners, LP. (the "Partnership"); and WHEREAS, the Partnership intends to purchase the Project and use funding from a construction lender and a tax credit investor to undertake a major rehabilitation of the Project; and WHEREAS, the Partnership has informed the City that certain revisions are needed to the HOME Loan Documents to allow the Partnership to carry out its(financing plan for the rehabilitation of the Project; and WHEREAS, the changes required by the Partnership include a reduction in the interest rate of the HOME Loan-for the Project to the "applicable federal rate" (as defined in the Internal Revenue Code), an extension of the loan term to 55 years, and the City's consent to the assignment to and assumption by the partnership of all obligations under the HOME Loan Documents; and WHEREAS, the Partnership has also informed the City that the City will need to subordinate the HOME Loan Documents to the deed of trust securing a construction loan in the maximum amount of$14,000,000 and a permanent loan in the maximum amount of$6,000,000. 6 THEREFORE, BE IT RESOLVED that the City•Council,of the City of Petaluma authorizes the City Manager or his,designee to`enter into (i)'an amendment of the HOME Loan Documents for--the purposes and according to the terms described herein; (ii) an Assignment and Assumption of the HOME Loan Documents from BHCC to the Partnership; and (iii) an agreement to subordinate the HOME Loan Documents to the construction and permanent financing for the Project, together with such additional terms as are required in the judgment of the Housing Administrator to implement the-City-approved financing plan for the Project and which do not materially increase the City's obligations thereunder. PASSED AND ADOPTED this 6'h day of August 2012 by the following vote: 7