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HomeMy WebLinkAbout2012/08/14 Item 05C H U L A V I S T A HOUSING AUTHORITY AGENDA STATEMENT AUGUST 14, 2012, Item vJ ITEM TITLE: PUBLIC HEARING: CITY COUNCIL CONSIDERATION OF THE ISSUANCE OF TAX EXEMPT OBLIGATIONS WITH RESPECT TO THE PROPOSED FINANCE OF THE REHABILITATION OF EXISTING AFFORDABLE UNITS AT CONGREGATIONAL TOWERS APARTMENTS (288 F STREET) RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING THE ISSUANCE, SALE AND DELIVERY OF MULTIFAMILY HOUSING REVENUE BONDS OF THE HOUSING AUTHORITY OF THE CITY OF CHULA VISTA FOR CONGREGATIONAL TOWERS RESOLUTION OF THE HOUSING AUTHORITY REGARDING ITS INTENTION TO ISSUE TAX EXEMPT OBLIGATIONS FOR A PROPOSED REHABILITATION OF EXISTING AFFORDABLE UNITS AT CONGREGATIONAL TOWERS APARTMENTS SUBMITTED BY: ASSISTANT CITY M,A1,~TAGER / DEVELOPMENT SERVICES DIRECTOR ~d"'~c~ REVIEWED BY: CITY MANAGER S / ~ ?S 4/STHS VOTE: YES ~ NO ~X SUMMARY The City of Chula Vista has received a request from Retirement Housing Foundation ("Applicant") to consider the issuance of tax exempt obligations to finance the rehabilitation of 186 existing affordable units at the Congregational Towers Apartments (the "Project"). The Congregational Towers Apartments are located at 288 F Street in northwest Chula Vista. The rehabilitation will improve the property and extend the term of the affordable rents. The Applicant is preparing an application for an allocation of tax credits and tax-exempt private activity bonds for multi-family projects from the California Debt Limit Allocation Committee (CDLAC) and is requesting that the Housing Authority of the City of Chula Vista be the conduit bond issuer for an aggregate amount not to exceed $21 million. The 5-1 AUGUST 14, 2012, Item 5 Page 2 of 6 application must be submitted by September 14, 2012. The bond allocation and tax credit contributions will be used to substantially finance the Project. At this time, the City Council is asked to hold a public hearing regazding whether the Housing Authority should issue tax exempt bonds to finance the Project and to approve the issuance, sale, and delivery of multi-family housing revenue bonds by the Housing Authority after a bond allocation is received from CDLAC. Additionally, it is requested that the Housing Authority adopt a resolution expressing its preliminary intention to issue bonds. The requested actions are preliminary and do not commit the Housing Authority to issue the bonds. Such preliminary actions are necessary in order to allow the Housing Authority to submit an application to the State bonding authority on behalf of the Applicant and to allow the Applicant to receive reimbursement out of bond proceeds for costs it incurs leading up to the actual sale of bonds. If successful in obtaining a bond allocation from CDLAC, the Applicant plans to come back to the Housing Authority to request final approval of bond documents for the issuance of the bonds. Resolutions presented for the City Council's and Housing Authority's consideration have been prepazed by Stradling Yocca Carlson & Rauth, serving as bond counsel for the City of Chula Vista and its Housing Authority. All future bond documents will also be prepared by bond counsel. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a "Project" as defined under Secfion 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary. RECOMMENDATION It is recommended that the Housing Authority and the City Council take the following actions: 1. That the City Council conduct the required public heazing regarding the Housing Authority's intent to issue the tax exempt obligations for the proposed rehabilitation of existing affordable units at Congregational Towers Apartments. 2. That the City Council adopt a resolution approving the issuance, sale and delivery of multifamily revenue bonds of the Housing Authority of the City of Chula Vista for the proposed rehabilitation of existing affordable units at Congregational Towers Apartments, and authorizing the City Manager, or his designee, to execute all necessary documents to further such purpose. 3. That the Housing Authority adopt the resolution regazding its intention to issue tax-exempt obligations for the proposed rehabilitation of existing affordable units at Congregational Towers Apartments. 5-2 AUGUST 14, 2012, Item iJ Page 3 of 6 BOARDS/COMMISSION RECOMMENDATION Not Applicable DISCUSSION The Applicant Community Congregational Development Corporation (a development corporation created by the Congregational Church) currently owns and operates the Congregational Towers Apartment project located at 288 F Street. Retirement Housing Foundation, a nonprofit service agency organized under section 501(c)(3) of the Internal Revenue Service Code, is proposing to create a new partnership with Community Congregational Development Corporation. The new partnership will be named Congregational Tower Partners, LP. The current property owner has successfully operated the property for 39 years. The new partner, Retirement Housing Foundation, operates 161 communities across the United States in 29 states, the Virgin Islands and Puerto Rico, and has created over 16,000 units of affordable rental housing. The Property The project is an existing 186 unit affordable complex originally financed through the Department of Housing and Urban Development (HUD). After the renovations the community will include a new, larger community room, rooms for arts and crafts, central laundry, outside garden patio azea, and a computer lab for all residents. The Proposal The project is thirty-nine years old and in need of rehabilitation to ensure continued long term use and viability. To take advantage of tax credits, the existing owner, Community Congregational Development Corporation, will sell the project to a new partnership named Congregational Tower Partners, LP, a California limited partnership that will acquire and rehabilitate the property using bond financing and tax credits. The new partnership, Congregational Towers Partners, LP, consists of Retirement Housing Foundation, Community Congregational Development Corporation and a tax credit equity investor as the Limited Partner to be determined later. The scope of the proposed renovation includes full apartment interior renovations, new roof, mechanical systems, electrical system, plumbing system, and other exterior finishes. The main floor will have an increase of approximately 2,000 square feet to include a lounge/librazy, adjoining recreational/media room, and additional bathrooms. Improvements will also be made to the parking lot and landscaping. Income and Rent Restrictions For the bond funding, Section 142 (d) of the Internal Revenue Services Code requires either a minimum of 20 percent of the rental units in the Project to be available for occupancy by persons or families whose income does not exceed 50 percent of the azea median income (AMI) for the San Diego Primary Metropolitan Statistical Area, or alternatively, at least 40 percent of the rental units are required to be available for 5-3 AUGUST 14, 2012, Item 5 Page 4 of 6 occupancy by persons or families whose income does not exceed 60 percent of the AMI. In each case, the units are to be made available at affordable rents established by the applicable State law. A total of 38 units must be affordable for very low income households at 50 percent of AMI, or at least 75 units for low income households at 60 percent of AMI. Congregational Towers Apartments will continue to operate the entire project as an affordable project, with 184 units affordable to lower income households (2 units are managers' units). The bond regulatory agreement will restrict 184 units for low income households at 60 percent of AMI. The bond restricted rents will be based upon HUD income limits established for the year. The Project also has an existing Section 8 financing contract with HUD. This allows the tenants to pay only 30% of their income, with HUD paying the remaining portion of the rent. The applicant has applied for a Section 8 rent increase based on post rehabilitation market rent which will increase the Studio rent to $1,200 and the One Bedroom to $1,375. The request will not increase the amount currently paid by the tenants. Unit Description No. of Units Target Income Level Maximum Rent Tenant Pays 0 Bd/1 Ba 124 60%AMI $844 30% of their income 1 Bd/1 Ba 60 60%AMI $904 30% of their income 1 Bd/1 Ba 1 Manager - - 2 Bd/1 Ba 1 Manager - - Total Restricted 186 ,: The Project proposes to maintain the income and rent restrictions for Congregational Towers for a period not less than fifty-five years, exceeding the 30-year term of the bonds. The income and rent restrictions outlined above are to be incorporated into the Regulatory Agreement for the bonds, which will be recorded against the property. Compliance with the income and rent restrictions will be subject annually to a regulatory audit and annual tax credit certification. Compliance with strict property management policies and procedures will ensure that income and rent restrictions will be maintained for the full 55-year compliance period. Proposed Financing of Project The Property Owner will be using Tax Exempt Multi-Family Revenue Bonds and Low Income Housing Tax Credit financing to support the majority of the estimated $39.9 million cost of the Project. Retirement Housing Foundation has requested the Housing Authority consider the issuance of $20.9 million in unrated tax exempt bonds. The tax exempt bonds will be acquired by Citi Bank under a private placement structure and Citi will then provide a construction and permanent loan. Retirement Housing Foundation will also apply for approximately $11 million in Low Income Housing Tax Credits. The permanent Bonds and Tax Credits would cover almost 80 percent of the estimated cost. 5-4 AUGUST 14, 2012, Item `~ Page 5 of 6 The balance is expected to be provided by seller financing. HUD will allow the financing and provide a 20 year Section 8 contract for the property. The required documents will be presented to the Housing Authority for approval at such time as final approval of the issuance of the bonds and the related bond documents is requested. Article 34 Article 34 of the California Constitution requires that voter approval be obtained before any "state public body" develops, constructs or acquires a "low rent housing project". However, this project already has a contract for financial assistance from the Federal Govenunent for affordable units. Therefore the project is exempt under Article 34 of the State Constitution. DECISION MAKER CONFLICT Staff has reviewed the property holdings of the City Council and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. CURRENT YEAR FISCAL IMPACT Bond financing is aself-supporting program with the borrower responsible for the payment of all costs of issuance and other costs and repayment of the bonds. All costs related to the issuance of the bonds will be paid for from bond proceeds. The bonds will be secured by the project and will not constitute a liability to or obligation of the City or Housing Authority. The City of Chula Vista Housing Authority will receive compensation for its services in preparing the bond issuance by charging an origination fee of 1/8 of 1% of the bond issuance, approximately $27,278. ONGOING FISCAL IMPACT All costs related to the issuance of the bonds will be paid for from bond proceeds or profits. The bonds will be secured by the project and will not constitute a liability to or obligation of the City or Housing Authority. The City of Chula Vista Housing Authority will receive compensation for ongoing monitoring compliance of the regulatory restrictions from an annual administrative fee of approximately $27,278 paid by the borrower. ATTACHMENTS 1. Locator Map Prepared by: Amanda Mills, Housing Manager, Development Services Department, Housing Division 5-5 ATTACHMENTI LOCATOR MAP CONGREGATIONAL TOWERS APARTMENTS 288 F STREET 5-6 RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING THE ISSUANCE, SALE AND DELIVERY OF MULTIFAMILY HOUSING REVENUE BONDS OF THE HOUSING AUTHORITY OF THE CITY OF CHULA VISTA FOR CONGREGATIONAL TOWERS WHEREAS, the Housing Authority of the City of Chula Vista (the "Authority") intends to issue not to exceed $21,000,000 aggregate principal amount of multifamily housing revenue bonds (the "Bonds") to finance the acquisition and rehabilitation of a 186-unit multifamily rental housing project (the "Project") located at 288 F Street in the City of Chula Vista, California (the "City"); and WHEREAS, the Project will be owned and/or operated by Congregational Tower Partners, LP, a California limited partnership, or another limited partnership affiliated with Retirement Housing Foundation (the "Owner"); and WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), the Bonds are required to be approved, following a public hearing, by an elected representative of the governmental unit having jurisdiction over the area in which the Project is located; and WHEREAS, the Project is located wholly within the geographic jurisdiction of the City; and WHEREAS, the City Council (the "City Council") is the elected legislative body of the City; and WHEREAS, the City has caused a notice to appear in the Star News, which is a newspaper of general circulation in the City, on July 27, 2012 to the effect that a public hearing would be held by the City Council on August 14, 2012, regarding the issuance of the Bonds by the Authority; and WHEREAS, On August 14, 2012, the City Council held said public hearing, at which time an opportunity was provided to present arguments both for and against the issuance of the Bonds. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Chula Vista, as follows: Section 1. The City Council does hereby find and declare that the above recitals are true and correct. Section 2. Pursuant to Section 147(f) of the Code, the City Council hereby approves the issuance of the Bonds by the Authority in one or more series, in an aggregate principal amount not to exceed $21,000,000 and with a final maturity not later than 45 years from the date of issuance to finance the acquisition, rehabilitation and equipping of the Project. It is the purpose and intent of the City Council that this Resolution constitute approval of the issuance of the Bonds by the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is located, in accordance with said Section 147(f). 5-7 Resolution No. Page 2 Section 3. Presented by This Resolution shall take effect from and after its adoption. Gary Halbert, AICP, PE Assistant City Manager/Director of Development Services Approved as to form by .G s ~~ ~~ (~,,~Cit Attorney 5=8 RESOLUTION NO. RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF CHULA VISTA REGARDING ITS INTENTION TO ISSUE TAX-EXEMPT OBLIGATIONS FOR A PROPOSED REHABILITATION OF EXISTING AFFORDABLE UNITS AT CONGREGATIONAL TOWERS APARTMENTS WHEREAS, the Housing Authority of the City of Chula Vista (the "Issuer") desires to assist Retirement Housing Foundation (the "Applicant") in financing the costs of acquiring and rehabilitating a multifamily rental housing project, as described Exhibit A attached hereto and incorporated herein (the "Project"); and WHEREAS, the Issuer intends to assist in the financing of the acquisition and rehabilitation of the Project or portions of the Project with the proceeds of the sale of obligations the interest upon which is excluded from gross income for federal income tax purposes (the "Obligations"), which Obligations are expected to be issued pursuant to Chapter lof Part 2 of Division 24 the Health and Safety Code of the State of California; provided, however, that this Resolution shall not authorize the issuance of the Obligations and provided further that neither the faith and credit nor the taxing power of the Issuer shall be pledged to repay such Obligations if, and when, authorized; and WHEREAS, prior to the issuance of the Obligations the Applicant expects to incur certain expenditures with respect to the Project from its own available monies which expenditures it desires to have reimbursed from a portion of the proceeds of the sale of the Obligations if, and when, issued; and WHEREAS, Section 146 of the Internal Revenue Code of 1986, as amended (the "Code") limits the amount of multifamily housing revenue bonds that may be issued in any calendar year by entities within a state and authorizes the governor or the legislature of a state to provide the method of allocation within the state; and WHEREAS, Chapter 11.8 of Division 1 of Title 2 of the Government Code of the State of California (the "Government Code") governs the allocation of the state ceiling among governmental units in the State of California having the authority to issue multifamily housing revenue bonds; and WHEREAS, Section 8869.85 of the Government Code requires a local agency to file an application with the California Debt Limit Allocation Committee ("CDLAC") prior to the issuance of multifamily housing revenue bonds; and WHEREAS, the Issuer desires to apply to CDLAC for an allocation for the Project. 5-9 Resolution No. Page 2 NOW, THEREFORE, THE BOARD OF COMMISSIONERS OF THE HOUSING AUTHORITY OF THE CITY OF CHULA VISTA DOES HEREBY RESOLVE, ORDER AND DETERMINE AS FOLLOWS: SECTION 1. The Issuer has received an application for the financing of the Project on behalf of the Applicant (the "Application"). The Applicant will incur costs with respect to the Project prior to the issuance of the Obligations. The Issuer hereby states its intention and reasonably expects to reimburse to the Applicant for such costs with proceeds of the Obligations; provided, however, that nothing herein obligates the Issuer to issue the Obligations or provides the Applicant with any legal right to compel the issuance of the Obligations, which decision remains in the final discretion of the Issuer. Exhibit A describes the general character, type, purpose, and function of the Project. SECTION 2. The reasonably expected maximum principal amount of the Obligations is $21,000,000. This Resolution is being adopted no later than sixty (60) days after the date (the "Expenditure Date or Dates") that the Applicant will expend moneys for the portion of Project costs to be reimbursed from proceeds of the Bonds. The expected date of issue of the Bonds is within eighteen (18) months of the later of the Expenditure Date or Dates and the first date the Project is placed in service and, in no event, later than three years after the Expenditure Date or Dates. SECTION 3. Proceeds of the Bonds to be used to reimburse for Project costs are not expected to be used directly or indirectly to pay debt service with respect to any obligation or to be held as a reasonably required reserve or replacement fund with respect to an obligation of the Issuer or any entity related in any manner to the Issuer, or to reimburse any expenditure that was originally paid with the proceeds of any obligation, or to replace funds that are or will be used in such manner. SECTION 4. This Resolution is consistent with the budgetary and financial circumstances of the Issuer, as of the date hereof. No monies from sources other than the Obligations are, or are reasonably expected to be reserved, allocated on a long-term basis, or otherwise set aside by the Issuer (or any related party) pursuant to their budget or financial policies with respect to the portion of the Project costs to be financed with the Obligations. This Board of Commissioners is not aware of any previous adoption of official intents by the Issuer that have been made as a matter of course for the purpose of reimbursing expenditures relating to the Project and for which tax-exempt obligations have not been issued. SECTION 5. This Resolution is adopted as official action of the Issuer in order to comply with Treasury Regulation § 1.103-8(a)(5) and Treasury Regulation § 1.150-2 and any other regulations of the Internal Revenue Service relating to the qualification for reimbursement of expenditures incurred prior to the date of issue of the Obligations, is part of the Issuer's official proceedings, and will be available for inspection by the general public at the main administrative office of the Issuer. 5-10 Resolution No. Page 3 SECTION 6. The officers and employees of the Authority are hereby authorized and directed to apply to CDLAC for a portion of the private activity bond allocation set aside for the calendar year 2012 for the Project in an aggregate amount not to exceed $21,000,000, to collect from the Applicant and hold pursuant to CDLAC requirements the required CDLAC deposit for the requested allocation, and to certify to CDLAC that such amount has been placed on deposit in an account in a financial institution. Because the amount of private activity bond allocation is limited, such officers are also authorized to resubmit the application to CDLAC one or more times during the calendar year 2012 in the event the application is denied by CDLAC. SECTION 7. The officers and employees of the Issuer are hereby authorized and directed, jointly and severally, to take any actions and execute and deliver any and all documents which any of them deem necessary or advisable, with the advice of City Attorney, in order to effectuate the purposes of this Resolution, and such actions previously taken by such officers and employees are hereby ratified and confirmed; provided that the terms and conditions under which the Bonds are to be issued and sold must be approved by this Board in the manner provided by law prior to the sale of the Bonds. SECTION 8. All the recitals in this Resolution are true and correct. SECTION 9. This Resolution shall take effect immediately upon its adoption. Presented by Gary Halbert, AICP, PE Assistant City Manager/Director of Development Services Approved as to form by ~i -'(`il R. Googins ~C' y Attorney 5-11 EXHIBIT A DESCRIPTION OF PROJECT A multifamily rental housing project of approximately 186 units known as "Congregational Towers" and located at 288 F Street, in the City of Chula Vista, California. 5-12