HomeMy WebLinkAboutAgenda Statement 1985/08/27 Item 12 COUNCIL AGENDA STATEMENT
Item 12
Meeting Date 8/27/85
ITEM TITLE: Resolution 5 ?/5 Approving documents associated with sale
of $21 ,81 ,000 principal amount of Multi-Family Housing
Revenue Bonds (Eucalyptus Grove Project) 1985 Series, and
approving official action
SUBMITTED BY: Community Development Director 4i6
REVIEWED BY: City Manager 1 ' (4/5ths Vote: Yes No X )
On August 6, the City Council conducted a public hearing and adopted a
resolution authorizing the sale of Multi-Family Housing Revenue Bonds for the
Eucalyptus Grove Apartments Project, subject to subsequent approval of the
associated documents. The project is a 376-unit apartment development located
at the intersection of Flower Street and Bonita Road. The associated
documents have been completed and are on file in the City Clerk' s office.
RECOMMENDATION: That the Council adopt the resolution approving the
documents for the Eucalyptus Grove Apartments Multi-Family Housing Revenue
Bonds Issue and approving official action.
BOARDS/COMMISSIONS RECOMMENDATION: On February 9, 1983, the Human Relations
Commission considered a Community Development staff report on the
Redevelopment Agency's Low and Moderate-Income Housing Fund use. The
Commission endorsed a five point strategy in their report which included use
of the funds in conjunction with mortgage revenue bond financing.
DISCUSSION:
The salient points of the bond financing structure are as follows:
Bond interest rate: 7.75%
Mortgage interest rate: Approximately 8.5%
Term of the bond: 24 years, with the bondholder's option to "put" or
redeem the bond after seven years.
Amount of bond issue: $21 ,815,000
Amount of project mortgage: $17,893,000
Bond funds: Cost of Issuance - $1 ,868,000 �..
Debt Service Reserve - $2,054,000 // -__ --ce
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Page 2, Item 12
Meeting Date 8/27/85
The bond issue participants are as follows:
Issuer: The City of Chula Vista under State law authority AB1335. The
City has no fiscal liability for the bond indebtedness. Debt service on
the bonds is paid from project mortgage payments and bond fund revenues,
with a surety bond as a guarantee of bond debt service payment in case of
mortgage delinquency or default.
Bond Counsel : Jones Hall Hill & White, under contract with the City
approved by the City Council in the August 6 resolution. Their fee is
paid from bond proceeds.
Underwriter: Newman & Associates, an investment banking firm. The
Underwriter markets the bonds, usually purchasing a substantial amount of
the bonds at a discount which represents their fee.
Trustee: The Bank of California as the Trustee is custodian of the bond
funds, the assignee of the Issuer in making the project loan, and the
official representative of the bondholders and the Issuer.
Mortgage Banker/Servicer: Lomas & Nettleton. The mortgage banker
provides the project mortgage funded through the Trustee from bond sale
revenue, and services the mortgage.
Surety: CNA Insurance Company provides the surety bond to guarantee bond
debt service payment in the event of mortgage default or delinquency. The
bond is a credit enhancement in order to eliminate real estate risk.
The most pertinent associated documents are as follows:
Preliminary Official Statement: This is the prospectus used to market the
bonds. It tells all pertinent facts about the bond structuring, pricing,
and restrictions. The Preliminary Official Statement proceeds the
Official Statement, but must be substantially the same as the final
Official Statement.
Trust Indenture: This is the agreement between the City and the Trustee
which details the structure, terms, and payment procedures on the bonds.
Distribution of the bond revenues will be governed by this agreement.
Regulatory Agreement: This is an agreement between the City, the Trustee,
and the developer which declares the restrictive covenants on the project.
Loan Agreement: This is the agreement between the City, the developer and
the Trustee which sets out the terms and conditions of the loan to the
devel oper.
Bond Purchase Agreement: This is an agreement between the City and the
Underwriter, setting forth the terms and conditions of the purchase of the
bonds by the Underwriter, including the Underwriter' s discount rate.
Page 3, Item 12
Meeting Date 8/27/85
Housing Cooperation Agreement: This is an agreement (attached) between
the City and the developer specifying the low-income housing obligations
undertaken by the developer in accordance with the City' s Multi-Family
Mortgage Revenue Bond Policy. The agreement is more restrictive than
federal tax-exempt regulations and includes mechanisms for monitoring
compliance. Violation of the agreement by the developer is an event of
default of the Loan Agreement and could cause the calling of the loan.
The particulars of the Housing Cooperation Agreement restrictions were
discussed in detail in the Eucalyptus Grove TEFRA hearing agenda statement
of August 6.
In summary, the particulars of the bond financing package have been resolved
and are reflected in the associated documents. The recommended action
approves those documents, authorizes the Mayor to sign same, and will result
in the issuance of the housing revenue bonds for the Eucalyptus Grove
Apartments Project, in conjunction with the Council 's previous action to
approve the issuance of the bonds subject to the approval of these documents.
FISCAL IMPACT: All costs of issuance of bonds are paid for from bond
proceeds or developer fees. The bonds will be repaid from the project
mortgage payments and bond issue special funds, will be secured by the surety
bond from CNA Insurance Company, and will not constitute a liability or
obligation to the City.
Some staff cost will be associated with monitoring compliance with the Housing
Cooperation Agreement. Those costs will be reimbursed from the Low and
Moderate-Income Housing Fund salary appropriations .
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