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4.1. SR 11-22-1999 rei ---'\) ( ); ~l}{ Item #4.1. River MEMORANDUM TO: Mayor & City Council FROM: Paul T. Steinman, Director ~nomic Development . r u November 22,1999 DATE: SUBJECT: Resolution Reciting a Proposal for a Multifamily Housing Development Project, Taking Official Action with Respect Thereto, and Indicating Preliminary Intent to Assist the Financing of the Project Pursuant to Minnesota Statutes, Chapter 462C . Issue The City Council is being asked to consider a resolution allowing a developer to access a pool of tax-exempt funds through the State of Minnesota to purchase multifamily housing units in the city of Elk River. The city has no liability in connection with the sale or repayment of the bonds. Background City staff was contacted by the developer to request the council to pass a resolution allowing the developer access to tax-exempt financing through the State of Minnesota to purchase two multifamily housing buildings located in Elk River as follows: · 18 unit housing facility - Elk Ridge Estates - 11755 191-1/2 NW Avenue · 54 unit housing facility - Oak Crest Apartments - 300/340/380 3rd Street NW The developer estimates the principal amount of the revenue bonds to be issued is $4 million. . 13065 Orono Parkway. P.O. Box 490. Elk River, MN 55330. TDD & Phone: (612) 441-7420. Fax: (612) 441-7425 . This type of request is fairly standard in that it is one of the only ways developers are able to access tax-exempt funds for this purpose. As indicated in the attached letter, Minnesota allocates approximately $20 million of its total bonding authority to the multifamily housing pool each year. These funds are only accessed on a competitive basis beginning the first Tuesday of each calendar year. As is typical in other cities where such requests are more common, city staff is recommending a fee oflh of 1 percent of the total amount of the bonds. It is also recommended that staffbe authorized to bring forward for council consideration, a draft policy for this type of application process. The lh percent fee will generate approximately $20,000 and staff recommends that amount be deposited to the development account as is provided for within the development account policy and so that these funds can be made available for future development activities. Attached to this memo is a letter from Todd Urness, Winthrop and Weinstine, describing the request and overall process. Mr. Urness and counsel will be available at the City Council meeting to address questions or comments by the City Council. . Also attached are the following documents: · Notice of Public Hearing - published on Wednesday, November 3, 1999 · Resolution and Supporting Information Recommendation Staff recommends the council hold a public hearing to consider comments on a proposal for issuance of multifamily housing development revenue bonds, approve Resolution 99-_, in consideration of payment of an administrative fee to the City of Elk River equal to lh of 1 percent of the bond issue. Staff will proceed to draft a policy with regard to these types of applications/requests and bring such policy to the City Council for further consideration. . . . . RESOLUTION 99 - A RESOLUTION OF THE CITY OF ELK RIVER A RESOLUTION RECITING A PROPOSAL FOR A MULTIFAMILY HOUSING DEVELOPMENT PROJECT, TAKING OFFICIAL ACTION WITH RESPECT THERETO, AND INDICATING PRELIMINARY INTENT TO ASSIST THE FINANCING OF THE PROJECT PURSUANT TO MINNESOTA STATUTES, CHAPTER 462C WHEREAS, WHEREAS, WHEREAS, WHEREAS, WHEREAS, WHEREAS, the City is authorized pursuant to Minnesota Statutes, Chapter 462C, as amended (the "Act") to finance the making or purchasing of loans with respect to multifamily housing developments within the boundaries of the City of Elk River (the "City"); and, neither the full faith and credit of the City or the Authority will be pledged to the payment of the principal of, premium, if any, and interest on the Revenue Bonds; and, the City has received a proposal from West Suburban Housing Partners II Limited Partnership, a Minnesota limited partnership (the "Company"), that the City assist in financing a Project hereinafter described, through the issuance of Revenue Bonds in the maximum aggregate principal amount of $4,000,000 (hereinafter referred to in this resolution as "Revenue Bonds") pursuant to the Act and in accordance with a housing finance program prepared with respect to the Project (the "Housing Program"); and, the undertaking of the proposed Housing Program and the issuance of the Revenue Bonds to finance the cost thereof will further promote the public purposes and legislative objectives of the Act by expanding and assisting the existing multifamily housing operations of the Company in the City; and, the Project to be financed by the Revenue Bonds is the acquisition and renovation of an 18 unit housing facility (Elk Ridge Estates Facility) located at 11755 1911h Avenue Northwest in the City and a 54 unit housing facility (Oak Crest Apartments Facility) located at 300,340, and 380 Third Street Northwest in the City (collectively, the "Project"). the City has been advised by representatives of the Company that conventional, commercial financing to pay the capital cost of the Project is available only on a limited basis and at such high costs of borrowing that the economic feasibility of operating the Project would be significantly reduced; and, . . . WHEREAS, no public official of the City has either a direct or indirect financial interest in the Project, nor will any public official either directly or indirectly benefit financially from the Project. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River, Minnesota, as follows: 1. The Council hereby indicates its preliminary intent to undertake the Project pursuant to the Act and the Housing Program and to issue the Revenue Bonds in the maximum aggregate principal amount of $4,000,000 pursuant to the Act to finance the Project. 2. On the basis of information available to the City it appears, and the City hereby finds, that the Project constitutes a multifamily housing development wi thin the meaning of Section 462C. 05 of the Act; that the availability of financing under the Act and the willingness of the City to furnish such financing will be a substantial inducement to the Company to undertake the Project, and that the effect of the Project, if undertaken, will be to encourage the provision of multifamily rental housing opportunities to residents of the City at a reasonable cost. 3. The City hereby gives preliminary approval of the Housing Program and the issuance of the Revenue Bonds. The City staff is hereby authorized, upon receipt of the City from the Company of the application deposit, to submit an application to the Minnesota Department of Financing for an allocation of tax exempt bonding authority for the Project from the housing pool. 4. The issuance of the Revenue Bonds by the City is subject to, among other things, receipt of an allocation of tax exempt bonding authority from the Minnesota Department of Finance, final approval by this Council, the Company, and the purchaser of the Revenue Bonds as to the ultimate details of the financing ofthe Project. 5. Company has agreed and it is hereby determined that any and all costs incurred by the City in connection with the financing of the Project whether or not the Project is carried to completion and whether or not approved by the City will be paid by Company. 6. Nothing is this resolution or in the documents prepared pursuant hereto shall authorize the expenditure of any municipal funds on the Project other than the revenues derived from the Project or otherwise granted to the City for this purpose. The Revenue Bonds shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property or funds of the City except the revenue and proceeds pledged to the payment thereof, nor shall the City be subject to any liability thereon. The holder of the Revenue Bonds shall never have the right to compel any exercise of the taxing power of the City to pay the outstanding principal on the Revenue Bonds or the interest thereon, or to enforce payment thereof against any property of the City. The Revenue Bonds shall recite in substance that the Revenue Bonds, including interest thereon, is . . . payable solely from the revenue and proceeds pledged to the paYment thereof. The Revenue Bonds shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation. 7. It is the purpose of this resolution to evidence the commitment of the parties and their intentions with respect to the proposed Project in order that the Company may proceed without delay with the commencement of the acquisition and renovation of the Project with the assurance that there has been sufficient "official action" within the meaning of the Internal Revenue Code of 1986, as amended, to allow for the issuance of multifamily revenue bonds (including, if deemed appropriate, any interim note or notes to provide temporary financing thereof) to finance the entire cost of the Project upon agreement being reached as to the ultimate details of the Project and its financing. 8. In anticipation of the final approval by the City of the issuance of the Revenue Bonds to finance all or a portion of the Project, and in order that completion of the Project will not be unduly delayed when approved, the Company is hereby authorized to make such expenditures and advances toward paYment of that portion of the costs of the Project to be financed from the proceeds of the Revenue Bonds as Company considers necessary, including the use of interim, short-term financing, subject to reimbursement from the proceeds of the Revenue Bonds if and when delivered but otherwise without liability on the part of the City. Passed and adopted by the City Council of the City of Elk River this 22nd day of November, 1999. Stephanie Klinzing, Mayor ATTEST: Sandra A. Peine, City Clerk Paul T. Steinman Director of Economic Development City of Elk River 13065 Orono Parkway Elk River, MN 55330 SHERMAN WlNTIlROP ETR. WEINSTINE A. HOEL GER D. GORDON STEVEN C. TOUREK STEPHEN J. SNYDER MARVIN C. INGBER HART KULLER DAVID P. PEARSON THOMAS M. HART IV DARRON C. KNUTSON JOHN A. KNAPP K. CRAIG W1LDFANG MICHELE D. VAILLANCOURT DAVID E. MORAN, JR. DONALD J. BROWN JON 1. HOGANSON SANDRA J. MARTIN TODD B. URNESS TIMOTHY M. BARNETT . Re: Dear Paul: WINTHROP & WEINSTINE A PROFESSIONAL ASSOCIATION SCOTT J. DONGOSKE PETER J. GLEEREL EDWARD J. DRENTTEL JEFFREY R. ANSEL LAURIE A. KNOCKE LLOYD W. GROOMS MARK T. JOHNSON BROOKS F. POLEY THOMAS H. BOYD DANIEL C. BECK ERIC J. NYSTROM JOANNE L. MATZEN PATRICK W. WEBER PAUL W. MARKWARDT CRAIG A. BRANDT JAMES W. DIERKING THERESE M. MARSO MEUSSA A. GRANT CHRISTOPHER W. MADEL JEFFREY L. LECLERC Attorneys and Counselors at Law THOMAS A. WALKER SUZANNE M. SPELLACY TREVOR V. GUNDERSON JOHN C. HOLPER M. CATHERINE POWELL STEVEN E. UHR TIFFANY A. BLOFIELD ANDREW D. PUGH RYAN K. CRAYNE BETH GERSTEIN TIMM JULIE A. Sn.VERMAN LAURA A. PFEIFFER CRAIG S. KRUMMEN CELESTE J. TAYLOR ANN DUNN WESSBERG MARK R. PRJVRATSKY PHlUP R.MAHOWALD NORMAN L. JONES ill KARL E. ROBINSON JONATHAN W.J. ARMOUR DANIEL S. SCHLECK JOHN C. EKMAN CHARLES 1. SCHOENWETTER KAITLIN A. HALLETT ANDREW C. TRIGGS JOSEPH P. ROGERS JASON L. BROWN JULIE ANN FISHEL INGRID N. NYBERG DARRELL E. GRAHAM ANN E. WAlJ'ERS JOSEPH S. FRIEDBERG of Counsel In connection with the City Council's public hearing for the issuance of bonds for West Suburban Housing Partners II Limited Partnership regarding the acquisition and rehabilitation of certain apartment complexes located in Elk River Minnesota, you have asked us to provide a short explanation as to the basis for our request. That is, you have asked us to provide you with an explanation as to why the City Council's action requited to make this financing available to us. 3200 Minnesota World Trade Center 30 East Seventh Street Saint Paul. Minnesota 55101 Telephone (651) 290-8400 Fax (651) 292-9347 3000 Dain Rauscher Plaza 60 South Sixth Street Minneapolis, Minnesota 55402 Telephone (612) 347-0700 Fax (612) 347-0600 As you are probably aware, federal tax law provides an incentive for the acquisition and rehabilitation of certain multi-family housing complexes (i.e. apartments). The incentive is that these facilities may (subject to state law allocation provisions) be financed with tax exempt bonds. The use of tax exempt bonds has the effect of lowering the borrowing costs but requiring a certain amount be reinvested in the property in the form of rehabilitation, The purpose of this law is to provide and upgrade multi-family housing for affordable purposes. (gJ2)Dj~7-0657 November 12, 1999 ,R.tply to . Mtnneapolzs Minnesota allocates its total tax exempt bond allocation to a variety of uses including single family housing, multi-family housing, manufacturing and other qualifying facilities. Minnesota allocates approximately $20,000,000 of its total bonding authority to the multi-family housing pool which can be accessed by a competitive process beginning on the first Tuesday of each calendar year. . VIA FACSIMILE & U.S. MAIL 1;" Illi Il Elk River Apartments Oak Crest Apartments . . . Paul T. Steinman November 12, 1999 Page 2 In order to access this pool, we must have a resolution from the City and pay two points on the requested allocated amount. Obviously, the City has no liability in connection with this bond allocation nor does it have any liability for the repayment of the bonds. Simply put, the City's resolution is necessary to allow us to access this bond allocation. Very truly yours, WINTHROP & WEINSTINE, P.A. By- 7.,// %~ Todd B. Urness TBU/ser cc: Scott Mann MPLl: 314651-2/8596.5 . . . NOTICE OF PUBLIC HEARING ON A PROPOSAL FOR ISSUANCE OF MULTIFAMILY HOUSING DEVELOPMENT REVENUE BONDS Notice is hereby given that the City Council of the City of Elk River, Minnesota (the "City"), will meet "in the City Council Chambers at the City Hall at 6:00 p.m. on November 22, 1999 to consider the proposal of West Suburban Housing Partners II Limited Partnership, a Minnesota limited partnership (the "Company"), that the City undertake a housing program to finance a project hereinafter described by the issuance of revenue bonds of the City pursuant to Minnesota Statutes, Chapter 462C, as amended. The project consists of the acquisition and renovation of an 18 unit housing facility (Elk Ridge Estates Facility) located at 11755 191 1/2 Northwest Avenue in the City and a 54 unit housing facility (Oak Crest Apartments Facility) located at 300, 340 and 380 Third Street Northwest in the City (collectively, the "Project"). The Project will be owned and operated by the Company. The estimated principal amount of Revenue Bonds to be issued to finance the Project is $4,000,000. The Revenue Bonds or other obligations if and when issued will not constitute a charge, lien or encumbrance upon any property of the City except the project and the revenues to be derived from the Project, and such Revenue Bonds or obligations will not be a charge against the City's general credit or taxing powers but will be payable from sums to be paid by the Company pursuant to a revenue agreement. At the time and place fixed for the Public Hearing, the City Council of the City will give all persons who appear at the hearing an opportunity to express their views with respect to the proposal. In addition, interested persons may file written comments respecting the proposal with the City Administrator at or prior to said public hearing. By order of the City Council. By /s/ Patrick Klaers City Administrator 1099112.1 . CITY OF ELK RIVER HOUSING FINANCE PROGRAM Proposal Authoritv. This housing finance program (the "Program") is undertaken by the City of Elk River (the "City") to finance a Project (as defined and described in this document) to be owned and operated by West Suburban Housing Partners II Limited Partnership, a Minnesota corporation (the "Company"). The City expects to issue multifamily housing development revenue bonds (the "Bonds") pursuant to Minnesota Statutes, Chapter 462C, to assist in financing the Project. General Description of the Proqram and Location. The City anticipates loaning the proceeds of the Bonds to the Company to . finance the acquisition and renovation of an 18 unit housing facility located at 11755 191 ~ Avenue Northwest in the City and a 54 unit housing facility located at 300, 340 and 380 Third Street Northwest in the City (collectively, the "project"). In accordance with the requirements of Minnesota Statutes, Section 462C.05, subdivision 1, the Company shall covenant that the costs of rehabilitation will be at least $1,000 per unit or 20 percent . of the appraised value of the project, whichever is less. in accordance with applicable development restrictions, and all Operation of proiect. The Company will operate the Project new construction is subject to applicable state and local building codes. The Company will rent either (a) 40% of the units in the Project to individuals or families with gross _. incomes that do not exceed 60% of area median income, or (b) 20% of the units in the project to individuals or families with gross 1099040.2 ... incomes that do not exceed 50% of area media income. The Company will be required to operate the project in accordance with state . and local anti-discrimination laws and ordinances. Revenue Bonds. The Company has indicated that the amount of revenue bonds required to finance the Project is approximately $4,000,000. The proceeds will finance the acquisition and rehabilitation of the project and pay costs of issuing the bonds, and may be used to establish a reserve. Monitorinq. The Company expects to enter into or continue suitable agreements with necessary parties to ensure consistent compliance with the objectives of this Program, as well as with the requirements of applicable law. Use of Bond Proceeds. The proceeds of the Bonds would be ... loaned to the Company pursuant to a revenue agreement (the "Loan Agreement") by and between the City and the Company. The Company will be required, pursuant to the Loan Agreement, to make paYments sufficient to pay when due the principal of, premium, if any, and interest on the Bonds. ... 2 1099040.2 . . . STATE OF MINNESOTA COUNTY OF SHERBURNE CITY OF ELK RIVER I, the undersigned, being the duly qualified and acting City Clerk of the City of Elk River, Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of minutes with the original thereof on file in my office, and that the same is a full, true and complete transcript of the minutes of a meeting of the City Council of said City duly called and held on the date therein indicated, insofar as such minutes relate to a resolution giving preliminary approval to a multifamily housing development project. WITNESS my hand this day of , 1999. City Clerk 1099117.1 4 . . . :' Extract of Minutes of a Meeting of the City Council of the City of Elk River, Minnesota Pursuant to due call and notice thereof, ~ regular or special meeting of the City Council of the City of Elk River, Minnesota, was duly held at the City Hall in said City on Monday, the 22nd day of November, 1999, at o'clock .M. The following Councilmembers were present: and the following were absent: During said meeting introduced the following resolution and moved its adoption: RESOLUTION NO. RESOLUTION RECITING A PROPOSAL FOR A MULTIFAMILY HOUSING PROJECT, TAKING OFFICIAL ACTION WITH RESPECT THERETO AND INDICATING PRELIMINARY INTENT TO ASSIST THE FINANCING OF THE PROJECT PURSUANT TO MINNESOTA STATUTES CHAPTER 462C The motion for the adoption of the foregoing resolution was duly seconded by Councilmember , and after full discussion thereof and upon vote being taken thereon, the following voted in favor thereof: and the following voted against the same: whereupon said resolution was declared duly passed and adopted. 1099117.1