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HomeMy WebLinkAbout7B Prior Lake Senior Apartments Proposal & Financing of "1°4 4646 Dakota Street SE Prior Lake, MN 55372 'yr�sogA CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 11, 2015 AGENDA#: 7B PREPARED BY: DAN ROGNESS, COMMUNITY & ECONOMIC DEVELOPMENT DIRECTOR PRESENTED BY: DAN ROGNESS AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION RECITING A PROPOSAL FOR A MULTIFAMILY HOUSING DEVELOPMENT PROJECT, APPROVING A HOUSING PROGRAM AND INDICATING PRELIMINARY INTENT TO ASSIST IN THE FINANCING OF THE PROJECT PURSUANT TO MINNESOTA STAT- UTES, CHAPTER 462C (PRIOR LAKE SENIOR APARTMENTS PROJECT) DISCUSSION: Introduction The purpose of this agenda item is to consider approval of revenue bond financ- ing for the proposed Dominium affordable senior housing redevelopment project at the Gateway Center site. This action follows the City Council's earlier consid- eration of: (1) modifying the existing Municipal Development District No. 1; (2) establishing TIF District No. 1-5; and (3) approving a TIF Plan. History Dominium has proposed to develop a 170-unit senior affordable housing rental project on the existing Gateway Center commercial site of approximately 2.5 acres. Previously, the City Council approved the following actions in support of this redevelopment project: (1) amend the comprehensive plan to Urban High Density Residential; (2) rezone the property to PUD; and (3) approve a Final PUD Plan. Dominium intends to develop a project with a Total Development Cost of nearly $34.0 million. Of that cost, Dominium is proposing to finance up to $21.0 million through tax exempt revenue bonds and $1.85 million through a combination of tax increment financing and direct assistance (interfund loan from the Park Fund). Current Circumstances Prior Lake Leased Housing Associates I, LLP, a Minnesota Limited Liability Lim- ited Partnership (the "Borrower") which is related to Dominium, is requesting preliminary approval to issue tax exempt bonds ("Bonds") through the City of Prior Lake in an amount not to exceed $21.0 million dollars. The proceeds from the Bonds will be used to acquire the existing facilities and land at 5119 Gate- way Street in the City and to construct and equip a 170-unit independent senior living apartment complex (the "Project"). The City will be merely a conduit with regard to issuance and payment of the Bonds, and the money and obligations will flow only between the Borrower and a trustee on behalf of the owners of the Bonds. This financing is separate and apart from the proposed TIF financing which will also provide funds for the Project. Dougherty & Company will serve as the underwriter for the issuance of the Bonds. In order to process this request, a notice calling for the Public Hearing for the May 11, 2015 City Council meeting was published in the Prior Lake American on April 25, 2015. Pursuant to Minnesota Statutes, Chapter 462C (the "Act"), the City is authorized to develop and administer programs of multifamily senior housing developments such as the Project under the circumstances and within the limitations set forth in the Act. Minnesota Statutes Section 462C.07 provides that such programs for Minnesota family housing may be financed by revenue bonds issued by the City. The City expects to issue revenue bonds pursuant to the Act to assist in financing the Project. The Bonds and the resolution to be adopted by the City will recite that the Bonds, if and when issued, will not be payable from or charged upon any of the City's funds, other than the revenues received under a loan agreement which will be assigned to the trustee under a trust indenture and pledged to the pay- ment of the Bonds, and the City is not subject to any liability on the Bonds. No holder of the Bonds will ever have the right to compel any exercise by the City of its taxing powers to pay any of the principal of the Bonds or the interest or premium thereon, or to enforce payment of the Bonds against any property of the City except the interests of the City in payments to be made by the Borrower under the loan agreement. The Bonds will not constitute a charge, lien or en- cumbrance, legal or equitable, upon any property of the City except the inter- ests of the City in payments to be made by the Borrower under the loan agree- ment. The Bonds will not be a moral obligation on the part of the State of Min- nesota or its political subdivisions, including the City, and the Bonds will not constitute a debt of the City within the meaning of any constitutional or statutory limitations. At the April 20th EDA meeting, a unanimous vote (4-0) recommended public,fi- nancing assistance for the Dominium redevelopment project as proposed by staff. In addition, the EDA discussed and recommended a business financing program for potential assistance that would support the move of three businesses in the Gateway Center (McGeez Closet, Pizza & Pasta, and Prior Lake Shoe Service)to move to other commercial property in Prior Lake. That recommended program is provided in a separate agenda item under New Business. Conclusion Staff and the City's consultants, including Northland Securities (financial) and Briggs & Morgan (legal) have evaluated this agreement based upon what is ben- eficial to the City and to Dominium. All financial and legal consulting costs asso- ciated with this agreement are being paid by Dominium. The description of the housing program related to the proposed revenue bond financing is found in At- tachment 1, "Multifamily Rental Housing Program of the City of Prior Lake, Min- nesota, Prior Lake Senior Apartments Project". ISSUES: Staff has worked closely with Dominium staff to develop this final proposal to include Tax Increment and Revenue Bond financing. The City will see the following benefits from the Dominium redevelopment project: • An underutilized commercial area will be redeveloped into a new use, which may also spur other improvements in the Gateway area. • The market value of the property will increase ten-fold to $17 million. 2 • After the TIF District is complete within 15-20 years, an estimated total property tax revenue will be over $150,000 annually to be divided by the school districts, county, city and other taxing jurisdictions. • Affordable high-quality housing will be available to the growing senior population in and around Prior Lake. • This project will help the city achieve its affordable and life-cycle housing goals identified in the Comprehensive Plan. • Single family housing being vacated by seniors for this rental option will make more affordable housing available to families. • The city's Park Fund will see a net revenue gain of$450,000 for city park improvements. • The city's sewer and water trunk funds will see an estimated net revenue gain of$297,500 in 2015. • The city's Building Inspection division will see a gain of permit revenue of nearly $117,500 in 2015. • A high level of construction jobs will be in Prior Lake for this project within an estimated 14-month timeframe. ALTERNATIVES: 1. Open and close the public hearing; motion and a second to approve a resolution reciting a proposal for a multifamily housing development pro- ject, approving a housing program and indicating preliminary intent to as- sist in the financing of a project pursuant to Minnesota Statutes, Chapter 462C (Prior Lake Senior Apartments Project). 2. Motion and a second to deny a resolution reciting a proposal for a multi- family housing development project, approving a housing program and indicating preliminary intent to assist in the financing of a project pursuant to Minnesota Statutes, Chapter 462C (Prior Lake Senior Apartments Pro- ject). 3. Motion and a second to table action and ask City staff to provide additional information as requested by the Council. RECOMMENDED Alternative#1 MOTION: ATTACHMENTS: 1. Multifamily Rental Housing Program of the City of Prior Lake for the Senior Apartments Project 3 o� POMP ti u 4646 Dakota Street SE Prior Lake,MN 55372 RESOLUTION 15-xx A RESOLUTION RECITING A PROPOSAL FOR A MULTIFAMILY HOUSING DEVELOPMENT PROJECT,APPROVING A HOUSING PROGRAM AND INDICATING PRELIMINARY INTENT TO ASSIST IN THE FINANCING OF THE PROJECT PURSUANT TO MINNESOTA STATUTES, CHAPTER 462C (PRIOR LAKE SENIOR APARTMENTS PROJECT) Motion By: Second By: WHEREAS, The City of Prior Lake, Minnesota (the "City") is authorized pursuant to Minnesota Statutes, Chapter 462C, as amended (the"Act")to finance the making of loans with respect to multifamily housing developments within the boundaries of the City through the issuance of revenue bonds, notes or other obligations; and WHEREAS, Pursuant to the Act, the full faith and credit of the City will not be pledged to the payment of the principal of, premium, if any, and interest on such obligations; and WHEREAS, The City has received a proposal from Prior Lake Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership(the"Borrower"), that the City assist in financing a Project hereinafter described, through the issuance of revenue bonds or a single note, in the principal amount not to exceed $21,000,000(the"Note") pursuant to the Act and in accordance with a housing finance program prepared with respect to the Project ; and WHEREAS, The undertaking of the proposed Project and the issuance of the Note to finance the cost thereof will further promote the public purposes and legislative objectives of the Act by expanding and assisting in the availability of multifamily housing facilities in the City,especially housing facilities for seniors; and WHEREAS, The Project to be financed by the Note is the acquisition, construction and equipping of an approximately 170-unit independent multifamily senior housing development, to be located at 5119 Gateway Street SE in the City(the"Project"). The Project will be owned and operated by the Borrower; and WHEREAS, The City has been advised by representatives of the Borrower 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, The City has on this date held a public hearing with respect to the Project, at which hearing all persons wishing to comment were heard; 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 HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. The Council hereby approves the housing program and gives preliminary approval to the Project and the financing thereof, pursuant to the Act and to issue the Note in the principal amount not to exceed $21,000,000. The issuance of the Note by the City is subject to, among other things, final approval by this Council, the Borrower and the purchaser of the Note as to the ultimate details of the financing of the Project. 3. On the basis of information available to the City it appears, and the City hereby finds, that the Project constitutes a multifamily housing development within 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 Borrower to undertake the Project, and that the effect of the Project, if undertaken, will be to encourage the provision of senior multifamily rental housing opportunities to residents of the City at a reasonable cost. 4. The borrower has agreed and it is hereby determined that any and all costs incurred by the City, including all fees required by the City's administrative policies, 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 the Borrower. 5. Briggs and Morgan, Professional Association, acting as bond counsel, is authorized to assist in the preparation and review of necessary documents relating to the Project, to consult with the Borrower and the purchaser of the Note as to the maturities, interest rates and other terms and provisions of the Note and as to the covenants and other provisions of the necessary documents and submit such documents to the City for final approval. 6. Nothing in 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 Note 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 Note shall never have the right to compel any exercise of the taxing power of the City to pay the outstanding principal on the Note or the interest thereon, or to enforce payment thereof against any property of the City. The Note shall recite in substance that the Note, including interest thereon, is payable solely from the revenue and proceeds pledged to the payment thereof. The Note 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 Project in order that the Borrower may proceed without delay with the commencement of the acquisition, construction and equipping of the Project with the assurance that there has been sufficient"official intent"within the meaning of Treasury Regulations Section 1.150-2(d) to permit Project costs incurred within sixty (60)days prior to the date of adoption of this Resolution to be financed by the issuance of multifamily revenue bonds to finance the entire cost of the Project upon agreement being reached as to the ultimate details of the Project and its financing. PASSED AND ADOPTED THIS 11h DAY OF MAY, 2015. VOTE Hedberg Keeney McGuire Morton Thompson Aye ❑ ❑ ❑ ❑ ❑ Nay ❑ ❑ ❑ ❑ ❑ Absent ❑ ❑ ❑ ❑ ❑ Abstain ❑ ❑ ❑ ❑ ❑ Frank Boyles, City Manager MULTI-FAMILY RENTAL HOUSING PROGRAM OF THE CITY OF PRIOR LAKE,MINNESOTA PRIOR LAKE SENIOR APARTMENTS PROJECT Proposal; Authority. The City of Prior Lake, Minnesota(the "City"), at the request of the Borrower (defined below), proposes to issue revenue bonds to assist in financing the acquisition, construction and equipping of a senior rental housing project described herein (this "Program") pursuant to applicable authority conferred upon the City by the laws of the State of Minnesota, including without limitation Minnesota Statutes,Chapter 462C,as the same may be amended from time to time (collectively, the "Act"). Purposes. In creating this Program,the City is acting in furtherance of its findings that the preservation of the quality of life in the City is in part dependent upon the maintenance and provision of adequate, decent, safe, sanitary, and affordable housing stock for seniors; that accomplishing the goals of this Program is a public purpose and will benefit the residents of the City;that the need exists within the City to provide in a timely fashion additional affordable rental housing to and for the benefit of seniors of low and moderate income and their families residing and expected to reside within the City;that there exist or are expected to exist persons and families within the City who are and will be able to benefit from and are in need of the Program; that the Program is necessary in view of the limited resources that may be available to such persons relative to the expenses involved in accomplishing the type of objectives outlined in this Program in the absence of one or more of the forms of assistance described herein or otherwise available pursuant to the Act; and that the City hereby finds that such forms of assistance are often necessary for the benefit of such persons, families, and goals and that, furthermore, the successful implementation of the objectives of the kind described in this Program has been found to provide impetus for the development of other housing in the City, as well as the general development of the City,by other persons who are not the beneficiaries of such governmentally sponsored or assisted activities. Rental Housing Purposes. More particularly, the City finds that there exists a need for affordable senior rental housing for qualifying individuals and families, which need is not being filled by private enterprise alone due to a variety of factors, including that the cost of new construction of senior rental units may in many cases prove economically unfeasible, given the high costs of construction and prevailing area rental levels, and that therefore appropriate levels of public assistance may be helpful and necessary in bridging that gap. General Description of the Program. This Program consists of financing the acquisition, construction and equipping of a 170-unit senior multifamily rental housing development, comprised of 115 one-bedroom, 23 two-bedroom and 32 three-bedroom units, within one contiguous approximately 287,000 square foot four story building (the "Project"). The one bedroom units will rent for approximately $930 per month, and the two bedroom units will rent for approximately$964-$1,120 per month. The initial owner and operator of the Project,pursuant to the financing, will be Prior Lake Leased Housing Associates I, LLLP, a Minnesota limited liability limited partnership (the "Borrower"). Location. This Program is limited to the Project. The Project will be located at 5119 Gateway Street SE in the City. 6971175v1 Revenue Bonds. The amount of revenue bonds required to finance this Program will not exceed a maximum principal amount of $21,000,000. The City preliminarily intends to finance the Program by issuing bonds. The proceeds will finance the acquisition, construction and equipping of the Project and pay costs of issuing the bonds, and maybe used to establish a reserve. The revenue bonds are expected to be issued in 2015, subject to final City Council approval in its sole and absolute discretion. Monitoring. The City expects to enter into suitable agreements with the Borrower, the trustee for the bonds and/or others respecting the monitoring or implementation by participants to ensure that the Project will be consistent with this housing Program and its objectives, which for this purpose means providing affordable rental housing. Meeting Needs; Methods. The Program will meet the need for rental housing for seniors of low and moderate incomes by providing units at an affordable rent. The City believes that this Program will help meet the identified needs under this Program. The specific methods anticipated to be used include the issuance of revenue bonds under the Act to provide feasible financing for various aspects of the Program so undertaken. Authorization. The Program is undertaken pursuant to Minnesota Statutes, Section 462C.05, Subdivision 4, for rental primarily to elderly persons. Limits on Gross Income. In connection with the issuance of the Bonds, the Borrower will be required to agree to limit the gross income of occupants of the Project in accordance with the requirements of Minnesota Statutes, Chapters 462C and 474A, and with the requirements relating to tax-exempt bonds for qualified residential rental projects. Adopted and approved on April 11, 2015, by the City Council of the City of Prior Lake, Minnesota. 2 6971175v1