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HomeMy WebLinkAbout8C - Housing Finance Program MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: R\.L\genda 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 CITY COUNCIL AGENDA REPORT JUNE 5, 2006 8C PAUL SNOOK, ECONOMIC DEVELOPMENT DIRECTOR CONSIDER APPROVAL OF A RESOLUTION ESTABLISHING A HOUSING FINANCE PROGRAM AND ISSUANCE OF REVENUE BONDS TO FINANCE A SENIOR INDEPENDENT LIVING FACILITY PURSUANT TO MINNESOTA LAW Introduction The purpose of this item is to consider the establishment ot a housing finance program and issuance of City ($22,000,000) and Economic Development Authority ($10,000,000) revenue bonds to finance a senior independent living facility pursuant to Minnesota Law. At its May 15th meeting City Council received from Shepherd's Path LLC an Application for Financial Assistance, and called public hearings on proposed City and Economic Development Authority revenue bonds, and proposed establishment of Tax Increment Financing district 6-1. (the City Council conducts the public hearing on issuance of both the EDA and City bonds; the EDA does not hold a public hearing. The City and EDA then act separately to approve their respective bonds). The public hearing for tax increment financing will be June 26, 2006. Shepherd's Path Senior Campus is designed to be a full service high quality residential environment and a comprehensive community resource exclusively for adults age 62 and over. Shepherd's Path will serve a wide spectrum of lifestyle needs from active adults 62 and over to very frail adults who need a wide range of support and services. In order to have an affordable residential element to Shepherd's Path, revenue bonds and tax increment financing is necessary to keep the rents at an affordable rate. City Council is asked to hold the required public hearing on the issuance of City and Economic Development Authority revenue bonds, and both the City and EDA are asked to approve respective revenue bonds for the purposes of assisting in the development of the Shepherd's Path senior residential community. History The development of the senior residential campus arrives on the heels of the new Shepherd of the Lake Lutheran Church which was completed in 2003. The senior campus represents the implementation of the master plan developed by the church to create a multi-generational community where senior adults, family members, church members, youth, volunteers and the residents of Prior Lake have an opportunity to benefit from the synergy of cooperative programs. www.cityofpriorlake.com 5 EO,I\ MeetPHt:f~4Wf.lf~30Ct)~~5Z!ijlli~f5e2i (6-05-06).COC ISSUES: FINANCIAL IMPACT: Current Circumstances Shepherd's Path contracted with Maxfield Research to conduct a market analysis of the senior housing needs in Prior Lake. Maxfield's market analysis shows a total potential market base for senior housing of 660 households in the Prior Lake market area. It is estimated that 45% of the market base will need or want subsidized / affordable housing. Thus, demand in the Prior Lake market area exists for 297 subsidized / affordable senior housing units. Some but not all of that demand is or will be met by existing subsidized / affordable units provided by other sources such as the Scott County HRA. The analysis also reveals that Scott County is one of the few counties in the state that has an inadequate number of skilled nursing beds to serve the senior population. In fact, there are no skilled nursing facilities in Savage or Prior Lake. Maxfield's calculations reveal the potential to support up to 180 beds in the Prior Lake market area through 2009. Conclusion The Shepherd's Path project meets many of the objectives of the City's 2030 Vision and Strategic Plan under the Housing Quality and Diversity section. Most importantly, the developers ot this project will make available various styles and levels of senior housing and this is a project that provides for lifecycle housing, specifically for the senior community. If the Council wishes to proceed, it should by resolution, issue the revenue bonds (the EDA would proceed in the same manner as the City, issuing its revenue bonds). The City Council needs to determine if it is important to have Shepherd's Path be a development that provides opportunity for lifecycle housing, inclusive of affordable units. If so, revenue bonds will help achieve the affordable residential component of the project. It is proposed that the City and EDA both issue tax-exempt revenue bonds on behalf of Shepherd's Path to finance a senior housing campus, including 84 independent housing units, 18 memory care units and 10,000 square feet of community space. The bonds will help keep the residential units affordable, and provide a significantly greater degree of related services than would occur without the bonds. The use of the bonds will require (in the development agreement) that a non-profit maintain ownership and operation of Shepherd's Path, which will consequently result in a continuum ot affordability to the units. NOTE: all financial approvals for this project are conditioned upon approval of a final plat. The bonds being proposed in this development are known as "conduit" bonds. In effect, the City is allowing its name and issuance authority to be used by the developer in return for an agreement to provide affordable housing. The developer uses the below-market interest rates attained with the City's tax exempt bond issuance authority to reduce financing costs thereby making affordable rents achievable. The EDA and the City will assign all of their rights to payments under the loan agreements to a trustee for the bondholders who will purchase the bonds and loan the purchase price of the bonds directly to Shepherd's Path. The EDA and the City are merely "conduits" and the money 5 Conduit Bonds and obligations flow only between the trustee (for the bondholders) and Shepherd's Path. The revenue bonds issued by the EDA would not exceed $10,000,000 and the bonds issued by the City would not exceed $22,000,000. The EDA and the City would enter into separate loan agreements with Shepherd's Path under which Shepherd's Path will agree to pay all principal and interest on both series of bonds. The bonds and the resolutions adopted by the EDA and the City for issuing the bonds will state that when issued, the bonds will not be payable from any of the EDA's or the City's funds, other than the revenues received under the Loan Agreements and pledged to the payment of the bonds, and the EDA and the City are not subject to any liability on the bonds. The bonds will not constitute a debt of the EDA or the City. The bonds issued by the EDA must be factored into the EDA's $10,000,000 bank qualification allowance leaving no amount available for other obligations that the EDA might issue this year for governmental purposes or other nonprofit borrowers. It is not expected that there will be any other EDA bonds issued this year. For the City, these bonds and others to be issued this year for governmental purposes will exceed the $10,000,000 limit so no bonds issued by the City will be Bank Qualified this year. However, Shepherd's Path stipulates as part of the loan agreement to compensate the City for the additional costs it incurs due to being unable to designate its bonds as Bank Qualified in 2006. Issuing the bonds will not affect the credit rating of the EDA or the City on bonds they issue for municipal purposes. Enclosed is a memo from the City and EDA's bond counsel Briggs and Morgan regarding conduit bonds. ALTERNATIVES: Allen Black of Presbyterian Homes 1 Shepherd's Path will be in attendance at the public hearing to make a presentation and answer questions you may have. 1. Approve the resolution 2. Deny the resolution 3. Defer for a specific reason RECOMMENDED MOTION: Alternative 1. R <5 E REF'CRT (6-05-06).DOC Extract of Minutes of a Meeting of the City Council of the City of Prior Lake, Minnesota Pursuant to due call and notice thereof, a regular meeting of the City Council of the City of Prior Lake, Minnesota, was duly held at the Prior Lake Fire Station 1 in said City on Monday, the 5th day of June, 2006 at 6:00 o'clock P.M. The following members were present: and the following members were absent: Member introduced the following resolution and moved its adoption: A RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF SENIOR HOUSING REVENUE BONDS, (SHEPHERD'S PATH SENIOR HOUSING, INC. PROJECT), SERIES 2006B TO PROVIDE FUNDS FOR A SENIOR MUL TIF AMIL Y HOUSING PROJECT The motion for the adoption of the foregoing resolution was duly seconded by member , 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. 1908315vl A RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF SENIOR HOUSING REVENUE BONDS, (SHEPHERD'S PATH SENIOR HOUSING, INC. PROJECT), SERIES 2006B TO PROVIDE FUNDS FOR A SENIOR MUL TIF AMIL Y HOUSING PROJECT BE IT RESOLVED by the City Council of the City of Prior Lake, Minnesota (the "City"), as follows: 1. Authority. The City is, by the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Chapter 462C, as amended (the "Act"), authorized to issue and sell its revenue bonds for the purpose of financing the cost of multifamily housing facilities for the elderly and to enter into agreements necessary or convenient in the exercise of the powers granted by the Act. 2. Authorization ofProiect Documents Presented. Shepherd's Path Senior Housing, Inc., a Minnesota nonprofit corporation (the "Borrower"), has proposed that the City issue and sell its $20,500,000 Senior Housing Revenue Bonds (Shepherd's Path Senior Housing, Inc. Project), Series 2006B (the "Series 2006B Bonds") in substantially the form set forth in the Indenture (as hereafter defined) pursuant to the Act and loan the proceeds thereof to the Borrower, in order to assist in financing the acquisition, construction and equipping of an approximately 154-unit senior housing and assisted living facility (the "Project") located adjacent to the Shepherd of the Lutheran Lake Church, located at 13760 McKenna Road in the City. Forms of the following documents relating to the Series 2006B Bonds have been submitted to the City, all of which are dated as of the first day of the month in which the Series 2006B Bonds are issued, unless otherwise indicated: (a) The Loan Agreement (the "Loan Agreement") between the City and the Borrower, whereby the City agrees to make a loan of the proceeds of sale of the Series 2006B Bonds to the Borrower and pursuant to which agreement the Borrower agrees to undertake and complete the Project and to pay amounts in repayment of the loan sufficient to provide for the full and prompt payment of the principal of, premium, if any, and interest on the Series 2006B Bonds; and (b) The Trust Indenture (the "Indenture") among the City, the Economic Development Authority of the City of Prior Lake, Minnesota (the "EDA") and U.S. Bank National Association, as trustee (the "Trustee"), authorizing the issuance of the Series 2006B Bonds and the EDA's $10,000,000 Senior Housing Revenue Bonds (Shepherd's Path Senior Living, Inc. Project), Series 2006A (the "Series 2006A Bonds" and together with the Series 2006B Bonds, the "Bonds") and pledging certain revenues, including those to be derived from the Loan Agreement, as security for the Bonds, and setting forth proposed recitals, covenants and agreements relating thereto; and (c) The Limited Guaranty Agreement from Presbyterian Homes and Services, a Minnesota nonprofit Borrower (the "Guarantor"), to the Trustee, by which the Guarantor guarantees payment of certain obligations of the Borrower relating to payment and purchase of the Bonds (this document not executed by the City); and 1908315vl 2 (d) The Combination Mortgage, Security Agreement and Fixture Financing Statement and Assignment of Leases and Rents (the "Mortgage") between the Borrower, as mortgagor, and the Trustee, as mortgagee, granting to the Trustee a first mortgage lien on and security interest in the Project as security for repayment of the Bonds, (this document not executed by the City); and (e) The Disbursing Agreement (the "Disbursing Agreement") among the Borrower, the Trustee, and a disbursing agent, setting forth the conditions to disbursement of proceeds of the Bonds in payment of costs of the Project (this document not executed by the City); and (f) The Bond Purchase Agreement (the "Bond Purchase Agreement"), among Northland Securities, Inc. (the "Underwriter"), the Borrower and the City, providing for the purchase of the Series 2006B Bonds from the City by the Underwriter and setting forth the terms and conditions of purchase; and (g) The Preliminary Official Statement (together with the form of final Official Statement and the insertion of the final underwriting details of the Bonds, including the interest rates thereon, and any other changes deemed necessary or desirable, intended to constitute the form of the final Official Statement, and including all Appendices thereto (together the "Official Statement")), describing the offering of the Bonds, and certain terms and provisions of the foregoing documents relating to the Bonds. 3. Findings. It is hereby found, determined and declared that: (a) Based on Borrower representations to City, the Project constitutes a project authorized by and described in the Act as elderly rental housing. (b) There is no litigation pending or, to the City's actual knowledge, threatened against the City relating to the Series 2006B Bonds, the Loan Agreement, the Bond Purchase Agreement or the Indenture (collectively, the "City Bond Documents") or questioning the due organization of the City, or the powers or authority of the City to issue the Series 2006B Bonds and undertake the transactions contemplated hereby. (c) The execution, delivery and performance of the City's obligations under the City Bond Documents do not and will not violate any order of any court or other agency of government of which the City is aware or in which the City is a party, or any indenture, agreement or other instrument to which the City is a party or by which it or any of its property is bound, or be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument. (d) It is desirable that the Series 2006B Bonds be issued by the City upon the terms set forth in the Indenture under the provisions of which the City's interest in the Loan Agreement will be pledged to the Trustee as security for the payment of principal of, premium, if any, and interest on the Series 2006B Bonds. 1908315vl 3 (e) Under the provisions of the Act, and as provided in the City Bond Documents, the Series 2006B Bonds are not to be payable from nor charged upon any funds other than amounts payable pursuant to the Loan Agreement and moneys in the funds and accounts held by the Trustee which are pledged to the payment thereof; the City is not subject to any liability thereon; no owners of the Series 2006B Bonds shall ever have the right to compel the exercise of the taxing power of the City to pay any of the Series 2006B Bonds or the interest thereon, nor to enforce payment thereof against any property of the City; the Series 2006B Bonds shall not constitute a general or moral obligation of the City or a charge, lien or encumbrance, legal or equitable, upon any property of the City (other than the interest of the City in the Loan Repayments to be made by the Borrower under the Loan Agreement); and each Series 2006B Bond issued under the Indenture shall recite that such Series 2006B Bond, including interest thereon, shall not constitute or give rise to a charge against the general credit or taxing powers of the City. 4. Approval of Housing Program. The City hereby approves the housing program prepared in connection with financing the Project. The City has established a governmental program of acquiring purpose investments for qualified 501(c)(3) projects. The governmental program is one in which the following requirements of ~ 1.148-1 (b) of the federal regulations relating to tax-exempt obligations shall be met: (1) the program involves the origination or acquisition of purpose investments; (2) at least 95% of the cost of the purpose investments acquired under the program represents one or more loans to a substantial number of persons representing the general public, states or political subdivisions, 501(c)(3) organizations, persons who provide housing and related facilities, or any combination of the foregoing; (3) at least 95% of the receipts from the purpose investments are used to pay principal, interest, or redemption prices on issues that financed the program, to payor reimburse administrative costs of those issues or of the program, to payor reimburse anticipated future losses directly related to the program, to finance additional purpose investments for the same general purposes of the program, or to redeem and retire governmental obligations at the next earliest possible date of redemption; (4) the program documents prohibit any obligor on a purpose investment financed by the program or any related party to that obligor from purchasing bonds of an issue that finances the program in an amount related to the amount of the purpose investment acquired from that obligor; and (5) the City shall not waive the right to treat the investment as a program investment. 5. Approval and Execution of Documents. The forms of Series 2006B Bonds and the City Bond Documents are approved. The City Bond Documents, together with such other documents necessary in connection therewith, are authorized to be executed in the name and on 190831Svl 4 behalf of the City by the Mayor and the City Manager at such time, if any, as they may deem appropriate, or executed or attested by other officers of the City, in substantially the form on file, but with all such changes therein, not inconsistent with the Act or other law, as may be approved by the officers executing the same, which approval shall be conclusively evidenced by the execution thereof; and then shall be delivered to the Trustee. Modifications to the form of Mortgage may be made at the discretion of the parties thereto. 6. Approval. Execution and Delivery of Bonds. The City is authorized to issue the Series 2006B Bonds, in an aggregate principal amount of not to exceed $20,500,000, in the form and upon the terms set forth in the Indenture which terms are for this purpose incorporated in this resolution and made a part hereof; provided, however, that the initial aggregate principal amount of and the maturities of the Series 2006B Bonds, the interest rates thereon, and any provisions for the optional or mandatory redemption thereof shall all be as set forth in the final form of the Indenture to be approved, executed and delivered by the officers of the City authorized to do so by the provisions of this Resolution, which approval shall be conclusively evidenced by such execution and delivery; and provided further that, in no event, shall such maturities exceed forty (40) years. The Underwriter has agreed pursuant to the provisions of the Bond Purchase Agreement and subject to the conditions therein set forth, to purchase the Series 2006B Bonds at the purchase price set forth in the Bond Purchase Agreement and said purchase price is hereby accepted. The Mayor, City Manager, and other City officers are authorized to execute the Series 2006B Bonds as prescribed in the Indenture at such time, if any, as they may deem appropriate, and to deliver them to the Trustee, together with a certified copy of this Resolution and the other documents required by Section 2.08 of the Indenture for authentication, registration and delivery to the Underwriter. 7. Official Statement. As requested by the Underwriter, the City hereby consents to the circulation by the Underwriter of the Official Statement in offering the Series 2006B Bonds for sale; provided, however, that the City has not participated in the preparation of the Official Statement or independently verified the information in the Official Statement and takes no responsibility for, and makes no representations or warranties as to, the accuracy, completeness or sufficiency of such information. 8. Certificates. etc. The Mayor, City Manager, and other officers of the City are authorized at such time, if any, as they may deem appropriate, to prepare and furnish to bond counsel and the purchaser of the Series 2006B Bonds, when issued, certified copies of all proceedings and records of the City relating to the Series 2006B Bonds, and such other affidavits and certificates as may be required to show the facts appearing from the books and records in theoofficers custody and control or as otherwise known to them; and all such certified copies, certificates and affidavits, including any heretofore furnished, shall constitute representations of the City as to the truth of all statements contained therein. 1908315vl 5 Adopted by the City Council of the City of Prior Lake, Minnesota, this 5th day of June, 2006. Mayor ATTEST: City Manager 1908315vl 6 STATE OF MINNESOTA ) ) ss. COUNTY OF SCOTT ) I, the undersigned, being the duly qualified City Manager of the City of Prior Lake, Minnesota (the "City"), do hereby certify that attached hereto is a compared, true and correct copy of a resolution giving final approval to an issuance of revenue bonds by the City on behalf of Shepherd's Path Senior Housing, Inc., duly adopted by the City Council of the City on June 5, 2006, at a regular meeting thereof duly called and held, as on file and of recbrd in my office, which resolution has not been amended, modified or rescinded since the date thereof, and is in full force and effect as of the date hereof. WITNESS My hand this _ day of June, 2006. City Manager 1908315vl