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HomeMy WebLinkAboutR-2016-014 Naches House and Glenn Acres Housing; Acquisition and Rehabilitation Revenue Bond from the Yakima Housing Authority RESOLUTION NO. R- 2016 -014 A RESOLUTION approving the issuance of a revenue bond by the Housing Authority of the City of Yakima in the principal amount of not to exceed $7,000,000, to finance the acquisition and rehabilitation of the Naches House and Glenn Acres Housing complexes to provide housing for low- income persons in the city of Yakima, Washington WHEREAS, the City of Yakima, Washington (the "City ") is a first class charter city duly organized and existing under and virtue of the Constitution and laws of the State of Washington (the "State "); and WHEREAS, RCW 35.82.020 defines "housing project" to include, among other things, "any work or undertaking . . to provide decent, safe and sanitary urban or rural dwellings, apartments, mobile home parks or other living accommodations for persons of low income "; and WHEREAS, RCW 35.82.070(18) provides that a housing authority may, among other things and if certain conditions are met, "make . loans for the ... acquisition, construction, reconstruction, rehabilitation, ... of land, buildings or developments for housing for persons of low income "; and WHEREAS, RCW 35.82.020(11) and 35 82.130 together that a housing authority may issue bonds, notes or other obligations for any of its corporate purposes; and WHEREAS, the Housing Authority of the City of Yakima (the "Authority ") has advised the City that the Authority intends to issue certain obligations (the "Obligations ") in the maximum aggregate principal amount of $7,000,000 pursuant to chapter 35.82 RCW and a plan of financing (the "Plan of Financing ") with respect to the acquisition and rehabilitation of the 51 -unit multifamily housing complex known as Naches House located at 314 N. Naches Avenue, in Yakima, Washington, and the 38 -unit multifamily housing complex known as Glenn Acres located at 15 N 37th Avenue in the City of Yakima, Washington, all to provide housing for low- income persons (the "Project "). Ownership of the Project for federal income tax purposes will be transferred via a long -term lease to Yakima Affordable Housing LLLP (the "Borrower"), a Washington limited liability limited partnership of which the Authority is the sole general partner; and WHEREAS, Section 147(f)(3) of the Internal Revenue Code of 1986, as amended (the "Code "), provides that the Authority cannot issue the Obligations on a tax - exempt basis except upon the approval of the applicable elected representative (including the legislative body) of (a) the governmental unit which has empowered the Authority's creation and appoints the members of the Authority's Board of Commissioners, which is the City, and (b) a governmental unit in whose geographic jurisdiction the Project lies, which also includes the City; and WHEREAS, the Authority has advised the City that, following timely notice thereof being published in a newspaper of general circulation throughout the City, a public hearing was held on December 16, 2015, in accordance with the requirements of Section 147(f) of the Code, on the proposed issuance of the Obligations pursuant to the Plan of Financing (within the meaning of Treasury Regulations 5f.103 -2) for the Project; and WHEREAS, the Authority has provided the City with a written summary of the public testimony and any written comments received at such public hearing; and WHEREAS, the Authority has advised the City that the Obligations to be issued by the Authority for the Project pursuant to the Plan of Financing (a) may consist of a line of credit and /or one or more issues (including refunding issues) of revenue bond anticipation notes to provide interim financing for the Project and one or more issues (including refunding issues) of long -term revenue bonds to provide permanent financing for the Project; and (b) will be issued in accordance with a schedule such that the first issue of Obligations for the Project will be issued no later than one year after the date of this approval and any subsequent issue for the Project will be issued no later than three years after the issue date of the first such issue for the Project; (c) will not exceed a maximum aggregate principal amount of $7,000,000. In calculating the maximum aggregate principal amount of Obligations issued for the Project pursuant to the Plan of Financing, the principal amount of any issue of Obligations used to currently refund a prior issue of Obligations will be disregarded to the extent that the principal amount of such refunding issue does not exceed the outstanding principal amount of such prior issue, and WHEREAS, the Authority has further advised the City that the proceeds of the Obligations will be used to make a loan or loans to the Borrower to finance the costs of the Project; NOW, THEREFORE, IT IS HEREBY FOUND, DETERMINED AND ORDERED as follows Section 1. The City approves the Plan of Financing for the Project, and each issue of Obligations that is timely issued by the Authority for the Project in accordance with the Plan of Financing, the proceeds of which Obligations will be used to make a loan to the Borrower. This approval is intended to comply with the requirements of Section 147(f) of the Code in order to permit the issuance of the Obligations. Section 2. This approval is not intended to imply that the City is under any obligation to repay the Obligations. In so approving the issuance of Obligations, the Council does not assume any responsibility with respect to any payments due thereunder. The City is not obligated to pay the principal of or the interest on the Obligations; no tax funds or governmental revenue of the City may be used to pay the principal of or the interest on the Obligations; the Obligations do not directly or indirectly constitute a debt or liability of the City; and neither the faith and credit nor the taxing power of the City is pledged to the payment of such principal or interest. Section 3. This approval is not intended to serve as any land use, permit, occupancy, zoning or other approval for the Project not expressly set forth in this resolution. The City reserves the right to require compliance with all applicable development standards and zoning requirements for the Project, including, without limitation, the provisions of Titles 11, 12 and 15 of the Yakima Municipal Code ( "YMC ") and the provisions of Chapter 15.19 YMC, as applicable Section 4. This resolution shall take effect immediately upon its passage and approval. ADOPTED by the City Council of the City of Yakima, Washington, at an open public meeting this 19t day of January, 2016. WHEREAS, the City of Yakima, Washington (the "City ") is a first class charter city duly organized and existing under and virtue of the Constitution and laws of the State of Washington (the "State "), and BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: That the City Council of the City of Yakima adopts the 2016 regular meeting schedule on specified Tuesdays as indicated. ADOPTED BY THE CITY COUNCIL this 19 da, of January, 2016. AdmiAl ATTEST: 'na utierrez, Ma • ✓ Sonya Cliar Tee, City CIe1'l ??.% * , v • • BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDASTATEMENT Item No. 10. For Meeting of: January 19, 2016 ITEM TITLE: Resolution approving the issuance of a Revenue Bond by the Housing Authority of the City of Yakima not to Exceed $7,000,000, to finance the acquisition and rehabilitation of housing complexes to provide housing for low- income persons in the City of Yakima SUBMITTED BY: Cindy Epperson, Director of Finance and Budget SUMMARY EXPLANATION: The City of Yakima created the Yakima Housing Authority (the Authority) per Washington State Revised Code Chapter 35.82 which makes the Authority an independent entity with distinct governmental character and organization, although the City appoints all of its Board members. The Authority is responsible for its own liabilities —the City is not legally liable for their debts. The Authority is putting together 2 low- income housing projects that require them to issue debt. I n accordance with IRS regulations (Section 147(f) of the IRS Code), this particular type of debt must be approved by (a) the governmental unit that issues the bond, or on behalf of which such bond is issued, and (b) a governmental unit having jurisdiction over the area in which the financed facility is located. Because (a) requires the approval of "applicable elected representative" for the organization, and the Authority's governing body is appointed - not elected, the City is the elected representative. Also, both projects are in the City limits, so the City's approval meets the requirement in (b). There are other requirements, including a public hearing, which the Authority has completed. Although approval of the City is required for issuance of tax - exempt, qualified private activity bonds to finance the Project, this approval is intended solely to comply with the requirements of Sections 147 (f) of the IRS Code and is not intended to imply that the debt obligations are issued on behalf of the City, or that the City is under any duty or has any responsibility for the payment of the resulting obligations. Attached are the resolution approving the issuance of a revenue bond by the Yakima Housing Authority; a letter from Foster Pepper, the Authority's bond counsel, explaining the relationship between and City and the Authority and why this is required; and the minutes of the Authority's public hearing regarding the projects. ITEM BUDGETED: NA STRATEGIC PRIORITY: Partnership Development APPROVED FOR SUBMITTAL: Interim City Manager STAFF RECOMMENDATION: Adopt Resolution BOARD /COMMITTEE RECOMMENDATION: ATTACHMENTS: Description Upload Date Type ❑ Resolution Approving Yakima Housing Authority to Issue 1/11/2016 Coker Memo Bonds ❑ Attomey Letter re Debt Issuance by Yakima Housing 1/11/2016 Executive Summary Authority ❑ Yakima Housing Authority meeting minutes 1/11/2016 Exhibit El FOSTER PEPPER Direct Phone (206) 447 -6406 Direct Facsimile (206) 749 -1962 E -Mail SchwA @foster.com December 8, 2015 VIA Email Cindy Epperson City of Yakima Finance and Budget Director 129 North 2 Street Yakima, Washington 98901 Re: Housing Authority of the City of Yakima — Naches House and Glenn Acres Dear Ms. Epperson: Thank you for your time last Friday, December 4, 2015, discussing the TEFRA approval process for tax - exempt qualified private activity obligations (the "Obligations ") by the Housing Authority of the City of Yakima (the "Authority ") to finance the acquisition and rehabilitation of the Naches House and Glenn Acres - housing complexes. As we discussed, we serve as bond counsel the Authority, and this letter includes some background regarding the Project and the TEFRA approval requirements. The Authority, a housing authority created under chapter 35.82 of the Revised Code of Washington (the "Housing Authorities Law "), is planning the acquisition and rehabilitation of a 51 -unit multifamily housing complex known as Naches House located at 314 N. Naches Avenue, in the City of Yakima, Washington (the "City "), and the 38 -unit multifamily housing complex known as Glenn Acres located at 15 N. 37 Avenue in the City. The renovated Project will provide a total of 89 units of housing for low income individuals and families in the City. As further described below, the Authority is requesting the City's approval of the issuance of tax - exempt qualified private activity obligations (the "Obligations ") to finance a portion of the costs of acquiring and rehabilitating the Project. Although the City's approval is required for the issuance of the Obligations, it does not create or imply any responsibility on the part of the City to issue the Obligations, to pay debt service on the Obligations or to determine whether the Obligations or the Project are financially feasible. The financing sources for the Project will include low income housing tax credits, the Obligations, and other loans. In order to qualify for low income housing tax credits, the Project must be owned by a private entity. Here, ownership of the Project for federal income tax purposes will be transferred via a long -term lease to Yakima Affordable Housing LLLP, a Washington limited liability limited partnership of which the Authority is the sole general partner (the "Borrower "). The Authority will issue the Obligations as a conduit issuer and use TEL: 206.447.4400 FAx: 206.447.9700 1111 THIRD AVENUE, SUITE 3400 SEATTLE, WASHINGTON 98101 -3299 www.FOSTER.coml SEATTLE WASHINGTON SPOKANE WASHINGTON • Cindy Epperson December 8, 2015 Page 2 the proceeds of the sale of the Obligations to make a loan or loans to the Borrower to finance the costs of constructing the Project. The Obligations will be issued for the Project pursuant to a plan of financing within the meaning of the applicable Treasury Regulations (the "Plan of Financing ") and (a) may consist of a line of credit and /or one or more issues (including refunding issues) of revenue bond anticipation notes to provide interim financing for the Project and one or more issues (including refunding issues) of long -term revenue bonds or notes to provide permanent financing for the Project; (b) will be issued in accordance with a schedule such that the first issue of the Obligations for the Project will be issued no later than one year after the date of the City's approval and any subsequent issue for the Project will be issued no later than three years after the issue date of the first such issue for the Project; and (c) will not exceed a maximum aggregate principal amount of $7,000,000. In calculating the maximum aggregate principal amount of the Obligations issued for the Project pursuant to the Plan of Financing, the principal amount of any issue of Obligations used to currently refund a prior issue of Obligations will be disregarded to the extent that the principal amount of such refunding issue does not exceed the outstanding principal amount of the prior issue. Unlike "governmental" tax - exempt bonds, qualified private activity bonds may finance a facility to be used primarily by a private entity, so long as 95% of the proceeds of the bonds are applied to a qualifying purpose (here, provision of low - income housing) and certain other requirements are met. Among the special requirements applicable to qualified private activity bonds are those contained in Section 147(f) of the Internal Revenue Code (the "Code "). Under these provisions, added by the Tax Equity and Fiscal Responsibility Act and therefore often referred to by the acronym "TEFRA ", are notice, hearing and local government approval requirements. These TEFRA requirements are intended to provide opportunities for the public to be made aware of projects to be financed with tax - exempt qualified private activity bonds. Section 147(f) of the Code requires that a qualified private activity bond be approved by (a) the governmental unit that issues the bond, or on behalf of which such bond is issued, and (b) a governmental unit having jurisdiction over the area in which the financed facility is located. A bond may be approved by the "applicable elected representative" of a governmental unit. The City has jurisdiction over the locations of the Project. Therefore, approval by the City constitutes approval by a governmental unit having jurisdiction over the area in which the financed facility is located. In addition, as explained below, approval by the City also satisfies the requirement for approval by the governmental unit that issues the bond, in this case, the Authority. Here, the Authority is serving as the issuer of the tax - exempt bond. But, because the members of the Authority's governing body are appointed, rather than elected, the Authority does not have its own "applicable elected representative" for purposes of the TEFRA requirements. Because the City activated the Authority (by resolution adopted by the City Council on June 27, 1977, a copy of which is attached as Appendix I) under the Housing Authorities Law and appoints members to the Authority's governing body, the "applicable elected representative" of the City is treated as the "applicable elected representative" of the 51487093.1 Cindy Epperson December 8, 2015 Page 3 Authority for TEFRA purposes. The City Council, as the City's elected legislative body, is the "applicable elected representative" of the City and represents the City for purposes of TEFRA approval. Therefore, approval by the City Council satisfies both the "issuer" and "jurisdiction" TEFRA approval requirements. The approval of the applicable elected representative must be made "after a public hearing following reasonable public notice." The Treasury Regulations on this topic provide that notice is presumed reasonable if is published no fewer than 14 days before the hearing in a newspaper of general circulation available to residents of that locality. The Authority published a notice of a public hearing with respect to the Project and the Obligations December 2, 2015, in the Yakima Herald Republic. The Treasury Regulations also provide that a public hearing "means a forum providing a reasonable opportunity for interested individuals to express their views, both orally and in writing, on the proposed issue of bonds and the location and nature of a proposed facility to be financed." The Authority will hold a hearing regarding the proposed Obligations and the Project on December 16, 2015. After the hearing date, the Authority will provide the City with minutes regarding any testimony presented at the hearing, or submitted in writing in advance of the hearing. Although approval of the City is required for issuance of tax - exempt qualified private activity bonds to finance the Project, this approval is intended solely to comply with the requirements of Section 147(f) of the Code and is not intended to imply that the Obligations are issued on behalf of the City, that the City has approved the form of documents relating to the Obligations, that the City has approved underlying credit issues regarding the Project, or that the City is under any duty or has any responsibility for the payment of the Obligations or for fulfillment of the Authority's or the Borrower's obligations under documents relating to the Project or Plan of Financing. A form of resolution approving the issuance of the Obligations is enclosed for your review. On behalf of the Authority, I respectfully request that the resolution be submitted for consideration by the City Council at a January, 2016 meeting. Please do not hesitate to contact me with any questions or if we may be of assistance. Sincerely, Allison Cam' • tzman Encl. cc Mark Kunkler Lowel Krueger Tim Locke 51487093.1 Appendix I Copy of Resolution Activating Authority Adopted by City Council • 51487093,1 RESOLUTION NO. D A RESOLUTION finding and declaring the need for a Housing Authority to function in the City of Yakima and authorizing the implementation of such a Housing Authority. WHEREAS, R.C.W. Chapter 35.82 created a Housing Authority in each city of the State of Washington, including the City of Yakima, to transact business and exercise powers on the finding and declar- tion by resolution of the governing body of a city that there is need for a Housing Authority to function in a city, and WHEREAS, pursuant to studies, reports and public hearings, the City Council hereby finds that insanitary or unsafe inhabited dwell- ing accommodations exist in the City of Yakima and that there is a shortage of safe or sanitary dwelling accommodations in the City of Yakima available to persons of low income at rentals they can afford, and that there is a need for a Housing Authority to function in the City of Yakima, now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKTMA: The City Council does hereby find and declare the need to exist for a •Housing Authority to transact business, exercise its powers and otherwise function in the City of Yakima; and the City Council hereby authorizes and directs the Mayor and City Manager of the City of Yakima to appoint five persons as commissioners of such a Housing Authority, all as contemplated by•and in accordance with applicable laws of the State of Washington. ADOPTED BY THE CITY COUNCIL this ) day of _._, 1977. V L. Mayor £1ES1 ; City Clerk Col d to i.a_a tr, o and correct copy of the original i in - iny e;rica CiIY CLERK .,,.. Deputy MINUTES OF PUBLIC HEARING The Housing Authority of the City of Yakima (the "Authority ") conducted a public hearing on Wednesday, December 16, 2015 at 3:00 p.m., at the offices of the Authority located at 810 North 6 Avenue, Yakima, Washington. The purpose of the hearing was to consider public testimony on the proposed issuance by Authority, pursuant to chapter 35.82 RCW and a plan of financing with respect to the project described below (the "Project "), of certain obligations the interest on which will be excluded from gross income for federal income tax purposes pursuant to Sections 103 and 142 of the Internal Revenue Code of 1986, as amended (the "Code "). Project Description: Finance the acquisition and rehabilitation of two apartment complexes known as Naches House and Glenn Acres, containing a total of 89 units, to provide housing for low- income persons Maximum Amount of Obligations: $7,000,000 Project Operator: Yakima Affordable Housing LLLP, a Washington limited liability limited partnership of which the Authority is the sole general partner Project Locations: Naches House: 314 N. Naches Avenue, Yakima, Washington 98901 Glenn Acres: 15 N. 37 Avenue, Yakima, Washington 98902 The hearing was called to order by Sally Shelton, Executive Assistant of the Authority, at 3:00 p.m. No one from the public appeared to present testimony. No written comments were received prior to or at the hearing. The hearing was . journed at 3:30 p.m. Lowe " e! , Executive rector 51482897 1