HomeMy WebLinkAboutR-1997-124 Chestnut Manor Tax Credit PartnershipRESOLUTION NO. R- 97.124
A Resolution finding that reconveyance of Chestnut Manor from the
Chestnut Manor Association to Chestnut Manor Limited
Partnership is in the best interests of the City and its
inhabitants and consenting to such reconveyance.
WHEREAS, the City of Yakima housing conservation program, beginning
around 1990, with substantial state financial assistance, acquired and
refurbished the 46 -unit apartment building known as Chestnut Manor on
South 4th Street in downtown Yakima so that it could be used for low-income
senior housing; and
WHEREAS, during 1994 the City duly conveyed title to Chestnut Manor to the
non-profit corporation known as Chestnut Manor Association, which was
formed to operate Chestnut Manor for low-income senior housing; and
WHEREAS, the 1994 conveyance of Chestnut Manor to the Chestnut Manor
Association was made expressly subject to requirement that the City consent
to any reconveyance and that such consent required that the City find that any
reconveyance would be in the best interests of the City and its inhabitants;
and
WHEREAS, the Neighborhood Development Services Division of the
Department of Community and Economic Development has continued to serve
and assist the Chestnut Manor Association to operate Chestnut Manor as low-
income senior housing; and
WHEREAS, the Chestnut Manor Association has proposed to reorganize itself
as the general partner of a limited partnership in order to make the benefits of
low-income housing tax credits (LIHTC) from the Washington State Housing
Finance Commission available to finance improvements to Chestnut Manor
while maintaining affordable rental prices for residents; and
WHEREAS, as part of the proposed reorganization, title to the real property
which comprises Chestnut Manor would be conveyed from Chestnut Manor
Association to Chestnut Manor Limited Partnership; and
WHEREAS, so long as subsequent conveyances of the real property which
comprises Chestnut Manor remain subject to the same conditions stated in the
1994 deed, the proposed reconveyance from Chestnut Manor Association to
Chestnut Manor Limited Partnership is in the best interests of the City and its
inhabitants; and
WHEREAS, no issue of reimbursement arises because such reconveyance
would enhance the accomplishment of the purposes for which public money
has been previously spent to refurbish Chestnut Manor; now therefore:
1
IT IS HEREBY RESOLVED:
THE CITY COUNCIL OF'THE CITY OF YAKIMA finds that so long as
subsequent conveyances of the real propertywhich comprises Chestnut Manor
remain subject to the same conditions stated in the 1994 deed, conveyance
from Chestnut Manor Association to Chestnut Manor Limited Partnership of
title to the real property which comprises Chestnut Manor is in the best
interest of the City, and, subject to review and approval by the City Attorney of
the specific conveyance transaction documents prior to closing, the City
consents to such conveyance of Chestnut Manor from Chestnut Manor
Association to Chestnut Manor Limited Partnership.
ADOPTED this day of October, 1997.
A1'1EST
Karen Roberts, City Clerk
2
ohn Puccinelli, Mayor Pro tem
•
•
STATUTORY WARRANTY DEED
TI IF, GRANTOR, the CITY OP YAKIMA, a Washington municipal corporation, for and in
consideration of Ten Dollars ($10.00) and other good and valuable consideration, in hand
paid, conveys and warrants to the CHESTNUT MANOR ASSOCIATION, a Washington
non-profit corporation, GRANTEE, the following -described real estate, situated in the
County of Yakima, State of Washington:
Lots 18, 19, 20 and 21, Block 19, TOWN OF NORTII YAKIMA, now Yakima,
Washington, according to the official plat thereof, recorded in Volume "A" of
Plats, page 10 and rerecorded in Volume "E" of Plats, Page 1, records of Yakima
County, Washington.
(Yakima County Assessor's parcel number 191319-24467)
subject to the following:
(a)
Terms and conditions of Ordinance Number 3255, regarding future vacation of
alleyways located within Block 91 of said Town of North Yakima, recorded April
12, 1991, in Volume 1321 of Official Records, under Auditor's File Number
2920241.
(b) Lease and terms and conditions thereof, executed by the City of Yakima Housing
Service Center, as Lessor and American Meter Machine Corporation as Lessee, for
a term of 5 years, dated June 19, 1991, and recorded June 26, 1991 in Volume 1328
of Official Records, under Auditor's File Number 2927818.
(c) The Deed of Trust and the terms and conditions thereof, wherein the City of
Yakima, Office of housing and Neighborhood Conservation, is Grantor, and
Fidelity Title Company is Trustee, and State of Washington, Department of
Community Development, beneficiary, in the original amount $325,000.00 dated
January 22, 1992, and recorded January 23, 1992 in Volume 1347 of Official
Records, page 184 under Auditor's File Number 2947973.
(d) Non -delinquent real property taxes (whether general or special);
(e) Rights reserved in federal patents or state deeds;
(f) Building or use restrictions consistent with current zoning, other than government
platting and subdivision requirements;
(g) Utility easements;
(h) Items disclosed in the preliminary title report and expressly approved in writing or
waived in writing by Purchaser.
GRANTOR and GRANTEE understand and agree that this conveyance is made and
accepted, and the realty is granted, on and subject to the following covenants, restrictions
and conditions which shall apply to and run with the conveyed land; all successive future
owners and occupants shall have the same right to invoke and enforce the following
covenants, restrictions and conditions as the original parties to this document:.
Cart n NTEE shall operate use and maintain CI IESTNUT MANOR exclusively to provide
safe, sanitary, affordable, resident -operated apartment housing for low income elderly
residents of the City of Yakima, and all such persons shall enjoy equal opportunity to
become residents of C11INTNI IT MANOR, regardless of race, creed, national origin or
any other vcharacteristic vprohibited by federal, state or local laws as a basis for
discrimination.
GRANTEE shall preserve CHESTNUT MANOR as an historic structure, in full
compliance with all applicable federal, state and local laws, regulations, rules and
guidelines applicable to it as an historic structure.
GRANTEE shall not reconvey CI IESTNUT MANOR without the consent of the City of
t t. t t•. / finding
made 1. L�.,. i'ti{t, Council that
Yakima, which consent�shaii be conditioned on a by the City Council that
such reconveyance is in the best interests of the City and its inhabitants, and which
consent may be conditioned on the seller's payment to the City of all or a portion of the
total amount of money the City has paid for the acquisition, maintenance and
improvement of CIIESTNUT MANOR, (including the Ilousing Trust Fund award of
$325,000) less the total of all payments for rental of CI IESTNUT MANOR apartments
then received by the City.
The acceptance of this deed by the GRANTEE shall constitute an acceptance by the
GRANTEE of all the stated covenants, conditions, and restrictions on the property
conveyed by this deed. GRANTEE agrees that all the covenants, restrictions and
conditions contained in this deed shall be inserted in full in all future deeds of the above-
described property conveyed by this deed.
DATED this - l t' day of n '�y- 1994.
Dick Zais
STATE OF WASHINGTON ) Manager, City of Yakima
) :ss.
County of Yakima )
I certify that I know or have satisfactory evidence that Dick Zais is the person who
appeared before me, and said person acknowledged that he signed this instrument, on
oath stated that he was authorized to execute the instrument and acknowledged it as the
Manager of the City of Yakima to be the free and voluntary act of the City of Yakima for
the uses and purposes mentioned in the instrument.
f
Dated: i�%9/9 y6_0
.�(1-v�} �o-��--
j Notary Public in and r the State of Washington,
residing at YaKima
My commission expires: .3/3o 7(
C'T' A'rr rTllnv \A7 A nn A ! rry r 1171"1-1
From: Michael Martin To Marvin Miller
Date: 1012197 Time: 09:17:09 Page 3 of 4
Chestnut Manor
Chronology
1990 City began negotiations for acquisition of building, and began
negotiations with the Washington State Department of
Community Development (DCD) for a Housing Trust Fund
Grant
June, 1991
January, 1992
City acquired Chestnut Manor by deed. City assumed an
existing mortgage loan from Everett Mutual Bank in the
approximate amount of $387,000 and paid approximately
$285,330 in cash.
DCD provides Housing Trust Fund grant to City for Chestnut
Manor in the amount of $325,000 for rehabilitation of the
building.
June, 1993 Chestnut Manor Association is formed as a 501(c)(3) nonprofit
organization
November, 1994
April, 1997
City transfers ownership of the building to Chestnut Manor
Association Concurrent with the transfer, the City provided a
grant from the Office of Housing and Neighborhood
Conservation in the amount of $325,000, used to repay or
replace the initial cash payments made by the City in its
acquisition of the building and to make certain other payments
At closing, Chestnut Manor Association also assumed the DCD
grant and entered into a new loan with Yakima Federal Savings
and Loan for $335,000, which paid off the balance of the
Everett Mutual Bank loan.
Chestnut Manor Association makes application to the
Washington State Housing Finance Commission for an
allocation of Low -Income Housing Tax Credits for additional
rehabilitation work on Chestnut Manor
September, 1997 The Housing Finance Commission announces Chestnut Manor
will be awarded tax credits out of its 1997 allocation round.
From: Michael Martin To Marvin Miller
Date: 10/2197 Time: 09:18:21 Page 4 of 4
Chestnut Manor
Intended Rehabilitation Hard Cost Breakdown
Replace skylights $6,000
Insulation $8,400
Windows $17,000
Exterior Doors $1,500
Painting $15,000
Dropped Ceiling $5,000
Furred out walls $23,000
Common area carpet $9,000
Refrigerators & ranges $31,000
Electrical for ranges $4,600
Drywall $8,000
Elevator $40,000
Elevator shaft $9,600
Remodel 3 apts $12,000
(to accommodate elevator)
Ramp & retaining wall $3,000
Sidewalks & demolition $2,000
Exterior dryvit $65,800
Awnings $35,000
Gyp board . $18,500
Remove roof tile $2,000
Rebuild caps $2,000
Front awning 35,000
Electrical $3,000
Plumbing $6,300
HVAC $32,200
Venting $10,000
Patch roof $5,000
Revise sprinkler system $4,000
TOTAL: $383,900
Estimate by Group M Architecture, Inc.
Michael S. Martin
Tax Credit & Technical Assistance
For Affordable Housing
July 30, 1997
Marvin Miller
Neighborhood Development Services
City of Yakima
112 S. Eight St
Yakima WA 98901
Re: Chestnut Manor,' 27 South 4th Street, Yakima WA
Request for Consent of Transfer of Building to Tax Credit Partnership
Dear Mr. Miller:
As you know, Chestnut Manor is a 46 -unit apartment building occupied by low-income seniors, owned
by Chestnut Manor Association, a 501(eX3) nonprofit organization which the City ofYakima was
instrumental in forming. In 1994, the City transferred Chestnut Manor to the Association and
documented a $325,000 grant from the Office of Housing and Neighborhood Conservation, which was
used at that time for various rehabilitation and reserve expenditures. The conveyance deed to the
Association and a note executed in connection with the grant provide that Chestnut Manor cannot be
transfen.ed without the consent of the City of Yakima. The City's consent is to be conditioned on a
finding made by the City Council that the transfer is in the best interests of the of the City and its
inhabitants. A transfer or change in use can trigger repayment of all or part of the $325,000 grant from
the City as well as repayment of an earlier $325,000 grant from the State Housing Trust Fund. I have
been working with the Association and its board to obtain an allocation oflow-income housing tax
credits (LIHTC) from the Washington State Housing Finance Commission for additional rehabilitation
of the building. The rehabilitation will make the building handicapped accessible and improve the
apartment units, while maintaining affordable rents for the residents. As explained in more detail
below, in order to receive the LIHTC, the structure of the ownership of the building needs to be
changed to a limited partnership in which Chestnut Manor Association is the general partner. By this
letter, I am requesting that the City approve a transfer of Chestnut Manor to Chestnut Manor Limited
Partnership, a recently formed Washington limited partnership in which Chestnut Manor Association is
the sole general partner. A separate request regarding the Housing Trust Fund grant is being directed
concurrently to the State Department of Trade and Economic Development.
The proposed rehabilitation will include installation of an elevator and a ramped entrance (the 3 -story
building is currently non -accessible to those in wheelchairs), repair and rehabilitation of skylights,
plumbing and HVAC, replacement of appliances in the residents' units, and other repairs. Chestnut
Manor has an internal light well extending from skylights on the roof to the basement. The elevator
will be installed within a part of this light well, although three units, one on each floor, will need to be
remodeled to accommodate the elevator. In addition to the rehabilitation work, approximately
152 Lakes Lane Selah WA 95942 Phone: (509) 695-4531
thirdeyeOwolfenet.com Fax: (509) 695-4567
Marvin Miller
July 30, 1997
Page 2
$20,000 from the proceeds of the LIHTC will be set aside as reserves for operations or future capital
needs. The rehabilitation will be conducted "around" the existing residents, so that displacement will
be limited to temporary relocation within the building to either vacant units or dayrooms which were
originally residential units and which will be converted back to housing units during the rehabilitation.
The 7 I TTC federal program created within the Internal Revenue Code to foster the development
r r7e S.Sr3 9 L is a IIS'4!S! sae program Q�■, .�,,,..6,... ..,�.......,.� �.__`---- Revenue or rehabilitaion of affordable multifamily housing. LIHTC is awarded to a specified project and the
legal entity that owns the project. This entity is typically a limited partnership, a general
partnership, a joint venture or a limited liability company, all of which are legal entity forms that
allow the benefit of the tax credits to flow through to investors. The ownership entity obtains
funds from the sale of the tax credits to investors, which comes into the project as capital equity
contributions. The investors use the credit to offset their income tax liability. Credits are
received annually over a 10 -year period, although the equity is usually contributed during or
shortly after completion of construction or rehabilitation. The equity fiords are used to pay for
part of the development costs of the project. The balance of the project costs are paid with
conventional mortgage financing and other sources of construction fiords. The LIHTC is unique in
that the funds for the development subsidy come directly from the private sector. The tax credit
program is well-established, and the documentation for bringing investors into the ownership entity
clearly maintain control and management in the nonprofit sponsor.
The trade-off for receiving tax credits is that the owner must agree that the housing units
receiving credit will be restricted to low-income households (either families or seniors) for a
specific extended period of time and that the rents for these units be capped, following a fixed
formula A "low-income household" is defined as one earning 60% or less of the county median
income, adjusted for family size. Because a large portion of the project costs have been paid from
equity, projects are typically designed so that the restricted rents are sufficient to pay the
operational costs and mortgage debt on the property without any need for ongoing operating
subsidies.
Each State is allocated an amount of LIHTC based on population. The tax credits are allocated
within each State by a designated state agency, which in Washington is the Washington State
Housing Finance Commission To receive tax credits, an owner must first apply to the state
agency and be awarded a reservation or allocation of the state's available credit. The demand by
owners seeking tax credits is currently about four times the amount of credit available to the
State In Washington, the allocation process is made through an annual competitive application
round, with allocation criteria points given for project characteristics such as size and location,
and for specific commitments made, such as the income levels of residents served, special -needs
groups served (such as the elderly), etc. Once a project is selected to receive an allocation, the
state allocating agency calculates the amount of credit reserved for the project. Chestnut Manor
152 Lakes Lane Selah WA 98942 Phone: (509) 698-4831
thircieye3woTfenet.com Fax: (509) 698-4867
Marvin Miller
July 30, 1997
Page 3
Association applied to the Commission in the current application cycle for an allocation of tax
credits to perform the rehabilitation of the building. Commission staff have indicated that
Chestnut Manor has scored the highest number of points in this allocation round, and staff will be
recommending that the full Commission award an allocation of credit for the rehabilitation at the
Commission's August meeting. In order to accept the award of credit, the building must be
transferred to Chestnut Manor Limited Partnership no later than the first Monday in December.
One of the commitments made to obtain an allocation of LIHTC for Chestnut Manor is that all
residents are certified to have incomes at or below 45% ofthe county median income (currently,
$11,070 for a one-person household and $12,645 for a two -person household -- which fits the current
tenant population), and that rents are restricted to 30% of that income level. The LIHTC commitment
nuns for a 40 -year term and is evidenced in a restrictive covenant to be filed by the Commission against
the property The Commission reviews operations and tenant records annually and conducts periodic
site visits to ensure compliance with the low-income use and rent -restrictions throughout this 40 -year
period.
The proposed rehabilitation has two financing components. One component is a refinancing of the
existing Yakima Federal mortgage loan, which was in the initial amount of $335,000. Interest rates
have dropped since the initial loan was made. In addition, the property is now pursuing a property tax
exemption as low-income seniors housing owned by a nonprofit organization. Combined together,
these factors suggest that the loan could be increased to approximately $530,000 while maintaining
rents at 30% of the residents' income level. The tax credit component is funded by an investor
purchasing the tax credits that have been allocated to the building. In the case of Chestnut Manor, it is
anticipated that a local or regional bank will provide both the refinancing and the purchase of the credit.
Approximately $570,000 will be raised from the sale of tax credits. When added to the refinancing
proceeds, the rehab budget totals approximately $770,000.
The request, then, is that a transfer from Chestnut Manor Association to Chestnut Manor Limited
Partnership be approved, without triggering repayment of the existing City grant. I suggest that the
approval for the transfer include the following conditions:
1. Receipt of a formal award of tax credits from the Housing Finance Commission; and
2. Chestnut Manor Limited Partnership entering into a Credit Reservation Contract with the
Commission.
I am available to answer questions regarding the planned rehabilitation or the tax credit program, either
by phone or at a meeting convenient to you, and am also available to appear at a City Council meeting,
if required, to additionally explain the program and answer any questions. I ask that approval to the
transfer be provided by the end of September or middle of October, if possible, so that confirmation
152 Lakes Lane Selah WA 98942 Phone: (509) 698-4831
thirdeyegwoifenet.com Fax: (509) 698-4867
Marvin Miller
July 30, 1997
Page 4
can be provided to the Housing Finance Commission in accordance with their timelines. I appreciate
your considering this request.
Sincer
Michael Martin
cc. Ron Perry, President, Chestnut Manor Association
Members of the Board of Chestnut Manor Association:
Paul Pieti, LeMaster & Daniels
Carol Frederickson, Aging & Long Term Care, Yakima County
Marvin Miller, Neighborhood Development Services, City of Yakima
Jeff Enright, Preferred Property Management
D \WORD\BIZ\CHESTNUT\072897MM.CST
152 Lakes Lane Selah WA 95942 Phone: (509) 695-4531
thin ;eye awolfenet.com Fax: (509) 695-4567
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No.: 8
For Meeting of: October 7. 1997
ITEM '1'Tl'LE: Chestnut Manor Tax Credit Partnership.
SUBMITTED BY: Glenn Valenzuela, Director of Community and Economic Develop
CONTACT PERSON/TELEPHONE: William Cook, Neighborhood Development Seivices
Manager, 575-6101.
SUMMARY EXPLANATION: In the early 1990's the City of Yakima Office Neighborhood
Development Services purchased and rehabilitated the Chestnut Manor located on South 4th Street
and East Chestnut.
In 1994, the City of Yakima sold the Chestnut Manor, a 46 -unit apartment building occupied by
low income seniors to Chestnut Manor Association, a 501 (C) (3) non-profit organization. Part of
1994 conveyance to the Chestnut Manor Association was made subject to the requirement that the
City consent to any reconveyance or transfer.
The Chestnut Manor Association is requesting that the City of Yakima approve a transfer of
Chestnut Manor to Chestnut Manor Limited Partnership to be in a position to receive an allocation
of low income housing tax credits from the Washington State Housing Finance Commission to
finish the rehabilitation of the building. The deed of conveyance to Chestnut Manor Limited
Partnership will include language incorporating the conditions stated in the 1994 deed and must be
approved as to form and content by the City Attorney's office.
Chestnut Manor Association has applied for and has been awarded an allocation of credit at the
Commission's August meeting. In order to accept the award of credit, the building must be
transferred to Chestnut Manor Limited Partnership no later than the first Monday in December.
Resolution x
Ordinance
Contract Other Specify
Funding Source: Low Incon °using Tax Cre
APPROVAL FOR SUBMITTAL:
is
cb
Manager
STAFF RECOMMENDATION: Approve Resolution
BOARD/COMMISSION RECOMMENDATION:
COUNCIL ACTION: