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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: