CR 96-47 Renaissance Project Housing Bond•
March 7, 1996
Proposed Action
Staff recommends approval of the following motion: Approval of Resolution 96 -22 adopting a
housing program and giving preliminary approval to the issuance of multi - family revenue refunding
bonds for the Hopkins Renaissance Project, subject to staff conditions.
With approval of this action, the applicant will proceed forward to process the necessary documents
to facilitate this transaction. The applicant will be required to return to the City Council at a future
date for final action on this item.
Overview
HOPKINS RENAISSANCE PROJECT HOUSING REVENUE BOND
Hopkins Renaissance Apartments is a 101 -unit, multi - family residential housing project, rented to
persons and families of low income. Community Housing Development Corporation (CHDC), a
Minnesota nonprofit corporation, is requesting approval from the City for the issuance of tax exempt
housing revenue bonds to finance the purchase of this project from the existing owner. The total
amount of the issue is proposed to be $5,810,000.
The applicant, as part of the purchase, is proposing to establish a lease cooperative with the tenants
of the project. Attached is a letter detailing a description of the cooperative and its benefits.
A public hearing is required as part of the overall review process. Approval of the subject resolution
would demonstrate primary acceptance by the City Council of the proposed action. The applicant
would need to return to the City Council for action at a future date.
Primary Issues to Consider
Supporting Documents
▪ , K Council Report 96 -47
o What is the purpose of this financing?
o Does the project meet the requirements of the City policy regarding taxable/tax exempt
financing?
o How does the lease cooperative operate?
o What are the implications to the City regarding payment of bonds?
o Has legal counsel reviewed this matter?
o Other issues.
o What is the basis for the staff recommendation?
o What are the staff conditions?
o Letter from Community Housing Development Corporation, dated February 6, 1996
o Resolution 22
Jam
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1 'ng & Economic Development
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Council Report 95 -47 - Page 2
Primary Issues to Consider
o What is the purpose of this financing?
Local units of government are authorized to issue tax exempt and taxable revenue bonds to
facilitate projects that are felt will be beneficial to the community. For bonds that are tax exempt,
the issue is able to secure a lower interest rate, therefore, making the project more "financially
feasible,"
o Does the project meet the requirements of the City policy regarding taxable /tax exempt
financing?
The City adopted a policy regarding revenue bond financing in 1991. Approval criteria within this
policy, for the most part, relate to new construction projects.
At the time that the subject project was renovated into housing, there was financial assistance
provided by the City, which would indicate that it was felt that the project met certain housing
goals and objectives important to the Council. Also, as noted above, presently this project does
provide for the housing needs of low income families, and it is the intent of CHDC to own and
operate the project for low and moderate income families for the life of the development.
O How does the lease cooperative operate?
The members of the cooperative association would be the tenants of the project. CHDC will
enter into a master lease with the cooperative association to lease the entire project. The
cooperative association will then lease the individual units to the residents. As a result of this
structure, tenants will participate in establishing budgets; supervising maintenance and operation,
selecting the management agent, setting house rules, and participating in tenant selection and
eviction.
O What are the implications to the City regarding payment of bonds?
These bonds and all such bonds are hereby pledge of repayment strictly from the proposed
project. The City is not liable to make any payments should there be a default. The City is acting
only as a facilitator in this process.
The applicant is required to pay all the City's legal and administrative costs, as well as an
application fee.
O Has legal counsel reviewed this matter?
Stefanie Galey of Holmes & Galey, Ltd., is acting as bond counsel on this transaction and also
representing the City interests on this matter. Jerre Miller has also reviewed the bond document.
Council Report 95-47 - Page 3
0 Other issues.
There are two items the Council needs to consider regarding this matter.
• The city provided three loans of $50,000 each in 1979 and 1980 to help facilitate the
conversion of the subject property to housing units. This $150,000 (along with simple interest
of 5 percent) is due in 2010 or upon sale of the project by the present owner, National Housing
Partnership As the subject transaction would facilitate a sale, this loan would now be due and
payable.
With approval of the subject action, following closing on the new financing, the applicant
would repay the entire $150,000 outstanding loan principal plus accrued interest (interest is
approximately $150,000):
• The total taxes payable for the subject project for both the apartments and townhouses is
$99,139. If the property is converted to a cooperative, the current tax rates of 3.4 percent on
the land and 2 3 on the structures would be reduced to a total rate of 1 percent for both the
land and structures (assuming all units are homesteaded). The total tax for a cooperative
would drop to $41,110. This would amount to a tax loss per year for the City of Hopkins of
$11,629 and a loss for the Hopkins School District of $28,360.
The applicant is proposing to address the matter by paying the City an annual administrative
fee equal to the City's share of the difference between a Title dI real estate classification and a
homestead classification. This would be paid from project cash flow only if sufficient cash
flow is available to make such payment.
The loss to the School District under the proposed structure of property tax dollars would be
made up to the District by the State, except for those tax dollars generated through an excess
levy referendum.
o What is the basis for the staff recommendation?
• Staff feels that Community Housing Development Corporation is a good organization, and
they will bring professional, local ownership to the subject property.
• There is the concern that if this project were sold on the open market, the Section 8 contract
could be terminated. This would eliminate needed low income housing within the community.
• With the present proposal, staff also feels that CHDC is adequately addressing the property tax
and repayment of the outstanding City loan.
• The lease cooperative structure will allow tenants to be more involved in the daily operation of
this project.
Council Report 95 -47 - Page 4
o What are the staff conditions?
1. Acceptable review of the project financial documents by Ehlers/Publicorp.
2. Structuring of annual administrative fee acceptable to the City of Hopkins.
3. Payment of revenue bond application/administrative fee in accordance with the approved fee
schedule.
4. The City is not obligated to provide final approval on the issue.
5. Payment of all legal fees and administrative fees to facilitate the sale.
Alternatives
The City Council has the following alternatives regarding this item:
1. Approve the actions recommended by staff. This will allow the applicant to proceed forward
and prepare the necessary documents to secure final approval from the City Council.
2. Deny approval of the sale of the bonds
Continue for additional information.
DAMPK I O1OO41RES1SGPREL1M. DOC
CITY OF HOPKINS
Hennepin County, Minnesota
RESOLUTION NO. 96-22
RESOLUTION ADOPTING A HOUSING PROGRAM AND GIVING
PRELIMINARY APPROVAL FOR THE ISSUANCE OF MULTIFAMILY
HOUSING REVENUE BONDS FOR THE HOPKINS RENAISSANCE PROJECT
WHEREAS, pursuant to the Minnesota Municipal Housing Act, Minnesota Statutes, Chapter
462C (the "Act "), the City of Hopkins (the "City ") is authorized to carry out housing
programs for the financing of multifamily housing developments (the "Program "),
including the payment of interest on taxable and tax- exempt bonds, the establishment of
reserves to secure such bonds and the payment of all other expenditures of the City
incident to and necessary or convenient to carry out such program; and
WHEREAS, the Act requires adoption of the Program after a public hearing held thereon after
publication of notice in a newspaper of general circulation within the City at least fifteen
(15) days in advance of the hearing; and
WHEREAS, the City on this date conducted a public hearing on the Program, after publication of
notice as required by the Act; and
WHEREAS, the Program provides for the issuance of multifamily housing revenue bonds for the
Hopkins Renaissance Project in an aggregate principal amount of approximately
$5,810,000 to finance the acquisition and rehabilitation of an existing multifamily rental
housing development, consisting of 101 units located at 27 - 14th Avenue North within
the City (the "Project ").
NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
HOPKINS, MINNESOTA:
1. The Program for the Project is hereby in all respects adopted.
2. The City hereby ratifies the prior publication of the notice of public hearing.
3. The City staff, its consultants and bond counsel are hereby authorized to do all
things and take all actions as may be necessary or appropriate to carry out the
Program in accordance with the Act and any other applicable laws and
regulations.
4. The issuance of approximately $5,810,000 principal amount of multifamily
housing revenue bonds pursuant to the Program to finance the Project is hereby
given preliminary approval.
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PRELEVIINARY RESOLUTION
Adopted by the City Council of the City of Hopkins this 19th day of March, 1996.
ATTEST:
James A. Genellie, City Clerk
D:ARPK100 \004\RES\SOPRELIM DOC
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BY:
Charles D. Redepenning, Mayor
PRELIMINARY RESOLUTION
The motion for the adoption of the foregoing resolution was duly seconded by
Councilmember and upon vote being taken thereon, the
following voted in favor thereof:
and the following voted against the sane:
Whereupon said resolution was declared duly passed and adopted, and was signed by the
Mayor and attested to by the City Clerk.
D:VIPKt00\004\RES\SCPRELIM.DOC
PRELIMINARY RESOLUTION
The City has determined that it is in the best interests of the residents of the City to create a
program of financing to encourage and facilitate the development of multifamily rental housing
developments for families and elderly persons in the City (the "Program "). The City has received
proposals from representatives of Community Housing Development Corporation, a Minnesota
nonprofit corporation (the "Developer "), that, pursuant to the authority found in the Act, the City
approves a program providing for the acquisition of the Hopkins Renaissance Project, a multifamily
housing development located at 27 - 14th Avenue North in the City (the "Project "). The acquisition
of the Project is to be funded through the issuance of up to $5,810,000 in revenue bonds issued by
the City (the "Bonds "). Twenty percent (20 %) of the units financed will be specifically reserved for
tenants whose incomes are not greater than fifty percent (50 %) of the area median income. It is
estimated that rents for the Project will range from $613 per month to $738 per month.
The City, in establishing this multifamily housing program (the "Program "), has considered
(i) the availability and affordability of other government housing programs, (ii) the availability and
affordability of private marketing financing for the construction of multifamily housing units; (iii)
an analysis of population, unemployment trends and projections of future population trends and
future employment needs; (iv) the recent housing trends and future housing needs of the City; and
(v) an analysis of how the Program will meet the needs of persons and families residing and
expected to reside in the City.
The City, in adopting the Program, has further considered (i) the amount, timing and sale of
Bonds to finance the estimated costs of the housing units, to fund the appropriate reserves and to
pay the cost of issuance; (ii) the method of monitoring and implementation of the Program to insure
compliance with the City's housing plan and its objectives; (iii) the method of administering,
servicing and supervising the Program, (iv) the costs of the City, including future administrative
expenses; (v) the restrictions on the multifamily development to be financed under the Program,
and (vi) certain other limitations.
PROGRAM FOR THE FINANCING
OF MULTIFAMILY RENTAL HOUSING DEVELOPMENTS
Pursuant to Minnesota Statutes, Chapter 462C (the "Act "), the City of Hopkins (the "City ")
has been authorized to develop and administer programs of multifamily housing developments
under the circumstances and within the limitations set forth in the Act Minnesota Statutes, Section
462C.07 provides that such programs for multifamily housing developments may be financed by
revenue bonds issued by the City.
The City, in adopting the Program, considered the potential financing impact of a bond
issuance on affected public agencies. In addition, the City reviewed the method of marketing the
Program. Such review examined the equal opportunity for participation by (i) minorities; (ii)
households with incomes at the lower end of the range that can be served by the Program, (iii)
households displaced by public or private actions; (iv) elderly persons; and (v) accessibility to the
handicapped.
The Project will be constructed and financed pursuant to Subdivision 1 of Section 462C.05
of the Act.
D:\HPK I0010041DOCS\SGPROGRM.DOC
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HOUSING PROGRAM
Subsection A. Definitions. The following terms used in this Program shall have the
following meanings, respectively:
(1) "Act" shall mean Minnesota Statutes, Section 462C.O1, et seq., as currently
in effect and as the same may be from time to time amended.
(2) "Adjusted Gross Income" shall mean gross family income less $750 for each
adult and less $500 for each other dependent in the family.
(3) "Bonds" shall mean the revenue bonds to be issued by the City or the Board
to finance the Program.
(4) "City" shall mean the City of Hopkins, State of Minnesota.
(5) "Developer" shall mean Community Housing Development Corporation, a
Minnesota nonprofit corporation.
(6) "Housing Unit" shall mean any one of the apartment units located in the
Project, occupied by one person or family, and containing complete living facilities.
(7) "Land" shall mean the real property upon which each Project is situated.
(8) "Program" shall mean the program for the financing of the Projects pursuant
to the Act.
(9) "Project" shall mean the Hopkins Renaissance Project.
Subsection B. Program For Financing the Project. It is proposed that the City establish this
Program to provide financing for acquisition of the Project to be owned by the Developer, or a
related entity, at a cost and upon such other terms and conditions as are set forth herein and as may
be agreed upon in writing between the City, the initial purchaser of the Bonds and the respective
Developer. To do this, the City or expects to issue Bonds the proceeds of which will be loaned to
the Developer for financing the acquisition and renovation of the Project. It is expected that a
trustee will be appointed by the City to monitor the renovation of the Project and payments of
principal and interest on the Bonds. The cost of any additional security devices for the Bonds will
be borne by the Developer and payable in addition to the principal and interest on the Bonds except
as otherwise provided by resolution of the City.
It is contemplated that the Bonds shall have a maturity of thirty (30) years and will be priced
to the market at the time of issuance.
The City will hire no additional staff for the administrationof the Program. The City intends
to select and contract with a financial institution or trustee, experienced in trust matters to
administer the Bonds.
Insofar as the City will be contracting with underwriters, legal counsel, bond counsel, the
trustee, and others, all of whom will be reimbursed from bond proceeds and revenues generated by
the Program, no administrative costs will be paid from the City's budget with respect to this
Program except as otherwise provided by resolution of the City. The Bonds will not be general
D: kHPK 3 00 \004\DOCS\SGPR OGRM. DOC
HOUSING PROGRAM
• obligation bonds of the City, but are to be paid only from properties pledged to the payment thereof,
which may include additional security such as additional collateral, insurance or a letter of credit.
Subsection C. Local Contributions To The Program. It is presently contemplated that the
City will not use other financial initiatives in conjunction with the Project.
Subsection D. Standards and Requirements Relating to the Financing of the Projects
Pursuant to the Program. The following standards and requirements shall apply with respect to the
operation of the Project by the Developer pursuant to this Program:
(1) Substantially all of the proceeds of the sale of the Bonds will be used to
provide funds for the acquisition and rehabilitation of the Project. The funds will be made
available to the Developer pursuant to the terms of the Bond offering, which may include
certain covenants to be entered into between the City and the Developer.
(2) The Developer or subsequent owner of the Project will not arbitrarily reject
an application from a proposed tenant because of race, color, creed, religion, national origin,
sex, marital status, or status with regard to public assistance or disability.
(3) No Housing Unit may be in violation of applicable zoning ordinances or
other applicable land use regulations, including any urban renewal plan or development
district plan, and including the state building code as set forth under Minnesota Statutes,
Section 16.83, et seq.
Subsection E. Evidence of Compliance. The City may require from the Developer or such
other person deemed necessary at or before the issuance of the Bonds, evidence satisfactory to the
City of the ability and intention of the Developer to complete the Project, and evidence satisfactory
to the City of compliance with the standards and requirements for the making of the financing
established by the City, as set forth herein; and in connection therewith, the City or its
representatives may inspect the relevant books and records of the Developer in order to confirm
such ability, intention and compliance. In addition, the City may periodically require certification
from either the Developer or such other person deemed necessary concerning compliance with
various aspects of the Program.
Subsection F. Issuance of Bonds. To finance the Program authorized by this Section, the
City may by resolution authorize, issue and sell its Revenue Bonds on one or mores series, and
using and additional credit enhancement devices determined by the City to be necessary or
desireable for each such series, in an aggregate principal amount estimated to be up to $5,810,000.
The Bonds shall be issued pursuant to Section 462C.07, Subdivision 1 of the Act, and shall be
payable primarily from the revenues of the Program authorized by this Section. The City anticipates
the issuance of such amount prior to the end of 1996.
Subsection G. Severability. The provisions of this Program are severable and if any of its
provisions, sentences, clauses or paragraphs shall be held unconstitutional, contrary to statute,
exceeding the authority of the City or otherwise illegal or inoperative by any court of competent
jurisdiction, the decision of such court shall not affect or impair any of the remaining provisions.
D:\HPK100 \004\DOCS \SGPROGRM.DOC
HOUSING PROGRAM
Subsection H. Amendment. The City shall not amend this Program while Bonds authorized
hereby are outstanding, to the detriment of the holders of such Bonds.
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4
HOUSING PROGRAM
Community
• Housing
Development
Corporation
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408 Butler North 510 First Avenue North Minneapolis, Minnesota 55403
March 6, 1996
Mr. James Kerrigan
Director of Planning and Development
City of Hopkins
1010 South First Street
Hopkins, Minnesota 55343
Re: Hopkins Renaissance
Dear Mr. Kerrigan:
I am writing to provide you with background information on the proposal by Community
Housing Development Corporation to purchase the Hopkins Renaissance development with
financing provided by the sale of Section 501(c)3 Housing Revenue Bonds.
History and Background
Hopkins Renaissance is typical of the affordable housing developed in the 1970's in this country
The program was a bold experiment on the national level to move the development and
operations of affordable housing from the public sector to the private sector. The HUD Section
8 program was created to provide ongoing Federal subsidy funds to reduce the rents of low and
moderate income persons to levels they could afford. The subsidy funds were guaranteed for
a long period of time (usually 20 to 40 years) in order to provide stability to the economics of
the development. More than 840,000 dwelling units were produced nationally under the Section
8 program.
To finance the construction of these Section 8 developments state housing finance agencies were
established across the country to sell tax exempt bonds to provide mortgage funds. Also, the
Federal Tax code was modified to permit accelerated depreciation to limited partner investors
who invested in these Section 8 developments. These limited partner investors are both
individuals and corporations. To further the investment in these developments the Congress
created the National Housing Partnership as a vehicle for investment on a national basis.
This program has been extremely successful in providing quality housing that was financially
sound. However, beginning with the Tax Reform Act of 1986, these developments have come
Equal Housing Opportunity
(612) 332 -6264
•
Mr James Kerrigan
March 6, 1996
Page Two
under financial stress. The Act basically removed the income tax benefits previously available
to the limited partner investors and has created a financial disincentive to remain in these
developments and provide good housing There is, therefore, no economic incentive for the
present owners of the developments to continue as owners. This is referred to as a "ticking time
bomb" for low income housing on a national basis, and the story is the same in Minnesota.
The National Housing Partnership, the general partner in Hopkins Renaissance, is no longer a
semi- public agency and has gone into the market rate apartment business. It is now the nation's
largest multi- family operator. In Minnesota it is selling its Section 8 developments and CHDC
has purchased three of their developments.
The congress recognized the problem of preserving these older Section 8 developments with the
passage of the Cranston - Gonzales National Affordable Housing Act of 1990. The Act provides
a system to protect these developments and provide for their continued viability. Most of the
solutions revolve around the purchase, refinancing and rehabilitation of the developments by a
non - profit development corporation.
Benefits
There are a number of benefits that result from the purchase of Hopkins Renaissance by CHDC:
1. The development is preserved as a high quality affordable housing resource for persons
in need.
2. The property will be physically upgraded to the benefit of both the tenants and the
Hopkins community. The current estimate is that there will be $200,000 available for
rehabilitation over the next twenty -four months.
Also because the development is non - profit and will be operated as a leased cooperative,
the level of funding for ongoing maintenance and repair will be significantly higher.
3. The owner will be CHDC, a local owner created by the Minneapolis area business
community to preserve and protect this type of housing. CHDC has a proven track
record, the financial capacity to improve the property, and the commitment to preserving
the development and its housing subsidy.
4. CHDC will begin an aggressive program to preserve the existing level of senior housing,
and expand the senior waiting list to assure the school portion of the development
remains a senior facility. CHDC has also begun an effort with Congressman Martin
Mr. James Kerrigan
March 6, 1996
Page Three
Sabo to change Federal legislation to permit Section 8 developments like this to be
converted back to senior only occupancy. There are several developments in our
workload that are affected in the same way as Hopkins Renaissance, and we are
optimistic we can succeed. The effort will be similar to the effort we launched several
years ago for public housing that resulted in a new Federal law permitting senior only
facilities.
5. We believe that ownership by a non - profit corporation will more likely result in the long
term preservation of the property and the affordable nature of the development. Under
present Federal preservation laws a non - profit is preferred as an owner. Also, under
most of the pending proposals to restructure HUD, the development will be in a stronger
position with non - profit ownership.
6 Conversion of the development to a leased cooperative will promote the involvement of
the residents of their housing in a positive and constructive manner. The City of
Hopkins will have the benefits of a homeowner -like association operating the property
on a day -to -day basis. But it will also have the guarantee of a solid owner. The leased
cooperative will mean
7. The City of Hopkins will be repaid the $150,000 CDBG
approximately $124,000 for a total of $274,000.
Status Ouo Option
More funds for maintenance.
More efficient operations.
Reduced resident turnover, carefully screened
community life for residents.
Residents who benefit from learning how to make
properly run a business.
residents, and an enhanced
decisions for themselves and
loan plus accrued interest of
It is always difficult to predict what could happen if a development proposal doesn't move
ahead, and we of course, have a bias for moving ahead, but I do believe the following could
occur. We will still be faced with an absentee owner who will operate the property from
Pittsburgh and who finds it necessary to sell the property. It is on the market for a sale. In a
situation like this, the most common method of transferring ownership is to retain the same legal
owner, and simply substitute the general partner. If this occurs, it is likely to be another
absentee owner who would not be able to repay the City loan or perform the rehabilitation. The
new owner would have the following options:
Drop the Section 8 funding and operate the property as a low grade rental property.
•
•
Mr. James Kerrigan
March 6, 1996
Page Four
Sincerely,
RB:Ib
Convert the property to a leased cooperative.
Operate the property at a lower level of maintenance and hope for some unspecified relief
in the future.
In summary, we are proud of our work in preserving and upgrading affordable housing
developments like Hopkins Renaissance, and will be a good citizen of the community of Hopkins
upon assuming ownership.
COMMUNITY HOUSING DEVELOPMENT CORPORATION
Richard Brustad
Community
• Housing
Development
Corporation
408 Butler North 510 First Avenue North Minneapolis, Minnesota 55403
March 6, 1996
Mr. James Kerrigan
Director of Planning and Development
City of Hopkins
1010 South First Street
Hopkins, Minnesota 55343
Re: Hopkins Renaissance
Dear Mr. Kerrigan:
I am writing to confirm our discussions regarding the numbers on the project as they relate
to Hopkins. The items we discussed were:
1. City of Hopkins Loan
2. Issuer's Fee
The development will pay an Issuer's Fee at closing of $29,050.
3. Annual Administrative Fee
Equal Housing Opportunity
(612) 332 -6264
The City of Hopkins entered into an Agreement For A Loan For The Rehabilitation
Of South Junior High School on August 20, 1979. The loan provided $150,000 in
capital to assist in the rehabilitation of the Hopkins Renaissance project. The loan is
due on June 1, 2010 and the interest accrues at the rate of 5% per annum.
Our proposal is to repay the loan principal plus accrued interest (approximately
$274,000) on behalf of the present owner. The payment would be made at the time
of the closing on the new financing for the project.
The development will pay an annual administrative fee beginning in 1997 (payable in
1998) equal to the City of Hopkin's share of the difference between a Title II real
estate classification and a Homestead classification. This fee will be paid from Project
Cash Flow on a first call basis, but only if cash flow is available
•
Mr. James Kerrigan
March 6, 1996
Page Two
It should be noted that the development owner will be required by
Poor's Rating Service to maintain a debt service ratio of 1.15 which
1998 the minimum cash flow that must be maintained will be $53,058.
be paid on April of each year after the audit is complete and the
determined.
Please let us know if this is satisfactory.
Sincerely,
COMMUNITY HOUSING DEVELOPMENT CORPORATION
Richard Brustad
RB:Ib
• Enclosure
Standard and
means that in
This fee will
cash flow is
i
I Community
Housing
Development
Corporation
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408 Butler North
February 20, 1996
510 First Avenue North Minneapolis, Minnesota 55403
Mr. James Kerrigan
Director of Planning and Economic Development
City of Hopkins
1010 South First Street
Hopkins, Minnesota 55343
Re: Hopkins Renaissance Project
Dear Mr. Kerrigan:
(612) 332 -6264
We would like to request that the City of Hopkins approve the purchase of the Hopkins Elderly
Apartments housing development by Community Housing Development Corporation. We are
also requesting that the City of Hopkins agree to become the issuer of Section 501(c)3 bonds to
finance the purchase.
Set forth below is information on this proposal.
Existing Program
Development. Hopkins Elderly Apartments
27 14th Avenue North
Hopkins, Minnesota 55343
One Bedroom Units: 39
Two Bedroom Units: 52
Three Bedroom Units:
Total Units 101
152 Parking Spaces
Owner:
Equal Housing Opportunity
Hopkins Renaissance Associates, A Limited Partnership
c/o National Corporation for Housing Partnerships
General Partner
1225 Eye Street N.W.
Washington, D.C. 20005
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Mr. James Kerrigan
February 20, 1996
Page Two
Community Housing Development Corporation
Community Housing Development Corporation (CHDC) was incorporated in 1990 as a Section
501(c)3 corporation. The primary goal of the corporation is the preservation of low and
moderate income housing.
Proposed Acquisition
CHDC would purchase the development from NHP and assume the existing Housing Assistance
Payments Contract (HAP Contract) with the Minnesota Housing Finance Agency (MHFA).
MHFA has entered into an Annual Contribution Contract with the Department of Housing and
Urban Development to provide financial assistance pursuant to Section 8 of the National Housing
Act. The HAP Contract first became effective in 1980 and runs until 2020, or forty years.
The affect of assuming this HAP Contract is to assure the long term affordability for low and
moderate income tenants.
It is the mission of CHDC to own and operate low and moderate income housing for the life of
the development. This preservation approach means the property would not be sold at a later
date.
Initially the project will be managed by NHP Property Management, Inc., a wholly -owned
subsidiary of the National Corporation for Housing Partnerships. The management contract will
be for a term of five years, although it may be terminated by CHDC after three years.
Leased Cooperative
CHDC intends to enter into a lease with a newly formed Cooperative Corporation in accordance
with Minnesota Statute 273.124, subdivision 6. The members of the cooperative association will
be the tenants who live at the development.
CHDC will enter into a master lease with the cooperative corporation to lease the entire
development. The cooperative corporation will then lease the individual units to the tenant
residents. The term of the lease will be approximately 20 years.
Pursuant to the master lease the cooperative will participate in establishing budgets, supervising
maintenance and operations, selecting the management agent, setting house rules, and participate
in tenant selection and evictions.
•
•
Mr. James Kerrigan
February 20, 1996
Page Three
CHDC's experience with leased cooperatives make clear that by any objective measure, the
housing development operates better, and are a better place to live. The Minnesota leased
cooperative Iaw is the closest that we can get to "home ownership characteristics" in a low and
moderate income rental development.
The leased cooperative statute also permits the development to secure homestead level real estate
taxes. This permits a higher level of maintenance and operation.
As part of the initial leased cooperative process, the City of Hopkins will make a series of
findings in accordance with these Minnesota Statutes.
Team
CHDC will employ the following to work with us on this development:
Financing
Norwest Investment Services, Inc.
Norwest Center
Sixth and Marquette, 14th Floor
Minneapolis, Minnesota 55479
(612) 667 -5141
Contact: Gayle Trebesch
Bond Attorney
Holmes and Galey
120 South Sixth Street, Suite 1200
Minneapolis, Minnesota 55402
(612) 288 -9300
Contact: Stefanie Galey
Real Estate Attorney
Leonard, Street and Deinard
150 South Fifth Street
Suite 2300
Minneapolis, Minnesota 55402
(612) 335 -1672
Contact: Angela Christy
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Mr. James Kerrigan
February 20, 1996
Page Four
Architect
Roark, Kramer, Roscoe Design
2929 Fourth Avenue South
Minneapolis, Minnesota 55408
(612) 8224200
Contact: Peter Kramer
Asset Management/Leased Cooperative Implementation
Dunbar Strandness, Inc.
1306 Wynridge Drive
St. Paul, Minnesota 55112
(612) 638 -0765
Contact: Doug Strandness
Asset Management /Leased Cooperative Implementation
Dunbar Strandness, Inc. will contract with CHDC to provide the asset management supervision
of the development on an ongoing basis. Mr. Strandness will also be responsible for creation
of the leased cooperative, cooperative training, and ongoing liaison with the cooperative board.
Funding
Section 501(c)3 bonds will be sold through the services of Norwest Investment Services, Inc.
They will be Multi- Family Housing Revenue Bonds with a rating from Standard and Poor's
Corporation The bonds do not constitute an indebtedness or general or moral obligation of the
City of Hopkins.
Sincerely,
COMMUNITY HOUSING DEVELOPMENT CORPORATION
Richard Brustad
RB:lb
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Type of Request:
1 Taxable Bond Issue
Tax - Exempt Bond Issue
Refunding of Previous Bond Issue
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APPLICATION FOR TAXABLE /TAX EXEMPT
1 BOND FINANCING OR BOND REFUNDING
(Complete as appropriate)
CITY OF HOPKINS
1010 FIRST STREET SOUTH
HOPKINS, MN 55343
OFFICE USE ONLY:
Date Received:
Received by:
1 APPLICANT INFORMATION
' 1. Applicant /business name: Community Housing Development Corp.
Contact person: Richard Brustad
1 Address: 510 First Avenue North, #408
City: Minneapolis State: MN Zip: 55403
1 S Telephone: (work) (612) 332 -6264 (home)
' Fax: (612) 332 -2365
Interest in property: Purchaser
2. Applicant's legal counsel: Ms. Angela Christy
1 Firm: Leonard, Street and Deinard
f Address: 150 South Fifth Street, Suite 2300
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1 Fax: (612) 335 -1657
City: Minneapolis State: MN Zip: 55402
Telephone: (work) (612) 335 -1672 (home)
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3. Applicant's architect: Roark, Kramer, Kosowski Design - Peter Kramer
Address: 2929 Fourth Avenue South
City: Minneapolis State: MN Zip: 55408
Telephone: (work) 822 - 4200 (home)
Fax:
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4. Applicant's contractor: (If selected):
Firm: Flannery Construction
Address: 351 Fast Relingg_Bonle
City: St. Paul State: MN Zip: 55101
Telephone: (work) 225 -1100 (home)
Fax: 225 -1100
5. Property owner(s) of record: Hopkins Renaissance Associates, A Limited
Partnership, c/o National Corporation for Housing Partner, 1225 Eye Street N.W.
Washington, DC 20005
Addresses:
City: State: Zip:
Telephone: (work) (202) 326 - 8281 (home)
Fax:
Applicant's business form (corporation, partnership, sole
proprietorship, etc.) - and state of incorporation or
organization:
Corporation, Minnesota
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7. If the applicant is a corporation, list the officers, directors
and stockholders holding more than 5% of the stock of the
corporation. State their name, address, telephone and
relationship to the applicant. (If a corporation is not
formed, list the potential officers, directors and
stockholders):
The applicant is a Sec. 501 (C) non - profit corporation and has no stockholders.
The Board of Directors are:
- Richard Jefferson, 1314 Washburn Ave, N., Minneapolis, MN 55411 - 296 -8659 Pres
-Kent Robbins,222 E Sixth Ave, Shakopee, MN 55379 - 496 -1748, Vice Pres /Treas.
- Carolyn Olson, 604 Third Ave NE, Minneapolis, MN 55413 - 339 -8703, VP /Secr.
- Richard Brustad, 1123 St. Paul Ave, St. Paul, MN 55116 - 698 -7961, Vice Pres.
- Dianna Wilson, 11345 Westwind Drive, Eden Prairie, MN 55349 - 944 -9373
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141, 10. Has the applicant ever been in bankruptcy? If yes, please
explain:
1 No
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8. If the applicant is a partnership, list the general partners
and any limited partners with more than 5% interest. (If the
partnership is, not formed, give as much data as possible
concerning the potential partners):
N/A
9. List any cities to which you have previously applied for
taxable /tax exempt bond financing within the last five years:
Eden Prairie, Minnesota
Brooklyn Center, Minnesota
Minneapolis, Minnesota
11. Has the applicant ever defaulted on any bond or mortgage
commitment? If yes, please explain:
No
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PROJECT INFORMATION
Project name: Hopkins Renaissance Proiect
Legal description of the site: See next page.
3. Brief description of the nature of the business, such as
principal services or products, etc.:
Rental housing for low and moderate income households.
4. Amount of bond issue requested: $ 5,810,000
5. Who is lending interim financing, and in what amount:
Not applicable.
BUSINESS INFORMATION
1. Number of employees in Hopkins?
A. Before this project:
B. After this project:
2. Projected annual sales: $
N/ A
3. Projected annual payroll: $ N/A
Full Time Part Time
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4. Is the project associated with an existing Hopkins business?
A. Yes
B. No X
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02/08/96 14:31 COMMONWEALTH LAND TITLE 4 12029555564 NO.569 P009
Parce.1 1:
Lots 16 to 24 inclusive, Mock 71; that part of vacated 13th Avenue North lying haw= the North line of
s a i d Lot 16 a n d the South line of said Lot 24 extended Westerly, all in West Mhmeapolis Second Division.
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LEGAL DESCRIPTION
Parcel 2:
Block 72 together with the vacated alley in said Block 72, West Minneapolis Second Division, except that
part embraced within Registered Land Suxvey No. 1678:
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5. If this project is associated with an existing Hopkins
business, which of the following apply:
A. Relocation
B. Expansion
C. Rehabilitation X
6. Will you occupy this project after completion?
A. Yes X
B. No
7. If no, state name of future lessees and status of commitments
or lease agreements:
Estimated date of construction: 6/96 Completion: 6/98
Will any public official of the City, directly or indirectly,
to the best of your knowledge, benefit by the issuance of the
City's tax - exempt financing for this project according_ to
Minnesota Statutes, Section 412.87? No
If so, please explain:
FILING REQUIREMENTS
You must provide all of the following items with your application,
unless the Director of Planning & Economic Development waives a
requirement:
1. If the project requires approval by the Zoning and Planning
Commission, you must apply for these approvals prior to or with
this application. If Zoning or Planning Commission approval is
not required, you must submit a list of property owners and
their addresses, for your property and for all-properties
within 350 feet. An abstract company must certify this list.
Abstract companies are listed in the yellow pages.
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2. A written opinion, with supporting justification, from an
expert acceptable to the Director of Planning & Economic
I Development, to document that the development will not
adversely effect similar, existing developments. This
I requirement may be waived if there are no similar developments
in the area of your project.
1 3.
A public hearing notice and resolution of preliminary approval.
You must have these items prepared by the City's bond counsel.
4. An application fee of $5,000. Make your check out to the City
of Hopkins. This fee is not refundable and is separate from
the Bond Counsels', City Attorneys', or closing fees.
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PROCEDURE
1. Return this application to the Community Development
Department.
2. The City Council will hold a public hearing and decide whether
to approve your application. City staff will notify you of the
meeting.
REOUIREMENTS FOR TAX- EXEMPT /TAXABLE BOND FINANCING
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Your application must meet the following requirements for approval
of taxable /tax - exempt bond financing*
1. The project shall not require a significant amount of public
money for City improvements if the City Council determines that
the site is premature for development.
2. The notes or bonds shall be for an issue not less than
$250,000.
3. Construction must begin within one year of preliminary
approval. The City Council may grant a time extension if just
cause is shown.
4. Contractors doing work on projects funded in whole or in part
by tax- exempt financing:
a. Shall not discriminate in the hiring and firing of
employees on the basis of race, color, creed, religion,
national origin, sex, marital status, age, disability or
the need for public assistance.
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b. Shall pay employees as provided under the United States
Code, Section 276A, as amended through June 23, 1986, and
under Minnesota Statutes 1985, Sections 177.41 - 177.44.
c. Shall employ Minnesota residents in at least 80% of the
jobs created by the project. In addition, at least 60% of
these employees shall be residents of the seven - county
metropolitan area. Residential status shall be determined
as of the date of the project's approval by the City
Council. However, if the contractor can show that these
quotas are not possible because of a shortage of qualified
personnel in specific skills, the contractor may request a
release from the City Council of the two residency
requirements. These requirements shall continue for the
length of the construction project.
d. Shall be active participants in a State of Minnesota
apprentice program, approved by the Department of Labor
and Industry.
e. The above requirements shall apply to all subcontractors
working on the project.
You must use the City's Bond Counsel.
The project must involve an existing business that the City
wishes to expand or a new business which the City wishes to
attract. A business is the manufacturing, distribution, sale,
storage or making of any merchandise, real estate, produce
food, housing or services which will produce income for one or
more individuals. An existing business is a commercial project
that has operated for at least one year in the City. A new
business is a commercial project which does not qualify as an
existing business.
a. Existing business criteria: The City will consider any
expansion, relocation or rehabilitation of an existing
business for approval.
b. New business criteria: The City will only consider a new
business for approval if it:
(1) Offers at least 400 hours per week of new,
year- around employment, or
(2) Involves the rehabilitation of a vacant or scheduled
to be vacated structure, or
(3) Is within a designated development or redevelopment
target area, and
(4) Has a low potential for creating pollution.
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7. The project must exceed minimum code requirements by including
at least five of the following features into the project:
financap
a. Brick
NIP b. Building design should be a distinctive, non - generic
style.
c. A noticeable increase in the size and quantity of
landscape plantings over what the City normally requires.
d. Underground irrigation of all landscaping.
1 e. Open space, other than required setbacks.
I f. At least 10% more parking than code requires.
g. Walkway along street frontages.
1 h. All parking stall widths at least ten feet.
i. All signs shall be at least 20% smaller or fewer than
I allowed by code.
' 8 City staff shall review compliance with the appropriate request
.for refunding of previous bond issues.
1 9. You must pay an administrative fee to the City of one quarter
percent of the bond issue with a maximum of $10,000 at closing.
The City will credit the application fee against the
O i l administrative fee.
1 AGREEMENT
I, by signing this application, agree to the following:
' 1. I have read and will abide by all the requirements of the
City for taxable /tax- exempt financing. I will also commit
all contractors, subcontractors and any other major
' contributors to the project to all segments applicable to
them. I am aware that failure to comply by myself or any
of the above can result in cancellation of the resolution.
1 2. The above information is true and correct.
3. I agree to pay all costs involved in the legal and fiscal
review of this project. These costs include the Bond
Counsel and City Attorney, and all costs involved in the
issuance of the bonds to finance the project.
1 4. I understand that the City reserves the right to deny
final approval, regardless of preliminary approval or the
Ile degre onstruction completed.
Applicant
Date
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Community
Housing
Development
Corporation
(612) 332 -6264
408 Butler North 510 First Avenue North Minneapolis, Minnesota 55403
February 8, 1996
Mr. James Kerrigan
Director of Planning and Economic Development
City of Hopkins
1010 South First Street
Hopkins, Minnesota 55343
Re: Hopkins Elderly Apartments
Dear Mr. Kerrigan:
I am writing to follow up on our discussion on February 7, 1996 by providing the following
information on the leased cooperative program.
1. Description of a Leasehold Cooperative
Equal Housing Opportunity
A Leasehold cooperative is a cooperative corporation established under Minnesota State
Law. It is a nonprofit corporation which means none of the board members or stock
holders can receive income or profits from the activities of the corporation.
To be eligible to become a stockholder (a member) of the leased cooperative corporation
you must be a current resident of the housing development and agree to abide by the
rules of the cooperative. In that sense the leasehold cooperative functions like a
condominium association.
At an annual meeting the cooperative stockholders elect a board of directors that will be
responsible for the activities of the corporation. The board will, among other duties-
A. Adopt an annual operating budget.
B. Hire and supervise a professional property management company.
C. Adopt and implement house rules which set forth standards for living in the
development.
D. Adopt maintenance policies.
E. Interview and choose new tenants.
F. Evict tenants for cause.
Mr. James Kerrigan
February 8, 1996
Page Two
2. Track Record
A study conducted several years ago by the staff at the University of Minnesota
Department of Applied Economics found that the leased cooperative cost savings
averaged 9.5% per year, In the world of low and moderate income housing this savings
is very significant. It is, for example, enough to totally fund a replacement reserve for
a project which is used for capital improvements over the years such as a new roof,
appliances, etc.
In summary, we believe the leased cooperative concept is a valuable tool to stabilize and
improve the rental housing of Hopkins.
Sincerely,
Enclosed is a copy of the relevant statute.
By any objective measure, the leasehold cooperatives have been a clear success.
Studies and our experience have shown that leasehold cooperative developments are
operated more efficiently and are more stable than standard rental developments in the
following ways:
a. Operating costs are lower.
b. Maintenance levels are higher.
c. There is a more stable resident population. There is less occupancy turnover.
d. Crime is lower and 911 calls are lower.
e. Tenants express a higher satisfaction with their living situation.
COMMUNITY HOUSING DEVELOPMENT CORPORATION
Richard Brustad
RB:lb
cc: Douglas Strandness
Mark Ruff
MAR 13 '96 06 :50PM EHLERS & ASSOCIATES
Ehlers and Associates inc.
LEADERS IN PUBLIC FINANCE
Mr. Jinn Kerrigan
City of Hopkins
1010 South First Street
Hopkins, MN 55343
Dear Jim:
March 13, 1996
P.2
Ehlers'Publicorp has reviewed the preliminary financing plan for the purchase of the Hopkins Renaissance
Apartments by Community Housing Development Corporation (CHDC).
In general, our preliminary review has indicated that the project will be financially feasible after the sale of
the units. Based solely upon the cash flows of the project, the tax - exempt bonds are expected to receive an
investment grade rating from Standard & Poors which will be higher than many Minnesota cities' general
obligation bond ratings. Standard & Poors will require significant assurance from CHDC that the property
will be managed and maintained over the 20 to 25 year duration of the bonds.
The debt service coverage on the bonds is expected to be at least 111% with a net cash flow of $35,000 to
$50,000 per year. The City will receive its administrative payment to compensate for the loss of property
taxes out of the net cash flow. We are working with CIIDC to ensure that the City payment is as secured
as possible given the financing parameters.
Many of the details of the financing are not yet finalized. We will provide a more complete report to the City
Council prior to the final approval of the bonds.
Please contact us with questions or comments.
Sincerely,
Mark Ruff
Financial Advisor
OFFICES IN MINNEAPOLIS, MN AND BROOKFIELD, WI
2950 Norwest Center • 90 South Seventh Street • Minneapolis, MN 55402 -4100
Telephone 612- 339 -8291 • FAX 612- 329.OSSd