CR 91-88 Refinancing Auburn N/S Housing Bond
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.".. Aprl.l 8, 1991 K! Councl.l Report: 91-88
REFINANCING AUBURN NORTH/SOUTH HOUSING BOND
Proposed Action.
Staff recommends adoption of the fOllowing motion: A'Pproval of
Resolution No. 91-49 giving preliminary approval to the issuance of
mUlti-family housing revenue refundinq bonds for the Auburn Apartment
proiect and authorizing pUblication of the public hearing.
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Approval of this action should be based upon the conditions as
identified by Staff. Approval of this Resolution will demonstrate
preliminary acceptance by the City Council for Miller Schroeder to
continue processing this item in accordance with their recommended
schedule.
Overview.
In 1983 the City Council approved the sale of 5.6 million dollars in
tax exempt housing bonds to finance the Auburn North and South
proj ects . The purpose of issuing these bonds was to provide a low
interest mortgage financing in order to make the project more
financially feasible.
In 1988 the City Council approved action refunding the existing bond
... debt and selling new tax exempt and taxable housing development
. revenue bonds for this proj ect. The purpose of that action was
'- because the applicant was able to' obtain a lower interest rate with
the market at that time.
Miller Schroeder, in conjunction with project owner Richard Nesland,
is now proposing to sell new bonds to refund the bonds sold in 1988.
The purpose of this action is as follows:
o Replace existing letter of credit which was originally with
Midwest Federal (assets which have now been transferred to the
Resolution Trust Corporation) with a new letter of credit.
o The proposed sale would be for a 30 year bond issue. The
present bonds mature in 1994.
Primary Issues to Consider.
o What are the obligations of the applicant as relates to a bond
issue of this type?
o Does the City have any obligations as a result of this action or
future action on this item?
o Are there any costs to the City?
o What is the amount in terms of the proposed issue?
o Has the city Attorney reviewed the proposed action?
o What other actions will the City Council be requested to
undertake?
o What conditions are being recommended by Staff?
'.. supporting Information.
. 0 Resolution No. 91-49
o emo from Miller Schroeder dated April 3, 1991
Ker gan, Planning &
Development Director
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. CR:91-88
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Analvsis of Issues.
Based on the recommendation, the City council has the following issues
to consider:
o What are the obligations of the applicant as relates to a bond
issue of this type?
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The applicant is required to make all payments on the bonds with
revenues generated from the project.
Also at least 20% of the dwelling units in the project must be held
available for persons of low to moderate income level and the project
cannot be converted into owner-occupied units for a minimum of ten
years after 50% of the project becomes occupied.
o Does the city have any obligation as a result of this action or
future action on this item?
Only preliminary approval is being requested at this time . The City,
e" has the ability to deny' final approval if they feel appropriate
because of additional information.
The ci ty Council should be aware that the ci ty does not have any
obligations for a payment on these bonds should there ever be a
default. They are secured by a letter of credit from a private
financial institution.
o Are there any oosts to the City?
staff is recommending that preliminary approval be given wi th the
condition that a $5,000 payment be provided by the applicant to cover
all legal and administrative fees in conjunction with this project.
o What is the amount in terms of the proposed issue?
The proposed issue will bel a tax exempt bond in the amount of 5.75
million dollars. These bonds will have a term of thirty years with a
seven year call date.
o Has the City Attorney reviewed this proposed action?
Because this is preliminary approval and no bond documents have been
prepared, the city Attorney has not been involved in any review. Both
the City Attorney and an attorney from Holmes and Graven will be
'. utilized to review the bond documents and the overall structuring of
4It this transaction.
o What other actions will the City Council be requested to undertake?
If the City Council approves the action as proposed, a public hearing
will be scheduled for May 21 to consider a final resolution on this
item. Th'is would be the last action required by the City Council.
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. CR: 91-88
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The Mayor and City Manager would subsequently be. required to execute
the necessary bond documents.
0 What conditions are being recommended by Staff?
As part of the approval of this project staff is recommending the
following:
0 Applicant provide the City with a check in the amount of $5,000
within ten days following approval of the preliminary
application to cover legal and administrative costs.
0 It is understood that approval of the preliminary resolution
does not obligate the City for any future approvals on this
item.
Alternatives.
Based upon the action recommended, the City Council has the following
alternatives in regards to this issue:
. 1. Approve the action as recommended by Staff. This will allow the
public hearing to be set and consideration of the final
resolution.
2. Deny the request. Under this alternative, the owner of the
property will either be required to retain the existing
financing on this project or find some type of private mortgage
financing.
3. continue for further information.
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CITY OF HOPKINS
.~"o Hennepin County, Minnesota
RESOLUTION NO: 91-49
GIVING PRELIMINARY APPROVAL TO THE ISSUANCE OF
MULTIFAMILY HOUSING REVENUE REFUNDING BONDS FOR THE
AUBURN APARTMENTS PROJECT AND AUTHORIZING PUBLICATION
OF A NOTICE OF PUBLIC HEARING
)WHEREAS, pursuant to Minnesota Statutes, Chapter 462C, as
amended (the "Act"), the city of Hopkins (the "city")
issued on October 12, 1983 its $5,600,000
Collateralized Multifamily Housing Development Revenue
Bonds (Auburn Apartments Project), Series 1983 (the
"Original Bonds"); and
WHEREAS, the proceeds of the original Bonds were loaned to
Richard Neslund (the "Developer") for the purpose of
constructing a multifamily housing development on two
sites, consisting of 102 units located at the southwest
corner of. Highway 7 and VanBuren. Avenue in the city,
and 34 units located at the southwest corner of Lake
Street and Tyler Avenue in the City (collectively, the
"Project"); and
WHEREAS, the Original Bonds were refunded by the City'S
..< $5,375,000 Collateralized Housing Development Revenue
Refunding Bonds (Auburn Apartments Project) Series 1988
(the "Prior Bonds"), issued on September 1, 1988; and
WHEREAS, The Developer has requested that the City issue its
$5,195,000 Multifamily Housing .Revenue Refunding Bonds
(Auburn Apartments Project), Series 1991 (the "Bonds")
in order to refund the outstanding principal amount of
the Prior Bonds and refinance the Project; and
WHEREAS, the issuance of the Bonds requires that the City hold a
public hearing after publication of notice;
NOW, THEREFORE, BE IT RESOLVED by the city of Hopkins:
1. The issuance of the Bonds is hereby preliminarily approved,
and the City Clerk is hereby authorized to publish the
notice of public hearing in sUbstantially the form attached
hereto.
2. The adoption of this resolution does not constitute a
guarantee that the City will issue the Bonds as requested by
the Developer. The City retains the right in its sole
discretion to withdraw from participation and accordingly
not issue the Bonds should the City at any time prior to the
issuance thereof determine that it is in the best interest
..., ., .
of the C1ty not to 1ssue the Bonds or should the part1es to
. the transaction be unable to reach agreement as to the terms
and conditions of any of the documents required for the
transaction.
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3. The Developer has agreed to pay directly or through the City
c~ any and all costs incurred by the City in connection with
. the Project whether or not the Bonds or operative
instruments are executed.
4. All commitments of the city expressed herein are subject to
the condition that by December 31, 1991 the city and the
Developer shall have agreed to mutually acceptable terms and
conditions of the Loan Agreement, the Bonds and of the other
instruments and proceedings relating to the Bonds and their
issuance and sale. If the events set forth herein do not
take place within the time set forth above, or any extension
thereof, and the Bonds are not sold within such time, this
Resolution shall expire and be of no further effect.
Adopted this 16th day of April, 1991.
Nelson W. Berg, Mayor
ATTEST:
James A. Genellie, city Clerk
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J MI. Toll Fre, Mi""""'" (800) 862-6002
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'. . 'Miller & Schroeder Financial, Inc.
. Northwestern Financial Center · 7900 Xerxes Avenue South. P.O. Box 789. Minneapolis, Minnesota 55440. (612) 831-1500
USF&G M~mber of the USF&G Financial Services Group' .
MEMORANDUM
DATE: April 3, 1991
TO: Jim Kerrigan
FROM: Marcia Cohodes
$5,375,000
CITY OF HOPKINS, MINNESOTA
Collateralized Housing Development Revenue Refunding Bonds
(Auburn Apartments project)
Series 1988
The purpose of this memorandum is to summarize for you, the
. .'history of the Auburn Apartments project (the "Project" ) and the
, city of Hopkins, Minnesota Collateralized Housing Development
Revenue Refunding Bonds Series 1988 (the "BondS"). Also, we
would like to discuss our proposal to accomplish a refunding of
the Bonds in June.
HISTORY
In October, 1983, the City of Hopkiris (the "City") approved the
issuance of the Bonds to provide construction and permanent
mortgage financing for the Project. Under the terms of the legal
documents governing the Bonds, at least twenty percent (20%) of
the dwelling units in the Project must be held available for
persons of low to moderate income levels and the project cannot
be converted into owner-occupied units for a minimum of ten years
after 50% of the Project became occupied.
The original transaction was str~ctured under the "Loans-to-
Lenders" program wherein the Bond proceeds were loaned to Midwest
Federal Savings and Loan Association ("Midwest") . Midwest
disbursed the Bond proceeds to the developer of the Project,
Richard Neslund, as construction draws under the Reimbursement
Agreement and in 1984, Mr. Neslund completed construction of the
Project in two phases consisting of 136 apartment homes.
Midwest pledged collateral to the Bond Trustee as security for
the Bonds which collateral consisted of securities acceptable to
. Moody's Investors Services (the "Rating Agency") to obtain a
Headquarters: Minneapolis, Minnesota
Branch Offices: San Diego Area. San Francisco Area' St. Paul' Milwaukee - Columbus "...
Member of the Securities Investor Protection Corporation .
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rating on the Bonds. Under the Collateral Agreement, Midwest was
required to supply the Bond Trustee with sufficient collateral to
maintain the rating on the Bonds until the holders of the Bonds
were paid their entire principal investment and interest due on
.the Bonds.
Five years later, the interest rate at which Mr. Neslund could
borrow was considerably less than that which was established on
the original issue of the Bonds. In order to refinance the
Bonds, Mr. Neslund was required to pay a pre-payment penalty to
the holders of the series 1983 Bonds. Midwest was willing to
continue guaranteeing the Bonds and Mil~er & Schroeder
accomplished a refunding of the Bonds in September, 1988.
The following year, Midwest was taken into conservatorship by the
Federal savings and Loan Insurance corporation (the "FSLIC").
The Rating Agency confirmed the outstanding rating on the Bonds
and, in spite of a plethora of inquiries into the Bond Trustee,
the Bonds remained outstanding with Midwest's collateral in the
possession of the Bond Trustee for the benefit of the holders of
the Bonds.
. Shortly thereafter, the assets of the FSLIC for Midwest were
transferred to the Resolution Trust corporation (the "RTC") and
discussions were initiated with Mr. Neslund to refinance again,
this time for the purpose of removing the obligation of Midwest
from the Bonds and thus freeing up the pledged collateral. These
discussions have been taking place over the past several months
and have culminated in an agreement between the RTC and Mr.
Neslund which agreement included a refinancing of the Bonds with
the city.
TODAY
Under the terms of the agreement with the RTC, Mr. Neslund has
agreed to refund the Bonds at par (which is allowable under the
Bond documents as early as June, 1991) and seek an alternate form
of credit enhancement for the Bonds. Miller & Schroeder has
obtained a commitment for credit enhancement from Sumitomo Trust
and Banking Company, Ltd. ("Sumitomo") for a letter of credit
sufficient to guarantee 100% of the principal and interest on the
Bonds once they are refunded.
One of the requirements set forth in the commitment from sumitomo
includes the extension of the Bonds to thirty (30) years in order
to conform to their underwriting standards. This is accomplished
through the process of a Public Hearing. The city would
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authorize a publication of the attached Notice. of Public Hearing
and would hold a Public Hearing at the.. same time we return for
our final authorization of the Bonds.
As we begin our process of structuring a refunding of the Bonds,
Miller & Schroeder and Mr. Neslund would like to request that the
City give its preliminary approval to this proposed refunding of
the Bonds at the next scheduled meeting of the City.council. At
this time, the city will be asked to approve, on a preliminary
level, the refunding of the Bonds and authorize a publication of
. the Notice of Public Hearing. (The Preliminary Resolution is
also attached.)
We ~re available to respond to any questions you may have
regarding our proposal to refund the Bonds and, if the schedule
of the city permits it, we will.plan to attend the next meeting
of the city council. ..
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1 April 10, 1991 P K \ I Council Report: 91-89
AWARD OF BID
17TH AVENUE MAINTENANCE RECONSTRUCTION
S.A.P. 132-349-03
Prol;)osed.Action.
Staff recommends the following motion: Move to adopt Resolution 91-
50, Resolution for Award of Bid - 17th Avenue Maintenance Reconstruc-
tion.
Overview.
Bids were received and opened on April 9, 1991 for 17th Avenue
Maintenance Reconstruction Project. Three bids were received and are
tabulated below.' The low bidder is P. C. I. !
Bidder Bid
P.C.I. $270,387.50
Palada & Sons $291,587.60
Thomas & Sons Construction $326,155.50
Engineers Estimate $288,300~00
" RCM Associates, Inc. has checked the bids and reviewed the
,,: qualifications of P. c. I. They find the company has the experience and
equipment to complete the project in a timely manner.
primary Issues to Consider.
o Should the award be made to P.C.I.?
P.C.I. is a qualified bidder with the equipment and manpower to
complete ~he project.
o Is the bid reasonable?
The bid of $270,387.50 is approximately $1.8,'000 lower than the
engineer'S estimate. The engineer recommends award of the
contract to P.C.I. Funding for this project is 100% state Aid.
o When can construction begin?
Gonstruction is planned to commence the first week in May at
County Road 3 and progress northward to T.H. 7. The anticipated
completion date. is June 20. A. meeting has been held with
neighborhood residents to discuss issues of access to driveways
and parking.
Supportinq Information.
o Bid tabulation
o Resolution 91-50
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, James Gessele
Engineering Supervisor
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April 10. 1991
Mr. Jim Gesselc, Engineering Supervisor
City of Hopkins
1010 First St. S.
'Hopkins. MN 55343
{@ill RE: 17th Avenue Pavement Rehabilitation
S.A.P. 132-349-02
ReM Project No. 10067.02
rieke Dear Jim:
ca~ll
-" mu ler
4II'~latesJ Inc. After review of the bid proposals submitted to the City of Hopkins for the
'e~neers above referenced project. Progressive Contractors, Inc. (PCI) of Osseo.
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land surveyors Minnesota has submitted the lowest responsible bid.
equal opportunity Therefore, we recommend that pel be awarded the project.
employer
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RIEKE CARROLL MULLER ASSOCIATES. INC. ,
PJC/jj
c: Harry Koutsoumbos, RCM
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, 10901 red circle drive
bOx 130
minnetonka. minnesota 55343
612-935-6901 \
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CITY OF HOPKINS
.' . Hennepin County, Minnesota
i' RESOLUTION NO: 91-50
\ RESOLUTION FOR AWARD OF BID
17TH AVENUE MAINTENANCE RECONSTRUCTION
S.A.P. 132-349-03
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BE IT RESOLVED, By The City Council of Hopkins, Minnesota, that
the bid of Progressive Contractors Incorporated in the
amount of $270,387.50 is the lowest responsible bid for
the pavement rehabilitation of 17th Avenue between
County Road 3 and T.H. 7, City project 90~03, and the
Mayor and city Manager are hereby authorized and
directed to enter into a contract with said bidder for
and on behalf of the City.
Adopted this 16th day of April, 1991.
Nelson W. Berg, Mayor
ATTEST:
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James A. Genellie, city Clerk
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