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CR 2013-039 Call for Public Hearing - Agustana Chapel View Homes, Inc.
May 7, 2013 - Council Report 2013-039 City of Hopkins CALL FOR PUBLIC HEARING REGARDING A HOUSING DEVELOPMENT AND THE ISSUANCE OF A HOUSING FACILITIES REVENUE REFUNDING BOND, SERIES 2013, FOR THE BENEFIT OF AUGUSTANA CHAPEL VIEW HOMES, INC. Proposed Action Annrove Resolution 2013-023 calling a public hearing regarding a housing development and the issuance of a Housing Facilities Revenue Refunding Bond, Series 2013, for the benefit of Augustana Chapel View Homes, Inc., under Minnesota statutes, Chapter 462C, as amended, and providing preliminary approval to the issuance of the bond. With this motion a notice will be placed in the official newspaper announcing the details of the public hearing. Overview Pursuant to Minnesota Statutes, Chapter 462C, as amended (the "Housing Act"), a municipality is authorized to carry out the public purposes described in the Housing Act by providing for the issuance of revenue bonds to provide funds to finance or refinance multifamily housing developments located within the municipality. In May 2006 the City of Minneapolis issued Housing Refunding Bonds for Augustana Chapel View Homes, Inc. in the amount of $7,010,000 of which $5,735,000 remain outstanding. Due to lower interest rates Augustana Chapel View Homes would like to refinance the bonds and is asking the City of Hopkins to issue $5,290,000 on their behalf. As a condition to the issuance of revenue bonds under the Housing Act, the City must adopt a housing program providing the information required by Section 462C.03, subdivision 1 a, of the Housing Act. The borrower has requested that the City Council conduct a public hearing on June 4, 2013 to provide: (i) approval of the issuance of the Series 2013 Bond pursuant to the requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations promulgated thereunder; and (ii) approval of the Housing Program pursuant to the requirements of the Housing Act. The Series 2013 Bond will be a limited obligation of the City payable solely from the revenues pledges to the payment and will not be a general obligation of the City and will not be secured by or payable from revenue derived from any exercise of the taxing authority powers of the City. With this resolution the City Council also hereby states its preliminary intention to issue the Series 2013 Bond in the maximum aggregate principal amount of $5,290,000 to finance a portion of (i) refunding the outstanding principal amount of the Series 2006A Bonds; and (ii) paying the costs of issuing the Series 2013 Bond and other costs related to the issuance of the Series 2013 Bond and the refunding of the Series 2006A Bonds. Supporting Information • Letter from Kennedy & Graven • Resolution No. 2013-023 Financial Impact: $ Budgeted: Y/N '",,c� . � Source: �j ` Related Documents (CIP, ERP, etc.): Christine M. Harkess, CPA, CGFM Notes: Finance Director Offices in 470 U.S. Sank Plaza Kennedy , 200 South Sixth Street Minneapolis Minneapolis, MN 55402 Saint Paul (612) 337-9300 telephone (612) 337-9310 fax $t. Cloud www.kennedy-graven.com C H A R T E R E D Affirmative Action, Equal Opportunity Employer JULIE A. EDDINGTON Attorney at Law Direct Dial (612) 337-9213 Email: jeddington©kennedy-graven.com April 30, 2013 Christine Harkess Finance Director, City of Hopkins 1010 First Street South Hopkins, MN 55343-7558 Re: Resolution providing preliminary approval and calling a public hearing with respect to the Housing Facilities Revenue Refunding Bond (Augustana Chapel View Homes, Inc. Project), Series 2013, proposed to be issued by the City of Hopkins, Minnesota Dear Christine, Augustana Chapel View Homes, Inc., a Minnesota nonprofit corporation (the "Borrower"), has requested that the City of Hopkins (the "City") issue its Housing Facilities Revenue Refunding Bond (Augustana Chapel View Homes, Inc. Project), Series 2013 (the "Series 2013 Bond"), in a principal amount not to exceed $5,290,000. Proceeds of the Series 2013 Bond are proposed to be used to (i) refinance certain of the Borrower's existing senior housing facilities located at 1020 East 17°i Street and 1509 1& Avenue South in the City of Minneapolis (together, the "Project") through the redemption and prepayment of the Series 2006A Bonds (as hereinafter defined); and (ii) pay the costs of issuance of the Series 2013 Bond and other expenses related -to the transaction. The Project was originally financed and subsequently refinanced with the proceeds of various bonds issued by the City of Minneapolis (the "City of Minneapolis"), most recently with the proceeds of the Housing Facilities Refunding Revenue Bonds (Augustana Chapel View Homes, Inc. Project), Series 2006A (the "Series 2006A Bonds"), issued by the City of Minneapolis on May 19, 2006, in the original aggregate principal amount of $5,735,000. Although the Project is located in the City of Minneapolis, the Borrower has requested that the Series 2013 Bond be issued by the City. The Borrower is also the owner of Augustana Chapel View and Chapel View Apartments, both of which are located in the City. Pursuant to Minnesota Statutes, Section 471.656, the City may enter into a cooperative agreement with the City of Minneapolis to issue the Series 2013 Bond to refinance the Project. The City Council of the City of Minneapolis will meet on May 24, 2013, to provide approval to the issuance of the Series 2013 Bond by the City and to approve the execution of the proposed cooperative agreement. The Series 2013 Bond is proposed to be issued pursuant to Minnesota Statutes, Chapter 462C, as amended (the "Housing Act"). As a condition to issuing bonds pursuant to the Housing Act, the City is required to prepare and submit for comment and review to the Metropolitan Council a housing program (the "Housing Program") for the Project. In order to satisfy the public notice requirements of the Housing Act and Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), the Borrower has requested that the City Council of the City hold a public hearing on June 4, 2013. At the proposed public hearing on June 4, 2013, the City Council will be asked to provide approval to the issuance of the Series 2013 Bond, the 423123v1 JAE HPI 10-85 Housing Program, and the execution of loan documents and related documents, including but not limited to the cooperative agreement with the City of Minneapolis. The Series 2013 Bond is proposed to be issued as a tax-exempt obligation, the interest on which is not includable in gross income for federal income tax purposes. Northland Securities, Inc. will act as placement agent for this financing, and Venture Bank (the "Lender") has agreed to purchase the Series 2013 Bond from the City. If the Series 2013 Bond is authorized to be issued by the City Council, it will be issued as a conduit revenue bond secured solely by the revenues derived from a loan agreement (the "Loan Agreement") to be executed byrthe Borrower and from other security provided by the Borrower. The Series 2013 Bond will not constitute a general or moral obligation of the City and will not be secured by or payable from any property or assets of the City (other than the interests of the City in the Loan Agreement) and will not be secured by any taxing power of the City. The Series 2013 Bond will not be subject to any debt limitation imposed on the City, and the issuance of the Series 2013 Bond will not have any adverse impact on the credit rating of the City, even in the event that the Borrower encounters financial difficulties with respect to the Project to be refinanced with the proceeds of the Series 2013 Bond. The Series 2013 Bond is proposed to be privately placed with the Lender. The Borrower has requested that the City designate the Series 2013 Bond as a "qualified tax-exempt obligation" for purposes of Section 265(b)(3) of the Code. Tax-exempt obligations are usually not eligible for purchase by banks and other financial institutions, but Section 265(b)(3) of the Code permits each issuer of tax-exempt obligations to designate up to $10,000,000 of tax-exempt bonds as "qualified tax-exempt obligations" (sometimes referred to as "bank -qualified bonds") that are eligible for purchase by banks and other financial institutions. In order to issue bank -qualified bonds, the issuer must not expect to issue more than $10,000,000 of bonds (other than private activity bonds that are not qualified 501(c)(3) bonds) in a calendar year. Under the terms of the Loan Agreement, the Borrower will agree to pay the out-of-pocket expenses of the City with respect to this transaction. The Borrower will also pay the City's bond administrative fee in the amount of one-eighth of one percent (0.25%) of the principal amount of the Series 2013 Bond when the Series 2013 Bond is issued. Please contact me with any questions you may have prior to the City Council meeting. Sincerely, ulie A. Eddington 423123v1 JAE HP 10-85 2 follows: CITY OF HOPKINS, MINNESOTA RESOLUTION NO. 2013-023 RESOLUTION CALLING A PUBLIC HEARING REGARDING A HOUSING DEVELOPMENT AND THE ISSUANCE OF A HOUSING FACILITIES REVENUE REFUNDING BOND, SERIES 2013, FOR THE BENEFIT OF AUGUSTANA CHAPEL VIEW HOMES, INC., UNDER MINNESOTA STATUTES, CHAPTER 462C, AS AMENDED, AND PROVIDING PRELIMINARY APPROVAL TO THE ISSUANCE OF THE BOND BE IT RESOLVED by the City Council of the City of Hopkins, Minnesota (the "City"), as Section 1. Recitals. 1.01. Pursuant to Minnesota Statutes, Chapter 462C, as amended (the "Housing Act"), a municipality is authorized to carry out the public purposes described in the Housing Act by providing for the issuance of revenue bonds to provide funds to finance or refinance multifamily housing developments located within the municipality. 1.02. Pursuant to Minnesota Statutes, Section 471.656, as amended, a municipality is authorized to issue obligations to finance the acquisition or improvement of property located outside of the corporate boundaries of such municipality if the obligations are issued under a joint powers agreement between the governmental unit issuing the obligations and the governmental unit in which the property to be acquired or improved is located. Pursuant to Minnesota Statutes, Section 471.59, as amended, by the terms of a joint powers agreement entered into through action of their governing bodies, two governmental units may jointly or cooperatively exercise any power common to the contracting parties or any similar powers, including those which are the same except for the territorial limits within which they may be exercised and the joint powers agreement may provide for the exercise of such powers by one or more of the participating governmental units on behalf of the other participating units. 1.03. On May 19, 2006, the City of Minneapolis, Minnesota (the "City of Minneapolis") issued its (i) Housing Facilities Refunding Revenue Bonds (Augustana Chapel View Homes, Inc. Project), Series 2006A (the "Series 2006A Bonds"), in the original aggregate principal amount of $7,010,000, which are currently outstanding in the aggregate principal amount of $5,735,000; and (ii) Taxable Housing Facilities Refunding Revenue Bonds (Augustana Chapel View Homes, Inc. Project), Series 2006B (the "Series 2006B Bonds," and together with the Series 2006A Bonds, the "Series 2006 Bonds"), in the original aggregate principal amount of $80,000, which are no longer outstanding. The Series 2006 Bonds were issued pursuant to the Housing Act, a Trust Indenture, dated as of May 1, 2006, between the City of Minneapolis and U.S. Bank National Association, as trustee, and a resolution adopted by the City Council of the City of Minneapolis on April 28, 2006, and approved by the Mayor of the City of Minneapolis on May 4, 2006. The proceeds of the Series 2006 Bonds were loaned to Augustana Chapel View Homes, Inc., a Minnesota nonprofit corporation (the "Borrower"), pursuant to the terms of a Loan Agreement, dated as of May 1, 2006, between the City of Minneapolis and the Borrower, and were used to (i) refinance certain 4225210 JAE HPI 10-85 of the Borrower's existing senior housing facilities located at 1020 East 171h Street and 1509 10`h Avenue South in the City of Minneapolis (together, the "Project") by refunding the Housing and Health Care Facilities Revenue Bonds (Augustana Chapel View Homes, Inc. Project), Series 1997 (the "Series 1997 Bonds"), issued by the City of Minneapolis in the original aggregate principal amount of $10,100,000; and (ii) pay the costs of issuance of the Series 2006 Bonds. 1.04. The Borrower has requested that the City issue its Housing Facilities Revenue Refunding Bond (Augustana Chapel View Homes, Inc. Project), Series 2013 (the "Series 2013 Bond"), in one or more series, in an aggregate principal amount not to exceed $5,290,000. The proceeds of the Series 2013 Bond will be applied to (i) the refinancing of the Project through the redemption and prepayment of the Series 2006A Bonds issued by the City of Minneapolis; and (ii) the payment of costs of issuance of the Series 2013 Bond and other costs related to the refunding of the Series 2006A Bonds. 1.05. As a condition to the issuance of revenue bonds under the Housing Act, the City must adopt a housing program providing the information required by Section 462C.03, subdivision la, of the Housing Act (the "Housing Program"). 1.06. The Borrower has requested that the City Council conduct a public hearing on June 4, 2013 to provide: (i) approval of the issuance of the Series 2013 Bond pursuant to the requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations promulgated thereunder; and (ii) approval of the Housing Program pursuant to the requirements of the Housing Act. Section 2. Preliminary Findings. Based on representations made by the Borrower to the City to date, the City Council of the City hereby makes the following preliminary findings, determinations, and declarations: (a) The Project, which is being refinanced with proceeds of the Series 2013 Bond, consists of a multifamily housing development designed and intended to be used for rental occupancy by seniors. (b) The proceeds of the Series 2013 Bond will be loaned to the Borrower and the proceeds of the loan will be applied to refinance the Project and pay costs of issuance of the Series 2013 Bond and other costs related to the refunding of the Series 2006A Bonds. The City will enter into a loan agreement (or other revenue agreement) with the Borrower requiring loan repayments from the Borrower in amounts sufficient to repay the loan of the proceeds of the Series 2013 Bond when due and requiring the Borrower to pay all costs of maintaining and insuring the Project, including taxes thereon. (c) In preliminarily authorizing the issuance of the Series 2013 Bond and the refinancing of the Project, the City's purpose is to further the policies of the Housing Act. (d) The Series 2013 Bond will be a limited obligation of the City payable solely from the revenues pledged to the payment thereof, and will not be a general or moral obligation of the City and will not be secured by or payable from revenues derived from any exercise of the taxing powers of the City. 422521v1 JAE HPI 10-85 2 Section 3. Public Hearing. 3.01. The City Council shall meet at 7:00 p.m. on Tuesday, June 4, 2013, to conduct a public hearing as requested by the Borrower, notice of which hearing (the "Public Notice") will be published as required by Section 462C.04, subdivision 2, of the Housing Act, and Section 147(f) of the Code. 3.02. The City Clerk is hereby authorized and directed to publish the Public Notice, in substantially the form attached hereto as EXHIBIT A to this resolution, in the Sun -Sailor, the official newspaper of the City and a newspaper of general circulation in the City. The Public Notice shall be published at least once, at least fifteen (15) days prior to the date of the public hearing. At the public hearing, reasonable opportunity will be provided for interested individuals to express their views, both orally and in writing, on the Housing Program and the proposed issuance of the Series 2013 Bond. 3.03. Kennedy & Graven, Chartered, as bond counsel, shall prepare and submit to the City the Housing Program to authorize the issuance by the City of the Series 2013 Bond in a principal amount not to exceed $5,290,000 to, among other things, refinance the Project. City staff is authorized and directed to submit the Housing Program to Metropolitan Council for review and comment on or before the date the Public Notice is published, as required by Section 462C.04, subdivision 2, of the Housing Act. Section 4. Preliminary Approval. The City Council hereby states its preliminary intention to issue the Series 2013 Bond in the maximum aggregate principal amount of $5,290,000 to finance a portion of. (i) refunding the outstanding principal amount of the Series 2006A Bonds; and (ii) paying the costs of issuing the Series 2013 Bond and other costs related to the issuance of the Series 2013 Bond and the refunding of the Series 2006A Bonds. Section 5. Costs. The Borrower will pay the administrative fees of the City and pay, or, upon demand, reimburse the City for payment of, any and all costs incurred by the City in connection with refinancing the Project and issuing the Series 2013 Bond, whether or not the Series 2013 Bond is issued. Section 6. Commitment Conditional. The adoption of this resolution does not constitute a guaranty or firm commitment that the City will issue the Series 2013 Bond as requested by the Borrower. The City retains the right in its sole discretion to withdraw from participation and accordingly not to issue the Series 2013 Bond, or issue the Series 2013 Bond in an amount less than the amount referred to herein, should the City at any time prior to issuance thereof determine that it is in the best interest of the City not to issue the Series 2013 Bond, or to issue the Series 2013 Bond in an amount less than the amount referred to in Section 1.04 hereof, or should the parties to the transaction be unable to reach agreement as to the terms and conditions of any of the documents required for the transaction. Section 7. Effective Date. This resolution shall be in full force and effect from and after its passage. 422521vl JAE HPI 10-85 Adopted by the City Council of the City of Hopkins, Minnesota, this 7 I day of May, 2013. LO Attest: Kristine A. Luedke, City Clerk 422521v1 JAE HPI 10-85 Eugene I Maxwell, Mayor EXHIBIT A NOTICE OF PUBLIC HEARING CITY OF HOPKINS, MINNESOTA NOTICE OF PUBLIC HEARING ON THE APPROVAL OF A HOUSING PROGRAM FOR A MULTIFAMILY HOUSING DEVELOPMENT AND THE ISSUANCE OF A HOUSING FACILITIES REVENUE REFUNDING BOND UNDER MINNESOTA STATUTES, CHAPTER 462C, AS AMENDED NOTICE IS HEREBY GIVEN that the City Council of the City of Hopkins, Minnesota (the "City"), will hold a public hearing on Tuesday, June 4, 2013, at or after 7:00 p.m. in the City Council Chambers at City Hall, 1010 First Street South in the City, on a proposal that the City approve and authorize the issuance by the City of its housing facilities revenue refunding bond (the "Series 2013 Bond"), in one or more series, under Minnesota Statutes, Chapter 462C, as amended (the "Act"), for the benefit of Augustana Chapel View Homes, Inc., a Minnesota nonprofit corporation (the "Borrower"). The proceeds of the Series 2013 Bond will be used to (i) refund the Housing Facilities Refunding Revenue Bonds (Augustana Chapel View Homes, Inc. Project), Series 2006A (the "Series 2006A Bonds"), issued by the City of Minneapolis, Minnesota (the "City of Minneapolis") in the original aggregate principal amount of $7,010,000; and (ii) pay the costs of issuance of the Series 2013 Bond and other costs related to the refunding of the Series 2006A Bonds. Proceeds of the Series 2006A Bonds were loaned to the Borrower and applied by the Borrower to refinance certain of the Borrower's existing senior housing facilities located at 1020 East 17`h Street and 1509 10th Avenue South in the City of Minneapolis (the "Project") by refunding the Housing and Health Care Facilities Revenue Bonds (Augustana Chapel View Homes, Inc. Project), Series 1997, issued by the City of Minneapolis in the original aggregate principal amount of $10,100,000. The Project to be refinanced with the proceeds of the Series 2013 Bond is owned and operated by the Borrower. Following the public hearing, the City Council will consider adoption of a resolution approving a housing program prepared in accordance with the requirements of the Act and approving the issuance of the Series 2013 Bond. The aggregate face amount of the Series 2013 Bond proposed to be issued to refinance the Project is presently estimated not to exceed $5,290,000. The Series 2013 Bond will be issued by the City and will constitute a limited obligation of the City payable solely from the revenues expressly pledged to the payment thereof, and will not constitute a general or moral obligation of the City and will not be secured by the taxing power of the City or any assets or property of the City except interests in the Project that may be granted to the City in conjunction with the refinancing. Dated: [Date of publication] BY ORDER OF THE CITY COUNCIL OF THE CITY OF HOPKINS, MINNESOTA /s/ Kristine A. Luedke City Clerk 422521vl JAE HPI 10-85 A_1