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HomeMy WebLinkAbout08-01 HOUSING AND REDEVELOPMENT AUTHORITY TN AND FOR THE CITY OF LAKEVILLE MINNESOTA PRIVATE ACTIVITY REVENUE. BOND FINANCING POLICY. RESOLUTION O8-ol L INTRODUCTION Each of the City of Lakeville, Minnesota (the "City") and the Housing and Redevelopment Authority in and for the City of Lakeville, Minnesota (the "Authority' ;together with the City, the "Issuers") has been granted authority to issue tax-exempt private activity bonds to finance the following types of projects: (1) Manufacturing /industrial facilities; (2) Multifamily housing; (3) Health care facilities and (4) Other projects on behalf of 501(c)(3) organizations. The City should be the issuer of first. resort. If the City is the issuer, the Authority-need not be involved. If the Authority is the issuer, both the Authority and the City must meet to approve the issuance. In certain instances, however, bank qualification or other considerations may lead to the Authority acting as issuer. With the exception of housing projects, financings for all of the above undertakings .are authorized under Minnesota Statutes,. Sections 469.152 through 469.165, as amended (the "Act"). Bonds for housing projects are authorized under Minnesota Statutes, Chapter 462C. II. GENERAL REQUIREMENTS The following are the general guidelines and requirements the Issuers will use. to evaluate requests for private activity bond financing and to administer private activity bonds. The Issuers have complete discretion to issue private activity bonds and reserve the right to approve only .proposals which, in the opinion of the Issuer, meet the needs of the Issuer and have a strong likelihood. of success. All proposals for the issuance of private activity .bonds must meet the following general requirements: A. Be consistent with the City's Comprehensive Plan (the "Plan"). B. Fulfill all of the applicable federal and state. requirements for the issuance of private activity bonds. C. Comply with all applicable federal, state, regional, and City laws, including zoning and land use. regulations and ordinances applicable to the development. D. The applicant agrees to use the legal services of a bond attorney designated by the City of Lakeville. E. The applicant for private activity bond financing and the applicant's bond underwriters shall hold the Issuers and their respective officers, consultants,. and agents harmless from any alleged or actual violations of any securities laws, state or federal, in connection with the issuance of private activity bonds for the development. In addition, the Issuers shall not be held responsible for any debt repayment of the bond issue or other costs relating to the development, should it fail financially-for any reason. F.. The applicant shall enter. into appropriate agreements with the Issuer for the issuance of the private activity bonds, including agreements to enforce the Issuer's requirements for the issuance of the private activity bonds. The term of these agreements shall at a minimum be equal to the term of the private activity bonds. The applicant has deposited all required fees on a timely basis. III. TYPES OF PROJECTS 1. Manufacturing /Industrial Facilities Bonds for manufacturing facilities are issued. under the .Act and either Section 144(a) or Section 141 of the Internal Revenue Code, as amended (the "Code"). In addition, the bonds are generally subject to the volume cap allocation requirements of Minnesota Statutes, Chapter 474A, as amended. The purpose of issuing bonds for such facilities is to encourage the development of appropriate industrial projects that. will benefit the community by providing-jobs and economic development, eliminating blight, and increasing property values. Manufacturing bonds are. available only for "core" manufacturing projects, and only for relatively small manufacturers (cannot expect to have more than the maximum IIZS allowable capital expenditures in the City in the six-year period surrounding issuance of the bonds). 2. Multifamily Housing Housing bonds to finance privately-owned multi-family housing facilities within the City are authorized under Minnesota Statutes, Chapter 462C and either (a) in the case of facilities owned by 501(c)(3) entities, Section 145 of the Code or (b) in the case of facilities owned by non-501(c)(3) entities, Section 142(d) of the Code. The purpose of issuing multifamily housing bonds is to benefit the community by encouraging the availability of multifamily housing opportunities for residents of the City. The Issuer within its sole discretion will determine whether or not to approve Housing bonds and if so, which multifamily project or projects it will finance. 2 The following requirements must be met for proposals to be considered by the Issuer: • The development must demonstrate equity participation of at least 10% of the total development cost in the form of cash or land or depreciable assets. Total .development cost may include "soft costs," such as consulting and legal, fees, reasonable development fees, title, recording, and insurance. costs, financing reserves, .and moving. costs. The Issuer may on an individual basis consider exceptions to this requirement. The City Council may waive or modify the equity participation requirement for SO1(c)(3) organizations. • The Issuers expect a debt service reserve. for all transactions. The debt service reserve amount shall be in conformance with the federal .requirements for tax- exempt issues.. In addition; an amount agreed upon between the Issuer and the applicant will be set aside and. maintained as a replacement reserve for any needed capital improvements and/or maintenance required.. With the approval of the Issuer, the developer may. post a surety bond, letter of credit, or other security mechanism to meet these requirements. • As required by federal law relating to housing bonds, proposals for the acquisition -and rehabilitation of existing structures must allocate an amount not less than 15% of the bond-funded acquisition cost within atwo-year period to rehabilitate the property. The Issuer may require specific work to be included in the rehabilitation of the structure as a condition for`the issuance of the bonds. 3. Health Care Facilities Health care facility revenue bonds are issued to finance hospital, nursing home or assisted living facilities within the City-owned and operated by 501(c)(3) entities. Such bonds are issued in accordance. with the Act and Section 145 of the Code. The purpose of issuing health care bonds is to benefit the community by encouraging the availability of affordable health care services for residents of the City. 4. Facilities for other 501(c)(3) Organizations Bonds may be issued to finance facilities within the City providing services. that benefit the City ,and its residents (including, without limitation, educational services) owned and operated by 501(c)(3) entities. Such bonds are issued in accordance with the Act and Section 1.45 of the Code. The purpose of issuing such bonds is to benefit the community by encouraging the availability of beneficial services for residents of the City. 3 f IV. DESIGN AND MAINTENANCE STANDARDS A. The development shall use building and design materials that are in compliance with applicable .state and local building and licensing codes and designated maintenance standards. B. The design and maintenance must be compatible with other neighboring land uses, building architecture, and landscaping. V. FINANCIAL REQUIREMENTS The Issuers strongly prefer that private activity bonds be issued (a) with an investment .grade. rating from one or more of the national rating agencies, or (b) be secured, in whole or in part, by a letterof credit or similar security from a major financial institution or (c) private placement with accredited investors in minimum. denominations of $100,000. VL .FEES A. Anon-refundable application fee of $2,500 is due at the time .the application is made. This fee shall be-due in the case of an application for either a new money or a refunding issue. This Application Fee is in addition to the other fees set forth below and is not a credit against any of said fees. B. An initial issuance fee shall be the greater of $10,000 or 1/8 of 1 % of the principal amount of the private activity bonds is due at the time of closing. This fee shall be due in the case of an application for either a refunding issue or a new money issue. The fee shall be deposited in the Community Development Account. C. All fees and .expenses in relation to the issuance of the private activity bonds (in addition to the foregoing application fee and issuance fee), including the fees of the Issuer's bond counsel and financial consultants, shall be the responsibility of the applicant, regardless of whether the private activity bonds are actually issued. The City may, at its discretion, require the applicant to provide an escrow. D. For applications requiring an allocation of bonding authority from the Minnesota Department of Finance (the "Department") pursuant to the. provisions of Chapter 474A, an application, in the form. prescribed by the Department, must be submitted to the Department along with .the appropriate application deposit and nonrefundable application fee due to the Department. The applicant must pay the .cost of completion of the application materials, if any, and the amount of the state application deposit and nonrefundable fee must be remitted to the Issuer prior to . 4 - its submission to the state. After the private activity bond closing and appropriate notice of issue is filed with the Deparhnent, the. application deposit paid by the Issuer at .the time of the bond allocation request will be refunded to the Issuer. The Issuer will then refund a corresponding amount of the application. fee paid to the Department to the applicant. E. The Issuer will.-require that an annual payment be made to the Issuer during the term the bonds are outstanding. At present, .the annual payment will not exceed an amount equal to 1/8th of 1% of the outstanding principal amount of the bonds, and, in any event, will not exceed the amount permitted under applicable arbitrage regulations of the United States Treasury. The fee shall be deposited in the Community Development Account. VII. REFUNDING BONDS Previous issuance of private activity bonds by the Issuer does not commit the Issuer to the issuance of refunding bonds at a fixture date. Applications for the refunding of previously issued private activity bonds will be evaluated in terms of general benefit'to the .Issuer based on .such factors as financial benefit to the applicant, the project's past operating history, including property maintenance and employment, and the applicant's future plans for operations in the City. To the extent appropriate, the provisions. of this. private activity bond financing policy shall apply to refunding bonds. It is recognized that developments previously. financed may not have met the foregoing requirements applicable to new financing. requests. Applications that include the .refunding of previously issued bonds .will be evaluated based on such factors as substantial debt service savings, removal of bonding covenants significantly impairing the financial feasibility of the development, significant rehabilitation or physical improvements of the property, or enhancements to the fiffordability of existing rents. VIII. PROCESS The process for obtaining private activity bond financing is as follows: A. An application for the issuance of private activity bonds must be submitted in the form specified by Issuer staff along with the required application fee. B. Issuer staff will complete an initial review to evaluate the proposal and determine whether it qualifies for consideration for financing. C: Staff will consult with the Issuers' bond counsel and financial consultant as necessary to verify the development's qualifications for financing and determine project feasibility. Because of the complexity of qualifying project activities 5 under the Internal Revenue Code, it is essential that bond- counsel. be consulted early in the application process. D. For proposals requiring a bond allocation from the Department prior to issuance (in general, projects described in (1) and some projects .described in (2) above), the proposal will be presented to the Issuer for a preliminary resolution. The resolution will identify the preliminary intent of the Issuer to issue bonds, a description of the proposed development, and the amount of bonds to be issued. Upon adoption of the preliminary resolution, the applicant, working with the Issuers' bond counsel, shall prepare the' application to be submitted by the Issuer for a bond allocation to the Department. E. After a state bond allocation has been issued or when a proposal does not require a bond allocation from the Department, the applicant, bond counsel, and underwriter will complete the necessary bond documents. All of the projects described in this policy require a public hearing held by the Issuer and approval by the City at some time after the public hearing. Housing bonds under Chapter 462C require, prior to :publication of notice of the public hearing, submission of a Housing Program to the Metropolitan Council. The Program must be approved by -the Metropolitan Council. Following such public hearing, the Issuer. will adopt a final bond resolution approving the documentation to be executed by the Issuer and authorizing the execution of said documents and the issuance of the bonds. F. Prior to the issuance of private activity.bonds (other than housing bonds issued under Minnesota Statutes, Chapter 462C), and following the public hearing, the Issuer must file an application for approval of the bond issue with the Minnesota Department of Employment and Economic Development. The application is considered .routine if the proper documentation is filed including the completed application form, the Issuer's bond resolution, a preliminary bond counsel opinion, evidence of the public hearing, and a letter of preliminary intent from the bond underwriter to underwrite the bond issue. G. Until the private activity bonds are issued, the Issuer reserves the right to: (1) .Reject applicant's choice of underwriter, trustee, paying agent, placement agent, or legal counsel (2) Require corrections or amendments to any legal document. (3) Reject the proposal and the issuance of the private activity bonds if the Issuer determines, in its sole discretion, that the financing is not in furtherance of the Issuer's goals or is otherwise unacceptable, even if preliminary approval for the proposal or any part of the proposal being separately considered has previously been given. 6 H. Within 5 days of closing of the bond issue, or as otherwise determined by statute or appropriate regulations, the Issuer must file a report with the Department that the bonds have been issued. This. filing will trigger the fee. refund referenced above in Section VI, paragraph D. APPROVED AND ADOPTED this 17~' day of March 2008 by the Housing and Redevelopment Authority in and for the City. of Lakeville Minnesota Housing and Redevelopment Authority By: ri Rieb, Chair ATTEST: Steven C. Mielke, Executive Director 7