Item Coversheet

Housing and Redevelopment Authority Board Action Request
19-HCHRA-0046

Item Description:
Preliminary approval to issue one or more tax-exempt multifamily housing revenue bonds for an affordable housing project at 1212 9th St So and 1225 8th St So, Mpls; authorization to apply for allocation of issuance authority

GRANTING PRELIMINARY APPROVAL TO THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS (ELLIOT TWINS PROJECT); AUTHORIZING THE SUBMISSION OF AN APPLICATION FOR AN ALLOCATION OF BONDING AUTHORITY UNDER MINNESOTA STATUTES, CHAPTER 474A; AUTHORIZING THE PREPARATION OF A HOUSING PROGRAM PURSUANT TO MINNESOTA STATUTES, CHAPTER 462C; AND ESTABLISHING THE DATE FOR A PUBLIC HEARING AND AUTHORIZING PUBLICATION OF A NOTICE OF PUBLIC HEARING

 

WHEREAS, the Hennepin County Housing and Redevelopment Authority (the “Issuer” or “HCHRA”) is a housing and redevelopment authority and a public body corporate and politic duly organized and existing under the Constitution and laws of the State of Minnesota; and

 

WHEREAS, pursuant to Minnesota Statutes, Chapter 462C, as amended (the “Housing Act”), the Issuer is authorized to carry out the public purposes described in the Housing Act by issuing revenue bonds or other obligations to finance or refinance multifamily housing developments, and as a condition to the issuance of such revenue bonds, adopt a housing program providing the information required by Section 462C.03, subdivision 1a of the Housing Act; and

 

WHEREAS, in the issuance of revenue bonds to finance multifamily housing developments, the Issuer may exercise within its corporate limits any of the powers the Minnesota Housing Finance Agency may exercise under Minnesota Statutes, Chapter 462A, as amended, including without limitation under the provisions of Minnesota Statutes, Chapter 475, as amended; and

 

WHEREAS, Elliots LP, a Minnesota limited partnership (together with its affiliates or assigns, the “Borrower”), submitted an application to the Issuer requesting the issuance of one or more series of multifamily housing revenue bonds or other obligations (the “Bonds”), in an aggregate principal amount not to exceed $26,500,000, under the provisions of the Housing Act to assist in the financing of the acquisition, rehabilitation, and equipping of an existing 174-unit multifamily rental housing development and facilities functionally related and subordinate thereto, comprised of two high-rise buildings, each with 87 units and located at 1212 9th Street South and 1225 8th Street South in the City of Minneapolis, the construction and equipping of a single-story building that will link the two existing buildings and house community amenities, and the creation of 10 additional units within the two high-rises in areas previously utilized for community amenities, for occupancy by persons and families of low and moderate income (the “Project”); and

 

WHEREAS, under Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”), prior to the issuance of the Bonds a public hearing duly noticed must be held by the Board of Commissioners (the “Board”) of the HCHRA. Under Section 462C.04, subdivision 2 of the Housing Act, a public hearing must be held on a housing program with respect to the Project (the “Housing Program”) after one publication of notice in a newspaper circulating generally in the County, at least fifteen (15) days before the hearing; and

 

WHEREAS, under Section 146 of the Code, the Bonds must receive an allocation of the bonding authority of the State of Minnesota, and an application for such an allocation must be made pursuant to the requirements of Minnesota Statutes, Chapter 474A, as amended (the “Allocation Act”); and

 

WHEREAS, the Board may grant preliminary approval to the issuance of the Bonds to finance the multifamily housing development referred to in the Housing Program, and may authorize the submission of an application to the State of Minnesota Department of Management and Budget (“MMB”) for an allocation of bonding authority with respect to the Bonds to finance the Project in accordance with the requirements of Section 146 of the Code and the Allocation Act.

Resolution:

BE IT RESOLVED, that the Board of the Hennepin County Housing and Redevelopment Authority approve the following:

 

  1. The Project and the issuance of the Bonds therefore in an amount not to exceed $26,500,000 are hereby given preliminary approval by the Issuer, subject to mutual agreement of the Issuer, the Borrower, and the initial purchaser of the Bonds as to the details of the Bonds and provisions for their payment.  In all events, it is understood, however, that the Bonds shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the Issuer, except the Issuer’s interest in the loan agreement with the Borrower for the Project.  The Bonds, when, as, and if issued, shall recite in substance that the Bonds, including interest thereon, are payable solely from the revenues received from the Project and property and security pledged to the payment thereof, and shall not constitute general or moral obligations of the Issuer or Hennepin County (the “County”).

     

  2. The Bonds will be payable solely from the revenues of the Project and other money and security, if any, provided by the Borrower, and the Bonds will not constitute or give rise to a pecuniary liability of the Issuer or of the County or a charge against the general credit, full faith and credit, or taxing powers of the Issuer or the County.

     

  3. No holder of any such Bonds shall ever have the right to compel any exercise of the taxing power of the Issuer or the County to pay the Bonds, or the interest thereon, nor to enforce payment against any property of the Issuer, except revenues of the Project to be paid to the Issuer and pledged to the Bonds.

     

  4. The Borrower may incur expenditures on the Project prior to the issuance of the Bonds therefore, and such expenditures may be reimbursed from proceeds of the Bonds, when, and if issued. This resolution shall constitute an “official intent” to reimburse such expenditures for purposes of Treasury Regulations, Section 1.150-2.

     

  5. The Executive Director and other officials, employees, and agents of the Issuer, with the assistance of the Borrower and Kennedy & Graven, Chartered, in its capacity as bond counsel (“Bond Counsel”), are authorized and directed to prepare and submit an application to MMB for an allocation of bonding authority for the Project and the Bonds to be issued therefore in an amount not to exceed $26,500,000, pursuant to the Allocation Act.

     

  6. The Executive Director and other officers, employees and agents of the Issuer are hereby authorized to: (i) prepare the Housing Program in accordance with the requirements of the Act; (ii) submit the Housing Program to the Metropolitan Council for its review and comments in accordance with Section 462C.04, subdivision 2 of the Housing Act; and (iii) participate in the preparation and review of necessary documents relating to the Project and Bonds issued in connection therewith.

     

  7. The Borrower will be responsible for paying any and all costs incurred by the Issuer in connection with the Bonds and the Project, including reasonable costs that the Issuer may incur for legal counsel and any reasonable fees the Issuer may charge, whether or not the Project is carried to completion, and whether or not the Bonds or operative instruments are executed.

     

  8. The adoption of this resolution does not constitute a guaranty or firm commitment that the Issuer will issue the Bonds as requested by the Borrower. The Issuer retains the right, in its sole discretion, to withdraw from participation and accordingly not to issue the Bonds, or issue the Bonds in an amount less than the amount referred to herein should the Issuer at any time prior to issuance thereof determine that it is in the best interest of the Issuer not to issue the Bonds, or to issue the Bonds in an amount less than the amount referred to in paragraph 1 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 this transaction.

     

  9. A public hearing on the Housing Program relating to the Project and the issuance of the Bonds shall be held before the Board of the Hennepin County Housing and Redevelopment Authority on a date, and at a time and place, as is deemed appropriate by the Clerk of the Board. The Clerk of the Board shall publish notice of the public hearing, in substantially the form attached hereto as EXHIBIT A in Finance and Commerce, the official newspaper of the County. Bond Counsel is hereby directed to publish notice of the public hearing in the Star Tribune, a newspaper of general circulation in the County. The notice shall be published at least once, in each newspaper, at least 15 days prior to the date of the public hearing, and a copy of the Housing Program shall be submitted to the Metropolitan Council for review and comment on or before the date of publication of the notice.

Background:

History: The Hennepin County Housing and Redevelopment Authority (HCHRA) is authorized to issue conduit financing, including housing revenue bonds pursuant to the provision of Minnesota Statutes, Chapters 462C and 469. The bonds are repayable solely from revenue and assets pledged in their support by the developer and are not a debt or property tax obligation of Hennepin County or the HCHRA.

 

Minneapolis Public Housing Authority (MPHA) (the Developer) applied for housing revenue bond financing to assist in the rehabilitation of 174 affordable rental housing units and the construction of 10 new affordable rental housing units at 1212 9th Street South and 1225 8th Street South (the Project) in Minneapolis. 

 

The Project is an existing public housing development known as “Elliot Twins Apartments” originally built in 1961. MPHA will utilize the Federal Rental Assistance Demonstration (RAD) program to convert the existing public housing subsidies for the Project into Section 8 operating subsidy. This conversion will allow the project to access conventional housing finance tools such as Low-Income Housing Tax Credits and mortgage loans to complete rehabilitation work on the property. MPHA will maintain long-term ownership of the Project through an affiliated nonprofit entity.

 

When complete, the Project will contain 92 efficiency and 92 one-bedroom apartments. Ten units will be restricted to households at or below 30 percent of area median income (AMI), 164 units at or below 60 percent AMI, and 10 units at or below 80 percent AMI, as determined by the U.S. Department of Housing and Urban Development (HUD). Through the RAD program, all 184 will units will receive project-based Section 8 assistance. The current residents of the Project have a median annual gross income of $10,212, which equates to approximately 10 percent AMI.

 

The current 30 percent annual income limits established by HUD for Hennepin County range from $21,000 for a one-person household to $30,000 for a four-person household. The 60 percent annual income limits range from $42,000 for a one-person household to $60,000 for a four-person household. The 80 percent income limits range from $56,000 for a one-person household to $80,000 for a four-person household.

 

The Project total development cost is expected to be approximately $51 million dollars. The Developer is requesting HCHRA preliminary approval to issue multifamily revenue bonds not to exceed $26,500,000.

 

The bonds would be special limited obligations of the HCHRA, payable solely from the revenues specifically pledged by the Developer. In addition to the housing revenue bonds, proposed sources of funding include four percent Low-Income Housing Tax Credits, MPHA, and the City of Minneapolis.

 

The Project meets the guidelines for conduit financing, as established by Resolution 02-HCHRA-32, and will preserve 174 units of long-term affordable housing and create 10 new affordable units.  The request is also consistent with previous HCHRA multifamily housing revenue bond actions for the Parkview Apartments and Holmes Greenway projects.

 

Since 2000, the HCHRA has issued approximately $201.5 million in conduit financing for 10 projects supporting 1,518 affordable housing units. Another two projects, totaling approximately $104 million and 302 affordable housing units, currently have obtained HCHRA’s preliminary approval.

 

Conduit financing requests typically follow a series of formal actions by the HCHRA Board: 1) consideration of preliminary approval; 2) establishment and holding of a public hearing; and 3) consideration of final approval. During the final approval phase, the Hennepin County Board of Commissioners also considers a companion resolution approving the HCHRA’s action.

 

Current Request:  This request is for preliminary approval to issue not to exceed $26,500,000 of multifamily housing revenue bonds.

 

Impact/Outcomes:  Issuance of multifamily housing revenue bonds will facilitate the rehabilitation and preservation of 174 rental housing units and the construction of 10 new rental housing units, of which all 184 units will have project-based Section 8 rental assistance.

Recommendation from County Administrator: Recommend Approval
ATTACHMENTS:
DescriptionUpload DateType
Exhibit A11/5/2019Backup Material