Item Coversheet

Housing and Redevelopment Authority Board Action Request
19-HCHRA-0050

Item Description:
Preliminary approval to issue one or more tax-exempt multifamily housing revenue bonds for an affordable housing project at 1201 Olson Memorial Hwy, Mpls; authorization to apply for allocation of issuance authority

GRANTING PRELIMINARY APPROVAL TO THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS (OLSON REDEVELOPMENT 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, Community Housing Development Corporation, a Minnesota nonprofit corporation (“CHDC”), 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 $16,500,000, under the provisions of the Housing Act to assist in the financing of the acquisition, reconstruction, and equipping of an existing 92-unit multifamily rental housing development and facilities functionally related and subordinate thereto, located at 1201 Olson Memorial Highway in the City of Minneapolis within Hennepin County (the “County”), for occupancy by persons and families of low and moderate income (the “Project”), to be initially developed and operated by CHDC or an affiliate and to be owned by Olson Redevelopment I Limited Partnership, a Minnesota limited partnership (together with its affiliates or assigns, the “Borrower”); 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 of the HCHRA (the “Board”). 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 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 one or more series of tax-exempt or taxable bonds or notes in an amount not to exceed $16,500,000 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 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 Dorsey & Whitney LLP, as bond counsel to the Issuer (“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 $16,500,000, pursuant to the Allocation Act.

  6. The officials, employees, and agents of the Issuer are hereby authorized to receive money from the Borrower for the payment of the deposit and fee required to be paid to MMB under the Allocation Act in connection with the application for an allocation of bonding authority. The officials, employees, and agents of the Issuer are further authorized to disburse to the Borrower any money returned to the Issuer by MMB in connection with such application.

  7. 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.

  8. 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.

  9. 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 herein, 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.

  10. 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 HCHRA 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, but not more than 30 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.

 

Community Housing Development Corporation (the Developer), submitted an application for housing revenue bond financing to assist in the reconstruction of 92 affordable rental housing units at 1201 Olson Memorial Highway (the Project) in north Minneapolis.

 

The Project is an existing affordable housing development known as “Olson Townhomes” originally built in 1956. The property is located in the historical floodplain of Bassett Creek and is challenged by poor soil conditions which have created structural concerns for the existing buildings on the property. The Developer will build new replacement units on an adjacent vacant site using soil correction and piling methods common in current construction practice to correct for the poor soil conditions. Current residents will then move directly from their current unit to a new unit without being displaced or temporarily relocated. The existing structurally deficient buildings would then be demolished.

 

The Project would replace all 92 existing units on a one-for-one basis. The number of three and four-bedroom units would be increased in order to better meet the needs of current residents of the property. The project has an existing Section 8 contract providing rental assistance for all 92 units. The Developer has committed to retaining the existing Section 8 contract for all 92 units and extending the affordability period for an additional 30 years.

 

All 92 units will be restricted to households at or below 60 percent of area median income (AMI), pursuant to the Low-Income Housing Tax Credit Program, but Section 8 will additionally target and make all 92 units affordable to households at or below 30 percent AMI. The current 60 percent annual income limits, established by the U.S. Department of Housing and Urban Development (HUD) for Hennepin County, range from $42,000 for a one-person household to $60,000 for a four-person household. The 30 percent income limits range from $21,000 for a one-person household to $30,000 for a four-person household.

 

The Project total development cost is expected to be approximately $30 million dollars. The Developer is requesting HCHRA preliminary approval to issue multifamily revenue bonds not to exceed $16,500,000.

 

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, Minnesota Housing Finance Agency, City of Minneapolis, Metropolitan Council, Hennepin County Affordable Housing Incentive Fund, and developer equity.

 

The Project meets the guidelines for conduit financing, as established by Resolution 02-HCHRA-32, and will preserve 92 units of long-term affordable housing. The request is also consistent with previous HCHRA multifamily housing revenue bond actions for the Holmes Greenway and Parkview Apartments 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 $16,500,000 of multifamily housing revenue bonds.

 

Impact/Outcomes: Issuance of multifamily housing revenue bonds will allow the reconstruction of 92 affordable rental housing units with project-based Section 8 rental assistance to ensure affordability for households with extremely low incomes.

ATTACHMENTS:
DescriptionUpload DateType
Exhibit A - Public Hearing Notice11/21/2019Backup Material