HomeMy WebLinkAbout1982-09-21; City Council; 7129-2; OFFICIAL REQUEST TO STATE OF CALIFORNIA FOR MORTGAGE REVENUE BOND ALLOCATIONI
I Ci 70 - OF CARLSBAD - AGEND,, e BILL
4 I
AB# 71 2 ?*d
MTG.- 9/21/82 ___
DEPl TITLE:
CITY DEPTBI DG&P'I NG
cl~y OFFICIAL REQUEST TO STATE OF CALIFORNIA FOR MORTGAGE REVENUE BOND ALLOCATION
I I
RECOMMENDED ACTION: @fLL$A&)idA"&.&&& fllwy
I City Council submit mortgage revenue bond allocation requeh
to State Mortgage Bond Allocation Committee.
ITEf4 EXPLANATION
The City is actively pursuing the feasibility of utilizing Mortgage Revenue Bonds to assist developers in providing affc housing. Staff has been advised by bond counsel and underwr. that we should request an allocation for this purpose from tl State as soon as possible. As there is a limited funding am( applicants will be considered on a first come, first served I
The State allocates these funds under authority granted in A! Bill #1355 (See Exhibit A). The City has met with developer! assess their interest. As a result of these meetings staff requesting $80 million for the single family program and $15 million for the multi-family program. The City must submit i official request to the Nortgage Sand Allocation Committee.
(Exhibit C)
This action does not incur any obligation on the part of the to use the funds requested. I FISCAL IMPACT:
This request not to exceed $80 million for single family and $15 million for multi-family revenue bond issue. This actio1 not incur any obligation on the part of the City to use the. 7 requested.
a r"
aQ
0 z
<
z ..
2 8 a
0 i
z 3 0
EXHIBITS
A - Synopsis of Assembly Bill #1355
B - Memo to City Manager C - Letter to State of California Mortgage Bond Allocation Cc
0
I
-. e e
n ASSEMBLY BILL NO. 1355
Assembly Bill No. 1355 ("AB 1355") became a state law on December 28, 1979.
major reason for the enactment of AB 13S5 is that the Legislature felt that there exi
within the State a serious shortage of "decent, safe and sanitary housing" which
affordable to many Californians. Following are the salient points of AB 1355:
1. Issuer - A city or county can issue mortgage revenue bonds. Also two or mc
cities in the same county, or a county and one or more cities within such county, or two
more adjacent counties and any'number of cities within those counties may enter into
agreement for the purpose of joining together or cooperating in one issue to finance ho~ mortgages within the boundaries of the participating entities.
2. Income Requirements - Criteria for qualification of homebuyers includes
maximum household income which cannot exceed 120% of the median household incor
where the purchaser will be the first home occupant. The recently enacted SB 12
increases this limit to 150% for the "entitlement" allocation. Where the purchaser is r the first time occupant, half of the funds allocated for home mortgages shall be f
households of median household income; and no less than half of such funds shall be i
households whose income does not exceed 80% of such median household income. T
legislative body of the issuer may, by resolution, increase this income limitation to 90%
median household income if there are insufficent numbers of creditworthy persons whc income does not exceed the 80% figure. For the "entitlement" allocation, the non-fi~
time occupant income limits are 120% and 100/110%.
3. New Construction - No less than 60% of the bond proceeds must be allocated
fund mortgage loans for new construction or substantial rehabilitation (where rehabilit
tion costs equal or exceed 20% of the value of the structure after rehabilitation).
4. Owner Occupancy - Each mortgagor must certify their intention to occupy tl
home a minimum of two years after receiving a home mortgage. There are exceptions
hardship cases as determined by the issuer.
5. Qualified Mortgage Lender - Before issuing a contract with a lending institutk to originate and service home mortgages, the issuer must establish criteria for qualific; tion of lending institutions and give each qualified lending institution within the area 2
opportunity to participate in such a program "on a equitable basis" with other lendir
institutions.
6. Land Use Element - A home financing program authorized pursusant to AB 131
cannot be implemented unless the program complies with the land use element and tk
housing element in the issuer's general plan.
7. Program Administrator - The issuer must appoint a program administrator t
oversee the residential mortgage revenue bond program.
8. Assumptions - A mortgage financed by the program is due and payable upon tk
sale of the home to a purchaser who does not meet the criteria for qualificatio
established above.
9. Mortgage Bond Allocation Committee - AB 1355 bond issues must be reviewed t
this Committee to determine if the .State's credit is subject to an undue risk. 1
determining such an evaluation, the committee considers: (i) the date of the propose
bonds sale; (2) the security of the bonds; and (3) the rating assigned to the issue. A ratin
of "A" or better is presumed not to subject the State's credit to undue risk.
EXHIGIT A -
0 0
q
MORTGAGE SUBSIDY BOND TAX ACT OF 1980
Any single family mortgage revenue bond .sue accomplished in the country ml
adhere to the rules established by the Mortgage Subsidy Bond Tax Act of 1980 (the "Act
The Act was passed by the Congress and signed into law in December, 1980. Followi
are the most important aspects of this legislation:
1. Three Year Requirement - The Act prohibits the financing of residences whc
the mortgagor had a present ownership interest in a principal residence within three ye2
prior to such financing. This restriction is waived if the home being purchased is in
"targeted" area.
2. Owner Occupan'cy - The home being financed with bond proceeds must be t
principal residence and occupied by the mortgagor.
3. Purchase Price - The purchase price of each residence must not exceed 90%
the average area purchase price of homes in the Standard Metropolitan Statistical Ar
("SMSA"). If the home being financed is located in a "targeted" area, the purchase pri
purchase price numbers which are the figures generally utilized in determining t
average area purchase price.
can be 110% of the SMSA average, The Department of Treasury has issued "safe harbc
4. Targeted Areas - A "targeted" area residence is a residence located in either
qualified census tract or an area of chronic economic distress. A "qualified census trac is an area defined by the Bureau of the Census in which at least 70% of the families ha
an income that is 80% or less of the state-wide median family income. An "area
chronic economic distress" is an area designated by the state as an area meeting t
standards for such a designation and approved by the Secretary of the Treasury and t
Secretary of HUD. Items considered include the unemployment rate and age of t
housing stock. California is currently in the process of defining criteria for su
designation.
5. Arbitrage Limit - The "Act" limits the permitted spread between the bonds a
the rate on the mortgage to 1%. It also changed the way this spread was calculated.
the aggregate, these changes have substantially reduced the money available to servic
mortgages and to pay for the cost of issuing the bonds.
6. Assumptions - Anyone assuming the mortgage loan must be able to meet the fir
three criteria listed above, otherwise the loan is due and payable.
7. State Issuance Ceiling - The total par value of single family mortgage reven1
bonds that may be issued in any state equals the greater of $200 million or 9% of tl
average single family mortgage market each of the last three years. The Sta
Legislature passed AB 1618 in the 1981 session which determined the allocation formu
for 1982 and 1983. Accordingly, local issuers are allocated at least 66 2/3% ("local bor
limit") of the State ceiling for each calendar year.
8. Sunset Provision - This law sunsets on December 31, 1983, afterwhich, unle:
legislation is henceforth adopted, mortgage revenue bonds will not be tax-exempt.
3
1) e
1 MORTGAGE REVENUE BONDS PARTICIPANTS IN THE PROGRAM
1. Issuer: The legal entity authorized to issue bonds.
2. City Counsel:
3. Underwriter:
The Counsel which represents the City and assists ir
writing the financing documents.
The organization which structures the financing, par.
ticipates in writing the financing documents and under.
writes (buys) the bonds. The underwriter also write:
the official statement which offers the bonds for sale
to the public.
4. Bond Counsel:
5. Special Tax Counsel:
6. Developer(s)
7. Mortgage Lenders/Servicers:
8. Feasibility Consultant:
9. Trustee:
10. Insurance Company:
11. Rating Agency:
12. Financial Printer:
The Counsel which writes the opinion printed on the
bonds which states that the bonds were issued legall)
and the interest on the bonds is exempt from federa
income tax. The Bond Counsel writes the financiq
documents.
The Counsel which renders the tax opinion stating tha,
the bonds do not violate federal regulations.
The individuals, partnerships or companies which con,
struct and market the homes.
The financial institution which packages the mortgagc loan documents and originates the mortgage loans or
behalf of the City. The institution also services the
loans and verifies that taxes and insurance are paid b)
the homeowner.
The real estate consultant which writes the feasibilit)
study analyzing the marketability of the developments.
The financial institution which handles all the mone)
involved in the financing and holds the mortgage:
originated in the program.
The company which insures the mortgages and provide:
special hazard insurance.
The agency which rates the bonds. The rating affect:
the marketability and therefore, the coupon rate on tht
bonds and the mortgage rate.
The company which prints the bonds and official state-
ment.
2 e 0 EXH1B1T B
MEMORANDUM
DATE : September 15, 1982 TO. Frank Aleshire, City Manager FROM; Marty Orenyak, Director Building an P' Planning
SUBJECT: DEVELOPER WORKSHOPS ON MORTGAGE REVENUE BONG PROGRAM
On September 15, 1982, workshops were held in City Council Chamb to assess developer interest in the multi-family and single-fami Mortgage Revenue Bond programs. A meeting at 1O:OO A.M. was held for those proposing multi-family projects. Another meeting 2:OO P.M. was for those developers proposing single-family proje The following panel presided over the meetings.
PANEL: Steve Hicks: Blyth Eastman Paine Webber-Bond Underwri John Murphy: Stradling, Yocca, Carlson and Rauth- Bon
Vince Biondo: City Attorney
Marty Orenyak: Director Building and Planning Chris Salomone: Community Development Manager
Counsel
As a result of the developer interest and proposals generated by these meetings, and with the concurrence of Bond Counsel and Bon Underwriter representatives, staff is recommending that a reques be made for $80 million for the single-family Mortgage Revenue B Program and $15 million for the multi-family program. This requ will be made to the State Bond Allocation Committee. This reque does not guarantee that the City will receive the allocation. I is the first step in the process.
Staff will continue to meet with the developers, Bond Counsel an Underwriter to further proceed with the program.
M0:al
LhllLDl 1 L 0 a
7 DEVELOPMENTAL 1200 ELM AVEN
SERVICES CARLSBAD, CALIFORP
0 Assistant City Manager Redevel opmen t
(714) 438-5596 438-55s
0 Building Department
(714) 438-5525 citp of Carlerbab
0 Engineering Department
(714) 438-5541
U Housing B Aedevefoprnent Department
3096 Harding St.
(714) 438-5611
0 Planning Department (714) 438-5591
September 21, 1982
State of California Mortgage Bond Allocation Committee Attn: Vern Ashby, Executive Secretary
P.O. Box 1919 Sacramento, CA. 95809
-
Dear Sir:
The City of Carlsbad is actively pursuing the use of Mortgage Rev€ Bonds as a vehicle through which to provide affordable housing. F this purpose we wish to request an allocation not to exceed $80 million for a single family bond issue. This would include our $2 million entitlement plus a $60 million supplementary amount.
This $80 million figure was determined by a survey of developer TIE However, we expect that upon demand of fees the amount may shrink. In that event we will inform you of the adjustment. We estimate a market date of within 60 days of your approval of the allocatior
This request was unanimously approved by the Carlsbad City Council at their meeting of September 2, 1982. If you require any additic information please let us know. I can be reached at (714) 438-55;
Sincerely,
MART Director hQ&i?q$-
Building and Planning
M0:al