HomeMy WebLinkAbout2003-05-20; City Council; 17176; Mulit-Family Housing Revenue BondsCITY OF CARLSBAD - AGENDA BILL 7
AB# 17,176
MTG. 5/20/02
DEPT. WRED
- TITLE: AUTHORIZATION TO SELL, ISSUE AND DELIVER
NOT TO EXCEED $8,107,000 FOR THE CONSTRUCTION OF THE
CALAVERA HILLS AFFORDABLE APARTMENT PROJECT AND
APPROVAL OF RELATED DOCUMENTS
DEPT. HD.
CITY ATTY.
CITY MGR.
MULTI-FAMILY HOUSING REVENUE BONDS IN AN AMOUNT
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RECOMMENDED ACTION:
That the City Council ADOPT Resolution No. AUTHORIZING the sale, issuance and delivery of
multi-family housing revenue bonds in an amount not to exceed $8,107,000 for the construction of the
Calavera Hills- Mariposa Affordable Apartment Project within the City of Carlsbad and APPROVING the
related Financing Agreements, Regulatory Agreement, Indentures of Trust, Bond Purchase Agreement,
and other related documents.
2003-130
ITEM EXPLANATION
Proiect Description
The Mariposa Apartments are a 106-unit development located on the west side of the future extension of
College Boulevard, approximately ‘N mile south of Carlsbad Village Drive, in what is known as Village Y of
the Calavera Hills Master Plan Phase II. The project is being developed by Chelsea Investment
Corporation of Solana Beach, and will satisfy the affordable housing requirement for the Calavera Hills
Phase II Master Plan. The project includes one, two and three bedroom units. Of the 106 units, 10 units will
be affordable to households earning 20% of the State Median Income (SMI) and 22 units at levels
affordable to households earning 30% of SMI (SMI is approximately 1 ?LO higher than the San Diego County
Area Median Income). The remainder of the project, 74 units, will be affordable to household earning 60%
of the San Diego County Area Median Income.
Financial Assistance
On September 10, 2002, the City Council approved the Site Development Plan for the development of the
affordable apartments. On October 15, 2002, the City Council took several actions related to the financing
of the project. First, the City Council approved a loan to the developer in the amount of $1,060,000 from
the Housing Trust Fund. The City Council also adopted a resolution expressing the City’s intent to issue
tax-exempt multi-family revenue bonds in an amount not to exceed $8.5 million to assist in financing the
subject project. Prior to the issuance and sale of the bonds, the City Council must first review and approve
the governing documents. The bond issuing process and the governing documents are discussed in
further detail below.
Bond Issuance
Prior to issuing tax-exempt multi-family revenue bonds, the City must first receive a bond allocation from
the California Debt Limit Allocation Committee (CDLAC). In March 2002, CDLAC granted the City’s
requested $8,107,000 bond allocation. As a condition of the bond allocation, CDLAC requires that the
bonds be issued no later than 90 days after the allocation (June 24, 2003). All parties related to the project
have been working diligently to develop the attached bond documents and process them in order to meet
the CDLAC deadline. If the City Council approves the issuance of the bonds and the attached documents,
it is anticipated that the issuance will occur on or before June 24, 2003.
Bond Documents
As stated above, the City Council has adopted an Inducement Resolution that expressed the City’s intent
to issue the bonds for the development of the project. However, before the bonds can be sold, the City
PAGE 2 OF AGENDA BILL NO. 17,176
Council must adopt the attached Issuance Resolution. The Resolution will authorize the actual sale and
issuance of the bonds and approve the related regulatory documents.
The sale of the bonds has been structured as a private placement transaction. The City of Carlsbad will be
the bond issuer, and Provident Bank (or through a subsidiary) will be the ultimate Bond Owner. During the
construction of the project, the bonds will be “credit enhanced” by a letter of credit from Provident Bank.
The letter of credit will guarantee payments of principal and interest in the event of a default of the
borrower during construction. During the operation of the project, the bonds will be “credit enhanced” by a
letter of credit from the Federal National Mortgage Association (Fannie Mae). By virtue of the credit
enhancement, the bonds will receive a AAA rating from Standard & Poor’s Ratings Services.
The proceeds of the bonds will be lent to the Borrower, CIC Calavera, LP, an entity of Chelsea Investment
Corporation. The regulatory agreements for this transaction are attached as Exhibits 2, 3, 4 and 5 for City
Council’s review. The documents have been prepared by the law firm of Jones Hall, the City’s bond
counsel for this transaction. In addition to being reviewed by staff, all of the documents related to this
transaction have been reviewed by the City’s financial advisor, CSG Advisors. The Council is being asked
to approve, in substantially the form presented, the Financing Agreements, Regulatory Agreement,
lndentures of Trust, and Bond Purchase Agreement that are described below:
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Financing Agreements - states the terms and conditions relating to the repayment of the bond
proceeds to the bond owner. There will be one Financing Agreement during the period in which
Provident Bank is providing the credit enhancement (Original Financing Agreement) and a second
Financing Agreement when Fannie Mae is providing the credit enhancement (Fannie Mae Financing
Agreement). Both documents must be executed by the City, the Borrower, and the Trustee (Wells
Fargo Bank, National Association) prior to the sale and issuance of the bonds.
Regulatory Agreement Declaration of Restrictive Covenants - records the terms of affordability and
the operation requirements for the project for the 30-year term of the bonds. The document must be
executed by the City, the Borrower, and the Trustee prior to the sale and issuance of the bonds.
Trust lndentures - grants authority from the City to the Trustee to accept and disburse the bond
proceeds. This document also stipulates the Trustee’s role in insuring that the bonds maintain their tax-
exempt status and provides for the redemption of the bonds. There will be one Trust Indenture during
the period in which Provident Bank is providing the credit enhancement (Original Trust Indenture) and a
second Trust Indenture when Fannie Mae is providing the credit enhancement (Fannie Mae Trust
Indenture). This document must be executed by the City and Trustee prior to the sale and issuance of
the bonds.
Bond Purchase Agreement - states the terms and conditions under which the City will issue the
bonds and the Bond Underwriter (Red Capital Markets, Inc.) will purchase the bonds in this transaction.
This document must be executed by the City, the Borrower and the Bond Owner prior to the sale and
issuance of the Bonds.
addition to the above described Bond Documents, there are additional documents related to the
transaction to which the City must execute. These documents include intercreditor agreements with other
parties lending amounts to the Borrower in connection with the construction of the project, and certain
certificates, agreements or documents necessary to further the purpose hereof. However, these
documents shall not create any obligation or liability of the City other than with respect to the revenues and
assets derived from the proceeds of the Bonds, but do not obligate the City in any manner. These
documents, which have been reviewed by the City Attorney, CSG and the City’s bond counsel, are
attached as Exhibit 6 of this report.
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Subordination of Citv Loan Documents
As stated above, on October 15, 2002, the City Council approved a loan to the developer in the amount of
$1,060,000 from the Housing Trust Fund and the related loan documents. At that time, staff indicated that
the City’s loan would likely be subordinated to the construction and permanent lenders. This is a customary
practice in the commercial lending field, and is consistent with every affordable housing project in which the
City has provided financial assistance. In addition to securing a commercial loan, the developer also
acquired a Multi-family Housing Program loan of approximately $3.7 from the California Department of
Housing and Community Development (HCD). In situations where they provide a larger amount of financial
assistance than the City, HCD would require the City to subordinate to their loan. Thus, the City would only
receive loan payments if funds were available after the commercial and HCD loans. However, after staff’s
negotiations, HCD has agreed to divide the project revenues proportionately to the amount of each
agency’s loan amount.
ENVIRONMENTAL REVIEW
A Negative Declaration was approved by the City Council for the Site Development Plan (SDP 01-05) on
September 10, 2002. No further environmental review is required as part of the approval of the subject
financial assistance or the bond issuance.
FISCAL IMPACT
The sale of the bonds and the assumption of the obligations by CIC Calavera, LP, does not impose a fiscal
obligation on the City of Carlsbad. The City is not obligated in any way to repay the bonds. With respect to
City staff costs, the applicant has made an initial deposit of $20,000 to cover staff time, the costs of the
City’s financial advisor and bond counsel. If the City’s costs exceed the amount of the deposit, the
remainder of the costs will be repaid from the bond proceeds. In addition, the City will receive an annual
fee equal to one eighth of one percent (.125%) of the total bond issuance ($10,133) for the 30-year term of
the bond to recover staff costs associated with project monitoring. Therefore, there will be no fiscal impact
to the City resulting from the issuance of the bonds.
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City Council Resolution No. 2003-130 , authorizing the issuance of Multi-Family Housing Revenue
Bonds and the loan of the proceeds thereof, for the Calavera Hills - Mariposa Affordable Apartment
Project and approving other related documents and actions.
Financing Agreements
Regulatory Agreement and Declaration of Restrictive Covenants
Indentures of Trust
Bond Purchase Agreement
Financing Documents
Vicinity Map
**NOTE: Exhibits 2-7 are on file in the Office of the City Clerk**
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CITY COUNCIL RESOLUTION NO. 2003-130
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD AUTHORIZING THE ISSUANCE OF
MULTIFAMILY HOUSING REVENUE BONDS AND THE
LOAN OF THE PROCEEDS THEREOF FOR THE
FINANCING OF THE MARIPOSA APARTMENTS AND
APPROVING OTHER RELATED DOCUMENTS AND
ACTIONS
APPLICANT: CHELSEA INVESTMENT CORPORATION
CASE NO: SDP 01-05
WHEREAS, Chapter 7 of Part 5 of Division 31 (commencing with Section 52075) of the
Health and Safety Code of the State of California (the "Act") authorizes cities to incur
indebtedness for the purpose of financing the acquisition and construction of multifamily rental
housing facilities;
WHEREAS, the City Council of the City of Carlsbad (the "City") hereby finds and
declares that it is necessary, essential and a public purpose for the City to engage in a program
(the "Program") of issuing revenue bonds to finance the acquisition and construction of
multifamily rental housing, and has determined to borrow money for such purpose by the
issuance of revenue bonds as authorized by the Act;
WHEREAS, the City Council hereby finds and declares that this resolution is being
adopted pursuant to the powers granted by the Act;
WHEREAS, CIC Calavera, L.P., a California limited partnership (the "Borrower"), has
requested that the City issue and sell the Bonds (hereinafter defined) for the purpose of financing
.he acquisition and construction of a multifamily rental housing development to be known as the
Mariposa Apartments (the "Project"); and
WHEREAS, all conditions, things and acts required to exist, to have happened and to
lave been performed precedent to and in the issuance of the Bonds and the implementation of the
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CC Resolution No. 2003-130
Page 2
program as contemplated by this resolution and the documents referred to herein exist, have
happened and have been performed in due time, form and manner as required by the laws of the
State of California, including the Act.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF CARLSBAD THAT:
1. The City Council hereby finds and declares that the above recitals are true and correct.
2. Pursuant to the Act and the Indenture (hereinafter defined), revenue bonds of the City,
designated as “City of Carlsbad Multifamily Housing Revenue Bonds (Mariposa Apartments)
2003 Series A” and designated as ”City of Carlsbad Multifamily Housing Revenue Bonds
(Mariposa Apartments) 2003 Series B” in a combined aggregate principal amount not to exceed
$8,107,000 (the “Bonds”) are hereby authorized to be issued. The Bonds shall be executed by the
manual or facsimile signature of the Mayor, City Manager or Finance Director (the “Designated
Officers”) and attested by the manual or facsimile signature of the City Clerk, in the form set
forth in and otherwise in accordance with the Indenture (as hereinafter defined).
3.
andor among the City and the institution’s named therein, in the forms on the file with the City
Clerk, are hereby approved:
The following documents with respect to the Bonds (the “Bond Documents”) between
(a) the trust indenture with respect to the Bonds while credit enhanced by
Provident Bank (the “Original Indenture”) between the City and Wells Fargo Bank,
National Association (the “Trustee”);
(b) the financing agreement with respect to the Bonds while credit enhanced
by Provident Bank (the “Original Financing Agreement”) among the City, the Trustee and
the Borrower;
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CC Resolution No. 2003-130
Page 3
(c) the trust indenture with respect to the Bonds while credit enhanced by
Fannie Mae (the “Fannie Mae Indenture”) between the City and the Trustee;
(d) the financing agreement with respect to the Bonds while credit enhanced
by the Fannie Mae (the “Fannie Mae Financing Agreement”) among the City, the Trustee
and the Borrower;
(e) the regulatory ’ agreement declaration of restrictive covenants (the
“Regulatory Agreement”) among the City, the Trustee and the Borrower; and
(f) the bond purchase agreement (the “Purchase Contract”) among the City,
the Borrower and Red Capital Markets, Inc.
The Designated Officers, or their designee, is hereby authorized and directed, for and in
the name and on behalf of the City, to execute and deliver the Bond Documents, and the City
Clerk, or its designee, is hereby authorized and directed to attest the Designated Officer’s (or its
designee’s) signature, if required, in said forms with such additions thereto or changes therein as
are recommended or approved by the Designated Officers upon consultation with bond counsel
and the City Attorney, including such additions or changes as are necessary or advisable in
accordance with Section 6 hereof, the approval of such additions or changes to be conclusively
2videnced by the execution and delivery by the City of the Bond Documents.
The date, maturity dates, interest rate or rates, interest payment dates, denominations,
Form, registration privileges, manner of execution, place of payment, terms of redemption and
ither terms of the Bonds shall be as provided in the Indenture as finally executed.
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3tatement”), in substantially the form on file with the City Clerk, is hereby approved. The
A preliminary official statement relating to the Bonds (the “Preliminary Official
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CC Resolution No. 2003-130
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Designated Officers, or their designee, is hereby authorized, for and in the name and on behalf of
the Authority, to bring to final form a Preliminary Official Statement (the “Official Statement”)
upon sale of the Bonds and to execute the Official Statement in said form, with such additions
thereto or changes therein as are recommended or approved by such officers upon consultation
with bond counsel to the Authority, the approval of such additions or changes to be conclusively
evidenced by the execution and delivery by the Authority of the Official Statement. The
Underwriter is hereby authorized to distribute copies of the Preliminary Official Statement to
persons who may be interested in the purchase of the Bonds and are directed to deliver copies of
the Official Statement to all actual purchasers of the Bonds.
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r-ustee is hereby requested and directed to authenticate the Bonds by executing the Trustee‘s
zertificate of authentication and registration appearing thereon, and to deliver the Bonds, when
duly executed and authenticated, to the purchasers thereof in accordance with written instructions
5xecuted on behalf of the City by the Designated Officers, or their designee, which instructions
such officer (or their designee) is hereby authorized and directed, for and in the name and on
oehalf of the City, to execute and deliver to the Trustee. Such instructions shall provide for the
ielivery of the Bonds in accordance with the Purchase Contract, upon payment of the applicable
purchase price therefore.
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xtablishment of the Program and the sale and issuance of the Bonds are hereby approved,
The Bonds, when executed, shall be delivered to the Trustee for authentication. The
All actions heretofore taken by the officers and agents of the City with respect to the
:onfirmed and ratified, and the proper officers of the City, including the Designated Officers, or
:heir designees, are hereby authorized and directed, for and in the name and on behalf of the City,
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CC Resolution No. 2003-130
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to do any and all things and take any and all actions and execute and deliver any and all
certificates, agreements and other documents which they, or any of them, may deem necessary or
advisable in order to consummate the lawful issuance and delivery of the Bonds in accordance
with this Resolution and resolutions heretofore adopted by the City in order to carry out the
Program, including but not limited to those certificates, agreements and other documents
described in the Original Indenture, the Original Financing Agreement, the Fannie Mae Indenture,
the Fannie Mae Financing Agreement, the Regulatory Agreement, the Purchase Contract and the
other documents herein approved, including, but not limited to any intercreditor agreements with
other parties lending amounts to the Borrower in connection with the acquisition and construction
of the Project, and any certificates, agreements or documents as may be necessary to further the
purpose hereof, but which shall not create any obligation or liability of the City other than with
respect to the revenues and assets derived from the proceeds of the Bonds.
7. This Resolution shall take effect immediately upon its adoption.
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PASSED, APPROVED, AND ADOPTED at a regular meeting of the City
2p- dayof Mav Council of the City of Carlsbad, California, held on the
2003, by the following vote, to wit:
AYES: Council Members Lewis, Hall, Packard
NOES: None
ABSENT: Council Me
ABSTAIN: None
-v - CLAUDE A. LEWIS, Mayor
ATTEST:
v LORRAINE M. WOOD, City Clerk
(SEAL)
CC Resolution No. 2003-130
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