Item Description:
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Authorize the issuance and sale of one or more tax-exempt multifamily housing revenue bonds by the Hennepin County Housing and Redevelopment Authority for an affordable housing preservation project at 124 Fourth Street SE in Minneapolis
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Resolution:
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APPROVING THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE BONDS BY THE HENNEPIN COUNTY HOUSING AND REDEVELOPMENT AUTHORITY UNDER MINNESOTA STATUTES, CHAPTER 462C, AS AMENDED, TO FINANCE A MULTIFAMILY HOUSING DEVELOPMENT TO BE LOCATED WITHIN HENNEPIN COUNTY
WHEREAS, under the provisions of Minnesota Statutes, Chapter 462C, as amended (the “Act”), cities are authorized to finance multifamily housing developments through the issuance and sale of revenue obligations payable exclusively from the revenues of the multifamily housing development; and
WHEREAS, among the purposes authorized by the Act, proceeds derived from the sale of revenue obligations issued under the terms of the Act may be applied to make a loan to finance the acquisition and preparation of a site and the construction of a new, or the acquisition and rehabilitation of an existing, multifamily housing development, and in the making of loans to finance multifamily housing developments and the issuance of revenue obligations, the city may exercise any of the powers the Minnesota Housing Finance Agency may exercise under Minnesota Statutes, Chapter 462A, as amended, without limitation under the provisions of Minnesota Statutes, Chapter 475, as amended; and
WHEREAS, for purposes of the Act, the term “city” is defined to include a county housing and redevelopment authority created by special law or authorized by its county to exercise its powers pursuant to Minnesota Statutes, Section 469.004; and
WHEREAS, the Hennepin County Housing and Redevelopment Authority (the “Issuer” or “HRA”) 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, created in Hennepin County (the “County”) pursuant to Minnesota Statutes, Section 383B.77 to exercise all the powers and duties of a housing and redevelopment authority under Minnesota Statutes, Sections 469.001 to 469.047; and
WHEREAS, at the request of Labor Retreat Housing Partners, LP, a Minnesota limited partnership (together with its affiliates or assigns, the “Borrower”), the Issuer is proposing to issue one or more series of multifamily housing revenue bonds or other obligations (the “Bonds”), in an aggregate principal amount not to exceed $10,000,000, and loan the proceeds derived therefrom to the Borrower (the “Loan”) to finance a portion of the cost of acquisition, rehabilitation, construction, and equipping of an approximately 77-unit multifamily rental housing development and facilities functionally related and subordinate thereto located at or about 124 4th Street SE in the City of Minneapolis, Minnesota (collectively, the “Project”); and
WHEREAS, the Borrower has requested that the Issuer issue, sell, and deliver the Bonds, designated as Multifamily Housing Revenue Bonds (Labor Retreat Project), Series 2023, in the aggregate principal amount not to exceed $10,000,000; and
WHEREAS, the Bonds are proposed to be issued as “exempt facility bonds,” the interest on which is not includable in gross income for federal income tax purposes under Sections 103 and 141(e)(1)(A) of the Internal Revenue Code of 1986, as amended (the “Code”); and
WHEREAS, under Section 146 of the Code, the Issuer must receive an allocation of the bonding authority of the State of Minnesota in order to issue multifamily housing revenue obligations, the interest on which is excludable from gross income for federal income tax purposes under Sections 141(e)(1)(A), 142(a)(7), and 142(d) of the Code, and an application for such an allocation must be made pursuant to the requirements of Minnesota Statutes, Chapter 474A (the “Allocation Act”); and
WHEREAS, in accordance with the authority granted under a resolution adopted by the Board of Commissioners of the Issuer (the “HRA Board”) on May 9, 2023, the Issuer and Kennedy & Graven, Chartered (“Bond Counsel”), in cooperation with the Borrower, submitted an application to the State of Minnesota Department of Management & Budget (“MMB”) for an allocation of bonding authority pursuant to Section 146 of the Code and the requirements of the Allocation Act; and
WHEREAS, the Issuer received an allocation of the bonding authority of the State of Minnesota to issue tax-exempt multifamily housing revenue obligations for the Project, in the aggregate amount of $9,600,000, pursuant to Certificate of Allocation Number 456, dated July 3, 2023; and
WHEREAS, on August 1, 2023, the HRA Board held a public hearing, preceded by publication of a notice of public hearing on July 15, 2023 in Finance and Commerce, the official newspaper of the Issuer, and in the Star Tribune, a newspaper of general circulation in the jurisdiction of the Issuer, a date at least fifteen (15) days prior to the public hearing; and
WHEREAS, the notice stated the time and place of the public hearing, that it would be held in person and via telephone and other electronic means and accessible to the residents of the County by calling a toll-free telephone number, a general description of the Project, the address of the Project, the initial operator of the Project, and the maximum stated principal amount of tax-exempt obligations to be issued to finance the Project; and
WHEREAS, in accordance with the Act, a Program for a Multifamily Housing Development (the “Housing Program”) was prepared on behalf of the Issuer with respect to the Project and submitted to Metropolitan Council on or before the day on which notice of the public hearing was published in a newspaper circulating generally in the County; and
WHEREAS, the public hearing was conducted in person and via telephone and other electronic means as allowed under Revenue Procedure 2022-20, issued by the Internal Revenue Service on March 18, 2022; and
WHEREAS, under the provisions of Section 147(f) of the Code and applicable Treasury Regulations, the Bonds will not constitute exempt facility bonds unless the Bonds are approved by the governmental unit which issues the Bonds or on behalf of which the Bonds are issued after a public hearing following reasonable public notice; and
WHEREAS, under the terms of Section 147(f) of the Code, private activity bonds (such as the Bonds) will not be qualified bonds, the interest on which is excludable from gross income for federal income tax purposes, unless the issuance of the bonds has been approved by the applicable elected representative of the governmental unit which issued the bonds or on behalf of which the bonds were issued; and
WHEREAS, the applicable elected representative of a governmental unit means its elected legislative body or its chief elected executive office; if a governmental unit has no applicable elected representative then the applicable elected representative of such governmental unit is deemed to be the applicable elected representative of the next higher governmental unit from which the governmental unit derives its authority by: (i) the enactment of a specific law by or under which the governmental unit is created; (ii) otherwise empowering or approving the creation of the governmental unit; or (iii) appointing members to the governing body of the governmental unit; and
WHEREAS, the HRA has no applicable elected representative; the County is the next higher governmental unit from which the HRA derives its authority, and the Board of Commissioners of the County (the “County Board”) is an applicable elected representative of the County.
BE IT RESOLVED, by the Board of Commissioners of Hennepin County, Minnesota the following:
1. County Board Approval of Issuance of the Bonds. As an applicable elected representative of the County and, therefore, the applicable elected representative of the HRA, the County Board hereby approves the issuance of the Bonds by the HRA in an aggregate principal amount not to exceed $9,600,000, or in such greater amount as may hereafter be additionally allocated by MMB to the HRA for this Project, provided the aggregate principal amount of the Bonds shall not exceed $10,000,000.
2. Special, Limited Obligation of the Issuer. The Bonds when, as, and if issued, shall be special, limited obligations of the Issuer, payable solely from the revenues received from the loan agreement between the Issuer and the Borrower, and other property pledged to the payment thereof, and shall not constitute a general or moral obligation of the County or the Issuer. The owners of the Bonds shall never have the right to compel any exercise of the taxing power of the County or the Issuer to pay the outstanding principal of the Bonds, or the interest thereon or to enforce payment thereof against any property of the County or the Issuer. The Bonds shall recite that the Bonds are issued pursuant to the Act, and that the Bonds, including interest and premium, if any, thereon, are payable solely from the revenues and assets pledged to the payment thereof, and the Bonds shall not constitute a debt of the Issuer or the County within the meaning of any constitutional or statutory limitation.
3. Housing Program. The Housing Program was submitted to the Metropolitan Council for its review and comment. All comments received from the Metropolitan Council were presented to this County Board.
4. Documents Furnished to Bond Counsel. The Chair, County Administrator, and other officers of the County are authorized and directed to furnish to Bond Counsel, certified copies of all proceedings and records of the County relating to the HRA, the Project, the Bonds, and the Housing Program, and such other affidavits, certificates, and other documents as may be required by Bond Counsel to show the facts relating to the validity of the Bonds and related documents, as such facts appear from the books and records in the custody and control of such officers or as otherwise known to them; and all such certified copies, certificates, affidavits, and other documents, including any heretofore furnished, shall constitute representations of the County as to the truth of all statements contained therein.
5. Costs. The County Board has adopted this resolution (“Resolution”) in reliance upon the assurances from the Borrower that the Borrower will, upon demand, reimburse the County and the Issuer for costs paid or incurred by the County or the Issuer in connection with this Resolution, the Bonds, the Project, and the Housing Program.
6. Effective Date. This Resolution shall be in full force and effect from and after its passage this 3rd day of October 2023.
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Background:
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.
Section 147(f) of the Internal Revenue Code requires that the issuance of revenue bonds be approved by the applicable elected representative of the HCHRA, which is the Hennepin County Board of Commissioners.
Vitus Development IV, LLC, on behalf of Labor Retreat Housing, L.P., submitted an application for housing revenue bond financing to assist in an affordable housing preservation project at 124 Fourth Street SE (Project) in Minneapolis.
This preservation project contains 77 units set aside for seniors (62 units) and people with disabilities (15 units.) The renovation will include roof and window replacement and electrical system upgrades, plus accessibility improvements and updated finishes in units and in common areas. The project will continue to provide affordable housing to households at or below 60 percent of the area median income (AMI) as determined by the U.S. Department of Housing and Urban Development (HUD). Affordability will be further enhanced by Project-Based Section 8, which allows households to pay no more than 30 percent of their income toward rent. The project will remain affordable for a minimum 40-year period.
The project total development cost is expected to be approximately $19 million. The bonds will 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 4% Low-Income Housing Tax Credits, a first mortgage, and developer-committed resources, including deferred developer fee.
The HCHRA Board of Commissioners authorized preliminary approval for the issuance of bonds on May 9, 2023 (Resolution 23-HCHRA-0018) and held a public hearing on the project on August 1, 2023; and authorized final approval for the issuance of bonds on September 19, 2023 (pending this writing).
Current Request: Approve issuance of multifamily housing revenue bonds by the HCHRA to finance a preservation project at 124 Fourth Street SE in Minneapolis.
Impact/Outcomes: Issuance of multifamily housing revenue bonds will facilitate the preservation of 77 rental housing opportunities, all of which will be affordable to, and reserved for, households at or below 60 percent of AMI, and all of which will have affordability further enhanced by commitments of Project-Based Section 8.
Housing Disparity: This board action request aligns with Hennepin County’s disparity reduction efforts by creating affordable housing opportunities for households with extremely low incomes.
recommendation
Recommendation from County Administrator: Recommend Approval