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HomeMy WebLinkAboutHA Request (Staff Report)Housing Authority of Kittitas County 107 W. 11th Ave. Ellensburg, WA 98926 July 30, 2019 JUL 3 0 7.019 psi - - _o:d.- County Commissioners of Kittitas County ..::;;; r W Gr• UJUM,> Re: Housing Authority of Kittitas County - Kittitas RAD Affordable Housing Portfolio LLLP Dear County Commissioners: The Housing Authority of the Kittitas County (the "Authority"), a housing authority created under chapter 35.82 of the Revised Code of Washington (the "Housing Authorities Law"), is planning the rehabilitation of the following six apartment complexes: (1) the 20 -unit multifamily rental housing development known as Cahill Manor located at 404 East Patrick Avenue in the City of Kittitas; (2) the nine -unit multifamily rental housing development known as Cherry Lane located at 301 East Cherry Lane in the City of Ellensburg; (3) the five -unit multifamily rental housing development known as Helena Annex located at 2201 North Airport Road in the City of Ellensburg; (4) the 30 -unit multifamily rental housing development known as Mount Stuart Vista located at 1305, 1307, 1309 and 1311 Cora Street, and 704, 705, 706, 707, 708, 709, 710, 711, 712, 713, 714, 715, 716, 717, 719, 801, 802, 803, 804, 805, 806, 807, 808, 809, 810 and 811 Rainier Avenue in the City of Ellensburg; (5) the 16 -unit multifamily rental housing development known as Patrick Place located at 308 East Patrick Avenue in the City of Kittitas; and (6) the 30 -unit multifamily rental housing development known as Trinal Manor located at 107 West 11th Avenue in the City of Ellensburg (collectively, the "Projects"), all located within Kittitas County (the "County"). The renovated Projects will provide approximately 110 units of housing for low income individuals and families in the County. As further described below, the Authority is requesting your approval of the issuance of tax-exempt qualified private activity obligations (the "Obligations") to finance a portion of the costs of acquiring and rehabilitating the Projects. Although the County's approval is required for the issuance of the Obligations, it does not create or imply any responsibility on the part of the County to issue the Obligations, to pay debt service on the Obligations or to determine whether the Obligations or the Projects are financially feasible. The financing sources for the Projects will include low income housing tax credits, the Obligations, and other loans. In order to qualify for low income housing tax credits, the Projects must be owned by a private entity. Here, ownership of the Projects for federal income tax purposes will be transferred via a long-term lease to Kittitas RAD Affordable Housing Portfolio LLLP, a Washington limited liability limited partnership of which the Authority is the sole general partner (the "Borrower"). The Authority will issue the Obligations as a conduit issuer and use the proceeds of the sale of the Obligations to make a loan or loans to the Borrower to finance the costs of acquiring, rehabilitating and equipping the Projects. PHONE: (509) 962-9006 FAX: (509) 962-3575 EMAIL: Housing@hakittitas.org The Obligations will be issued for the Projects pursuant to a plan of financing within the meaning of applicable Treasury Regulations (the "Plan of Financing") and (a) may consist of a line of credit and/or one or more issues (including refunding issues) of revenue bond anticipation notes to provide interim financing for the Projects and one or more issues (including refunding issues) of long-term revenue bonds or notes to provide permanent financing for the Projects; (b) will be issued in accordance with a schedule such that the first issue of the Obligations for the Projects will be issued no later than one year after the date of the County's approval and any subsequent issue for the Projects will be issued no later than three years after the issue date of the first such issue for the Projects; and (c) will not exceed a maximum aggregate principal amount of $15,435,000. In calculating the maximum aggregate principal amount of the Obligations issued for the Projects pursuant to the Plan of Financing, the principal amount of any issue of Obligations used to currently refund a prior issue of Obligations will be disregarded to the extent that the principal amount of such refunding issue does not exceed the outstanding principal amount of the prior issue. Unlike "governmental" tax-exempt bonds, qualified private activity bonds may finance a facility to be used primarily by a private entity, so long as 95% of the proceeds of the bonds are applied to a qualifying purpose (here, provision of low-income housing) and certain other requirements are met. Among the special requirements applicable to qualified private activity bonds are those contained in Section 147(f) of the Internal Revenue Code (the "Code"). Under these provisions, added by the Tax Equity and Fiscal Responsibility Act and therefore often referred to by the acronym "TEFRA", are notice, hearing and local government approval requirements. These TEFRA requirements are intended to provide opportunities for the public to be made aware of projects to be financed with tax-exempt qualified private activity bonds. Section 147(f) of the Code requires that a qualified private activity bond be approved by (a) the governmental unit that issues the bond, or on behalf of which such bond is issued, and (b) a governmental unit having jurisdiction over the area in which the financed facility is located. A bond may be approved by the "applicable elected representative" of a governmental unit. The County has jurisdiction over the locations of the Projects. Therefore, approval by the County constitutes approval by a governmental unit having jurisdiction over the area in which the financed facilities are located. In addition, as explained below, the Authority's bond counsel has advised us that approval by the County also satisfies the requirement for approval by the governmental unit that issues the bond, in this case, the Authority. Here, the Authority is serving as the issuer of the tax-exempt bond. But, because the members of the Authority's governing body are appointed, rather than elected, the Authority does not have its own "applicable elected representative" for purposes of the TEFRA requirements. The Authority's bond counsel has advised us that, because the County activated the Authority (by resolution adopted by the Board of Commissioners of the County on March 23, 1970) under the Housing Authorities Law and appoints members to the Authority's governing body, the "applicable elected representative" of the County is treated as the "applicable elected representative" of the Authority for TEFRA purposes. Our bond counsel has further advised that the County Board of Commissioners, as the elected legislative body, is an "applicable elected representative" of the County and represents the County for purposes of TEFRA approval. Approval by the County Board of Commissioners satisfies both the "issuer" and "jurisdiction" TEFRA approval requirements. The approval of the applicable elected representative must be made "after a public hearing following reasonable public notice." The Treasury Regulations on this topic provide that notice is presumed reasonable if is published no fewer than seven days before the hearing in a newspaper of general circulation available to residents of that locality. The Authority published a notice of a public hearing with respect to the Projects and the Obligations on July 22, 2019, in The Daily Record, a newspaper of general circulation in the County. A copy of the affidavit of publication of this notice is enclosed. The Treasury Regulations also provide that a public hearing "means a forum providing a reasonable opportunity for interested individuals to express their views, orally or in writing, on the proposed issue of bonds and the location and nature of a proposed facility to be financed." The Authority held a hearing regarding the proposed Obligations and the Projects on July 30, 2019. As shown in the enclosed hearing minutes, no one from the public appeared to present testimony or provided written testimony in advance of the hearing. PHONE: (509) 962-9006 FAX: (509) 962-3575 EMAIL: Housing@hakittitas.org Although approval of the County is required for issuance of tax-exempt qualified private activity bonds to finance the Projects, this approval is intended solely to comply with the requirements of Section 147(f) of the Code and is not intended to imply that the Obligations are issued on behalf of the County, that the County has approved the form of documents relating to the Obligations, that the County has approved underlying credit issues regarding the Projects, or that the County is under any duty or has any responsibility for the payment of the Obligations or for fulfillment of the Authority's or the Borrower's obligations under documents relating to the Projects or Plan of Financing. The Authority respectfully requests that the Kittitas County Board of Commissioners consideration the adoption of the enclosed resolution indicating approval of the issuance of the Obligations pursuant to the Plan of Financing for the Projects. Please do not hesitate to contact me, or our bond counsel (Allison Schwartzman (206) 447-6406) with any questions or if we may be of assistance. Encl. Sincerely, 7K ie I.laggin, Interim Executive Director/Operations Supervisor, I -I using Authority of Kittitas County PHONE: (509) 962-9006 FAX: (509) 962-3575 EMAIL: Housing@hakittitas.org