City of Alexandria, Virginia
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MEMORANDUM
DATE: JUNE 5, 2013
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
FROM: RASHAD M. YOUNG, CITY MANAGER /s/
DOCKET TITLE:
TITLE
Consideration of a Resolution Approving the Alexandria Housing and Redevelopment Housing Authority's (ARHA) Issuance of Revenue Bonds as Interim Financing for Alexandria Housing Development Corporation's (AHDC) Proposed Renovation and Permanent Financing of the Arbelo, Lacy Court and Longview Terrace (Trilogy) Apartments. [ROLL-CALL VOTE]
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ISSUE: Issuance of up to $17,500,000 in conduit revenue bonds by the Alexandria Redevelopment and Housing Authority (ARHA) as short-term bridge financing for AHDC's renovation and refinancing of the Arbelo, Lacy Court and Longview Terrace Apartments.
RECOMMENDATION: That City Council approve the attached resolution regarding ARHA's issuance of up to $17,500,000 in short-term bridge financing revenue bonds to facilitate AHDC's proposed renovation and long-term refinancing of the Arbelo, Lacy Court and Longview Terrace (Trilogy) Apartments.
BACKGROUND: In the prior docket item for this Council meeting, staff presented City Council AHDC's plan for the renovation and permanent financing of the Arbelo, Lacy Court and Longview Terrace (Trilogy) Apartments. In addition to a proposed restructuring of the existing City loans, AHDC will leverage permanent financing through a low-interest FHA/HUD loan as well as private equity through 4% noncompetitive tax credits to pay off the existing $9.5 million first trust mortgage with BB&T and undertake a substantial renovation of the three properties. In order to complete this proposed plan, short-term bridge financing is required.
In order to provide this short-term bridge financing, AHDC has selected ARHA, as a local conduit issuer for the revenue bonds, of up to $17,500,000 as the interim tax exempt funding bridge pending the FHA/ HUD permanent loan. The ARHA bond proceeds will be used to pay off the $9.5M first trust BB&T loan and fund a portion of the planned renovation; approximately $7.5 million in tax credit private equity funds will provide the balance needed for the renovations. ARHA's bonds will be repaid when the permanent FHA/HUD financing is put in place. This will occur once renovation is completed and units are placed in service (made available for leasing), around two years after issuance. In its bond issuer role, ARHA will earn fees but will have no ownership interest in the properties, nor liability for the bonds ARHA's Board of Commissioners approved the proposed bond issuance at its May 28, 2013 meeting, following a public hearing. ARHA will issue the bonds and the underwriter (and therefor the provider of the short term loan funds) will be Wells Fargo Bank with whom AHDC has already negotiated this short-term borrowing.
Pursuant to Section 147(f) of the Internal Revenue Code, the governmental unit having jurisdiction over the issuer of private activity bonds and over the geographic area in which any facility financed with the proceeds of private activity bonds is located must approve the issuance of the bonds. This is the same section of the Internal Revenue Code under which the City's Industrial Development Authority conduit revenue bonds also come to City Council for approval. Because the project being financed is located in the City, City Council is the appropriate body to provide this required approval. The attached Resolution will memorialize Council's endorsement. ARHA has furnished a certificate of the public hearing and a fiscal impact statement as required.
Although the structure is complex, major advantages to this approach include more favorable long term interest rates and transactional efficiency. AHDC can close on the bonds, FHA/HUD loans and tax credits in one settlement (anticipated later this year) and lock in a very low current interest rate on the federally insured permanent loan, while the conversion from construction to permanent financing is automatically phased in when AHDC achieves occupancy and property stabilization milestones after rehabilitation.
FISCAL IMPACT: No City investment is required. The revenue bonds to be issued area limited obligation of ARHA (payable solely out of revenues, receipts and payments specifically pledged therefor). ARHA has no liability for these bonds beyond this limited obligation. As will be stated on the face of the bonds, they do not constitute a general obligation, debt or pledge of the faith and credit of the City. This type of statement by the City is typical of conduit transactions such as those undertaken through the City's Industrial Development Authority for many non-profit organizations in the City.
ATTACHMENTS:
- Resolution Approving the Issuance of Public Activity Bonds by ARHA to Facilitate AHDC's Renovation and Refinancing of the Arbelo, Lacy Court and Longview Terrace (Trilogy) Properties
- Cover letter and supporting materials from ARHA, including Certificate of Public Hearing and Fiscal Impact Statement
STAFF:
Mark Jinks, Deputy City Manager
Mildrilyn Stephens Davis, Director, Office of Housing
Helen S. McIlvaine, Deputy Director, Office of Housing
Laura B. Triggs, Chief Financial Officer, Finance
Christopher Spera, Deputy City Attorney, City Attorney's Office
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