TITLE
Recommendation to receive supporting documentation into the record regarding the Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing;
Adopt resolution approving the reissuance of Multifamily Mortgage Revenue Bonds for Jamboree West Gateway Apartments in an amount not to exceed $13,000,000; and
Authorize City Manager to execute all documents necessary to complete this transaction as indicated in the resolution. (District 1)
DISCUSSION
On November 16, 2004, the City Council authorized the issuance of Multifamily Housing Revenue Bonds (Bonds) in the amount of $11,000,000 to finance the acquisition and construction of the Jamboree West Gateway Apartments (now called Puerto Del Sol Apartments), located at 3rd Street and Golden Avenue (Attachment A). Subsequent to the City Council action, Series 2004B bonds totaling $11,000,000 were issued on December 13, 2004.
On July 12, 2005, the City Council authorized the issuance of additional Multifamily Housing Revenue Bonds in an amount not to exceed $2,500,000 to provide additional financing for the acquisition and construction of the Jamboree West Gateway Apartments (Attachment B). Subsequent to the City Council action, Series 2005A bonds totaling $2,000,000 were issued on November 22,2005.
At the time the bonds were issued, construction was expected to be completed by January 2007. Construction was completed about a year later primarily due to significant changes to the design, including plumbing and HVAC changes that occurred after construction began to mitigate escalating construction costs. Despite these challenges, construction was virtually complete in January 2008 and the Temporary Certificate of Occupancy was issued. Tenant move-in was scheduled for February 2008. However, mold was discovered in 15 of 64 units as a result of water intrusion, and those 15 units are currently vacant while remediation is being completed. The construction loan funded with the proceeds of the Bonds matures on May 1, 2008. Remediation and occupancy of these 15 units will not conclude by this date. It is anticipated that the remediation and repairs will be complete by mid May, and the remaining tenants will move in by the end of May.
As such, the Borrower, Jamboree West Gateway L.P., has requested that the City execute an agreement to modify the Bond documents to allow for additional time to complete the project. The original maturity date of the loan was November 1, 2007 with the option of two three-month extensions. Both extensions were granted. As the final maturity of the loan is May 1, 2008, the Bonds may need to be reissued to extend the loan and ensure compliance with Internal Revenue Service (IRS) tax rules for taxexempt bonds.
The IRS Code requires that the Borrower seek approval from the City Council of the reissuance of bonds benefiting facilities within the City. A Tax and Equity Fiscal Responsibility Act (TEFRA) public hearing notification was published in the PressTelegram on April 4, 2008. The TEFRA hearing will be held on April 21, 2008 at 9:00 a.m. The public hearing, required by Federal tax law regulations, will be conducted by the City Treasurer in the sixth floor conference room at City Hall. On April 22, 2008, the City Treasurer will report the results of the TEFRA hearing.
Before proceeding with the requested modifications to the Bond documents, it is necessary for the City Council to receive documentation of the TEFRA hearing, and adopt the attached Resolution authorizing such modifications and reissuance.
This letter was reviewed by Deputy City Attorney Richard F. Anthony on April 16, 2008, and Budget Management Officer Victoria Bell on April 11, 2008.
TIMING CONSIDERATIONS
City Council action is requested on April 22, 2008 to meet the loan maturity date of May 1, 2008.
FISCAL IMPACT
There is no fiscal impact related to the recommended action. The developer will repay the Bond debt with revenue from project rents.
SUGGESTED ACTION
Approve recommendation.
BODY
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LONG BEACH APPROVING LOAN MODIFICATION AGREEMENT RELATED TO MULTIFAMILY HOUSING REVENUE BONDS FOR JAMBOREE WEST GATEWAY APARTMENTS, AND APPROVING OTHER RELATED ACTIONS
Respectfully Submitted,
Lori Ann Farrell
Director of Financial Management/CFO
Dennis J. Thys
Director of Community Development
NAME |
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PATRICK H. WEST |
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CITY MANAGER |