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HomeMy WebLinkAbout2003-R-15Ju1-16-~3 WHEREAS, the City of Jeffersonvill¢, Indiana (thc "Issuer") is anthorizcd by Indiana Code 36-7-11.9 and 36-%12, as supplemented and amended (collectively, the "Act"), to issue revenue bonds for the financing of economic development facilities, the funds from said financing to be used by a developer for the acquisition, conStniction, installation and equipping of said facilities; and WI-IEKEAS, The Sterling Group (and/or an affiliated limited partnership to be established) (the "Applicant"), has requested that the Issuer g/ye preliminary approval m the issuance of economic development revenue bonds by the issuer, the proceeds of which will be loaned tO the Applicant m finance the costs of certain ee0nomic development facilities consisting of the acquisition, conslxucfion, installation and equipping of an approximately 176-uuit multi- family apartment development consisting of approximately eleven two-story buildings with one, two, three and four bedroom apartments and a clubhouse with a gathering area, formal living room, common laundry, outside patio/entertainment area, fitness and workout facility and other space, together with certain other related facilities and equipment, located in the northern region of the Issuer (either at State Koad 62 immediately south of Ashley Drive or on Armstrong Koad) (the "l'roject"); WHEREAS, the Applicant has proposed that the Issuer issue i~s revanne bond~ under the Act to £menee the acquisition and installatiun o£ the Project under a financing agt~ment whereby the proceed~ of such bond~ would be utilized to acquixe and imtall the Project and the Applicant would make payments sufficient to pay the principal of, premium, if any, and interest on said bondz; and the Applicant has further advised the Issuer that the dgterminafion by the Issuer to aec?pt such a proposal for financing the Projee~ will constitute a substantial inducement to the Applicant to proceed with the Project; and WHEREAS, it ia estimated that within one year after completion of the ?reject, there will be created approximately five (5) permanent jobs with an es~mated total annual payroll (not including benefits) of approxiraately One Hundred Twen~ Thousand Dolla~ ($120,000); and WHF__R.EAS, the creation and r~ention of oppommities for gainful employm~m and busings opportunities to be achieved by ~e acquisition, construction, installation and equipping of the Project will serve a public purpose and be a public benefit to the health and general welfare of the Issu~ and i~s citizens; Jul-16-O; 16:63 From-lO01 T-335 P,O07/O09 NOW THEREFORE, BE IT RESOLVED BY THE COMMON COUNCIL OF THE CITY OF JEFFERSONVILLE, INDIANA, AS FOLLOWS: Section 1. The Common Council finds, determines, mtifias and confirms that the creation and retention of opportunities for gainful employment and the creation of business oppommities to be aehievad by the Project witkin the jurisdiction of the Issuer will serve a public purpose, and will be of benefit to the health and general welfare of the citizens of the Issuer; and that it is in ~he public interest that this Common Council take such action as k lawfully may take to encourage diversification of industry, the creation of business oppommities and the creation of opportunities for gainful employment within the jurisdiction of the Issuer. Section 2. The Common Council further fmds, determ/nes~ ratifies and confirms 'that the issnance and sale of economic development revenue bonds of the Issuer under me Act in an amount not to exceed Twelve Million Dollars ($12,000,000) (a portion of which is expected re bear interest that is excludable from gross income for federal tax purposes) for the Project (the "Bonds") and the loan of the proceeds of the Bonds to the Applicant will serve the public purposes referred to above, in accordance with the Act. Section 3. In order to induce the Applicant to proceed with the Project, the Common Counell hereby finds, determines, ratifies and confumas that: a. It will take or cause to be taken such actions pursuant to the Act as may be reasonably required to implement the aforesaid financing, or as it may deem reasonably appropriate in pursuance thereof; provided that all of the foregoing shall be mutually acceptable to the Issuer and the Applicant; and b. It will adopt such resolutions and ordinances and authorize the execution and delivery of such instruments and the taking of such action as may be reasonably necessary and advisable for the authorization, issuance and sale of the Bonds; provided that all of the foregoing shall be in accordance with applicable law, including without limitation, the requirements of the Act; and c. It will use its best efforts at the request of the Applicant to authorize the issuance of additional bonds for refunding and refinancing the outstanding principal amount of the Bonds, for completion of the Project and for additions to the Project, including the costs of issuance (providing that the financing of such addition or additions to the Project is found to serve a public purpose as defined in the Act at the time of the authorization of such additional bonds), and that the aforementioned purposes comply with the provisions of the Act. Section 4. This Resolution shall be deemed to constitute a declaration of the Common Council's official intent pursuant to U.S. Treasury Regulation § 1.150-2, that all costs of' the Project incurred after the date wltich is sixty (60) days prior to thc adoption of this Resolution, including reimbursement or repayment to the Applicant of moneys expended by the Applicant for planning, engineering, interest paid during construction, underarritiug expenses, attorney and bond counsel fees and other costs of issuance, acquisition, construction and equipping of the project, will be permitted to be included as part of the Project costs to be INIMAN! 650~$?'~? Jul-lG-03 16:64 Frm-1001 T-335 P.008/069 F-663 finmaced out of the loan of the proceeds to the Applicant from tho sale of the Bonds to the extent permitted by the Act and the Imemal Revenue Code of 1986, as mended, a~d the corresponding regulations promulgal~d thereunder. Section 5. This Resolution shall be in fall force and effect upon adoption and compliance with the procedures as required by law. -3- Jul-lG-03 16:64 From-t001 ?-335 P,009/069 F-603 PASSED AND ADOPTED this City of Jeffersonvill¢, Indiana. day of ,2003, by the Common Council of COMMON COUNCIL OF THE CITY OF JEFFERSONVILLE, INDIANA Al I~.ST: Presiding Officer Clark-Treas"er PRESENTED to the Mayor of the City of Jeffersonvillc, Indiana, this __ ., 2003, at : .m- day of CDrk-Trcasurcr APPROVED by mc, the Mayor oft.he City of Seffersonvill¢, Indiana, th. is ~ 2003, at : .m. day of Mayor INIMANI 680557v2 Ju1-16'03 16:62 From-lO01 T-336 P.992/009 F-663 July 16, 2003 VIA. FAX AND EMAIL Robert Waiz, Presidem Jeffersonvill~ CommOn Council CiTy County Building, Room 421 501 Eastl~ort Avenue Jeffersonville, lndi~-~ 47130 Kc: Economic Development Revenue Bond__s Dear President Waiz: As you are probably aware, Dave Dickey, a represemative of The Sterling Group, had an opportunity ~o meet wi~ Mayor Oalligan to discuss The possibility of JetTersonville's involvement in the financing of a proposed multi-family apa~u,em development in Jeffersonville. We have prepared the attached memorandum to lxOvide background infomaation on thc proposed development and the financing thereof t_~ougb the issuance o1' economic development revenue bonds by the City of Jeffersonville, Indiana. We have also included a draft inducement resolution ?or consideration by the Jeff~sonville Common Council. If you would like, we are willing m send a copy of uhis letter to each member of the Jeffersonville Common Council. We hope this is a helpful summary. Of course, we would be happy to answer any additional qaestions or provide additional infonnafion at your request- Please feel free to contact eithe~ Jason Schiesser at (317) 237-1143 or myself at the numbe~ lis:ed above. Thanks again for your assistance. With best wishes. Sincerely, K- Heckaman D, Dickey J. Schiesser Thomas C. Froeble, Jr. Jul-IS-03 16:62 From-lO01 T-335 P,OO3/O09 F-663 MEMORANDUM TO: FROM: DATE: RE: Seffersonville City Officials Thomas C. Frochle, Sr. - Baker & Daniels .Jason M. Schicsser- Baker & Daniels July 16, 200~ EconomiC Development Revenue Bonds Int~oductlon The intent of this memorandum is to provide you wi~h background information relaing to thc proposed multi-q~m~ly apartment development and financing thereof ~hrough the issuance o~' economic development revenue bonds by the City of Jeffersonvilic, Indiana. Development The development includes an approximately l?6-uniT apartment complex on vacant land in northern Jeffersonville (either at State Koad 62 immediately south of Astdey Drive or on Armstror~ Road), which is curranfly zoned R-2 to accommodate multi-family development. The apa, u,,ents are expected to include one-bedroom, two-bedroom, three*bedroom and four- bedroom units, and will also include a variety or' amenities, both in individual units, and as pan of the over~! complex. The project will be developed, consu'ucted, owned and managed by affiliates of The Sterling Croup (a separate limited pannership will be created as an affiliate of The Sterlin~ Group). The Sterling Group is located in Misbawaka, Indiana and hes been in the business of developing, constructing and managing apartment units for over 20 years. The Sterling C~roup ha~ developed and constructed and currently owns and manages over 6,000 apat~ent units in over 55 communities throughout the Midwest. The Sterling Croup has determined that there is an unrnet need for additional apartment units in Sef~ersonville and believes the combination of the high quality product which The Sterling Group will develop, together with an excdlent location, will result in an outstanding apartment development. Proposed Financing The Suxling Group proposes to finance a portion of the costs of construction of the development through dae issuance of tax-exempt bonds by the City of .leffersonville, Indiana. E!.4!!ifl_T..a~. Under federal tax law, certain "exempt" facilities may be financed through the issuance of tax-exempt bonds by governmental units. These "exempt" facilities include certain affordable housing developments where residents meet established income levels. JuI-T~-03 16=5~ F~=m-lO01 T-~S5 P,004/009 F-~53 For thc development in Jeffersonville, 100% of the units will be r~tricted to individuals families with incomes of up to $35,450, which is not more ~]mu sixty percent of ar~a ($effersonville) median income. Federal tax law r~qulres that only governmental entities may issu~ lax exempt bonds. The issuer generally is the governmental entity with jurisdiction over the territory in which thc development is to be located. These bonds are not obligations of the governmental issuer, but are repaid through thc private developer/user of the property. Accordingly, thes~ obligations generally are referred to as "private activity bonds" and are not characterized as "governmental bonds" more traditionally used to finance government infrastructure and paid for from taxes or other governmant funds. Fedexal law does limit the amount of private activity bonds that may be issued by granting to each state private activity bond "volume cap" that is allocated by each state. In Indiana, the volume cap is first allocated among a manber of broad catelgorics, one of which is multi-family housing, The multi-family housing volume cap is allocated by the Indiana Housing Finance Authority tbxough a competitive application process. The current deadline for submission of volume cap applications to the Indiana Housing Finance Authority is August 6, 2003. La order to apply for volume cap, the developer must have received an "inducement resolution" from the local guvcmmcntal issuer. Accordingly, Thc Sterling Group now seeks appi'oval of an inducement resolution from the Jefrersonville Common Council in order to meet thc August 6, 2003 deadline. Indiana Law. Under Indiana law, in particular lC 36-7-11.9 and lC 36-7-12, units of Indiana govemment~ including cities, may issue bonds to finance a variety of facilities, which generally include facilities that may be financed with tax-exempt bonds under federal law. IC 36-7-12 prescribes thc process for the issuance of bonds, including thc adoption of a preliminary "induc~nent" resolution by the fiscal body (in this case, the 3eff~rsonville Common Council), public heating held by economic development cornmission~ final review of financing by the local economic development commission and recommendation to fiscal body, and funnily, adoption of a bond ordinance by the fiscal body. The Sterling Group is currently requesting consideration of au inducement resolution for ptu-poses of making the application for volume cap to the Indiana Housing Finance Authority. In the event thc Indiana Housing Finance Authority awards an allocation of volume cap, The Sterling Group would expect to request the Seffersonville Economic Development Commission to hold a public hearing and adopt an approving resolution as required by statute, and the Seffersonviile Common Council to adopt bond ordinance priOr to the issuance of bonds. Iranact on the CiW. As wc discussed, the bonds do not impose any obligation on .leffersonville, but are rather payable from payments made by thc developer/owner of thc property. IC 36-7-12-25 states that bonds shall be "payable solely from revenues and receipts derived from the financing agreement or from payments made under a guaranty agreement by developer, users, or related persons. The bonds are not in any respect a general obligation of the unit, nor are they payable in any manner from revenues raised by taxation." Thus, 1effersonville acts only as a conduit for purposes of accessing mx-exempt financing. Thc financing agreement -2- INIMAlq I 6g(~3~'2 Ju1-15-03 16:53 From-lO01 T-3;$ P,005/009 F-66~ baween the issuer and The developer/owner typically provides for the developer to pay the ~easonabl¢ costs incurred by the issue~ in coaaection with the issuance o~the boads and includes an indemnification provision that requires thc developer/owner to indemnify the issuer for losses relating to the project or the financil~. Because the economic development bonds are not considered to be an obligation of the City, such bonds do not count against any constitutional or statutory debt limit applicable to thc City. Further, for federal tax purposes, the issuance of economic development bonds does not count against the "bank qualification" limit for purposes of determining whether or not othc-r tax- exempt obligations issued by Seffersonville may be "bank qualified." Consequently, the issuance of economic development revenue bonds should have no impact on the City's ability to issue future debt. Conclusion In summary, the issuance of economic development bonds is a way for Seffersonville to access a federal resource with virtually no cost or downside for the City. The bonds are not obligations of leffersonville, but are payable from the private developer, and do not count against any debt limit applicable to the City. Further the developer will pay the costs incurred by the City and indemnify the City against future loss. The issuance of bonds also provides benefits to the leffersonville. Because the property ii already zoned for multi.family development, the bond financing will allow for the construction of apa~h,ents on this propers/by a first class developer that will create quality housing provided exclusively to individuals and families with low to moderate income. Further, the development will add assessed value to the City's tax base as well as create construction jobs and permanent jobs in the area (without the need for Jeffersonville to provide any other economic development incentives). cc: K. Heckaman D. Dickey -3-