02/18/1997 - City Council SpecialAGENDA
SPECIAL CITY COUNCIL MEETING
Tuesday
February 18, 1997
5:00 p.m.
Municipal Building Community Room
I. ROLL CALL & ADOPTION OF AGENDA
II. VISITORS TO BE HEARD
III. HRA/SENIOR HOUSING ALTERNATIVES
IV. OTHER BUSINESS
V. ADJOURNMENT
6:10 RECOGNITION OF FORMER
ADVISORY COMMISSION MEMBERS
(City Council Chambers)
MEMO
city of eagan
TO: HONORABLE MAYOR & CITY COUNCILMEMBERS
FROM: CITY ADMINISTRATOR HEDGES
DATE: FEBRUARY 14, 1997
SUBJECT: SPECIAL CITY COUNCIL MEETING/FEBRUARY 18,1997
A Special City Council meeting is scheduled for 5:00 p.m. on Tuesday, February 18 in the
Community Room to discuss Senior Housing alternatives.
HRA/SENIOR HOUSING ALTERNATIVES
At a regular City Council workshop session, there was discussion regarding the construction
of a second independent living facility, similar to Oak Woods of Eagan. The discussion
included location and whether the next building should be constructed for independent or
assisted living. Also under consideration is the method of financing, specifically what level
of financial participation will be made by the City of Eagan.
The HRA has recently acquired a parcel that was tax forfeiture in the Town Centre
development southwest of the Mann Theater complex. There was some discussion by the
City Council as to whether the next senior housing complex should be constructed adjacent
to Oak Woods of Eagan or at the Town Centre site.
Another factor in determining the location of the next senior independent living facility is
whether the City Council feels the independent living and assisted living should be
centralized or decentralized. In other words, Oak Woods of Eagan is considered an
independent living facility. If demand is for another independent living facility, it may be
good policy to locate that facility on the Town Centre site and as the demand for assisted
living increases, this type of senior housing complex could be constructed on each site to
mitigate any social stigma that the independent living is a site in South Eagan while all
assisted living is in Town Centre.
The HRA has indicated that they do not intend to develop assisted living and nursing home
facilities. If the Town Centre concept with assisted living and nursing facilities is desirable,
the HRA will work with the City to request proposals from private organizations
specializing in such housing.
II
For additional information on this item. refer to a memo prepared by Community
Development enclosed on pages �� through ,2a. The concept plan for Town Centre
is enclosed on page .2—/.
DIRECTION TO BE CONSIDERED:
To provide direction to the HRA and Community Development staff regarding location for
the next senior housing building and how the City should address private groups that are
looking to build assisted housing. (This is not a formal action; any future plans for the
senior housing project will need to be presented at a regular City Council meeting.
especially the Town Centre site that will require platting. etc.)
OTHER BUSINESS
There are no items for Other Business at this time.
RECOGNITION OF FORMER ADVISORY COMMISSION MEMBERS
As a reminder. there will be an informal coffee and cookies at approximately 6:15 p.m. in
the Council Chambers to mingle with any former ads ison commission members who will
be formally recognized with�a certificate at the beginning of the regular City Council
meeting.
/S/ Thomas L. Hedges
Cite Administrator
MEMO
TO: Thomas Hedges, City Administrator
FROM: Lisa Freese, Senior Planner
DATE: February 14, 1997
SUBJECT: Senior Housing -Phase II
Feasibility of Town Centre Site
TOWN CENTRE CONCEPT
At the City Council's direction, the Community Development Department has :been working with the Dakota
County Housing and Redevelopment Authority staff to examine the Town Centre site recently acquired by the
HRA through tax forfeiture. The HRA's architect developed a concept plan for a senior housing campus with
three different housing types: 130 units of independent living developed in two phases, 65 units of assisted
living, and a 60 bed nursing facility. The concept plan assumes that all four buildings would be three stories
high. The elevations will have a residential character in an effort to fit in with the single family neighborhood
to the south. Overall the density for the development is 13.7 units/beds per acre. Its impact, however, is
anticipated to be less than a typical townhome or apartment development at a similar density because of
smaller unit sizes and parking needs. The building coverage is 13 percent of the site and the total impervious
surface comprises approximately 31 percent of the site. The building coverage is well below the 20 percent
maximum allowed in the LB zoning district.
Mark Ulfers has indicated that the HRA is not likely to the develop the assisted living and nursing home
element of the campus, but would work with the City to request proposals from private organizations that
specialized in such housing.
SITE ISSUES
The site is designated Central Area in the Comprehensive Plan. Land use encouraged in the Central Area
Plan for this quadrant includes office, retail and medium to high density residential. The property is zoned
Planned Development, Limited Business (LB). Nursing homes and senior housing are conditional uses in the
LB zoning district.
Because O'Leary Lake extends onto the site in the southeast comer, the shoreline regulations apply to the
development of this site. O'Leary Lake is a general development lake. The objective of the shoreland
regulations are to protect water quality, preserve natural buffers around the protected water body and to
preserve views from the lake. Preliminary site analysis provided by the architect shows that storm water can
be directed to the stormwater pond along Denmark Avenue which ultimately drains into Lemay Lake and a
natural buffer area around the water edge can be accommodated by the site design. The Shoreland
ordinance regulates density, building height and impervious surface around lakes. The City is currently
consulting with the Department of Natural Resources staff to determine how the ordinance should be applied
to this development, especially with regard to density.
PROJECT COST DIFFERENTIAL BETWEEN EACH SITE
The preliminary analysis of the Town Centre site has not has not revealed any extraordinary differences that
would result in a significant cost differential when compared to the Oak Woods site. There are some
uncollected assessments and development fees that the City will need to decided whether or not to recoup
as a part of this project.
Park and trail dedication were paid at a commercial rate on this site when it was initially platted as an outlot.
The residential park dedication fee is higher. The City's normal policy would be to require the developer to
pay the difference between the residential and commercial rate. Using the 1997 fee schedule, the extra park
dedication for the entire parcel would be $130.500 and if prorated for phase 1 the additional park dedication
would be $34,600. It would be helpful if the Council provides staff direction regarding what criteria would be
necessary to consider waiving the extra park dedication. If the Council feels it is not appropriate to waive the
park dedication should a different park dedication rate should be established for senior housing and/or
nursing facilities?
Approximately $295.125 in assessments have been written off through the tax forfeiture process. The HRA
has indicated that they usually try to work with the City to recoup those assessments through the project cost.
The scenarios prepared by the HRA compare the rents and additional equity requirements necessary to
cover phase I share of the park dedication costs and assessment recovery.
It should be noted that another $89,664 of uncollected city tax revenue has also be written off on this
property. The HRA is not legally obligated to pay these taxes. But the City Council may wish to provide the
HRA direction regarding this uncollected liability if the HRA sells a portion of the site to a private developer in
the future.
COMPARISION OF SITES
The following table is a generalized comparison of location and cost factors between the two sites
Oak Woods Town Centre
Location Factors
Close to Retail/Restaurants
X X
Close to Medical Offices
X
Close to Theater
X
Close to Park
X X
Cost Factors
Building Costs Equal
Site Construction Contingency Higher
Legal/Survey/Title/Real Estate Fees
Assessments
Park Dedication
Shoreline Limitations
X X
X ($75,000-5% rather than 3%)
X ($45,000)
X($74,000)
X($30.600)
X(Still investigating implications)
The HRA staff prepared revised pro formas for the 65 unit independent living project at Oak Woods and at
Town Centre. The general assumptions used are detailed in the HRA narrative prepared in December and is
included as an attachment to this memo. The equity available for the project includes the $761,000 of CDBG
funds that the HRA has allowed the City to swap to HOME funds and $98,608 of HRA 1991 issuance funds
remaining. Additional or revised assumptions used in these pro formas include:
e $59,000 per unit construction cost
e 5% construction contingency for Town Centre site to accommodate unexpected costs
e 3% construction contingency for Oak Woods
e Additional administrative, legal, surveying/engineering fees and closing costs for Town Centre
e City backed General Obligation Bond Financing
e Rents will be higher than Phase I at Oak Woods at either site
Y
The table below summarizes the rent and additional equity requirements for the various scenarios for both
sites.
OAK WOODS PHASE II
G.O. BACKING -fees waived
AVERAGE RENTS
ADD'L EQUITY REQUIRED
$475 / $575
$720.000
G.O. BACKING -fees included
AVERAGE RENTS ADD'L EQUITY REQUIRED
$485/$585 $710,000
TOWN CENTRE SITE
G.O. BACKING -City fees & Assessments waived
AVERAGE RENTS ADD'L EQUITY REQUIRED
$475/$575 $82000
G.O. BACKING -Assessments Waived, Citi- fees included
AVERAGE RENTS
:ADD'L EQUITY REQUIRED
$485/$585
$860.000
G.O. BACKING - City fees Waived, Assessments included
AVERAGE RENTS ADD'L EQUITY REQUIRED
$480/$580 $860,000
G.O. BACKING - Including City fees and Assessments
AVERAGE RENTS
ADD'L EQUITY .REQUIRED
$485/$585
S9310.000
s
REQUESTED DIRECTION
In order to continuing planning for phase II of the project, staff is asking the City Council to provide direction
on which site to proceed with, timing of project, whether to waive fees and what equity sources to consider. If
the Council wishes to proceed with the Town Centre site. staff is also requests direction regarding the site
concept, assessments and park dedication. Mark Ulfers the HRA Executive Director will be present at the
City Council workshop
X�
Lisa J. Freese, Senior Planner
Attachments: Pro formas prepared by the HRA
Minutes from December 16, 1996 City Council Workshop
Staff memo from December Workshop
HRA Narrative from December Workshop
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MINUTES OF A SPECIAL MEETING OF THE
iEAGAN CITY COUNCIL
EAGAN, MINNESOTA
December 16, 1996
A special meeting of the Eagan City Council was held on Monday, December 16, 1996 at
5:30 p.m., at the Eagan Municipal Center Building. Present were Mayor Egan and City Councilmembers
Awada, Hunter, Masin and Wachter. Also present were Assistant to the City Administrator Duffy, Chief of
Police Geagan, Director of Finance VanOverbeke, Senior Planner Freese and City Administrator Hedges.
VISITORS TO BE HEARD
Mayor Egan asked if there were any visitors to be heard. There was no one present.
EXECUTIVE SESSION
Mayor Egan acknowledged an executive session for the purpose of discussing union
negotiations that are pending with the police dispatchers.
CDBG FUNDING
Senior Planner Freese discussed the status of the CDBG funding and provided various
alternatives as to how the dollars are to be allocated for 1997. She stated that the total CDBG funding
level estimated for 1997 is $239,564. Mayor Egan asked whether this amount includes the ALOHA
funding approved in the City's livable communities grant program. Senior Planner Freese stated that the
ALOHA amount for 1997 is $46,554. She further stated that the total available funding for CDBG including
reallocation of previous unused funds is $289,564 of which $150,000 is proposed for senior housing,
$129,084 of which is proposed for housing rehabilitation, and $10,500 for the Wescott Square Junior
Program.
Mr. Louis Besser, president of OWABOPTE Industries, appeared before the City Council
and presented a request for $125,000 of CDBG funds for the construction of their facility. He stated that
OWABOPTE is a non-profit organization in Eagan providing employment programs, vocational services
and training to persons with developmental disabilities, mental illness, traumatic brain injuries and other
challenges. He stated that their plans are to vacate and sell a building in Lakeville and vacate leased
space in Eagan and consolidate their operation into a new facility in the Eagandale Corporate Center.
Mayor Egan asked whether people in the program are using public transit and, more specifically, about
the reverse commute from core cities. Mr. Besser stated that there are several persons that are involved
in the reverse commute and, further, would like more people to use the public transit offered by the MVTA.
Mayor Egan asked if OWABOPTE meets the eligibility criteria for CDBG funding. Mark Ulfers, executive
director, stated that the patients do meet the 80% test median income or within a neighborhood that meets
the income level. He further stated that persons who are involved in the OWAPOBTE program do meet
the criteria. City Councilmember Hunter asked how many people are employed with OWAPOBTE. Mr.
Besser stated that OWABOPTE helps more than 230 individuals on an annual basis that experience daily
challenges to independence and employment. City Councilmember Masin asked whether service
organizations are providing funding to OWABOPTE. Mr. Besser stated that the Lion's Club has been very
generous to OWABOPTE. City Councilmember Wachter asked what percentage of OWABOPTE'S
business is related to transportation. The amount is approximately 25%. Mr. Besser further stated that
programs are crowded, the numbers are growing and space needs are critical.
City Councilmember Hunter stated that in his opinion the capital building request by
OWABOPTE meets the CDBG criteria by benefiting low and moderate income levels which also helps
Special Eagan City Council Minutes
December 16, 1996/Page Two
people who are working and living in the community. He proposed that the City consider a $52,000
allocation from the CDBG annual appropriation to help defray capital costs for OWABOPTE. City
Councilmember Hunter stated that his calculation was based on the fact that 31 of the 230 live in the City
of Eagan. In other words, 13% will be directly benefited by the expansion proposed by OWAPOBTE. He
further stated that the $52,000 appropriation was calculated by a multiplier of the 13% Eagan benefit times
the $400,000 capital needs which equals an Eagan share of $52,000. City Councilmember Awada asked
whether a funding appropriation to OWABOPTE is a priority and, if so, what program will be reduced by
the $52,000. Mayor Egan stated that it is his opinion that the City should provide funding toward the
OWABOPTE capital drive as presented by City Councilmember Hunter. City Councilmember Hunter
stated that it is his suggestion that the housing rehab proposal be adjusted from $129,084 to $77,084.
City Councilmember Awada stated that it is a concern of hers to allocate money to a non-profit
organization, however, stated she would support this request but is concerned about future precedence.
Mayor Egan stated that this is a one-time capital decision and would not look at the funding as any future
precedence Mr. Besser thanked the City Council for their support.
Mayor Egan stated that the allocation for CDBG, as modified by the City Council, will be
presented for modification at the January 7, 1997 City Council meeting.
PHASE 11 SENIOR HOUSING PROJECT
City Administrator Hedges stated that under the Community Development Block Grant
Funding allocations in recent years, the City has set aside funds for the second phase of its senior
housing facilities. He further stated that the Oakwoods facility has a waiting list representing over three
times the number of units available and demand for senior housing within Dakota County and the City of
Eagan is expected to triple in the next three years. Senior Planner Freese stated that there are three
alternatives the City staff and Dakota County HRA have discussed regarding alternatives to provide
additional senior housing facilities within the City. She stated that those alternatives include 1) construct a
second senior housing facility in 1997 with rent levels and equity participation to be determined by the City
Council, 2) delay the construction of a second Eagan facility in order to coordinate with the second phase
of the Dakota County Senior Housing Program or 3) construct the second facility in 1997 with City equity
and the third facility as part of the County's second phase of its senior housing program. City
Councilmember Awada asked how rental rates are determined. Mark Ulfers, executive director of the
HRA stated that the rental costs are based on 30% of a person's income between an average of a low
$270 and a high $550 per month. City Councilmembers discussed excitement about both sites stating
that shopping and transportation is excellent in both locations. Mr. Ulfers stated that the County is also
giving consideration to a senior housing facility that would include assisted living units.
Mr. Ulfers reviewed options for financing a second senior housing complex, stating that
one option is to finance the addition through the HRA's common bond fund financing program and a
second financing option is for the City of Eagan to pledge its general obligation authority as additional
security for the bonds issued by the HRA. City Councilmembers discussed merits of various financing
options stating that they would give consideration to the financing options presented by the HRA. City
Councilmember Wachter stated that he is behind the project and would like to see the HRA proceed
ahead and review the finance and details at a later time.
City Administrator Hedges proposed that the assisted care facilities be distributed
between both sites as one consideration. Mayor Egan stated that if the City pledges the full faith and
credit of GO Bonds. it would seem that there could be no change of use without City Council action. Mr.
Ulfers concurred. City Councilmember Hunter asked whether there was any concern in acquiring a
favorable bond rating. Director of Finance VanOverbeke stated that there should be no problem with
either Standard and Poors or Moody's given the makeup of this issue.
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Special Eagan City Council Minutes
December 16, 1996/Page Three
Mayor Egan summarized the proposed senior housing by proposing that the HRA should
be directed in collaboration with City staff to look at a 65 unit building, a feasibility report should be
prepared for reviewing the pros and cons of both sites and, further, that the City and County should
consider GO lending as an alternative for financing.
OTHER BUSINESS
There being no further business, the meeting was adjoumed at 6:25 p.m.
Dated
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City Clerk
TLH
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_ city of eagan
TO: Thomas Hedges, City Administrator
FROM: Lisa Freese, Senior Planner
DATE: December 11, 1996
SUBJECT: Oak Woods Senior Housing -Phase II
MEMO
BACKGROUND
In 1992 the HRA and the City completed the first phase of Oak Woods senior housing development. This
project is fully occupied. Rents are based on income of the residents. but are not less than $275 for the one
bedroom units and $375 for the two bedroom units. Currently, there are 163 households on the waiting list
for the 1 bedroom units and 148 households on the waiting list for the 2 bedroom units. A recent needs
assessment study findings indicate that the need for independent and assisted living housing for the City of
Eagan's senior population, especially subsidized units will continue to rise through the year 2000.
Since 1992 the City has been setting aside funds for phase II from its CDBG allocation. To date, the HRA
has allowed the swap of $611.000 of CDBG funds to HOME funds for phase II. This year the City has an
opportunity to swap another $150.000 of CDBG funds to HOME funds. The total equity currently in reserve
at the HRA for phase II is $846,207 which includes 93-97 HOME funds and a small portion of funds left from
phase I.
FUNDING OF PHASE I
The phase I funding included approximately a $1 million dollar equity contribution from both the City and the
Dakota County HRA. The County provided its portion of the equity from a property tax levy that is authorized
through state statute. Through this tax levy, the HRA undertook a county wide senior housing construction
program that provided for the construction of ten projects consisting of 40 housing units. The City
contributed $952,000 equity to phase I which allowed the construction of 25 addition units and kept rents at a
very reasonable level.
In 1997, the County HRA will complete its tenth senior housing project in Rosemount . These projects are
financed through the year 2010 and the financing requires a dedicated property tax levy through that date,
Presently, the HRA is considering a request to the County Board for an additional tax levy for more senior
housing development, but to do this it will be necessary for state legislative authorization. If this funding is
pursued, it is not likely to be available for any projects until at least 1998.
PRO FORMA SCENARIOS
In order to help the City assess the feasibility of phase II, the HRA has prepared several pro formas involving
different financing assumptions and equity requirements which are detailed in the attached HRA narrative.
Phase II as proposed consists of 43 one bedroom units and 22 two bedroom units for a total of 65 units.
Based on the financial analysis, staff have identified several factors for discussion with the City Council.
Financing Structure Options The two financing options presented in the pro formas are the HRA
Common Bond Fund and City of Eagan General Obligation (G.O.) authority pledged as security for the
116
bonds. The main advantage of city G.O. backing is a lower interest rate because of the City's higher bond
rating. The city assumes some risk if the income and reserves are not sufficient to cover the debt payments,
but risk appears low given the housing demand projections.
Equity Sources. In addition to the HOME funds currently set aside for phase II, four potential equity sources
could be considered.
1. Eagan's Multi -family Housing Revenue Bond fund. This fund is earmarked for housing related
activities. As of December 1 the fund balance is $860,000.
2. Cinnamon Ridge TIF loan repayment. TIF proceeds were used to secure a loan to the
Cinnamon Ridge apartment owners. The last tax increment year is In 1997 and city's receivable
is currently estimated $1.5 million.
3. Community Investment Fund.
4. Additional HRA Tax Levy. The HRA is examining the possibility of an additional tax levy for
future senior housing development throughout the County.
Rent Levels. The desired rent level dictates how much additional equity is necessary to make the project
feasible. For example, if the Multi Family Housing Fund were used with the HOME fund equity, monthly rents
could be as low a $440 for one bedroom and $550 for two bedroom units, depending on the financing
structure. Generally, for each $10.000 of additional equity invested the rents can be reduced by $1. To
keep rents at the same level as phase I units, an additional $1.9 to $2.1 million equity contribution is
necessary. The HRA staff indicated that they believe that all rent scenarios presented in the pro formas are
marketable.
Waiving City Fees With phase I, the city waived development fees normally collected for construction
projects. To reduce equity requirement, the City may also want to consider waiving fees for phase II of the
project. The Protective Inspection staff calculated fees based on 65 units and a $4.35 million building
valuation using the 1997 rate schedule. Metropolitan SAC charges and state building surcharges cannot be
waived by the City. The project costs can be reduced by $73,500 if the fees identified exhibit A are waived.
Timinra The scheduling of the project clearly depends the desired rent levels and how the City Council
wishes to pursue the equity needs for the project. The HRA has indicated that if the equity requirements for
the desired rent levels can be met, they have the capacity to handle the construction project.
Alternative Site Potential The HRA is attempting to acquire a tax forfeited parcel in the town centre area
west of Denmark Avenue and south of Town Centre Drive in section 14. Based on the County's need
assessment it is very likely that another site will be necessary to meet the projected senior housing demands.
While the HRA is positioned to move forward at the Oak Woods site, they are open to pursuing this new site
for construction of a second housing project first if the City Council desires.
REQUESTED DIRECTION
In order to continuing planning for phase II of the project, staff is asking the City Council to provide initial
policy direction on financing structure, equity sources, rent levels, fees, time and site preference. Mark Ulfers
the HRA Executive Director will be present at the City Council workshop on December 16.
Lisa J. Freese, Senior Planner
Attachments: HRA Narrative & Pro Formas for Phase II
Excerpts from Dakota County Senior Housing Needs Assessment
1997 City Fee Projections Phase 11
OAK WOODS ADDITION
PRO FORMA NARRATIVE
In August of 1992, the construction of Oak Woods in Eagan was completed. This 65 -unit
apartment building was designed specifically for elderly residents. It is a three-story
building that was situated on its site to allow for the construction of a second 65 -unit
building. The site is 7.0 acres and located at the intersections of Cliff Road and Cliff
Lake Road. Oak Woods contains 43 one -bedroom units ranging from 689 to 726 square
feet and 22 two-bedroom units ranging from 968 to 1027 square feet.
The amount of rent to be paid by a resident depends upon his or her annual income.
Residents pay, as rent, 30% of their monthly income, but not less than $275 for a one -
bedroom unit and not less than $375 for a two-bedroom unit. Currently. there are 163
households on the waiting list for l bedroom units and 148 households on the waiting list
for 2 bedroom units.
The City of Eagan contributed approximately $952,000 of its funds to the original
project, which allowed the Dakota County HRA to develop 65 units rather than the 40
units originally planned.
• Four pro formas are provided with rents at $336 for 1 bedroom units and $436 for 2
bedroom units. Four similar pro formas are provided with rents at $386 and $486
respectively.
• Two pro formas calculate the development with the City fees waived, as they were
with the original Oak Woods development, and two pro formas include City fees.
The two different City fees scenarios were then calculated with the two different
financing scenarios (Common Bond Fund and City G O Backing), thus producing
four pro formas in all.
• The total cost of this development reflects a per-unit construction cost of $58,000.
This is reflective of rising construction costs found in recent HRA housing
developments.
• HOME funds invested include previous and current years HRA funds equaling
$611,000 to be exchanged for City CDBG funds. 1997 funds equaling $150,000 are
also included and would be a similar exchange with the City.
• An annual debt service coverage of at least 1 ] 5% was used.
• A vacancy rate of 1 % was used.
• An inflation rate of 2% was used.
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Some of the Oak Woods addition would be financed through the issuance of tax exempt
revenue bonds. One option, is to finance the addition through the HRA's Common Bond
Fund Financing Program. The Common Bond Fund is a series of bonds issued that are
secured and payable from the pledged revenues of the projects developed with these
proceeds and the HRA special tax levy. The Common Bond Fund has a BBB+ rating
from Standard and Poor's.
The second financing option, is for the City of Eagan to pledge its general obligation
authority as additional security for the bonds issued by the HRA. This is possible due to
a 1992 change in state law that enabled general jurisdiction governmental units to pledge
r their general obligation as additional security for bonds payable from income or revenues
of the project. The City has a AA- rating from Standard and Poor's.
Using finance option number two, City G O Backing, would reduce the interest rate on
the bonds by over 1 %. By reducing the interest rate on the bonds, the project is able to
acquire more debt through increasing the amount of bonds issued and thus require less
equity be invested. If more debt is not acquired with a lower interest rate and the same
amount of bonds are issued, the savings can be found in reduced rents.
The bonds will be structured to be payable solely from rental income and will have
significant funds in reserves. The project would have a replacement reserve and an
operating reserve. State statute requires debt service coverage equal to 110% of the
principal and interest due on the bonds for each year. The project would maintain 115%
debt service coverage. However, if the City pledges its general obligation authority for
the bond issuance, it would be taking some risk. If at some point in the future, the rental
income and reserves are not sufficient to cover debt payments, the bondholders would
look to the City.
The City has the opportunity to assist the HRA in achieving significant efficiencies and
cost savings in financing the addition to Oak Woods by pledging its general obligation
authority and reducing the interest rate of the bonds. The reduced interest rate would
reduce the rents required or reduce the amount of equity needed.
The amount of equity invested in the development from the City directly affects the rents
necessary. The approximate correlation between rents and City equity is for each
$10,000 invested in the addition, the rents can be reduced by $1. Therefore, if rents are
reduced by $50, an increase in City equity is necessary equaling approximately $500,000.
WAA
The City can also reduce the amount of equity necessary for the development and/or
reduce rents by waiving the City fees that would be charged to the development,
approximately $90,000. The first stage of the Oak Woods development received a
similar waive of City fees.
The following scenarios would achieve rents at the stated amount:
RENTS AT S336 (1 BR) AND $436 (2 BR)
G O Backing (AA-) w! City fees waived $1,880,000-
G O Backing (AA-) w/ City fees included $1,970,000
Common Bond Fund (BBB+) w/ City fees waived $2,040,000
Common Bond Fund (BBB+) w/ City fees included $2,130,000
RENTS AT $386 (1 BR) AND $486 (2 BR)
G O Backing (AA-) w/ City fees waived $1,390,000
G O Backing (AA-) w/ City fees included $1,490,000
Common Bond Fund (BBB -4-) w/ City fees waived $1,600,000
Common Bond Fund (BBB+) w.' City fees included $1,700,000
This scenario requested shows the rents necessary to keep City equity fixed:
CITY EQUITY AT $860,000
Financing > >r Rents Required
G O Backing (AA-) w/ City fees waived $440 (1 BR) & $540 (2 BR)
G O Backing (AA-) w/ City fees included $450 (1 BR) & $550 (2 BR)
Common Bond Fund (BBB+) w/ City fees waived $475 (1 BR) & $575 (2 BR)
Common Bond Fund (BBB+) w/ City fees included $485 (1 BR) & $585 (2 BR)
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