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5. Resolution 5309 - Preliminary Inducement Resolution and Call for PH - Family Multi-Housing Revenue BondsCharles A. Harball Office of City Attorney City Attomey 201 First Avenue East P.O. Box 1997 Kalispell, MT 59903-1.997 TO: .Mayor Pamela B. Kennedy and Kalispell City Council Tel 406.758.7977 Fax 406.758.7979 charbalI @kalispell.com FROM: Charles Harball, City .Attorney James H. Patrick, City :manager SUBJECT: Resolution No. 5300 relating To Issuance Of Revenue Bonds For The Financing of The Acquisition And rehabilitation Of A Multifamily Housing Development Located In The City of Kalispell and Calling For A Public Hearing MEETING DATE. Monday, September 2, 2005 - Regular Council Meeting BACKGROUND.* The City has been requested to issue revenue bonds in the approximate aggregate principal amount not to exceed $4,500,000. The proceeds will be loaned by the City to Glacier State Associates, LP, a Montana limited partnership (the Borrower). Morena Glacier, LLC and the United way, Inc. will be general partners in the Borrower. The Borrower will apply the proceeds derived from the Bonds to the costs of the acquisition, rehabilitation, and equipping of (a) a 01-unit multifamily housing development known as "Glacier Manor" located at 506 15t Avenue west, Kalispell, Montana and (b) a 33-unit multifamily housing development known. as "Treasure state Plaza Apartments" located. at 600 Liberty Street, Kalispell, Fontana (collectively, the "Project.) After the Borrower's acquisition of the Project, the Project will be known as the Glacier state Apartments. Montana law authorizes the City to issue revenue bonds for the purpose of defraying the cost of acquiring or improving any land, building or other improvement, that is suitable for, among other things, multifamily housing. As a condition to the issuance of such revenue bonds, the City must hold a public hearing in accordance with the requirements of the Internal revenue Code and the City Council must also authorize the submission of an application to the Montana Department of Administration for an allocation of bonding authority with respect to the Project and such revenue bonds. An application for an allocation of the bonding authority from the state of Montana must be made by the City to the Department of Administration of the Memorandum for Resolution 53013q August 27, 2008 Page - 2 State pursuant to MCA §17-5-1301 to 1323, (the "Allocation Act"). Adoption of a preliminary resolution by the City and evidence of a public hearing of the City Council of the City in accordance with the provisions of the Code is required prior to the City being able to make application to the Department of Administration of the State for an allocation of volume cap for the Bonds. The Project consists of a multifamily housing development designed and intended to be used for rental occupancy in accordance with the terms of the Act. The Borrower will operate the Project in a manner that complies with the income restrictions set forth in Section 142(d) of the Code in order that the Project qualifies as a "qualified residential rental. project." The City's purpose is and the effect will be to promote the public welfare of the City and its residents by retaining and improving affordable multifamily housing in the City. The Bonds shall not be or create an encumbrance upon any property of the City except the City's interest in the loan or revenue agreement with respect to the Bonds and the Project. The Bonds shall recite in substance that the Bonds, including interest thereon, are payable solely from the revenues received from the Project, the property pledged to the payment thereof and other sources of security for the Bonds, and shall not constitute a liability on the general obligation of the City, within the meaning of any constitutional or statutory limitation. The full faith, credit and taxing power of the City are not pledged to the payment of the Bonds. RECo WENDA.'T`ION: That Council consider and pass Resolution No. 5309 granting preliminary approval to the issuance of the Bonds subject to final approval following the preparation of bond documents, and subj ect to final determination by this City Council that the financing of the Project and the issuance of the Bonds are in the best interest of the City, authorizing the submission of an application for an allocation of bonding authority to the Department of Administration of the State and to further call for a public hearing. FISCAL EFFECTS: None at this time. Respectfully submitted, �p Charles H rball dity Attorney A es H. Patrick, City Manager Office of City Attorney City of Kalispell RESOLUTION NO.5309 RESOLUTION RELATING TO ISSUANCE OF REVENUE BONDS FOR THE FINANCING OF THE ACQUISITION AND REHABILITATION OF A MULTIFAMILY HOUSING DEVELOPMENT LOCATED IN THE CITY OF KALISPELL; CALLING FOR A PUBLIC HEARING WITH RESPECT TO THE ISSUANCE OF SUCH REVENUE BONDS; GRANTING PRELIMINARY APPROVAL TO THE ISSUANCE OF SUCH REVENUE BONDS; ESTABLISHING COMPLIANCE WITH CERTAIN REIMBURSEMENT REGULATIONS UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND TAKING CERTAIN OTHER ACTIONS WITH RESPECT THERETO BE IT RESOLVED by the City Council (the "City Council") of the City of Kalispell, Montana (the "City"), as follows: Section 1. Recitals. 1.01. . Montana Code Annotated, Title 90 Chapter 5 Part 1, as amended (the "Act"), authorizes the City to issue revenue bonds for the purpose of defraying the cost of acquiring or improving any land, building, other improvement, and real or personal property considered necessary in connection with an improvement that is suitable for: (i) commercial, manufacturing, agricultural, or industrial enterprises; (ii) recreation or tourist facilities; (iii) local, state, and federal governmental facilities; (iv) multifamily housing; (v) hospitals; (vi) long-term care facilities; (vii) community -based facilities for individuals who are persons with developmental disabilities as defined in Montana Code Annotated Title 53 Chapter 20 Part 102, as amended; (viii) medical facilities; (ix) higher education facilities; (x) electric energy generation facilities; (xi) family service provider facilities; (xii) the production of energy using an alternative renewable energy source as defined in Montana Code Annotated, Title 90 Chapter 4 Part 102, as amended; and (xiii) any combination of these projects.. As a condition to the issuance of such revenue bonds, the City must hold a public hearing in accordance with the requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), and the requirements of the Act. The City Council of the City must also authorize the submission of an application to the Montana Department of Administration for an allocation of bonding authority with respect to the Project (as hereafter defined) and such revenue bonds. 1.02. The City has been requested to issue its revenue bonds in the approximate aggregate principal amount not to exceed [$4,500,000,] in one or more series at one time or from time to time (the "Bonds"), the proceeds of which will be loaned by the City to Glacier State Associates, LP, a Montana limited partnership (the "Borrower"). Both Morena Glacier, LLC and the United Way, Inc. will be general partners in the Borrower. The Borrower will apply the proceeds derived from the Bonds to the following purposes: (i) the costs of the acquisition, rehabilitation, and equipping of (a) a 61-unit multifamily housing development known as "Glacier Manor" located at 506 1" Avenue West, Kalispell, Montana and (b) a 38-unit multifamily housing development known as "Treasure State Plaza Apartments" located at 600 Liberty Street, Kalispell, Montana (collectively, the "Project"); (ii) the funding of certain reserves for the Bonds, and (iii) the payment of certain costs related to the issuance of the Bonds (including the City's administrative fee related to the original issuance of the Bonds). After the Borrower's acquisition of the Project, the Project will be known as the Glacier State Apartments. 1.03. Under Section 147(f) of the Code and the Act, prior to the issuance of the Bonds, the City Council must hold a public hearing that has been duly noticed. 1.04. Under Section 146 of the Code, the Bonds must receive an allocation of the bonding authority from. the State of Montana (the "State"). An application for such an allocation must be made by the City to the Department of Administration of the State pursuant to the requirements of Montana Code Section 17-5-1301 to 1323, as amended (the "Allocation Act"). Adoption of a preliminary resolution by the City and evidence of a public hearing of the City Council of the City in accordance with the provisions of the Code is required prior to the City being able to make application to the Department of Administration of the State for an allocation of volume cap for the Bonds. Section 2. Preliminary Findings. Based on representations made by the Borrower to the City to date, the City Council hereby makes the following preliminary findings, determinations, and declarations: (a) The Project consists of a multifamily housing development designed and intended to be used for rental occupancy in accordance with the terms of the Act. The Borrower will operate the Project in a manner that complies with the income restrictions set forth in Section 142(d) of the Code in order that the Project qualifies as a "qualified residential rental project." (b) The proceeds of the Bonds will be loaned to the Borrower and the proceeds of the loan will be applied by the Borrower to the following purposes: (1) the costs of the acquisition, rehabilitation, and equipping of the Project; (ii) the funding of certain reserves for the Bonds, and (iii) the payment of certain costs related to the issuance of the Bonds (including the City's administrative fee related to the original issuance of the Bonds). The City will enter into a loan agreement (or other revenue agreement) with the Borrower requiring loan repayments from the Borrower in amounts sufficient to repay the loan when due and requiring the Borrower to pay all costs of maintaining and insuring the Project, including taxes thereon. In all events, it is understood, however, that the Bonds shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City except the City's interest in the loan or revenue agreement with respect to the Bonds and the Project, and the Bonds, when, as, and if issued, shall recite in substance that the Bonds, including interest thereon, are payable solely from the revenues received from the Project, the property pledged to the payment thereof and other sources of security for the Bonds, and shall not constitute a pecuniary liability of, or a general or moral obligation of the City, within the meaning of any constitutional or statutory limitation. The full faith, credit and taxing power of the City are not pledged to the payment of the Bonds. (c) In preliminarily authorizing the issuance of the Bonds and the financing of the acquisition, rehabilitation, and equipping of the Project and the related costs, the City's purpose 2 is and the effect thereof will be to promote the public welfare of the City and its residents by retaining and improving affordable multifamily housing developments in the City and otherwise furthering the purposes and policies of the Act. Section 3. Public Hearin. 3.01 Kennedy & Graven, Chartered, P.C., as bond counsel to the City, with cooperation from. City staff and staff of the Borrower, has prepared a Notice of Public Hearing (the "Hearing Notice") with respect to the Project and the issuance of the Bonds by the City. The Hearing Notice will be published in the Daily Inter Lake once a week for three consecutive weeks in preparation for a public hearing to be held by the City Council on Monday, October 6, 2008 at or after 7:00 p.m. in the City Council Chambers located in Kalispell City Hall at 201 V Avenue East, Kalispell, Montana. All persons who appear at the public hearing will be given an opportunity to express their views with respect to the Project and the issuance of the Bonds. The City Council will consider the views of the public expressed at the public hearing, any written comments filed with the City Clerk and the information submitted by the Borrower prior to the decision by the City Council on whether to issue the Bonds. The Hearing Notice will be published by Kennedy & Graven, Chartered, P.C., as bond counsel to the City, in substantially the form attached hereto as Exhibit A. The City Manager or his designee is hereby authorized to establish an alternate date for the public hearing, if necessary, in conformity with the requirements of Section 147(f) of the Code and the requirements of the Act. 3.02 It shall be the Borrower's responsibility to pay the costs of publication of the Hearing Notice. Section 4. Preliminary Approval. This City Council hereby grants preliminary approval to the issuance of the Bonds in the approximate aggregate principal amount not to exceed [$4,500,000] to finance all or a portion of the costs of the acquisition, rehabilitation, and equipping of the Project and the related costs discussed in Section 1.02 of this Resolution, subject to final approval following the preparation of bond documents, and subject to final determination by this City Council that the financing of the Project and the issuance of the Bonds are in the best interest of the City. Section 5. Submission of an A lication for an Allocation of Bonding Authority. Under Section 146 of the Code, the Bonds must receive an allocation of the bonding authority of the State. An application for such an allocation must be made by the City to the Department of Administration of the State pursuant to the requirements of the Allocation Act. The City Council hereby authorizes the submission of an application for allocation of bonding authority pursuant to Section 146 of the Code and the Allocation Act in accordance with the requirements of the Allocation Act. The Mayor of the City, the City Manager, and Kennedy & Graven, Chartered, P.C., acting as bond counsel to the City with respect to the Project and the Bonds, shall take all actions, in cooperation with the Borrower, as are necessary to submit an application for an allocation of bonding authority to the Department of Administration of the State. 3 Section 6. Reimbursement of Costs under the Code. 6.1. The United States Department of the Treasury has promulgated final regulations governing the use of the proceeds of tax-exempt bonds, all or a portion of which are to be used to reimburse the City or a borrower from the City for project expenditures paid prior to the date of issuance of such bonds. Those regulations (Treasury Regulations, Section 1.150-2) (the "Regulations") require that the City adopt a statement of official intent to reimburse an original expenditure not later than sixty (60) days after payment of the original expenditure. The Regulations also generally require that the Bonds be issued and the reimbursement allocation made from the proceeds of the bonds occur within eighteen (18) months after the later of: (i) the date the expenditure is paid; or (ii) the date the Project is placed in service or abandoned, but in no event more than three (3) years after the date the expenditure is paid. The Regulations generally permit reimbursement of capital expenditures and costs of issuance of the Bonds. 6.2. To the extent any portion of the proceeds of the Bonds will be applied to expenditures with respect to the Project, the City reasonably expects to reimburse the Borrower for the expenditures made for costs of the Project from the proceeds of the Bonds after the date of payment of all or a portion of such expenditures. All reimbursed expenditures shad be capital expenditures, a cost of issuance of the Bonds, or other expenditures eligible for reimbursement under Section 1.150-2(d)(3) of the Regulations and also qualifying expenditures under the Act. Based on representations by the Borrower as of the date hereof, other than (1) expenditures to be paid or reimbursed from sources other than the Bonds, (ii) expenditures permitted to be reimbursed under prior regulations pursuant to the transitional provision contained in Section 1.150-20)(2)(1)(B) of the Regulations, (ill) expenditures constituting preliminary expenditures within the meaning of Section 1.150-2(f)(2) of the Regulations, or (iv) expenditures in a "de minimus" amount (as defined in Section 1.150-2(f)(1) of the Regulations), no expenditures with respect to the Project have been made by the Borrower more than sixty (60) days before the date of adoption of this resolution. 6.3. Based on representations by the Borrower, as of the date hereof, there are no funds of the Borrower reserved, allocated on a long terns -basis or otherwise set aside (or reasonably expected to be reserved, allocated on a longterm basis or otherwise set aside) to provide permanent financing for the expenditures related to the Project to be financed from proceeds of the Bonds, other than pursuant to the issuance of the Bonds. This resolution, therefore, is determined to be consistent with the budgetary and financial circumstances of the Borrower as they exist or are reasonably foreseeable on the date hereof. Section 7. Costs. The Borrower will pay the administrative fees of the City with respect to the original issuance of the Bonds and pay, or, upon demand, reimburse the City for payment of, any and all costs incurred by the City in connection with the Project and the issuance of the Bonds, whether or not the Bonds are issued. Section S. Commitment Conditional. The adoption of this resolution does not constitute a guarantee or a firm commitment that the City will issue the Bonds as requested by the Borrower. If, based on comments received at a public hearing to be held pursuant to this resolution, or other information made available to or obtained by the City during its review of the I Project, it appears that the Project or the issuance of Bonds to finance or refinance the costs thereof is not in the public interest or is inconsistent with the purposes of the Act, the Code or the Allocation Act, the City reserves the right not to grant final approval to the issuance of the Bonds. The City also retains the right, in its sole discretion, to withdraw from participation and accordingly not issue the Bonds should the City Council, at any time prior to the issuance thereof, determine that it is in the best interests of the City not to issue the Bonds or should the parties to the transaction be unable to reach agreement as to the terms and conditions of any of the documents for the transaction. Section 9. Effective Date. This Resolution shall be in full force and effect from and after its passage. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL THIS 2ND DAY OF SEPTEMBER, 2008. ATTEST: Theresa White City Clerk Pamela B. Kennedy Mayor 9 EXHIBIT A FORM OF NOTICE OF PUBLIC HEARING CITY OF KALISPELL NOTICE OF PUBLIC HEARING WITH RESPECT TO THE ISSUANCE OF REVENUE BONDS FOR THE FINANCING OF A MULTIFAMILY HOUSING DEVELOPMENT NOTICE IS HEREBY GIVEN that the City Council of the City of Kalispell, Montana (the "City") will meet on October 6, 2008, on or after 7:00 p.m. in the Council Chambers at City Hall, 201 1" Avenue East, Kalispell, Montana, for the purpose of holding a public hearing to consider the preliminary approval of the issuance of one or more series of revenue bonds (the "Bonds") in accordance with the requirements of the Montana Code Title 90 Chapter 5 Part 1, as amended, and the Internal Revenue Code of 1986, as amended, to finance the costs of the acquisition, rehabilitation, and equipping of (i) a 61-unit multifamily housing development known as "Glacier Manor" located at 506 1 St Avenue west, Kalispell, Montana and (ii) a 38-unit multifamily housing development known as "Treasure State Plaza Apartments" located at 600 Liberty Street, Kalispell, Montana (collectively, the "Project"). The proceeds of the Bonds will be loaned by the City to Glacier State Associates, LP, a Montana limited partnership, and used by the Borrower for the following purposes: (1) acquisition, renovation, and equipping of the Project; (2) funding certain reserves for the Bonds, and (3) financing a portion of the costs of issuing the Bonds. At the public hearing, the City Council of the City will consider granting approval to the issuance of the Bonds by the City for and on behalf of itself for the purposes set forth above. The aggregate face amount of the Bonds proposed to be issued by the City is presently estimated not to exceed [$4,500,000]. The Bonds will be special, limited obligations of the City payable solely from the revenues pledged to the payment thereof under the terms of a loan agreement (or other revenue agreement) between the City and the Borrower, and the Bonds will not be a general or moral obligation of or be secured by the taxing power or any property or assets of the City. The full faith, credit and taxing power of the City are not pledged to the payment of the Bonds. The City, the State of Montana, or any political subdivisions thereof are not obligated in any manner for repayment of the Bonds. Anyone desiring to be heard during the public hearing will be afforded an opportunity to do so. Persons desiring additional information may contact the City Clerk, Ms. Theresa White at 201 1" Avenue East, Kalispell, Montana or by calling (406) 758-7756. All persons interested may appear and be heard at the time and place set forth above, or may file written comments with the City Clerk prior to the date of the hearing set forth above. Dated: September 2, 2008 Publication Dates: September 14, 2008 September 21, 2008 September 28, 2008 BY ORDER OF THE CITY COUNCIL OF THE CITY OF KALISPELL, MONTANA Theresa White City Clerk A-1 MONTANA'S UNIFIED VOLUME CAP BOND ALLOCATION APPLICATION AND RESPONSE For an allocation of state's bond volume cap capacity pursuant to Section 17-5-1301 to 1323, MCA, please complete and send to: Director's Office Department of Administration Room 155, Mitchell Building Capitol Station Helena, Montana 59620 Name of city, town, county, consolidated government, state agency or student loan agency (the "Issuer"); and the name and phone number of contact person: City of Kalispell 201 1" Avenue East P.O. Box 1997 Kalispell, Montana 59903-1997 Attn: James Patrick, City Manager Telephone: (406) 758-7708 We hereby apply for an allocation of bonding authority per Section 17-5-1301 to 1323, MCA. As required under statute, the following information is submitted: Please complete or attach the following: 1. Proposed project name, description, and location. Glacier State Apartments comprised of the following: Glacier Manor located at 506 1" Avenue west, Kalispell, Montana is a multifamily housing development with 61 units. and Treasure State Plaza Apartments located at 600 Liberty Street, Kalispell, Montana. is a multifamily housing development with 38 units (collectively, the "Project"). The Project buildings will both be purchased by the Borrower (as defined below) and substantially rehabilitated. Forty percent of the units in the Project will be restricted to individuals who have an adjusted gross income of no more than 60 percent of the AGI in the Kalispell area. 2. Name and mailing address and phone number of both project owner and operator. The Project owner will be Glacier State Associates, LP, a Montana limited partnership, The Project Manager will be Monfric Realty, Inc., 1915 Morena Boulevard, San Diego, California 92210 3. A certified copy of the inducement resolution adopted by the Issuer, and the date of adoption. (The inducement resolution is a resolution of the Issuer approving the project and preliminary authorizing the issuance of bonds therefore.) See Attached Resolution adopted by the City Council of the City of Kalispell on September 2, 2008 4. Bond counsel's name, address, and telephone number. Benjamin Johnson, Esq., Kennedy & Graven, Chartered, P.C., 470 U.S. Bank Plaza ton South Sixth Street Minneapolis, Minnesota 55402 Phone Number: (800) 788-8201 - 1 - 5. A copy of the bond counsel's preliminary opinion that the proposed project qualifies under state law and the Tax Reform Act of 1986 and if the Cap Bonds are issued, that interest thereon will not be included in gross income for purposes of federal income taxation. See attached preliminary bond counsel opinion of Kennedy & Graven, Chartered, P.C. 6. Evidence that public hearing requirements have been meet. (A bond counsel's opinion to that effect or a certification by the Clerk of the jurisdiction that a public hearing on the Project has been duly noticed and held by the City Council of the City of Kalispell on the 6th day of October, 2008.) See Attached Resolution of the City Council of the City of Kalispell 7. Underwriter's name, address, and telephone number: Glacier Bank 202 Main Street Kalispell, Montana 59303 Attn: Jennifer Wheeler, Vice President Phone Number: (406) 756-4282 S. A copy of a letter from an underwriter, bank or other financial institution stating that in its opinion the project is financially feasible, that the bonds could be successfully sold under current market conditions. The letter shall also state that the underwriter, bank, or financial institution has reviewed all information it deems necessary to form this opinion. See Attached Letter from Glacier Bank 9. Amount of allocation requested: [$4,500,0001 I hereby submit this application for an allocation to issue cap bonds as required by Section 17-5-1301 to 1323, MCA. City of Kalispell, Montana James Patrick, City Manager (Signature ❑f James Patrick) Date: FOR DEPARTMENT OF ADMINISTRATION USE ONLY of the state of Montana volume cap bond capacity is hereby allocated to the foregoing political subdivision for the foregoing project. This allocation will expire 90 days from the date below unless the bonds are issued by that time, or evidence of a bond purchase agreement is submitted to the Department of Administration at the address below, in which case this allocation will expire at the end of 120 days from the date below, unless the carry forward provisions of the Tax Reform Act of 1986 apply. -2- All allocations shall expire on December 31 of the year in which they were made; however, this subsection does not limit the term of an allocation for which a valid carry forward election has been made. In the event the above allocation expires as provided, the political subdivision :may resubmit its application for an allocation and the application of the political subdivision relating to the project or purpose will be reviewed in chronological order of receipt with no preference or priority being given to the political subdivision as a result of its prior application for the same project or purpose. Allocation Approved Date of Approval: Allocation Disapproved KA225-9 (BWJ) 338537v.1 Signature of Approving Official Name and Title of Approving official Address -3-