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HomeMy WebLinkAboutAgenda - 08-19-2008- 6cORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: August 19, 2008 Action Agen a Item No. SUBJECT: Housing Bond Pro ram -Eno Haven DEPARTMENT: Housing/Community Dev. PUBLIC HEARING: (Y/N) No ATTACHMENT(S): Location Map Project Proforma INFORMATION CONTACT: Tara L. Fikes, 245-2490 Gary Humphreys, 245-2450 Robert Jessup, 919/755-1800 PURPOSE: To consider approval of the issuance of a portion of the remaining authorized housing bonds as taxable bonds for the proposed Eno Haven multi-family rental complex. BACKGROUND: On June 5, 2008, the BOCC awarded $1,000,000 in housing bond funds to TBLF Eno Haven LLC to assist in the construction of a 76-unit multi-family rental complex in Hillsborough to be known as Eno Haven, contingent upon the award of Low Income Housing Tax Credits by the N.C. Housing Finance Agency. Eno Haven, hereinafter referred to as the "Project", will provide much needed rental housing for low-income elderly and disabled individuals in the community. This Project, should it receive tax credits, will be the first tax- credit rental project for low income elderly and disabled individuals in northern Orange County. This bond award was designated to come from proceeds of the issuance of affordable housing financing scheduled to occur early in 2009. The County's voters approved these bonds in 2001 to provide funds "to pay the capital costs of providing housing for the benefit of persons of low and moderate income." As stated earlier, the developer of the Project is also seeking additional financial assistance for the development from the Low Income Housing Tax Credits (LIHTC) Program, a federal program that provides income tax credits for affordable housing projects. Thus, a tax credit application for this Project has been submitted to the N.C. Housing Finance Agency which has the legal responsibility to review applications and allocate credits. As background, the LIHTC Program treats projects differently depending on whether the project includes any financing derived from tax-exempt bonds. Projects that include financing from tax- exempt bonds generally qualify for a lower level of credits. The theory behind this distinction is that projects that benefit from tax-exempt bond financing have already received some federal subsidy, even if indirectly, and that subsidy should be taken into account in determining the tax credits to be made available. In this case, however, even though proceeds from the County's general obligation bond do not represent a federal subsidy, the low qualification level is still applicable since the County would be providing tax-exempt bond financing to the Project. 2 The developers of the Project have asked the County to consider alternate funding sources for the County's $1,000,000 commitment to the Project, so that the Project may qualify for a higher level of tax credits. Specifically, the developers' representatives have asked that the County consider issuing a portion of the remaining authorized housing bonds as taxable bonds and structuring the loan in the form of a 0% interest direct loan deferred for a period of 30 years. The original principal of $1 M would be payable in a balloon payment at the end of the loan period. A copy of the Project Proforma is attached to this abstract. The County has $1,300,000 of housing bonds that have been approved by the voters, but not yet issued by the County that, if the Board elects, could be so issued as taxable bonds. County staff, with the assistance of bond counsel, has evaluated the cost difference to the County of issuing taxable bonds to provide a contribution to the Project.. A bank that is a frequent lender to the County and other North Carolina local governments has estimated the interest rate difference between taxable and tax-exempt bonds (assuming a 15-year payment period) as approximately 215 basis points (2.15% difference in the nominal annual interest .rate). It is estimated that the use of taxable debt will increase the County's general fund debt service costs approximately $216,000 over the life of a 15 year financing. This increased cost will be paid by the developer from the developer fees for the project under a separate agreement. FINANCIAL IMPACT: There is no immediate financial impact to the County since the increased cost for debt service associated with the taxable bond will be paid by the developer. A positive financial impact will be realized at the end of the loan period of 30 years when the full investment of $1 M will be repaid to the County. RECOMMENDATION(S): The Manager recommends that the Board approve the issuance of a portion of the remaining authorized housing bonds as taxable bonds for the proposed Eno Haven multi-family rental complex. E~ ~~ you C°unt In pran8e county page ~ °f 1 . ~~~1 '~~ ~~ A,. Cj ~~ oni~~••, r ~ dgra. crecordCaUon the tot `~...,.t onth~ fled trotn raCaded ~ $ sh ~b111Y t~ the e c~,nty, and is ao mart' lnfornration s al rest' ubTic P~ $sume no leQ wlthtn ° ~g nentiott~' P coroPa~es ~ ty of real noti~~~ ~atthe ~ ~~ ~ rnaPP~ rx the inw~e hereby Tne ooun Au~IWSt 4, 2~~$ 1;~6 1'(1 pf ihis ~~ed on this m~• _. ThCt] 4J2g+zooa __atnn r ... ~ ~guilding wand DSumnna-N Create Print ©ata~ ~'G..=-~"~-um-~e' ' "" ~ Addresses ~tifica~ Owners ~pocument$ ,prior ice~am~ ~°uCount~IS~... 4Sc~' esrima'F;~srimap o•nc.uslsc~letJcom.csxi• http;JJgis.co.oxanS sJ~J2~os Eno Haven Alternate Scenario Analysis Source: Taxable Bond Tax exempt Bond of Total Rate Term (Years) Amort. Period ears Annual Debt Service BANK $1,700,000 $1,700,000 20.7% 6.25% 30 30 $125,606 RPPLOAN $500,000 $500,000 6.1% 2.00% 20 20 $4,540 Oran a Coun Bond $1,000,000 $1,000,000 12.2% 0.00% 30 30 $0 State Refund Credit Loan $747,737 $647,737 7.9% 0.00% 30 30 $0 Equity: Federal Housing Tax Credits. Deferred Developer Fee $4,927,240 $77,333 $4,268,286 $77,333 52.1% l).9% Eshmated pricing on sale of tax credits: $0.83 TOTAL SOURCES $8,952,310 $8,193,356 100.0% $130,146 TOTAL USES $8,952,310 $8,952,310 Funding Gap excludin deferred devt fee $p ($75g,954) State Refund Credit Loan is a direct calculation (10%) of the eligible basis, which is reduced using tax-exempt financing. Federal Credit Equity is reduced due to the reduction of the federal credits. 8!7/2008 11:37 AM Eno Haven Alternate Scenario Analysis Total Costs Eligible Basis $1M taxable bond $1M tax- exempt bond 3. On-site Im rovements $820 000 S820 000 $820 000 5. Construction of New Buildin s $4,000,000 $4,000,000 $4,000,000 7. General Re uirements $385,600 $385,600 $385,600 8. Contractor Overhead $104112 $104112 $104,112 9. Contractor Profit $416,448 $416,448 5416 448 10. Construction Contin env $171,785 $171,785 $171,7$5 22. Architect's Fee- Desi n $142 600 $142 600 $142,600 12. Architect's Fee -Ins ection $30,000 $30,000 S3 000 14. Construction Loan Ori .Fee $50,000 $50,000 $50,000 25. Construction Loan Interest 5210,000 $210 000 $210,000 17. Construction Period Taxes $65 000 $65,000 565,000_ 28. Water, Sewer and Im act Fees $107,920 5107,920 $107,920 29. Surve $30,000 $30,0 530,000 20. Property Appraisal $6,000 $6,000 $6,000 21. Environments[ Re ort $4,000 $4,000 $4,000 22. Market Stud $4,400 $4 400 $4400 23. En ineerin 26. Permanent Loan Ori ination Fee $50,000 $34,500 550,000 $50,000 28. Title and Recordin $5,000 9. Resl Estate Attorne $25,000 $25,000 $25,000 0. Other Attorne 's Rees $10,000 $10,000 $10,000 32. Tax Credit A Fees $42,064 . Cost Certification and Accountin $12,004 $4,500 $4,500 35. Tax Credit Monitoring Fee 553,200 36. Furnishin s and E ui ment 540,000 $40,000 $40,000 38. Develo er's Fee 5800,000 $800,000 $800,000 1. Rent-u Ex enses aa. Off-site infrastructure $50,000 $20,(100 44. Rent u Reserve $27 000 45. O eratin Reserve $230,681 48. DEVELOPMENT COST (lines 1-4 $7,946 310 $7,477,365 $7,477,365 S1. Less Non ualified Nonreeourse Financin $0 $2,000,000 53. TOTAL ELIGIBLE BASIS $6,477,365 $7,477 5 $6,477,365 S4. A livable Fraction 100.00% 100.00% 100.00% 57. TOTAL UALIFIED BASIS $6,477 65 $7,477 65 $6,477,365 58. Tax Credit Rate 7.94% 7.94% 7.94% 60. FEDERAL TAX CREDITS at 7.94% $514,303 $593 703 $514 303 62. Land Cost $1000,000 b3. TOTAL REPLACEMENT COST $8,946 310 $1 Mtax-exempt bond must be removed from eligible basis. Resulting in a reduction of annual tax credits ~+ 1 611/3W8 4.04 PM Income Esc. 3.00% `YR`1 YR 2 'YR 3 - :;I'R 4 ' YR;S ` YR 6 YR~~ YR 8 ' T-'R 9 ' ` YR`10 E ense Esc. 4:'00% Gross rent 508,080 523,322 539,022 555,193 571,849 589,004 606,674 624,874 643,621 662,929 + Other Income 9,000 9,270 9,548 9,835 10,130 10,433 10,746 11,069 11,401 11,743 =Gross Income or Rent 517,080 532,592 548,570 565,027 581,978 599,437 617,421 635,943 655,021 674,672 - Vacant Allowance '1% 36,196 37,281 38 400 39,552 40,738 41,961 43,219 44,516 45,852 47,227 =EFFECTIVE NET RENT 480,884 495,311 510,170 525,475 541,240 557,477 574,201 591,427 609,170 627,445 - Operating Ezpenses 312,216 324,705 337,693 351,201 365,249 379,859 395,053 410,855 427,289 444,381 -Replacement Reserves 19,000 19,760 20,550 21,372 22,227 23,116 24,041 25;003 26,003 27,043 _ =NET OPERATING INCOME 149,668 150,846 151,927 152,902 153,764 154,502 155,107 155,569 155,878 156,021 - CICCAR loan 125,606 125,606 125,606 125,606 125,606 125,606 125,606 125,606 125,606 125,606 - RPP loan 4,540 5,564 6,504 7,352 8,101 8,743 9,270 9,672 9,944 10,064 - Orange County loan 0 0 0 0 0 0 0 0 0 0 Total Debt Service 130,146 131,171 132,110 132,959 133,708 134,349 134,876 135,278 135,546 135,671 =CASK FLOW AVAILABLE 19,522 19,676 19,817 19,944 20,056 20,152 20,231 24,292 20,332 20,351 Debt Coverage Ratio -CICCAR loan 1.19 1.20 1.21 1.22 1.22 1.23 1.23 1.24 1.24 1.24 Debt Coverage Ratio- All loans 1.150 1.150 1.150 1.150 1.150 1.150 1.150 1.150 LIS(1 1.150 7/28!2008 6:10 PM IncomeEsa 3.0©% ; YR~11 ``YR i4 YRI5 ' YR 16 ; YR 17 ' ' YR 18 ' ~R 19 --YR 20' erase Esc..9.00% Gross rent 682,817 703,302 724,401 746,133 768,517 791,572 815,319 839,779 864,972 890,921 + Other Income 12,095 12,458 12,832 13,217 13,613 14,022 14,442 14,876 15,322 15,782 = Gross Income or Rent 694,912 715,760 737,232 759,349 782,130 805,594 829,762 854,654 880,294 906,703 - VaCan Allowance 7% 48,644 50,103 51,606 53,154 54,749 56,392 58,083 59,826 61,621 63,469 =EFFECTIVE NET RENT 646,268 665,656 685,626 706,195 727,381 749,202 771,678 794,829 818,674 843,234 - Operating Ezpenses 462,156 480,642 499,868 519,863 540,657 562,283 584,775 608,166 632,492 657,792 - Replacement Reserves 28,125 29,250 30,420 31,636 32,902 34,218 35,587 37,010 38,491 40,030 =NET OPERATING INCOME ]55,988 155,765 155,339 154,696 153,822 152,701 151,317 149,653 147,691 145,412 - CICCAR loan 125,606 125,606 125,606 125,606 125,606 125,606 125,606 125,606 125,606 125,606 - RPP loan 10,035 9,841 9,471 8,912 8,152 7,177 5,974 4,527 2,820 839 - Orange County loan 0 0 0 0 0 0 0 0 0 0 Total Debt Service 135,642 .135,448 135,077 134,518 133,758 132,783 131,580 130,133 128,427 126,445 =CASH FLOW AVAILASLF, 20.346 20317 7.0262 2.0.17R 20.064 19.91R 19.737 19520 19.264 1R_967 C.:overage xatio - C1CCAx loan C`nveraue Ratite- All inane V 71282008 6:10 PM