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HomeMy WebLinkAboutAD04-231 - Amendment - #1 - King County Housing Authority - Housing Services for the Frail Elderly - 05/17/2004 - � x FIRST AMENDMENT TO HOUSING COOPERATION AGREEMENT This is a first amendment to that certain Housing Cooperation Agreement dated June 13, 1991 (the "HCA"), between the HOUSING AUTHORITY OF THE COUNTY OF KING, a public body corporate and politic formed under Washington law (the "Authority") and the CITY OF KENT, a Washington municipal corporation (the "City"). Capitalized terms not defined in this First Amendment shall have the meaning ascribed to them in the HCA. I . RECITALS WHEREAS, The Authority and the City entered into the HCA to facilitate their cooperation in financing, developing and operating housing for low-income senior citizens in the City of Kent. The City's participation in the Project was specifically authorized by City Ordinance No. 2948, passed on November 6, 1990, authorizing issuance of$6.7 million Unlimited Tax General Obligation (UTGO) Bonds to finance the construction of the Project, Ordinance No. 2985, passed on June 4, 1991, authorizing the City to enter into the HCA, and Ordinance No 3115, passed on May 18, 1993, authorizing the City to issue UTGO Refunding Bonds to refinance the original $6.7 million in bonds at a lower rate of interest. WHEREAS, Pursuant to the HCA, the City designed and constructed the Project which consists of a 94 unit apartment building for low income senior citizens known as Harrison House, located at 615 W. Harrison Street in downtown Kent. Following completion of construction, on December 15, 1992, the City transferred, and the Authority accepted, the Project. On the same day, public notice of the restrictions contained in the HCA was recorded under King County recording No. 9212150717 WHEREAS, It has been discovered that Harrison House has suffered a failure of its stucco building envelope due to moisture penetration. It is now essential that remedial action be undertaken to repair and prevent further structural damage, and to make other needed improvements to the building. The present estimate of the cost of repairing structural damage, replacing the building envelope, rebuilding the exterior decks and undertaking other needed capital improvements is approximately $2.4 million. 1 First Amendment to Housing Cooperation Agreement (between Housing Authority of King County and City of Kent) (April 19, 2004) ` S WHEREAS, The Authority proposes to minimize the impact on the rents of the low income senior citizens currently residing at Harrison House by financing the needed repairs and capital replacements by utilizing federal Section 8 rental assistance in combination with a low interest loan from the King County Housing Finance Program, and the equity proceeds from syndication of Low Income Housing Tax Credits allocated by the Washington State Housing Finance Commission (collectively"Funding Sources"). WHEREAS, To qualify for and undertake the needed financing, it will be necessary to amend the HCA to eliminate certain restrictions and to permit the Authority to: i. To use rental revenues for the repayment of loans, debt, financing related fees and costs, development fees and costs, lease payments and to pledge rental revenues to secure debt and equity financing for the Project. ii. Encumber the Project with instruments providing security for repayment of borrowed funds and/or performance of covenants related to borrowed, granted or invested funds and the allocation of Low Income Housing Tax Credits. Ili. Enter into a long-term lease of the Project to a tax credit limited partnership, limited liability partnership, or limited liability company ("Partnership") of which the Authority will be the sole managing general partner or managing member ("Managing Partner" and the tax credit investor(s) will be the limited partners or members ("Investment Partner(s)"). iv. Establish an admission policy that gives priority for admission for 50% of the housing units at Harrison House to very low income seniors with incomes at or below 30% of the King County median income. V. Retain fee simple title to the Project throughout the term of the Authority's financing obligations by restricting transfer or reversion of the property to the City while these obligations are outstanding, so long as the Project continues to be used to provide affordable housing opportunities for low income seniors. WHEREAS, The Authority, in connection with the new financing, proposes to: i Provide Section 8 rental assistance to approximately 54 low income senior citizens at Harrison House. ii. Relieve the City of its obligation to subsidize the rent of 12 very low income senior citizens saving the City approximately$17,280 per year. Ili. Pay in full an outstanding LID assessment of$71,412 in connection with LID No. 351. 2 First Amendment to Housing Cooperation Agreement (between Housing Authority of King County and City of Kent) (April 19, 2004) ` L WHEREAS, Leasing the Project to a private Partnership for the purpose of obtaining and utilizing Low Income Housing Tax Credits will require the City to take "remedial action" as defined by the IRS Code and accompanying Treasury regulations with respect to an allocable portion of the 1993 UTGO Refunding Bonds by advance refunding the outstanding tax exempt bonds with the proceeds of a newly issued, taxable, UTGO refunding bond issue. NOW THEREFORE, to undertake the needed repairs at Harrison House with minimal impact to the building's current residents and to preserve the building and the critical services it provides to the community, the Authority and the City have agreed to amend the HCA as follows: II . AMENDMENT 1. Partnership Transactions Authorized. Notwithstanding any other provisions of the HCA, the City agrees that the Authority may, to facilitate the syndication of Low Income Housing Tax Credits, enter into a long-term lease of the bare ground and all improvements to a Partnership to be formed for that purpose, in which the Authority will be the sole Managing Partner and shall remain as the sole Managing Partner unless removed from such position as a result of its default of material provisions of the partnership or operating agreement; provided, however, that the lease must specifically incorporate by reference the terms and conditions of the HCA, as amended. 2. Defeasance or Refunding of Bonds. The City agrees that no later than , 2004, it will take "remedial action" as required by the Internal Revenue Code and accompanying Treasury regulations by defeasing or refunding that portion of the 1993 Refunding Bonds authorized by City Ordinance No. 3115 allocable to the Harrison House Apartments (the "Harrison House Bonds"), which defeasance or refunding shall be accomplished by the issuance of taxable bonds or with any other funding source selected by the City and approved by the City's bond counsel. The City agrees that it will issue the maximum amount of refunding bonds permitted by the Refunding Bond Act and supported by the City's current levy rate, as determined by the City's Bond Counsel, and the Authority agrees to pay in cash upon the closing and issuance of the Refunding Bonds an amount sufficient, together with the amounts available from the refunding bonds, to effect the defeasance or refunding of the Harrison House Bonds. 3 First Amendment to Housing Cooperation Agreement (between Housing Authority of King County and City of Kent) (April 19, 2004) a • 3. Payment of LID Assessment. The Authority shall pay the full balance due on City L.I.D. No 351, Assessment No. 035600 no later than July 5, 2004. 4. Indemnification. a. The Authority shall indemnify and hold harmless the City from any and all claims and disputes arising from the repairs and capital improvements undertaken with the grants and borrowings addressed in Section 11.5.a. of this First Amendment. b. Section 111.4. of the HCA is deleted in its entirety. 5. Grants and Borrowings. a. The City hereby consents that the Authority or the Partnership may obtain grants, forgivable loans, borrow money, and enter into or create other debt obligations to finance the long term lease of the Project to the Partnership, to fund repairs or capital improvements to the Project or pay for other costs, fees, and expenses associated with the development and rehabilitation of the Project or with the lease of the project to the Partnership. The Authority may encumber the Project with liens and covenants to secure repayment or performance of obligations in connection with the tax credit allocation, grants, loans, borrowings or debt obligations. Notwithstanding any other provisions of the HCA, the Authority or the Partnership may establish rents at rates sufficient to repay loans, borrowings or debt obligations of the Authority or the Partnership related to the Project, make required lease payments, meet Operating Expenses and to meet other Internal Revenue Service or Washington State Housing Finance Commission requirements with respect to the operation of the Project in accordance with the requirements of the Low Income Housing Tax Credit Program. b. The City agrees that, notwithstanding any other provisions of the HCA and the provisions of the Bargain and Sale Deed from the City to the Authority dated December 11, 1992, which is recorded under King County, Washington, recording No. 921250716, so long as either (i) the Low Income Housing Tax Credit Partnership lease of the Project remains in effect or (ii) the Project remains encumbered by the grants or borrowings contemplated by the provisions of 5.a. above, or any low income 4 First Amendment to Housing Cooperation Agreement (between Housing Authority of King County and City of Kent) (April 19, 2004) housing covenants, restrictions or regulatory use agreements required by such borrowings or the low income housing tax credits, the City may not exercise the right to re-enter the Project, terminate the HCA or to otherwise terminate or limit the fee estate of the Authority in the Project or the leasehold estate of the Partnership in the Project. The City further agrees to execute and record such additional documentation as may be required by Project lenders or the tax credit Investment Partner(s) to effectuate this provision. C. Sections IV. 7 and IV. 12 of the HCA are deleted in their entirety and are replaced by the provisions of 4.a. above. d. Sections IV.9. and Section V.1. of the HCA are deleted in their entirety and are replaced by the provisions of 4.b. above. 6. Termination of City Tenant Subsidies. The Authority agrees to substitute Section 8 rental assistance for the 12 housingUnits at the Project that are current) 1 Y being subsidized by the City at an annual cost to the City of $17,280, whereupon the City may terminate its subsidy payments. 7. Admissions Priorities. a. Section IV. 4. of the HCA is hereby deleted in its entirety, and replaced with the following new Section IV. 4.: "4. Subject to approval of the City, the Authority will establish an admissions policy which gives priority for admission to the Senior Housing Project to Kent residents, but only to the extent that doing so will not violate the terms of any local, state or federal laws, or the terms and conditions imposed by funding sources to the Project including the King County Housing Finance Program, the Washington State Housing Finance Commission and the U.S. Department of Housing and Urban Development." b. Section IV. 5. of the HCA is hereby deleted in its entirety, and replaced with the following new Section IV.5.: 5 First Amendment to Housing Cooperation Agreement (between Housing Authority of King County and City of Kent) (April 19, 2004) "5. Subject to approval by the City, the Authority will establish an admissions policy which conforms with the covenants of the Funding Sources for the Project and targets for admission to 50% of the housing units at the Project very low income Seniors with incomes at or below 30% of King County median income, and targets for admission to the balance of the housing units to Seniors with incomes at or below 50% of King County median income; provided, however, that it is mutually understood and agreed that this admissions policy must meet the test of compliance with local, state and federal laws, and that those laws may be altered in the future." 8. Miscellaneous Provisions. a. The second sentence of Section VI. 1. of the HCA is hereby deleted in its entirety and is replaced with the following: "Any and all awards granted as a result of said condemnation whether or not this Agreement is terminated as a result of said condemnation proceedings, shall be paid over to the City, but only after first satisfying all outstanding debt or other financial obligations of the Partnership and the Authority in connection with the Project." b. The first sentence of Section VI. 2. is deleted in its entirety and replaced with: "2. Insurance. During the term of this Agreement, the Authority or the Partnership shall also maintain in effect an industry standard, all risk property policy based on replacement value for buildings and contents with a deductible not to exceed $50,000." C. Section VI 3. is hereby deleted and replaced with: "3. Dama-ge or Destruction of Project. In event the structures and facilities are destroyed by fire or other casualty, or are partially destroyed so as to render it unfit for occupancy, or in case it is so badly damaged that it cannot be repaired within a reasonable amount of time, then the Authority or the Partnership, in consultation with the City, may elect not to 6 First Amendment to Housing Cooperation Agreement (between Housing Authority of King County and City of Kent) (April 19, 2004) c f • e c restore the Project. If such an election is made, this Agreement shall terminate and the Authority shall acquire the Partnership's interest in the Project and shall then surrender the Project and all interest in the Project to the City provided that all outstanding debt or other financial obligations of the Partnership and the Authority in connection with the Project have been satisfied. Available insurance proceeds shall be paid directly to the City, but only after those proceeds are first used to satisfy all outstanding debt or other financial obligations of the Partnership and the Authority in connection with the Project." DATED for reference purposes as of this 1Z day of 2004. IN WITNESS WHEREOF, the Authority and City have executed this First Amendment through their duly authorized representatives. AUTHORITY: CITY: Housing Authority of the City of Kent County of King, ington By: By: u Print Name: tephen J Norman Print a e: J4v*VA!Ae u.-/6 E7F_2�oN Its: Executive Director Its: Ma or P-O `rZ�IV Date: o o 5t Date: 05-/7- APPROVED AS TO FO By: Print Name: Tom Brubaker Its: City Attomev P 1C4mKFILEbXOpenFdeeW549tHmsmgCoope tonAgreement-Clean-KCHARemrAons dx 7 First Amendment to Housing Cooperation Agreement (between Housing Authority of King County and City of Kent) (April 19, 2004) a Board of Commissioners DOREEN ORChair KING COUNTY I PETER ORSERER,Vice Chair DELORES BROWN NANCYHOLLANDYOUNG HOUSING AUTHORITY Executive Director. STEPHEN J.NORMAN May 24,2004 Ms. Lois Deusen, Administrative Assistant Finance Department City of Kent 220 Fourth Avenue, S. Kent,WA 98032 Dear Ms. Deusen: Attached is an executive copy, signed by Stephen Norman, of the First Amendment to the Housing Cooperation Agreement. Please give us a call if you have any questions. Sincerely, Tessa Martin Executive Offices Enclosure cc: Dan Watson Tim Walter Patricia Julio 600 ANDOVER PARK WEST•SEATTLE,WASHINGTON 98188-2583 PHONE(206)574-1100•FAX(206)574-1104 EQUAL HOUSING OPPORTUNITY