05-25-2016 Council Packet - Laserfiche WebLink

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STAFF REPORT TO: Mayor Keis and Members of City Council FROM: Joel Hanson, City Administrator DATE: May 20, 2016 RE: HIA Payoff - Unit #223 of Canabury Square Condominium Association The owner of Unit #223 in Canabury Square has requested a payoff calculation for the Housing Improvement Area (HIA) assessment levied back in 2009. This was a city financed renovation to CSCA made possible by State Statutes. Given the improvements occurred on private property, the bond was deemed a private activity bond and there had “taxable” status versus our typical tax exempt status. That resulted in higher interest costs to borrow the money. A condition the City made at that time was that no prepayments of the HIA assessments could be made early given we could not earn as high an interest return as was being paid on the bonds. Some people at the time asked if there would be anyway to pay off the assessment early. We stated the only possibility would be to prepay all principal and interest due over the full term of the assessment. To date, no one had made that request. In the past few weeks, I have had conversations with Mr. Bob Hamper about this issue. He feels it would be easier to sell the unit if this assessment did not have to be assumed by the buyer (that is what occurs in other transactions). I explained our prepayment dilemma and he stated he still wanted to pursue an early payoff. In reviewing this matter, it seems reasonable to discount the assessment by what we can safely earn as interest on the payoff amount over the remaining term of the bond. I have had conversations with Ehlers & Associates and Sharon Provos, our Finance Director. Based on our review of rates we thing we can earn on the money, we settled on a 0.5% rate of return. Attached is a spreadsheet that shows the payoff amount after allowing for the above discount. Because of the way assessment payoffs are calculated under state law, the payoff would need to be made by November 15th to avoid interest accrual for 2017. Mr. Hamper has agreed with this date. Therefore, staff is recommending we allow the prepayment of the HIA assessment for Unit #223 of Canabury Square Condominium Association in the amount of $21,947.68 that provides for a discount rate of 0.5% on all amounts due through 2024. This payoff would likely be conditioned on the owner’s ability to sell the unit. cc: Bob Hamper