11-12-1997 Council Agenda - Laserfiche WebLink

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This method of acquisition would allow for the following: a. Renovate Montreal Courts with approximately $1,100,000 of investment in capital improvements. b. Provide for the fire suppression of Montreal by retrofitting sprinklers in dwelling units and halls as well as upgrading current alarm and fire prevention equipment. The estimated cost of these items is approximately $700,000. HADC is requesting that the City waive the bond issuance fee it would receive for issuing the bonds and that HADC agree to pay for these costs as a part of it's acquisition. c. Establish a funded reserve for future capital improvements in the amount of $450,000. d. Establish a monthly reserve requirement. One issue raised by City Staff at our meeting was the question of property taxes. It is likely that the property taxes on Montreal Courts will decrease in the future as a result of the recent property tax legislation passed by the State of Minnesota. Staff questioned the possibility of the Property making an annual tax payment to the City to compensate them for any lost revenue as a result of this reduced property tax. HADC has addressed this question by proposing to make an annual payment during the life of the bonds equal to ten percent of the reduced portion of property taxes from the 1997 base tax year. The income from all sources including real estate tax savings is needed to service the debt on the bonds and maintain the debt service ratio needed to effectively market the bonds. As an aside, the new property tax classification is available to all property owners who meet the income and rent restriction. Montreal currently meets those restrictions and the real estate taxes will most certainly go down under current ownership, HADC ownership or under conventional financing if the Property does not use bond financing. Not less than 40% of the project's units must be occupied by tenants having adjusted annual family incomes of 60% or Less of the Minneapolis /St. Paul statistical Metropolitan Area median income, as adjusted for family size, as reported by the U.S. Department of Housing and Urban Development ( "HUD ") (the 40/60 test). Under current applicable limits, 60% of such median for a family of four is $30,600, for a family of three; $27,540; for a family of two, $24,489 and for one person, $21,420. Continuing compliance with the 40/60 test is necessary to maintain the tax - exempt status of the Bonds. As you can see, the total investment to the property would be significant. The City would achieve a substantial upgrading to it's largest apartment community while at the same time mitigating the impact of the real estate property tax reform adopted by the legislature this past session. HADC would evaluate and establish oversight management to Montreal Courts to achieve it's corporate mission. We believe that this method would Page 12