HomeMy WebLinkAboutItem 2: Adoption of Resolution 5017Authorizing Economic Development Project Revenue Bonds as Recovery Zone Facility Bonds to Finance Improvements and att A
ECC
UGENE ITY OUNCIL
AIS
GENDA TEM UMMARY
Action: Adoption of Resolution 5017Authorizing Economic Development Project
Revenue Bonds as Recovery Zone Facility Bonds to Finance Improvements
on the Vacant Parcel Located at Broadway and Willamette Street
and Adjacent to the Centre Court Building
Meeting Date: November 22, 2010 Agenda Item Number: 2
Department: Central Services Staff Contact: Sue Cutsogeorge
www.eugene-or.gov Contact Telephone Number: 541-682-5589
ISSUE STATEMENT
The council is being asked to approve a resolution necessary for issuance of Recovery Zone Facility
Bonds for the proposed redevelopment of the vacant parcel located at Broadway and Willamette streets
and adjacent to the Centre Court building. In addition, the council is also being asked to approve
updated terms for the redevelopment proposal.
BACKGROUND
At the August 11, 2010, work session, council supported a redevelopment proposal by Bennett
Management Company (“BMC”) in concept and directed the City Manager to bring back additional
project details for consideration.
At the September 15, 2010, meeting, council took action to approve BMC’s redevelopment of the
vacant parcel, authorized the City Manager to enter into agreements consistent with the terms included
in Attachment A, and passed Resolution 5014 to give preliminary approval for issuance of Recovery
Zone Facility Bonds for the project. Also at that meeting, the Urban Renewal Agency Board approved
the ownership transfer for the vacant parcel from Beam to BMC or related legal entity, and authorized
the Agency Director to enter into the agreements necessary to allow the property transfer and the
transfer of Beam’s development rights to BMC.
Redevelopment Project Terms:
Since the meeting in September, progress has been made on the
project. As a reminder, the project includes construction of a 50,000 square-foot mixed-use building
with ground floor retail and four floors of commercial office space. Onsite parking will be embedded
with underground parking being considered based on final construction costs. The total project cost,
including land, is estimated at $11 million. A conceptual design from project architects Ankrom
Moisan was provided to the council at the meeting on September 15. BMC has created Woolworth
Properties LLC to own the project.
A revised outline of terms for an agreement between the City and BMC/Woolworth Properties LLC for
the project is included in Attachment A. There is only one change in the terms since the initial council
approval in September. In order to meet the bank’s pre-leasing requirement, the developer has asked
the City to increase its commitment to guarantee the lease of space from 10,000 square feet to 16,000
square feet. (The City’s lease and commitment to occupy remains unchanged at 10,000 square feet in
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the new building.) The increase in guaranteed square footage is needed for the developer to close the
bank loan prior to the December 31 deadline for issuing the Recovery Zone bonds. The City’s lease
guarantee will be reduced as sufficient private lease commitments are achieved.
Recovery Zone Facility Bonds:
The American Reinvestment and Recovery Act (“ARRA”) permits
issuance of the Recovery Zone Facility Bonds. ARRA and Section 147 of the Internal Revenue Code
of 1986, as amended require that recovery zone facility bonds be approved by the council after a public
hearing. Notice of the hearing was published in the Register-Guard on November 1. A public hearing
was held at 11:00 am on November 15, 2010, before a hearings official to receive comments on the
proposed issuance by the City of not more than eight million dollars of recovery zone facility bonds to
finance an approximately 50,000 square-foot mixed-use building that will be constructed on the former
site of the Woolworth building at Broadway and Willamette Streets and will be owned by Woolworth
Properties, LLC. No one appeared to testify at the hearing. Resolution 5014 requires that the council
give final approval to the sale of bonds for the project prior to the sale of the bonds. The resolution
included in Attachment B provides for that final approval.
RELATED CITY POLICIES
Development of the vacant parcel addresses many goals for Eugene and downtown, including activity
in the core, employment, and sustainability. This project is supported by the Downtown Plan; Down-
town Code Amendments; West Broadway Advisory Committee Recommendations; Central Area
Transportation Study; Downtown Vision; City Council’s Downtown Collective Statements from
August 2009; Downtown Policing Action Plan Team Short-Term Public Safety Strategy
Recommendations 2004; Cultural Policy Review; Mayor’s 2004 Committee on Economic
Development; Growth Management Policies; Sustainable Business Initiative; and JEO’s regional
economic development principles.
The City’s debt policies set out provisions for the use of conduit financing, which is what BMC/Wool-
worth Properties LLC has requested for this project. Under those policies, a project has to meet certain
criteria, including that the City not incur any moral or financial obligation from the borrowing, and that
the private party requesting the financing pays all of the costs of the borrowing. The project financing
will comply with the debt policies related to conduit financings except for the rating or credit
enhancement requirement. Because the project will be financed through a bank private placement loan
rather than a public bond sale, this policy requirement is not needed. Council waived that part of the
policy in Resolution 5014.
COUNCIL OPTIONS
1.Approve the revised outline of terms included in Attachment A, and approve the resolution
authorizing issuance of the bonds included in Attachment B.
2.Do not approve the actions needed to go forward with the BMC/Woolworth Properties LLC
redevelopment proposal.
CITY MANAGER’S RECOMMENDATION
The City Manager recommends approval of the revised outline of terms for the redevelopment
proposal included in Attachment A and approval of the resolution authorizing issuance of the bonds
included in Attachment B.
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SUGGESTED MOTIONS
1.Move to approve the Revised Outline of Terms included in Attachment A.
2.Move to adopt Resolution 5017 authorizing Economic Development Project Revenue Bonds as
Recovery Zone Facility Bonds to finance improvements on the vacant parcel located at Broadway
and Willamette Street and adjacent to the Centre Court Building.
ATTACHMENTS
A. Revised Outline of Terms, November 15, 2010
B. Proposed Resolution 5017
FOR MORE INFORMATION
Staff Contact (Bonds): Sue Cutsogeorge
Telephone: 541-682-5589
Staff e-mail: sue.l.cutsogeorge@ci.eugene.or.us
Staff Contact (Development Proposal): Denny Braud
Telephone: 541-682-5536
Staff e-mail: denny.braud@ci.eugene.or.us
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ATTACHMENT A
REVISED OUTLINE OF TERMS: November 15, 2010
Redevelopment of Vacant Parcel
Term #5 is the only one with a proposed change. All other terms are
the same as approved by council on September 15, 2010.
1.Beam Development will transfer ownership of the Vacant Parcel to Bennett Management
Company (BMC), or related legal entity. Financial consideration for the transfer will only
include BMC’s assumption of the existing $404,000 Downtown Revitalization Loan Program
(DRLP) loan.
2.The $404,000 DRLP loan will be subordinate to the bank loan, and terms of the DRLP loan
will be restructured as needed to allow BMC to meet the bank’s loan-to-value and cash flow
coverage requirements.
3.The City’s Recovery Zone Facility Bonds allocation of up to $8 million will be used by
BMC to achieve a lower, tax-exempt interest rate on the bank loan. BMC will be responsible
for the legal and transaction costs associated with the Recovery Zone Facility Bonds.
4.The Wells Fargo Bank loan would be serviced by payments from BMC and security for the
loan will be provided by BMC as required by the bank. The City will not incur any moral or
financial obligation, and will not be responsible for repaying or securing the bank loan or
related Recovery Zone Facility Bonds.
5.The City will commit to occupy up to 10,000 square feet of office space in the new BMC
16,000
building, and guarantee an additional 10,000 square feet of office space. The City’s
lease guarantee will be reduced as sufficient private lease commitments are achieved to satisfy
the bank’s pre-leasing requirements. BMC will be required to provide evidence that
satisfactory efforts to lease vacant space have been made.
6.A DRLP loan, not to exceed ten percent of the total project cost, will be considered to assist
BMC in closing a defined gap resulting from the project proforma and the bank’s loan-to-value
and cash flow coverage underwriting criteria.
7.BMC will assume Beam’s obligation to redevelop the Vacant Parcel by constructing the
proposed mixed-use building consisting of approximately 50,000 square feet. The total project,
estimated at approximately $11 million, will include ground floor retail, four floors of office
space, and embedded or underground parking.
8.BMC will assume Beam’s obligation to move forward with the project in a timely manner,
including assumption of the May 1, 2011 ready-to-proceed date included in the Beam Purchase
and Sale Agreement.
9.In the event that ownership of the Vacant Parcel is transferred to BMC and development
does not move forward within the designated timeline, the property ownership will revert back
to the Urban Renewal Agency at no cost (other than satisfaction BMC’s note on the property).
Sale of the property to another entity without prior approval from the Urban Renewal Agency
will not be permitted.
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ATTACHMENT B
RESOLUTION NO. _________
A RESOLUTION AUTHORIZING ECONOMIC DEVELOPMENT
PROJECT REVENUE BONDS AS RECOVERY ZONE FACILITY BONDS
TO FINANCE IMPROVEMENTS ON
THE VACANT PARCEL LOCATED
AT BROADWAY AND WILLAMETTE STREET AND ADJACENT TO THE
CENTRE COURT BUILDING.
The City Council of the City of Eugene, Oregon finds as follows:
A. The City has received a request from Bennett Management Company to issue
economic development project revenue bonds to finance improvements (the “Project”) on the
vacant parcel located at Broadway and Willamette Street and adjacent to the Centre Court
building, and to loan the bond proceeds to Bennett Management Company or an entity formed by
Bennett Management Company (the “Borrower”).
B. On August 11, 2010, the City Council supported the Project proposal in concept
and directed the City Manager to bring back additional details for consideration.
C. On September 15, 2010, the City Council approved Resolution 5014, which
authorized the City Manager to work with Bennett Management Company, its financing team
and the City’s bond counsel to develop documents and otherwise prepare for the sale of conduit
recovery zone facility bonds for the Project. The resolution required additional City Council
approval prior to issuance of the bonds.
D. ORS 280.410 to 280.485 (the “Act”) authorizes the City to issue economic
development project revenue bonds. Bonds issued under the Act are payable solely from the
revenues and assets that the Borrower or another private party pledges to pay the Bonds, and are
not liabilities of the City.
E. The American Recovery and Reinvestment Act of 2009 (“ARRA”) allows the
City’s economic development project revenue bonds to qualify as “recovery zone facility
bonds,” but only if the bonds are issued by December 31, 2010. Recovery zone facility bonds
allow the Borrower to obtain low-cost, tax-exempt financing that is ordinarily not available
under federal law.
F. ARRA and Section 147 of the Internal Revenue Code of 1986, as amended, (the
“Code”) require that recovery zone facility bonds be approved by the City Council after a public
hearing. A public hearing was held before a hearings official on November 15, 2010, and
approval of this resolution will constitute approval of the recovery zone facility bonds that the
City issues for the Project for purposes of Section 147 of the Code.
G. Wells Fargo Bank, National Association has indicated that it expects to purchase
the bonds by December 31, 2010.
H. ORS 280.445 requires the City Council to consider the following factors before
approving issuance of economic development project revenue bonds under the Act:
(1) The bond market for the types of bonds proposed for issuance.
(2) The terms and conditions of the proposed issue.
(3) Whether the borrower, lessee or purchaser is financially responsible and fully
capable and willing to fulfill all its obligations under the loan agreement.
(4) Such other relevant factors as the governing body considers necessary to protect
the financial integrity of the city.
I. In compliance with ORS 280.455, the City Council has considered the following:
(1) The bond market for economic development project revenue bonds that are issued
as recovery zone facility bonds. City staff has indicated that conditions in the bond market for
these bonds are generally favorable. However, the City will not pay the bonds, so the
determination of market conditions is most appropriately made by the Borrower. The Borrower
has requested that the City issue the bonds.
(2) The terms and conditions of the proposed bonds. The proposed bonds will be
issued as multi-modal bonds and are expected to bear interest during their first ten years at
variable interest rates. The bonds will be purchased by Wells Fargo Bank, National Association
(the “Bank”). City staff and the City’s bond counsel have indicated that these terms are typical
for economic development project revenue bonds.
(3) The Bank will determine whether the Borrower is financially responsible and
fully capable and willing to fulfill its obligations under the loan agreement. The City has no
obligation to pay the bonds and makes no determination about whether the Borrower is
financially responsible and fully capable and willing to fulfill all its obligations under the loan
agreement.
(4) Development of the Project will improve downtown Eugene. Recovery zone
facility bonds will help reduce the cost of the Project.
J. The City has $8 million of recovery zone facility bond volume cap available for
this Project.
K. Pursuant to the City ordinance establishing procedures for approving economic
development project revenue bonds under the Act, the City Council has considered the benefit to
the community of the project, the availability of recovery zone facility bond volume cap for the
project, and the likelihood that applicant will be successful in having the recovery zone facility
bonds issued by December 31, 2010.
L. The City adopts this resolution to authorize the issuance of economic
development project revenue bonds as recovery zone facility bonds to finance the Project.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Eugene, a municipal corporation of the State of Oregon, as follows:
Section 1: Authorization.
The City hereby authorizes the issuance, sale and delivery of
no more than $8 million in principal amount of economic development project revenue bonds
(the “Bonds”) to finance the Project pursuant to the Act. The Bonds shall be issued so that they
are eligible for treatment as recovery zone facility bonds under ARRA and the Code.
Section 2: Security for Bonds.
The Bonds shall be special, limited obligations of the
City payable solely from the revenues and property provided by the Borrower. The Bonds will
not constitute a debt of the City nor shall the Bonds be payable from any funds of the City or any
tax levied upon any property within the City nor any other political subdivision of the State of
Oregon.
Section 3. Limitations.
The Bonds:
Shall not be payable from nor charged upon any funds other than the revenue pledged to
1.
the payment thereof, nor shall the City be subject to any liability thereon. No holder or holders
of such bonds shall ever have the right to compel any exercise of the taxing power of the City to
pay any such bonds or the interest thereon.
Shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property
2.
of the City, except the revenues and property pledged or otherwise committed by the Borrower.
3. Shall recite in substance that the Bonds, including interest thereon, are payable solely
from the revenue pledged to the payment thereof, and that no Bond shall constitute a debt of the
City or a lending of the credit of the City within the meaning of any constitutional or statutory
limitation.
Section 5. Delegation.
The City Manager or the person designated by the City Manager
to act on behalf of the City pursuant to this resolution (each of whom is referred to in this
resolution as the “City Official”) is hereby authorized on behalf of the City and without further
action by the City Council, to:
1. Participate in the negotiation of the terms of Bond documents.
2. Execute and deliver an indenture of trust, a loan agreement, a bond purchase agreement,
the Bonds and any other Bond documents the City Official determines will facilitate the
issuance of the Bonds and the financing of the Project in accordance with this resolution.
3. Allocate recovery zone facility bond volume cap to the Bonds.
4. Engage the services of and designate pursuant to ORS 280.440(3) paying agents,
remarketing agents, trustees, and any other professionals whose services are desirable for
the financing.
5. Execute and deliver any related certificates or documents and take any other action in
connection with the Bonds which the City Official finds are reasonably required to issue
the Bonds or will be advantageous to the City.
Section 6: Effective Date of Resolution.
This Resolution shall take effect immediately.
The foregoing resolution was adopted by the City Council on the 22nd day of
November, 2010.
______________________________
City Recorder