HomeMy WebLinkAboutItem 6: Resolution 5017 Authorizing Economic Development Project Revenue Bonds as Recovery Zone Facility Bonds
ECC
UGENE ITY OUNCIL
AIS
GENDA TEM UMMARY
Action: 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
Meeting Date: December 13, 2010 Agenda Item Number: 6
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, the 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, the 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.
An outline of terms was also provided to the council in September. The terms were based on a
preliminary offer of financing from Wells Fargo Bank that did not materialize. BMC has subsequently
received approval of financing for the project from Siuslaw Valley Bank. The approved financing
requires the terms of the agreement between the City and BMC/Woolworth Properties LLC to be
amended. An updated outline of terms is included in Attachment A.
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The following is a summary of the proposed changes in the terms that are needed for the developer to
close the bank loan prior to the December 31 deadline for issuing the Recovery Zone bonds:
To meet the bank’s pre-leasing requirement (60 percent of the space), the developer has
asked the City to commit to a total of 26,000 square feet (previously 20,000). This
would be accomplished by increasing the amount of guaranteed lease space from
10,000 square feet to 16,000 square feet. The City’s lease guarantee will be reduced as
sufficient private lease commitments are achieved. (The City’s commitment to lease
and occupy 10,000 square feet remains unchanged.)
The maximum Downtown Revitalization Loan (DRLP) would be increased from $1.1
million to $1.3 million. Consideration of the larger loan is the result of an approved
bank loan ($6.9 million) that is less than projected.
In addition to the requested changes to City terms, BMC/Woolworth Properties LLC has agreed to
increase their equity contribution from $2.25 million to $2.6 million.
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 a.m. on November 15, 2010, before a hearings official to receive comments
on the proposed issuance by the City of not more than $8 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 Recommen-
dations 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. The council waived that part of
the policy in Resolution 5014.
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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.
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, December 13, 2010
B. Proposed Resolution
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: December 13, 2010
Redevelopment of Vacant Parcel
Terms #4 through #6 are the only ones with proposed changes.
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 B 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.
$1.3 million
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. The Borrower is working with commercial banks and expects that a commercial
bank or similar institution will 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
secured solely by the Project and rents and other amounts the Borrower obtains from the Project.
The proposed bonds will be purchased and held by a commercial bank or similar institution and
can not be sold in the public securities markets without the prior consent of the City. The
proposed bonds will have terms that are acceptable to the Borrower and the bond purchaser.
City staff and the City’s bond counsel have indicated that these terms are typical for economic
development project revenue bonds.
(3) The bond purchaser 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 ___ day of
December, 2010.
______________________________
Acting City Recorder