HomeMy WebLinkAboutRS05-Redevelopment Agency
RE&VELOPMENT AGENCY.~EST FOR a"ISSION/COUNCIL AbllON
From: Glenda Saul, Executive Director
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Subject: AGREEMENT FOR INVESTMENT BANKING
SERVICES - MILLER & SCHROEDER
MUNICIPALS
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~t: Redevelopment Agency
Date: September 19, 1985
Synopsis of Previous Commission/Council action:
12-03-85 Set Public Hearing for Housing Report - approved Resolution 84-516
12-17-85 Public Hearing continue - sent to Legislative Review
02-18-85 Set new date for Public Hearing - approved Resolution 85-82
03-07-85 Public Hearing
01-01-85 Submitted application to state for Single Family Mortgage Revenue Bond
Allocation
Recommended motion:
(MAYOR AND (UM:lN COUNCIL)
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RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING AND DIRECTING THE
EXECUTION OF AN AGREEMENT FOR INVESTMENT BANKING SERVICES (HOUSING)
WITH MILLER AND SCHROEDER MUNICIPALS, INC.
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Signature
Contact person:
GLENDA SAUL
FUNDING REQUIREMENTS:
Amount: $
N/A
Phone: 383-5081
N/A
Ward:
N/A
Project:
September 23, 1985
Date:
Supporting data attached:
YES
No adverse Impact on City:
r''lcil Notes:
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13114.1 I OJ
Agenda Item NOPSS
. CI~ OF SAN BERNARD"-o - REQUe.:/r FOR COUNCIL AC~N
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75-0264
STAFF REPORT
Staff has learned that the City will receive an allocation from the state for a Single
Family Mortgage Revenue Bond in 1985. We anticipate an allocation of approximately
$35,000,000.
During 1984, Miller & Schroeder Municipals assisted staff and bond Counsel in the
preparation of the housing report, required by the Treasury Department in order to
issue this type of bond. Miller & Schroeder also assisted in the preparation of the
application to the State in January 1985.
Miller & Schroeder conducted, along with staff, the first developers meeting on
February 26, 1985. At that time, an outline of the proposed 1985 bond issue was
presented. The bond for 1985 is anticipated to be allocated for both new housing and
existing housing. Sixty percent of the mortgage allocation would be targeted towards
new single family housing developments. Fourty percent of the mortgage allocation
would be targeted for use on existing resale homes.
Miller & Schroeder has assisted staff by surveying planning permits and identifying
likely candidates for participation in the 1985 bond issue. They have prepared the
outline of the proposed 1985 Single Family Mortgage Revenue Bond (attached for your
review. )
Miller & Schroeder presented this material to the Redevelopment Committee at its
meeting on September 12, 1985. The committee recommended approving the agreement,
plus pursuing the financing. The materials are attached to this report for your
review.
The action before you today would authorize the execution of the Agreement with Miller
& Schroeder Municipals to act as the Banking investment services for the 1985 Single
Family Mortgage Revenue Bond issue. For the City to utilize the allocation the bond
must be closed by December 31, 1985.
Staff did not expect an allocation in 1985. Other cities who received allocations
were not able to utilize the allocation this year. Therefore, San Bernardino moved up
on the state's list and received this allocation. If we do not use this allocation in
1985, we would need to reapply in 1986 and would once again be out on a waiting list.
1384J/OJ
9-23-85
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AGREEMENT FOR INVESTMENT BANKING SERVICES
(HOUSING)
THIS AGREEMENT. made this _ day of . 1985, by and between the City of
San Bernardino, San Bernardino, California, a city duly organized under the laws of the
State of California (hereinafter called the "City"), party of the first part, and MILLER &
SCHROEDER MUNICIPALS. INC., 505 Lomas Santa Fe Drive. Solana Beach, California
(hereinafter called the "Investment Banker"), party of the second part:
WITNESSETH:
WHEREAS, the City has initiated its plans for the development and rehabilitation of
housing within the City and its environs; and
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WHEREAS, the City requires assistance in the development of a sound, equitable and
practical financing plan to implement the project by taking into consideration sources of
capital funds and cash flow requirements, annual costs, the allocation of those costs,
statutory requirements and restrictions, and alternate methods, if applicable; and
WHEREAS, the City requires the services of a municipal investment banker experienced
in underwriting the obligations of the housing authorities to assist in such financial
planning and to purchase the City's obligations at negotiated sale. where permitted by
law, and to coordinate the sale and distribution of obligations required to be sold at public
sale; and
WHEREAS, the City has determined that the Investment Banker is qualified by training
and experience to perform said services;
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L. NOW, THEREFORE, it is mutually agreed as follows, to wit:
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The Agency hereby employs the Investment Banker and the Investment Banker hereby
accepts such emplo}ment to perform the seIYices, upon the terms, subject to the
conditions. and in consideration of payments as hereinafter set forth:
SeIYices to be Performed bv the Investment Banker:
The Investment Banker shall perform in a diligent manner the following seIYices:
1. Assemble, review and analyze available financial and economic data and
information which may have a general bearing on a program for financing any proposed
project or projects.
2. Based on the foregoing analysis, prepare a general review and description of the
proposed project or projects and outline the possible methods of financing such projects,
the advantages and disadvantages of each method as applied to a given project, the
general legal and practical requirements or restrictions applicable to each method and
their attendant costs.
3. When the Agency has approved a specific project or projects for
implementation, the estimated costs and method of financing of which have been
sufficiently well established to permit the preparation of a final financing plan, the
Investment Banker shall prepare such plan containing, in addition to other information,
the following:
A. A description of the project or projects, including the purpose, benefits,
estimated costs and other pertinent information.
B. Details relating to the proposed method of financing, including tentative bond
amortization schedules, call features, sources and amounts of funds to be used in
amortizing the costs and other related data.
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C. Recommendations as to further procedures. The foregoing will be designed to
answer substantially all of the important questions which might arise in connection
with the particular project or projects and will contain current information as to
estimated costs and economic and fiscal information.
If. Assist Bond Counsel with the preparation of necessary resolutions and other
legal documents and make recommendations as to the exact terms and conditions under
which bonds are to be issued and sold, including timing and method of sale, final
amortization or repayment schedules, call and redemption features, provisions governing
the issuance of additional bonds, covenants and other provisions in order to secure the
best possible rating on the bonds.
5. Prepare the text and other material for an official statement or bond
prospectus describing the improvements, the bonds, their security, and the economic and
financial background of the City.
6. Make every effort to obtain a bond rating for each proposed issue to the end
that such bonds may be sold for the lowest possible cost. The Investment Banker shall
inform Moody's Investors Service and Standard and Poor's Corporation of all information
C required by such agencies necessary in establishing such rating and make such trips and
schedule such conferences with such agencies as may be necessary to obtain the highest
possible rating on the bonds.
7. If non-profit corporation financing is to be included in the financing program,
the Investment Banker shall recommend the timing and procedures to be used in forming a
non-profit corporation and obtaining the Internal Revenue Service ruling as to tax
exemption of the securities to be issued. if necessary, and specific terms governing the
issuance of the bonds of the non-profit corporation, including the amount of the issue, a
debt retirement schedule. call and redemption features. denominations, application of
bond proceeds and such other provisions to enable the bonds to be sold at the lowest
possible interest costs.
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The Investment Banker will serve as underwriter for the bonds of a non-profit
corporation at private sale. If a public sale of the non-profit corporation bonds is
required by law, the Investment Banker shall prepare the text of a prospectus describing
the bonds. their security, and the economic and financing background of the City which
may be duplicated and distributed to a comprehensive list of prospective bidders.
8. If it is appropriate or desirable for any other public entity or agency thereof to
participate in accomplishing the financing for any project or projects, the Investment
Banker, in order to achieve maximum coordination of the proposed financing, shall also
serve as the Investment Banker for such public entity or agency under the terms and
conditions hereof.
9. The Investment Banker shall be available at reasonable times by telephone or at
the offices of the City to discuss on a continuing basis the results of studies and analyses
and generate such additional information as desired or requested and consult with the City
as to the financial aspects of any specific project then being considered.
Sale of Bonds; Compensation; Expenses:
The City and the Investment Banker shall enter into a bond purchase agreement for
the sale of the Agency's obligations to the Investment Banker at a discount and bearing
interest at rates which are commensurate with the rates prevailing in the market for
similar securities at the time the bonds are offered to the public.
The bond discount will represent the total compensation to be paid to Miller &
Schroeder Municipals, Inc. and the City shall not be liable to us for any additional fees
whatsoever.
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All costs of the program will be payable out of bond proceeds when the bonds are sold
and delivered to Miller & Schroeder. In the event that market conditions or actions by
C. regulatory agencies prohibit completion of the financing by the City, Miller & Schroeder
will be responsible for all fees and expenses incurred by us in connection with services to
be performed as the City's Investment Banker. The City will be responsible for all the
other fees and expenses incurred in connection with the financing.
IN WITNESS WHEREOF, said City, party of the first part, has caused these presents
to be properly executed, and said Investment Banker, party of the second part, has caused
these presents to be executed by one of its officers, as of the date hereinabove set forth.
ATTEST:
By
(SEAL)
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MILLER & SCHROEDER MUNICIPALS, INC.
By
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CITY OF SAN BERNARDINO
SINGLE FAMILY RESIDENTIAL MORTGAGE REVENUE BONDS
ISSUE OF 1985
I.
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Mortgage Revenue Bond Allocation Process in California
A. Mortgage Bond Allocation Committee
1. Application List
B. San Bernardino allocation request - $100 million
1. Applied in January. 1985
2. Currently No. 1 on Application List
C. Granting of allocation - September. 1985
D. Estimated allocation to be received - $25 to 35 million
1. Entitlement - $20 million
2. Supplemental - $5 to $15 million
II. Authority for Issuance
A. Federal authority - Section 103A of Internal Revenue Code of 1945,
as amended (Mortgage Subsidy Bond Tax Act of 1980)
B. State authority - AS 1355
III. Eligible Mortgagors
A. Principal place of residence
B. Owner occupant
C. Intend to occupy for 2 years
D. First time homebuyer
1. Except for "Targeted Area" homes
2. Except for 101 of aggregate amoWlt of Mortgage Loans
E. Maximum Household Incomes
1. Median Household Income - $31,750
a. 1985 State median household income
2. First occupant
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a. $47,625 (1501 of Median) (Entitlement Allocation)
b. $38,100 (1201 of Median) (Supplemental Allocation)
3. Not first occupant
a. $38,100/$34,925 (1201/1101 of Median) (Entitlement
Alloca t ion)
b. $31,750/$28.575 (1001/901 of Median) (Supplemental
Allocation)
c.
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IV.
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Eligible Homes
A. Located in San Bernardino city boundaries
B. New Homes
1. At least 60'1. of lendable bond proceeds must be utilized to
finance new home loans
C. Existing Homes
1. No more than 40'1. of lendable bond proceeds may be utilized to
finance existing home loans
D. Maximum Purchase Prices
1. Riverside-San Bernardino PMSA Average Area Purchase Price
2. New Home - $117,100
a. $128,810 (110'1. of $117,100)
b. $140.520 for Targeted Area homes (120'1. of $117,100)
3. Existing Home - $107,900
a. $118,690 (110'1. of $107,900)
b. $129,480 for Targeted Area homes (120'1. of $107.900)
Targeted Areas (See attached map)
A. Qualified Census Tract
1. 70'1. or more families
have income
.:2 S', 'i06/'1Y'
80'1. or less of statewide
2.
median family income
Based on most recent (1980) decennial census
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B. Set-Aside Requirement
1. Required if Targeted Area located in Project Area
2. 20'1. of lendable bond proceeds must ~e set-aside/made available
to finance Targeted Area homes
a. For 1 year after bond proceeds are made available
C. Targeted Area Mortgagors/Homes
1. Mortgagors do not have to be first-time homebuyers
2. Maximum purchase price - 120'1. of applicable Average Area
Purchase Price
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VI.
Mortgage Loan Features
A. 30 year term. fixed rate
B. Level payment mortgage
1. 3-2-1 buydown option
C. Graduated payment mortgage (GPM)
1. Negative amortizing loan
2. Monthly payments increase 7.51 annually during first 5 years,
level payments thereafter
3. Effective qualifying rate 31 lower than actual rate
D. Insurance
1. Private mortgage insurance
2. FHA mortgage insurance
3. Standard hazard insurance (with earthquake coverage)
4. Special hazard insurance
E. Down payment - 51 minimum (except for FHA insured loans)
F. Origination fee - .501
G. Servicing fee - .20 to .351
H. Current mortgage interest rate - 9.751 to 10.01
1.
Factors: Bond rating, Investment Agreement rates, municipal
bond market conditions and on-going program expenses
1. Assumptions
J. Aff idavits
K. Delivery Period - 34 months ~
VII. Home Improvement Loans
A. To finance alterations, repairs or improvements that protect or
improve livability or energy efficiency of owner-occupied home
B. Maximum loan amount - $15.000
C.
No first time homebuyer requirement
Problems
1. Lack of demand/interest
2. Mortgage insurance
3. Qualified/interested lenders to operate program
4. Maximum loan amount too low
5. Rating agency acceptance
6. Payment of up-front bond issuance expenses
D.
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VIII. Rehabilitation Loans
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Federal requirements
1. Home at least 20 years old
2. 751 or more of existing external walls retained as external
walls in rehabilitation process
3. Rehabilitation costs - 251 or more of mortgagor's adjusted
basis in home
B. Two types of Rehabilitation Loans
A.
1. Loan to new occupant to purchase home that has been
rehabilitated
2. Loan to current occupant to finance rehabilitation costs and
outstanding loan on home
C. Mortgagor does not have to be a first time homebuyer
D. Maximum loan amount
1. 901 of lesser of appraised value or sales price; or
2. 971 of first $25.000 of appraised value. 951 of balance up to
$90,000
Problems
1. Generating adequate demand
2. Qualified/interested lenders to operate program
3. Rating agency acceptance
4. Payment of up-front bond issuance expenses
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IV. Tentative Financing Timetable
A. San Bernardino receives allocation - September
B. Solicit Developers to participate in Program - September/October
C. Determine initial structure of Program - October
D. Interested Developers submit Developer Questionnaires - October
E. Feasibility Study and drafting of Bond documents initiated - October
F. Submit issue to bond insurance firms/rating agencies - October
G. Issue receives bond insurance commitment/rating - November
H. Developers pay fees - November
I. City Council approves Bond documents and authorizes sale of Bonds -
November
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Bonds priced and marketed - November
Issue closes November
Mortgage money available - December
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City of San Bernardino
New Single Family Project Status Report
As of September 9, 1985
Tentative maps filed in the City of San Bernardino indicate approximately
1.560 dwelling units are to be built. The following information describes and
outlines the single family projects in San Bernardino either under
construction or planning to break ground within 90 days.
DeveloDer
Proiect
# of Units less Than
$90.000 $110.000
Bill Buster Construction Pacific Highlands
same
Description:
Current Status:
Price Range:
DeveloDer
100
100 single family detached units.
At present, the first 40 units are being framed.
Mid 80's.
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Proiect
# of Units less Than
$90.000 $110.000
Bill Buster Construction t.t.m.
12974
Description:
Current Status:
Price Range:
78
same
78 single family detached units on 20 acres.
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Working on final map. Construction to begin within
9 months. (This project is an exception to the
.within 90 days. parameter.)
Mid 70's.
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Deve10Der
Sunflower Properties
Description:
Current Status:
Price Range:
Deve10Der
College Group Assoc.
Description:
Current Status:
Price Range:
Deve10Der
Pacer Homes
Description:
Current Status:
Price Range:
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Proiect
# of Units less Than
S90.000 S110.000
Shadow Meadows
200
same
200 single family detached units in 6 phases.
Phase 1 is almost completed (16 units). Phase 2
will begin construction within 90 days.
S75.000 to S85,OOO (1st phase).
Proiect
# of Units less Than
S90.000 S110.000
Mounta i n pa rlc
121
same
121 townhomes on 11.5 acres with 8 phases.
Six of the eight phases have been built and 85 homes
have been sold. leaving 36 units awaiting completion.
S65.000 to S77,OOO.
Proiect
t.t.m.
12896
# of Units less Than
S90.000 S110.000
120 (max)
182
182 condominiums.
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144 units are built and sold. 11 units are built
but not sold and 27 unit are left to build.
low S70's to mid S90's.
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DeveloDer
Inland Development
Description:
Current Status:
Price Range:
DeveloDer
Canaday Company
Description:
Current Status:
Price Range:
Total DeveloDers
6
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Proiect
# of Units Less Than
190.000 1110.000
Myer Vi llas East
104
same
104 condominiums in one phase.
Will break ground in next 30 days.
Average price will be $60.000 per unit.
Proiect
Park Hill
# of Units Less Than
$90,000 1110.000
42
same
42 single family units in two phases.
Phase 1 (20 units) is being constructed at present
and will be ready for occupancy at the end of
September, 1985. 14 of the 20 units have been
sold. Phase 2 (22 units) will open for sale in
mid-September and construction will begin shortly
thereafter. ,
$66.900 to $86.900.
SUMMARY TOTALS
Total Proiects
Total # of Units Less Than
$90.000 1120.000
7
765
827
Total # of Unsold Units
584
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ADOITIDNAL PROJECTS
DeveloDer
Proiect
Highland Hills
I of Units
581
80nadiman Association
Description:
Four parcels (1 commercial) on over 44 acres. with a
maximum of 581 residential units.
Current Status:
Parcel maps are all approved. Development predicted
to begin in approximately six months.
DeveloDer
Proiect
I of Units
61
Shamma Enterprises
t.t.m. 's
13029 and
13036
Description:
61 single family detached units on 10.5 acres.
Tentative map approved on August 20, 1985. Plan to
proceed with final map filing as soon as possible.
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Current Status:
SUMMARY OF ADDITIONAL PROJECTS
T ota 1 Deve lODe rs
Total Projects
2
2
Total I of Units
642
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RESOLUTION NO.
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RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING AND
2 DIRECTING THE EXECUTION OF AN AGREEMENT FOR INVESTMENT BANKING
SERVICES CHOUSING) WITH MILLER AND SCHROEDER MUNICIPALS, INC. '
3
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY
4 OF SAN BERNARDINO AS FOLLOWS:
5 SECTION 1. The Mayor of the City of San Bernardino is
6 hereby authorized and directed to execute for and on behalf of
7 said City an Agreement for Investment Banking Services CHousing)
8 with Miller and Schroeder Municipals, Inc., a copy of which is
9 attached hereto as Exhibit -A- and incorporated herein by
13 Bernardino at a
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15 wit:
16 AYES: Council Members
17
10 reference as though fully set forth at length.
11 I HEREBY CERTIFY that the foregoing resolution was duly
12 adopted by the Mayor and Common Council of the City of San
meeting thereof, held on the
, 1985, by the following vote, to
18 NAYS:
19
20 ABSENT:
21
22
City Clerk
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The foregoing resolution is hereby approved this
day
of
, 1985.
Mayor of the City of San Bernardino
26 Approved as to form:
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fi;t:n:t: City Attorney