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HomeMy WebLinkAboutR8-Economic Development Agency e e e ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO REQUEST FOR COMMISSION/COUNCIL ACTION FROM: RONALD E. WINKLER Development Director SUBJECT: DATE: February 26, 1997 ~(Q)~W AUTHORIZATION TO SELL MOBILEHOME PARKS TO RESPECTIVE NON-PROFIT CORPORATIONS - PUBLIC HEARING ------------------------------..----------------------------------------------------------------------------------- Synop~is ofPrevions Cnmmission/Conneil/Cnmmittee Aetion(.c;): ---------------------------------------------------------------------------------------------------------------------- Reeommended Mntinn(.~: OPEN PUBLIC HEARING CWSE PUBLIC HEARING (Mayor and Common COllneil) RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF THE FRIENDLY VILLAGE MOBILEHOME ESTATES FROM THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO TO THE FRIENDLY VILLAGE MOBILEHOME ESTATES CORPORATION. MOTION A: ~~ Administrator Contact Person(s): Ronald E Winkler -------------------------------------------------------------------------------------------------------------------- 5081 Project Area(s): N/A Supporting Data Attached: SlaffRepOrl; Re.olnlion. Phone: Ward(s): N/A FUNDING REQUIREMENTS: Amount: S N/ A Source: ~--- Budget Authority: None ~------------------_.._---------------------..------------------..-..---------------------------------------------- Commiuinn/Collneil Notes: ~ 'fA .Res 97-7l> p.,~ E3~Res 97- 7/ PSV'Res 97- 7;<, PSf-Res 97- 73 --------------------------------------------------------------- COMMISSION MEETING AGENDA MEETING DATE{ ..~ Agenda Item Number:)( '6 {)3 f~ It 7 e e e REQUEST FOR COMMISSION/COUNCIL ACTION Authorization to Sell Mobilehome Parks February 26, 1997 Page 2 ------------------------------------------------------------------------------------------------------------.. Rer.nmmended Motion(N) Continued: MOTION B: MOTION C: MOTION D: MOTION E: (Mayor and Common Council) RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, APPROVING THE TRANSFER OF THE SEQUOIA PLAZA MOB1LEHOME PARK FROM THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO TO THE SEQUOIA PLAZA MOBILEHOME PARK CORPORATION (Community Developmeot Commk.ion) RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF THE SEQUOIA PLAZA MOBILEHOME PARK FROM THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO TO THE SEQUOIA PLAZA MOBILEHOME PARK CORPORATION. (Mayor and Common Council) RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, APPROVING THE TRANSFER OF THE GLEN AIRE MOBILEHOME PARK FROM THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO TO THE GLEN AIRE MOBILEHOME PARK CORPORATION. (Community Development Commission) RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF THE GLEN AIRE MOBILEHOME PARK FROM THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO TO THE GLEN AIRE MOBILEHOME PARK CORPORATION. REW:lmp:trans.cdc ---------------------------------------------------------------------------------------------------- COMMISSION MEETING AGENDA MEETING DATE: 03/03/1997 Agenda Item Number: J e e e REQUEST FOR COMMISSION/COUNCIL ACTION Authorization to Sell Mobilehome Parks February 26, 1997 Page 3 Reeommended Motion(.~ Continued: (Mayor and Common Couneil) MOTION F: RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, APPROVING THE TRANSFER OF THE PACIFIC PALMS MOBILEHOME PARK FROM THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO TO THE PACIFIC PALMS MOBILEHOME PARK CORPORATION. (Community Development Commission) MOTION G: RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF THE PACIFIC PALMS MOBILEHOME PARK FROM THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO TO THE PACIFIC PALMS MOBILEHOME PARK CORPORATION. REW:lmp:trans.cdc COMMISSION MEETING AGENDA MEETING DATE: 03/03/1997 Agenda Item Number: ~ e e e ECONOMrrCDEVELOPMENTAGENCY STAFF REPORT ---------------------------------------------------------------------------------------------------------------- Autbori7Jltion to Sell Mobilebome Parks BACKGROUND: The Glen Aire, Pacific Palms and Sequoia Plaza mobile home parks were acquired by the EDA on December 19,1995, in part with the proceeds of various issuances of San Bernardino Joint Powers Financing Authority Multifamily Housing Revenue Bonds, Series 1995 ("Bonds") relative to each acquisition and with HOME funds. The Glen Aire Mobilehome Park ("Glen Aire") consists of one hundred thirty-one (131) spaces, is located on an approximately 14.58 acre site at 222 South Rancho Avenue in the City of San Bernardino (the "City") and includes amenities consisting of a recreation building, swimming pool, spa, two shuffleboard courts, barbecue, laundry facilities, beauty shop and car wash. Glen Aire was acquired in part with the proceeds of Bonds issued in the amount oflbree Million Thirty Thousand Dollars ($3,030,000) and approximately $198,000 of HOME funds. The Pacific Palms Mobilehome Park ("Pacific Palms") consists of one hundred forty-two (142) spaces, is located on an approximately 15.4 acre site at 2727 East Pacific Street in the City of Highland, California, and includes amenities consisting of two recreation buildings, two heated swimming pools, a spa, barbeque and a tot lot. Pacific Palms was acquired in part with the proceeds of Bonds issued in the amount of Three Million Three Hundred Seventy-Five Thousand Dollars ($3,375,000) and approximately $282,000 of HOME funds. The Sequoia Plaza Mobilehome Park ("Sequoia Plaza") consists of two hundred forty-two (242) spaces, is located on an approximately 29.71 acre site at 2505 West Foothill Boulevard in the City and includes amenities consisting of a large clubhouse, heated swimming pool, spa, two saunas, three shuffleboard courts, a barbeque, pond, greenbelt area and two laundry buildings. Sequoia Plaza was acquired in part with the proceeds of Bonds issued in the amount of Five Million Two Hundred Thirty-Five Thousand Dollars ($5,235,000) and approximately $331,000 of HOME funds. TRANSFER OF MOBILE HOME PARKS: The mobile home park conversion program as adopted by the Mayor and Common Council and this Commission in December 1993, contemplated an acquisition of mobile home parks in San Bernardino from private owners with title vesting in the name of the EDA for an initial period of time. It was contemplated that the EDA would hold title until the necessary filings and approvals ------------------------------------------------------------------------------------------------------------------ REW:lmp:trans.cdc COMMISSION MEETING AGENDA MEETING DATE: 03/03/1997 Agenda Item Number: 1 e e e Economic Development Agency Staff Report Authorization to Sell Mobilehome Parks February 26,1997 Page 2 could be obtained for the eventual ownership by a nonprofit corporation. Future mobile home park conversions could then be accomplished with title vesting directly with the designated nonprofit corporation. It is unlikely that any of the San Bernardino mobile home parks presently owned by private parties would be subdivided into condominium interests with the spaces then being sold to individual residents. Although a nonprofit organization with a national presence could be obtained as the owner of the San Bernardino mobile home parks, the residents would not have the degree of input into the every day activities as they would in a situation where the residents are required to be represented on the board of directors. It is common for nationally oriented nonprofit organizations to operate through a master board of directors with a separate nonprofit corporation established for each of the locally owned real property assets. In most instances the same individuals who serve as the board of directors of the national organization also serve as the board of the directors of each of the local subsidiaries. The EDA has formed the San Bernardino Mobile Home Park Corporation, a California nonprofit corporation (SBMHPC), which will act as the oversight nonprofit corporation to each of the individual park nonprofit corporations. It is the individual park nonprofit corporations that will hold title to the separate mobile home parks upon transfer from the EDA. Nine (9) nonprofit corporations have been formed as California nonprofit corporations (these consist of the SBMHPC and one (I) park nonprofit corporation for each of the eight EDA owned mobile home parks) and an advanced ruling and determination letter with regard to the tax-exempt status of each of the nonprofit corporations was issued by the IRS in Washington, D.C. on December 23, 1996. The IRS has approved the San Bernardino concept of the oversight nonprofit corporation and the separate park nonprofit corporations. Under this structure the SBMHPC retains certain controls over specified aspects of the operations and the fmancial dealings of the individual park nonprofit corporations in an effort to assure the Bondholders and the IRS continuing compliance with the Bond documents and the tax covenants for the tax-exemption of the interest on the Bonds and maintaining the tax-exemption of the parks' nonprofit corporations. The by-laws and articles of incorporation of each park nonprofit corporation have been reviewed and approved by the IRS. ---------------------.-------------------------------------------------------------------------------------------- REW:lmp:trans.cdc COMMISSION MEETING AGENDA MEETING DATE: 03/03/1997 Agenda Item Number: fj; e e e Economic Development Agency Staff Report Authorization to Sell Mobilehome Parks February 26,1997 Page 3 --------------------------------------------------------------------------------------.------------------- The basis under the Internal Revenue Code for the formation of the San Bernardino nonprofit corporations and obtaining the 50l(c)(3) determination letter from the IRS is to assist in the relief of a "burden upon government." The "burden upon government" which has been accepted by the IRS results from a history in San Bernardino of mobile home park rent control and the EDA sponsored program of conversion of privately owned mobile home parks to some form of public ownership with resident control. The IRS required that at least one EDA employee be designated by position to be on the Board of Directors of the SBMHPC, and the IRS has agreed that designation of the Agency Administrator will comply with this requirement. Additionally, the boards of directors for each of the park nonprofit corporations must have six residents selected in a fair and equitable manner from among all of the residents of each particular mobile home park and one additional director who must be a non-resident who also must be a director of the SBMHPC. In this manner, the IRS will be assured that there are adequate controls to prevent any private inurement to the residents of the separate mobile home parks. No additional restrictions will be imposed upon the board of directors of the SBMHPC other than to require the Agency Administrator to be a member of the board of directors. As a part of the IRS review and approval process for the nine (9) nonprofit corporations, all of the bond documents and the related real estate transfer documents from the date of the original acquisition of each of the EDA owned mobile home parks were submitted to the IRS for review. The IRS is typically concerned with situations where there is a sale of property to a nonprofit corporation and a transfer price that is determined to be excessive. This situation is viewed by the IRS as benefitting a private party which can then result in the loss of tax-exemption to both the nonprofit corporation and the tax-exempt bond financing. The transfer price to each of the park nonprofit corporations will be adjusted by an amount that relates dollar-for-dollar to the costs incurred by the EDA from the date of initial acquisition to the date of transfer to the park nonprofit corporation. Such adjusted transfer price assures the residents that the best value possible is transferred to the park nonprofit corporation and demonstrates to the public that the entire transaction has been without cost to the EDA. Upon the transfer of title from the EDA, each park nonprofit corporation will assume: (i) the bonded indebtedness secured by each mobile home park and (ii) the obligation to reimburse the EDA from future cash flow revenues for all EDA expenditures with respect to a particular mobile home park. Updated appraisal reports will be obtained from Brabant & Associates prior to transfer of each EDA mobile home park. The appraisal reports analyze the current resale value of each particular EDA mobile home park on the basis on current market conditions, cash flows for the mobile ------------------------------------------------------------------------------------------------------------------ REW:lmp:trans.cdc COMMISSION MEETING AGENDA MEETING DATE: 03/03/1997 Agenda Item Number: Z) e . e Economic Development Agency Staff Report Authorization to Sell Mobilehome Parks February 26, 1997 Page 4 -------------------------------------------------------------------------------------------------------------------------- home park and the added funds invested by the EDA both in capital improvements and operating capital. The updated appraisal reports were not a factor in the IRS' review of the transfer price of the EDA mobile home parks since the transfer price from the EDA to each park nonprofit corporation will be adjusted to take into account the funds on deposit pursuant to the Bond documents and the EDA costs incurred during the EDA ownership of the mobile home park. RESIDENT BOARD OF DIRECTORS: The residents at each of the mobile home parks have conducted interim elections to appoint residents to an interim residents association with which EDA consultants have been meeting on a regular basis. Ongoing discussions and meetings have been held with the resident groups regarding the transition of the EDA owned mobile home parks to the particular park nonprofit corporations. However, such transfers will not occur until the resident association has been substituted as the official Board of Directors of the respective nonprofit corporations. EDA staff will want assurances that the members of such Boards of Directors are aware of their responsibility to maintain the covenants and restrictions under the Bond documents and to maintain the tax-exemption of the various nonprofit corporations pursuant to the limitations as may be imposed by the IRS by reason of the 501(c)(3) determination letters. COMMUNITY REDEVELOPMENT LAW CONSIDERATIONS: The Community Redevelopment Law requires California redevelopment agencies to sell real property only after having conducted a public hearing pursuant to Health & Safety Code Section 33431. Notices of the public hearings have been duly published. It is necessary for the Commission to conduct the required public hearing, and on the basis of public input, the Commission will then consider the approval of the transfer of the EDA owned mobile home park to the particular park nonprofit corporation. After EDA staffhas received the approval from the Commission to execute the final sales agreements between the EDA and the various nonprofit corporations, the EDA will be in a position to have the Glen Aire, Pacific Palms and Sequoia Plaza mobile home parks transferred to the respective nonprofit corporations. ------------------------------------------------------------------------------------------------------------------ REW:lmp:trans.cdc COMMISSION MEETING AGENDA MEETING DATE: 031031~ Agenda Item Number: . l> ,- , e e e Economic Development Agency Staff Report Authorization to Sell Mobilehome Parks February 26,1997 Page 5 -------------------------------------------------------------------------------------------------------- SALES PRICE DETERMINATION: Glen Aire Glen Aire was acquired for a cash purchase price with a portion of the proceeds of Bonds issued in a principal amount of $3,030,000. The proceeds of said Bonds and other deposits from the HOME funds were used to additionally fund the Debt Service Reserve Fund equal to $256,106, fund the Capital Reserve Replacement Fund equal to $69,016, and fund $10,945 into the Interest Account. The HOME funds in the amount of $198,000 were used to pay the additional costs of issuance and other expenses associated with the acquisition and the due diligence investigations. It was not financially possible for the Mobile Home Conversion Consultant fee to be paid in total from the proceeds of the Bonds or from the HOME funds, and this unpaid principal balance will be transferred as a debt obligation to be assumed by the Glen Aire Mobilehome Park Corporation. An additional promissory note and subordinate indebtedness will be added to the transfer price to allow the EDA to recapture the entire principal amount, plus interest, of the prior expenses paid by the EDA relative to the ownership of Glen Aire. The original appraisal value of Glen Aire was determined to be $2,980,000. An updated appraisal will be completed prior to transfer. The estimated resale price has been calculated at $3,656,125. The fmal transfer price will be based upon the following formula: (i) Bond debt assumed, plus (ii) EDA unreimbursed expenses, plus (iii) unpaid Mobile Home Park Conversion Consultant fee. The Trustee for the Bondholders has funds on deposit as of January, 1997, equal to an amount in excess of$393,299 which represents a portion of the valued-added adjustment which was made for the benefit of the Glen Aire residents. Paeifie Palms Pacific Palms was acquired for a cash purchase price with a portion of the proceeds of Bonds issued in a principal amount of$3,375,000. The proceeds of said Bonds and other deposits from the HOME funds were used to additionally fund the Debt Service Reserve Fund equal to $284,875, fund the Capital Reserve Replacement Fund equal to $47,319, and fund $12,193 into the Interest Account. The HOME funds in the amount of $282,000 were used to pay the additional costs of issuance and other expenses associated with the acquisition and the due diligence investigations. It was not financially possible for the Mobile Home Conversion Consultant fee to be paid in total from the proceeds of the Bonds or from the HOME funds, and this unpaid principal balance will be transferred as a debt obligation to be assumed by the Pacific ---------------------------------------------------------------------------------------------------------.-------- REW:lmp:trans.cdc COMMISSION MEETING AGENDA MEETING DATE: 03/03/1997 Agenda Item Number: /7J e e e Economic Development Agency Staff Report Authorization to Sell Mobilehome Parks February 26, 1997 Page 6 --------------.-.---------------------------------------------------------------------------------------------------.----- Palms Mobilehome Park Corporation. An additional promissory note and subordinate indebtedness will be added to the transfer price to allow the EDA to recapture the entire principal amount, plus interest, of the prior expenses paid by the EDA relative to the ownership of Pacific Palms. The original appraisal value of Pacific Palms was determined to be $3,450,000. An updated appraisal will be completed prior to transfer. The estimated resale price has been calculated at $4,066,002. The final transfer price will be based upon the following formula: (i) Bond debt assumed, plus (ii) EDA unreimbursed expenses, plus (iii) unpaid Mobile Home Park Conversion Consultant fee. The Trustee for the Bondholders has funds on deposit as of January, 1997, equal to an amount in excess of$399,141 which represents a portion of the valued-added adjustment which was made for the benefit of the Pacific Palms residents. Sequoia Plaza Sequoia Plaza was acquired for a cash purchase price with a portion of the proceeds of Bonds issued in a principal amount of $5,235,000. The proceeds of said Bonds and other deposits from the HOME funds were used to additionally fund the Debt Service Reserve Fund equal to $437,156, fund the Capital Reserve Replacement Fund equal to $71,353, and fund $18,734 into the Interest Account. The HOME funds in the amount of$331,000 were used to pay the additional costs of issuance and other expenses associated with the acquisition and the due diligence investigations. It was not financially possible for the Mobile Home Conversion Consultant fee to be paid in total from the proceeds of the Bonds or from the HOME funds, and this unpaid principal balance will be transferred as a debt obligation to be assumed by the Sequoia Plaza Mobilehome Park Corporation. An additional promissory note and subordinate indebtedness will be added to the transfer price to allow the EDA to recapture the entire principal amount, plus interest, of the prior expenses paid by the EDA relative to the ownership of Sequoia Plaza. The original appraisal value of Sequoia Plaza was determined to be $5,760,000. An updated appraisal will completed prior to transfer. The estimated resale price has been calculated at $6,467,605. The final transfer price will be based upon the following formula: (i) Bond debt assumed, plus (ii) EDA unreimbursed expenses, plus (iii) unpaid Mobile Home Park Conversion Consultant fee. The Trustee for the Bondholders has funds on deposit as of January, 1997, equal to an amount in excess of $635,436 which represents a portion of the valued-added adjustment which was made for the benefit of the Sequoia Plaza residents. ------------------------------------------------------------------------------------------------------------------ REW:lmp:trans.cdc COMMISSION MEETING AGENDA MEETING DATE: 03/03/1997 Agenda Item Number: ~ e e e Economic Development Agency Staff Report Authorization to Sell Mobilehome Parks February 26,1997 Page 7 -------------------------------------------------------------------------------------------------------------------------- Friendly Villllgll On December 16, 1996, the Agency duly noticed and conducted a public hearing in accordance with the requirements of Health & Safety Code Section 33431 concerning the sale of the Friendly Village Mobile Estates (Friendly Village) from the Agency to the Friendly Village Mobile Home Park Corporation. On that same date, the Commission adopted Resolution 5501 approving the transfer of Friendly Village from the Agency to the Friendly Village nonprofit corporation. It is necessary for the Mayor and Common Council to conduct a public hearing and adopt a resolution approving the transfer of Friendly Village. RECOMMENDATION: Staff recommends adoption of the attached Resolutions to authorize the sale of the Glen Aire Mobilehome Park from the EDA ownership to the Glen Aire Mobilehome Park Corporation for a resale price estimated at $3,656,125, the Pacific Palms Mobilehome Park to the Pacific Palms Mobilehome Park Corporation for a resale price estimated at $4,066,002, the Sequoia Plaza Mobilehome Park to the Sequoia Plaza Mobilehome Park Corporation for a resale price estimated at $6,467,605, and Friendly Village Mobilehome Park to the Friendly Village Mobilehome Park Corporation for a resale price estimated at $2,450,000, based upon final determination and assumption by the respective nonprofit corporations of the existing bonded indebtedness, reimbursements to the EDA and assumption of the other obligations as set forth in this EDA staff report. zi/~ , RON E. WINKLER, Director Development Department ------------------------------------------------------------------------------------------------------------------ REW:lmp:trans.cdc COMMISSION MEETING AGENDA MEETING DATE: 03103/1997 Agenda Item Number: l