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HomeMy WebLinkAboutRDA AG PKT 2009-01-26 #3AGENDA STAFF REPORT DATE: January 26, 2009 TO: Chairperson and Members of the Redevelopment Agency THRU: David Carmany, Executive Director FROM: Lee Whittenberg, Director of Development Services SUBJECT: SEAL BEACH MOBILE HOME PARK BONDS SUMMARY OF REQUEST: Seal Beach Shores, Inc. ("Trailer Park Residents' Group") has requested that the Redevelopment Agency explore the feasibility of the Trailer Park Residents' Group assuming bonds issued by the Agency in 2000 in connection with the acquisition of the Seal Beach Trailer Park. Staff seeks direction from the Agency Board of Directors. If the Board wants to explore the feasibility, Staff will contact Bond Counsel to find out whether an opinion from Bond Counsel is needed and ACA Financial Guaranty Corporation (ACA") to find out if ACA would approve the "assumption." BACKGROUND: The City has received the attached letter from The Loftin Group, the law firm that represents the Trailer Park Residents' Group. The letter requests consideration of the Agency "... to explore the feasibility of the resident's 501(c)(3) entity assuming the existing City bonds originally issued for the park purchase by L/NC Housing." Please refer to Attachment 1 to review the letter from The Loftin Group, dated December 18, 2008. In 2000, the Redevelopment Agency issued bonds for the purpose of loaning funds to LING Community Development Corporation ("LING") to allow LING to acquire the Seal Beach Trailer Park. The Bonds are secured solely by loan repayments made by LING from rental revenue and no City or Agency funds were pledged to the Bond repayment. The Underwriter is Pam Newcomb of Kinsell, Newcomb & De Dios, Inc. Best Best & Krieger LLP acted as bond counsel. ACA Financial Guaranty Corporation ("ACA") issued the bond insurance policy. Under the terms of the policy, ACA unconditionally and irrevocably guarantees the full and complete payment of all bond principal and interest payments. Agenda Item 3 Page 2 In 2006, the Trailer Park Residents' Group notified the Agency that it wants to acquire the Park from LING, and would be willing to pay off the Bonds. At that time, the Agency directed the Group to prepare all necessary paperwork and take all preliminary steps to accomplish the sale, and to approach the Agency once Agency approval was needed. The Trailer Park Residents' Group agreed to reimburse the Agency for any costs and expenses incurred by Agency staff, attorneys and consultants in connection with the Group's request, and deposited $10,000 as the initial deposit. In 2006, staff formulated the following rough estimate, subject to change: (1) Agency's staff costs and expenses: $10,000.00 (2) Agency's legal fees and expenses: $5,000.00 (3) Agency's consultant fees and expenses: $5,000.00. The Agreement acknowledged that such estimates are estimates only, and represent a reasonable approximation based upon past experience and then- current hourly rates. According to the December 18, 2008 Loftin Group letter, the cost of "defeasing" the Bonds is too expensive. Thus, the Trailer Park Residents' Group wants the Agency to consider an assumption of the Bonds by the Trailer Park Residents' Group. As part of the financing, several documents were executed and/or recorded that include provisions regarding a future transfer of the park to a different ownership entity. Provided below is a summary of those documents and the applicable provisions, as currently identified by staff: ^ Loan Agreement by and among the Redevelopment Agency of the City of Seal Beach, as Issuer, and Union Bank of California, as Trustee, and LINC Community Development Corporation, as Borrower, dated December 1, 2000 -Section 6.2, Borrower Not to Dispose of Assets: Conditions Under Which Exemptions Permitted; and Section 6.32, Transfer to Single Purpose Entity; ^ Regulatory Agreement and Declaration of Restrictive Covenants by and among the Redevelopment Agency of the Ciry of Seal Beach, as Issuer, and Union Bank of California, as Trustee, and LINC Community Development Corporation, as Borrower, dated December 1, 2000 - Section 10, Sale or Transfer of the Project; ^ Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, Recorded December 20, 2000 -Section 1.12, Transfer of Trust Estate by Trustor; and ^ Loan and Grant Agreement by and between the Redevelopment Agency of the City of Seal Beach and LINC Community Development Corporation, dated December 1, 2000 Section 4.14, Transfer. Page 3 FISCAL IMPACT: As noted above, the Trailer Park Residents' Group agreed to reimburse the Agency for all costs and expenses incurred by Agency staff, attorneys and consultants in connection with its request, and deposited $10,000 with the Agency to reimburse the Agency for any costs and expenses. It is not known at this time whether the $10,000 is sufficient to cover all costs and expenses. RECOMMENDATION: Redevelopment Agency to provide direction to Staff. e Whittenberg irector of Development Se ' es Attachment: NOTED AND APPROVED: ~~~ David Carmany, Executive Director Redevelopment Agency A. Letter from The Loftin Group re: Seal Beach Mobile Home Park, dated December 18, 2008 Carlsbad Location 576017eet Street, Ste. 110 Carlsbad, Celriorme 92008 Tel: 760.431.2171 fax: 760 431.2003 Respond to Carlsbad, CA Location www loklnfitm tx[m 1mtirlgueQlokmfum.com i n F i r m ®. '-~ -:Tf.~~- ~'S Attorneys at Law Via emarl (Iwhtttenbert~ci.seal-beach ca us1 and US IYlatl December I8, 2008 Lee Whittenberg City of Seal Beach 211 8"' Street Seal Beach, CA 90740 Re: Seal Beach Mobile Home Park Dear Lee: Tennessee Location 407 Main Sheet, Ste. 205 frnnklrn, Tennessee 37064 Tel• 615.56'76722 fsx.• 615.567.6723 Client/Matter NumberaSO It was a pleasure speaking with you earlier this week As you know, our Firm is counsel to Seal Beach Shores, Inc., the resident group formed and organized to purchase Seal Beach MHP and convett the pazk to a "resident owned community." Earher this year we were able to qualify Seal Beach Shores, Inc., a California non-profit public benefit corporation as a 50](c)(3) tax exempt organization. The resident association is a Limited Equity Housing Cooperative which ensures the affordability within the park for generations to come more so even than the current regulatory agreements. The "limited equity" component applies to all membership in the coop. A copy of our lRS exempt ruling is attached for your reference. The purpose of this correspondence is to iniriate a dialogue with the City to explore the feasibility of the residents' SOl(c)(3) entity assuming the existing City bonds originally issued for the park purchase by LINC Housing. While the residents have been pursuing federal financing through HUD (Dept. of Hauling and Urban Development), given recent market conditions ,the cost to `~defease" the bonds is rather high, w}uch cost would ultimately be passed on to the residents. As a practical matter, the debt service on the bonds is already being paid by the residents' rental payments. With the resident owned park, that practice would continue -rents (or assessments) would be paid to the limited equity coop, and the limited equity coop would make the principal and interest payments under the bonds. Further, the security of the bond holders is better than it was then eight years ago when the bands were originally issued -the original principal amount of the bond issuance has been significantly paid down with the residents' rents over the last nearly 10 years. I would appreciate Finding a time to sit down with the City and discuss the mechanics of this option in greater detail. I look forward to hearing from you THE L'QFTIN FIRM, LLP Jon cc: Client M \SuIBCUh\Q[yLLa Whnunhre wrth Bmd Auumpl.on Requert vl 13-IAAh dm INTERNAL REVENUE SERVICE P. 0. BOX 2508 CINCINNATI, OH 45201 Date: ~d~~° ~ F~~D~ SEAL BEACH SHORES INC C/0 JON P. ROGRiQUE THE LGFTIN FIRM 5760 FLEET STREET, SUiTE 110 CARLSBAD, CA 92008-4713 Dear Applicant: DEPARTMENT OF THE TREASURY Employer identification Number: 37-1530795 DLN: 17053352019006 Contact Person: JOANN DUNHAM ID# 95215 Contact Telephone Number: (877) 829-5500 Accounting Period Ending: December 31 Public Charity Status: 509(a)(2) Form 990 Required: Yes Effective Date of Exemption: November 14, 2005 Contribution Deductibility: Yes Advance Ruling Ending Date: December 31, 2009 Addendum Applies: No We are pleased to inform you that upon review of your application for tax exempt status we have determined that you are exempt from Federal income tax under section 501(c)(3> of the Internal Revenue Code. Contributions to you are deductible under section 170 of the Code. You are also qualified to receive tax deductible bequests, devises, transfers or gifts under section 2055, 2106 or 2522 of the Code. Because this letter could help resolve any questions regarding your exempt status, you should keep it in your permanent records. Organizations exempt under section 501(c)(3) of the Code are further classified as either public charities or private foundations. During your advance ruling period, you will be treated as a public charity. Your advance ruling period begins with the effective date of your exemption and ends with advance ruling ending date shown in the heading of the letter. Shortly before the end of your advance ruling period, we will send you Form 8734, Support Schedule for Advance Ruling Period. You will have 90 days after the end of your advance ruling period to return the completed form. We will then notify you, in writing, about your public charity status. Please see enclosed Publication 4221-PC, Compliance Guide for 501(c>(3) Public Charities, for sane helpful information about your responsibilities as an exempt orgam zation, Letter 1045 (DO/CG) -2- SEAL BEACH SHORES INC We have sent a copy of this letter to your representative as indicated in your power of attorney. Sincerely, Robert Choi Director, =xempt Organizations Rulings and Agreements Enclosures: Publication 4221-PC Statute Extension Letter 1045 (DO/CG) Fom, tczz law s-zaosl na.,ro. Seal Beach Shores, Inc EiN 3T _ 7530795 pa5e 1t Pubitc Chanty Status /Continued) e 509(a)(4)-an organization organized and operated exclusively for testing for public safety. ^ f 505(a)(1) antl 770(b)(1)(A)(iv}-an organization operated for the benefk of a college or university that is owned or ^ operated oy a governmental unit g 509(a)(1) and i70(b)(1 )(A)(vi}-an organization that receives a substantial part of Its financial suopcrt in the farm ^ or contrioutions from publicly supported organizations, tom a dovernmeraal unit, or from the general public h 509(a)(2)-an organization that normally receives not more than one-third of Its financial support from gross investment income and receives more than one-third of its financial support frcm contnhutions, membership fees, and gross receipts from activities related to Its exempt funC.lons (subiect to certain exceptions). i A publicly supported organization, but unsure rf it is described in Sg or Sh The organization would like the IRS to [i decide the correct status 6 If you checked box g, h, or i In question 5 above, you must request either an advance or a definitive ruling oy seleCing one of the poxes below. Refer to the instructions to determine which type of ruling you are eligible to receive. a Request for Advance Ruling: By checking this box end signing the consent, pursuant to section 6501(c)(4) of ~ the Coda you request an advance ruling and agree to extend the statute of limitations on the assessment of excise tax under section 4940 of the Code. The lax will apply only if you do not establish public support status at the end of the 5-year advance ruling period The assessment period will be extended for the 5 advance ruling years to B years, 4 months, and 15 days beyond the and of the first year. You have the right to refuse or Iamt the extension to a mutually agreed-upon period of time or Issue(s). Publication 1035, cxiencing the Tax Assessment Penod, provides a more detailed explanation of your rights and the consequences of the choices you make. You may obtain Publication 1035 free of charge from the I.RS web site at www.rrs.gov or by calling toll-free 1-900-629-3676. Signing this consent will not deprive you pf any appeal righ?s to which you would otherwise be enbtled If you Decide not to ez[end the statute of limitations, you are not eligible for an advance ruling. , Consent Fixing Pefiod of Limitations Upon Assessment of Tax Under Section 494D of the Internal Revenue Code For Organization Alan Goudge rL t) Q .................~ ~---~--~-- .....t.../....Li.... (-agrutura m OMcer, eater, ~ ee, leer (Type m port. name of si n aulhalznd ofM1cleq ~ ~ g ~ IOale) President (Typo er print tltk a au[honty pl signer) For lg~ Only -v. -' _ . ~" 1R1_- ~ f~i IRS fxrectw, Exempt Organaatwns ------ ----~ .................... b Request for Definitive Ruling: Cheok this bcx if you have completed one tax year of at least 9 full months and ^ you are requesting a definitive ruling. To confirm your public support status, answer Ilne 6b(i) if you checked box g in line 5 above Answer line 6b(li) If you checked box h in line 5 ab If ove. you checked box i in Ilna 5 above, answer both lines 6b(i) and (n). (I) (a) Enter 2% of line 6, column (e) on Part IX-A. Statement of Revenues and Expenses. (b) Attach a Ilst showing the name and amount contributed oy eacn person, company, or organization whose gifts totaled more than the 2% amount If the answer is "None " h k thi b ^ , c ec s ox. (ii) (a) For each year amounts are included on lines 1, 2, and 9 of Part IX-A. Statement of Revenues and Expenses, attach a list showing the name of and amount receiv d f " e rom each disqual rtied person. If the answer is "None," check tnis box. ~ (h) Fdr each year amounts are included on line 9 of Pert IX-A. Statement of Revenues and Expenses, aYUtch a hst showing the name of and amount recewed from eacn payer, other than a disqualified person, whose peymems were more than the larger of (1) 1 % of line 10, Part IX-A. Statement of Revenues and Expenses, or (2) $5,000 I` the answer is ' Ncne," cneck this box. _n 7 Did you receive any unusual grants during any of the years shown on Part IX-A. Statement of ^ Yes ° " ®N Revenues and 6tpensesv If Yes, attach a Ilst including the name of the contributor, the date and o amount of the grant, a brief descnp:lon of the grant, and explain why rt is unusual Farm 1023 (Rev &2006)