Explanation
BACKGROUND:
This legislation authorizes the Director of the Department of Development to forgive the principle and accrued interest for the property located at 3426 Corban Commons Dr., Columbus, Ohio 43219 that was originally developed by four mission driven non-profits Dayspring Christian Community Development Corporation, Columbus Housing Partnership dba Homeport, My Brother’s Keeper (affiliated with Mt Hermon Missionary Baptist Church) and New Salem Real Estate Holdings (affiliated with New Salem Baptist Church) for low income elderly housing. A HOME loan was made on December 21, 1988 in the amount of $720,000.00 from the City of Columbus for site acquisition and construction of the project which has been providing affordable housing for eligible residents since that time. The interest rate on the loan is 5.25% and the current balance of the loan exceeds $1,500,000.00. The required federal compliance period for this loan is complete and the restrictive covenant can be released. The project has never operated at a profit. The completion of the 20 year HOME affordability period has passed and the owner would like to recapitalize using 4% LIHTC funding and have requested gap funding from the City and other sources to do so.
The property is being refinanced and re-syndicated to allow the property to remain affordable housing for decades to come. In order to recapitalize the property it must take on additional debt. The owners must show the additional debt and the existing city debt can be paid in full for the new debt to not be considered a grant. If it is considered a grant, the low income housing tax credit basis and the corresponding tax credit equity will be reduced causing a funding gap.
The debt forgiveness policy of the Development Department allows debt forgiveness in those instances in which the affordability period has been completed and debt forgiveness will facilitate recapitalization of the project with a new affordability period and monitoring by an outside agency - in this case, it will be monitored by OHFA for an additional 30 years.
Emergency action is requested so that Agler Elderly Housing Limited Partnership can remove the debt from its financial statements before the property is recapitalized.
FISCAL IMPACT: There will be a loss of about $1,500,000.00 in fully reserved HOME receivables.
Title
To authorize the Director of the Department of Development to forgive the principal and accrued interest for Agler Elderly Housing Limited Partnership on a HOME loan due to the City of Columbus totaling approximately $1,500,000.00 and to declare an emergency.($1,500,000.00)
Body
WHEREAS, the Department of Development has approximately $1,500,000.00 in principal and accrued interest owed to it for a HOME loan made to Agler Elderly Housing Limited Partnership for the acquisition and rehabilitation of the project located at 3426 Corban Commons Dr. in Columbus; and
WHEREAS, this legislation would forgive approximately $1,500,000.00 of principal and accrued interest on the HOME loan; and
WHEREAS, this loan was made for the acquisition and construction of these rental units for low-to-moderate income (60% or below area median income) rental housing with a mortgage and terms that the loan would be repaid upon sale or transfer of the property, and
WHEREAS, the owner has sustained significant losses on the ongoing operation and maintenance of this project and has no belief that the loan can be repaid; and
WHEREAS, the property will continue to provide affordable housing to those who are elderly; and
WHEREAS, the City will have a loss of up to $1,500,000 in HOME principal and accrued interest receivable; and
WHEREAS, an emergency exists in the usual daily operation of the Department of Development, Housing Division, in that it is immediately necessary to authorize the forgiveness of the HOME loan due to the City of Columbus since completion of the 20 year HOME affordability period has passed and in order to allow the loan to be removed from the project owner’s financial statements before the property is recapitalized; and NOW, THEREFORE,
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF COLUMBUS:
SECTION 1. That the Director of the Department of Development be and is hereby authorized to forgive $720,000.00 of principal and all of the accrued interest totaling approximately $780,000.00 for the City HOME loan to Agler Elderly Housing Limited Partnership at the time that the project is recapitalized. There will be a loss of approximately $1,500,000.00 in principal and accrued interest receivable for the HOME Investment Partnerships program income.
SECTION 2. That this modification is made pursuant to Chapter 329 of the Columbus City Code.
SECTION 3. That for the reasons stated in the preamble thereto, which is hereby made a part hereof, this Ordinance is declared to be an emergency measure and shall take effect and be in force from and after its passage and approval by the Mayor, or ten days after passage if the Mayor neither approves nor vetoes the same.