SCIDPDA Village Square II Fiscal Note

Department:	Contact Person/Phone:	DOF Analyst/Phone:
Finance	Michael van Dyck 4-8347	Jan Oscherwitz 4-8510

Legislation Title:

AN ORDINANCE relating to the Seattle Chinatown-International District Preservation and Development Authority’s International District Village Square Project; authorizing the City to execute two separate guaranty agreements guaranteeing tax exempt bonds to be issued by the Authority for the support of the International District Village Square Two Project (“IDVSII Project”); establishing the terms and conditions under which the City will provide each such guaranty; and authorizing guaranty agreements, depository agreements, a reconveyance to the Authority of the City's interest in the real property which was the City's security for the City’s guaranty of the Village Square One Bond Issue or a subordination agreement relating thereto, and such related documents and agreements as are necessary between the City, the Authority and other parties with regard to the Authority's issuance of the bonds and the City's guaranties.

Summary of the Legislation:

The attached legislation:

1) Authorizes the City to guaranty $10.8 million of limited tax general obligation bonds to be issued by the Seattle Chinatown International District PDA for the Village Square II project.

2) Authorizes the City to release or subordinate approximately $1.9 million of land from the City’s security on the guaranty of the 1996 Village Square I bonds requirement for securing a tax credit partner.

Appropriations (in $1,000’s):

Fund Name and Number	Department	Budget Control Level*	2002 Appropriation	2003 Anticipated Appropriation
N/A	N/A	N/A	N/A	N/A
TOTAL

* This is line of business for operating budgets, and program or project for capital improvements

Notes: There are no appropriations associated with this ordinance. Appropriations for the Library and Community Center projects have occurred/will occur through the City’s annual budget process. The City will only incur additional expenses in the event that SCIDPDA fails to meet bond requirements.

Anticipated Revenue/Reimbursement (in $1,000’s):

Fund Name and Number	Department	Revenue Source	2003 Revenue	2004 Revenue
N/A	N/A	N/A	N/A	N/A
TOTAL

Total Permanent Positions Created Or Abrogated Through Legislation, Including FTE Impact; Estimated FTE Impact for Temporary Positions:

Fund Name and Number	Department	Position Title*	2003 FTE	2004 FTE
N/A	N/A	N/A	N/A	N/A
TOTAL

* List each position separately

Do positions sunset in the future? (If yes, identify sunset date):

No

Background (Include brief description which states the purpose and context of legislation and include record of previous legislation and funding history, if applicable):

The Seattle Chinatown-International District Preservation and Development Authority (“PDA”) is developing a $24,938,000 mixed-use facility that includes a branch library, community center, affordable housing, office and retail space, and structured parking. The City is a partner in this project, having committed Libraries for All funds for tenant improvements in a 4,000 sq. ft. library and 1999 Community Center Levy funds for a 7,000 sq. ft. community center, Office of Housing funds to support 57 housing units and Neighborhood Matching Fund, CDBG and Parks Opportunity Fund funds to support construction of a gym. The PDA will issue two series of revenue bonds for this project to be repaid with rents from the housing units and parking revenues. To reduce cost of borrowing, the PDA has requested a City debt guaranty for up to $10.8 million. The PDA will also seek a commercial loan for the retail component of the project. The PDA is pursuing private and non-City public funding to fill a $380,000 funding gap.

The PDA intends to pay debt service on these bonds from project revenues (including the Library lease) and the City would only be called upon to cover those costs if PDA revenues fall short of expectations. Since the PDA debt is guaranteed by the City, it reduces the City’s legal debt capacity. Please see the attached detailed analysis of this project for risks and remedies of this debt guaranty.

Sources

Fund Source	Total	Comments
Seattle Office of Housing	$2,550,000	Full amount approved in Spring NOFA
Seattle Housing Authority	1,662,878	Fully committed
Federal Home Loan Bank	256,000	Fully committed
Housing Trust Fund	1,900,000	Awarded April 30, 2002
Park Levy Opportunity Fund	250,000	Approved
Neighborhood Matching Fund	199,000	Allocated June 2001
1999 Community Center Levy	2,100,000	Levy Lid Lift passed by voters November 1999
SCIDPDA Contribution	1,966,027	Land and other SCIDPDA contribution
Low Income Housing Tax Credit	4,500,676	Available upon certification of tenants as income-eligible, short term bonds to be used in interim
Community Development Block Grant	175,000	Reimbursement basis
Fundraising	2,152,948	$360,000 is still pending
Misc Income (pre-development)	248,882
Financing
Bond Cap	3,187,000	Available at closing
Tax Exempt Bonds	2,790,000	To be paid back from parking and library rent revenies.
Conventional Financing	1,000,000	Loan from WAMU
Total	$24,938,411

Uses

	Housing	Library	Community Center	Retail	Parking	Total
Acquisition	1,117,561	65,500	225,698	90,469	422,371	1,921,599
Construction	9,586,571	624,916	2,961,383	863,136	3,265,708	17,301,714
Development (Professional)	1,506,436	93,252	441,908	128,800	487,320	2,657,716
Other Development	1,608,987	125,420	279,796	365,896	677,283	3,057,382
Total	$13,819,555	$909,088	$3,908,785	$1,448,301	$4,852,682	$24,938,411

The financial cost of not implementing the legislation

Without the City’s debt guaranty, the project would not go forward. The City would need to find alternative sites for the voter approved Library and Community Center in the International District.

Possible alternatives to the legislation which could achieve the same or similar objectives :

The City could build stand-alone facilities or find alternative partners to develop the Library and Community Center in the International District.

Is the legislation subject to public hearing requirements (If yes, what public hearings have been held to date):

No

Other Issues (including long-term implications of the legislation):

The Project poses a variety of credit risks of varying magnitudes. The analysis contemplates that each component (Housing Project and the Non-Housing Project) are separate credits. The projects can be broken down further into four distinct repayment sources:

Project Pledged Revenues Repayment Exposure

i) Long-term housing Section 8/other rental income $216,000 annually

ii) Short -term housing Tax credit receipts $4,370,000 lump sum

iii) Long-term Library Library lease payments $60,000 annually

iv) Long-term parking garage Parking revenues $123,800 annually

The attached financial analysis details these risks and proposes potential remedies. This legislation also authorizes the City to release or subordinate approximately $1.9 million of land from the City’s security on the guaranty of the 1996 Village Square I bonds requirement for securing a tax credit partner. This reduces the City’s security on the outstanding Village Square I bonds.

FOR CAPITAL PROJECTS ONLY

Background:

See description above. The City provided $9M debt guaranty for IDVS I in 1996. $8.6M is still outstanding. The Council passed Resolution 30491 in July 2002 to support the City’s negotiations with the PDA for a debt guaranty agreement for up to $12M for IDVS II. The City’s components of the project are described in the proposed 2003-2008 CIP in SPL’s Project BLIDV and Parks Project K734852. For a complete analysis, see attachment to fiscal note.

Project Name:	Project Location:	Start Date:	End Date:
International District Village Square II	8^th Ave South and Dearborn	October 2002	November 2004, some occupancy in July 2004

Spending Plan and Future Appropriations for Capital Projects ($000s)

Spending Plan and Budget	2002	2003	2004	2005	2006	2007	Total
Spending Plan (Non-Housing)
Spending Plan (Housing)
Current Year Appropriation	N/A
Future Appropriations		N/A	N/A	N/A	N/A	N/A

Key Assumptions:

See attached financial report.

Funding source (Identify funding sources including revenue generated from the project and the expected level of funding from each source):

Funding Source	2002	2003	2004	2005	2006	2007	Total
Library				75,000	75,525	76,068	$226,593
Parking				216,233	230,452	237,559	$684,244
Vacancy and Loss				-17,474	-18,359	-18,818	$-54,651
TOTAL				$273,759	$287,618	$294,809	$856,186

Bond Financing Required (If the project or program requires financing, please list type of financing, amount, interest rate, term and annual debt service or payment amount. Please include issuance costs of 3% in listed amount):

Type	Amount	Assumed Interest Rate	Term	Timing	Expected Annual Debt Service/Payment
Series A Short	$4,370,000	1.9%	30 months	Nov 2002	Lump sum payment
Series A Long	$3,187,000	5.07%	30 year	Nov 2002	$216,000
Series B Long	$2,790,000	4.85%	30 year	Nov 2002	$183,800
TOTAL	$10,347,000

Key Assumptions:

Based on SCIDPDA’s pro-formas. Numbers are slightly different from the consultant report

Uses and Sources for Operation and Maintenance Costs for the Project:

O&M	2002	2003	2004	2005	2006	2007	Total
Uses
Start Up			N/A	N/A	N/A
On-going Community Facilities				78,856	81,616	81,265	$241,737
On-going Housing				235,350	243,588	252,113	$731,051
Sources (itemize)

Key Assumptions:

Based on SCIDPDA’s pro-formas. Includes Administrative Fees, utilities, insurance, security, maintenance, also assumes fire alarm testing not necessary after 2006

Periodic Major Maintenance costs for the project (Estimate capital cost of performing periodic maintenance over life of facility. Please identify major work items, frequency):

Major Maintenance Item	Frequency	Cost	Likely Funding Source
Various	Various	Various	Tenant income or funding raising
TOTAL

Funding sources for replacement of project (Identify possible and/or recommended method of financing the project replacement costs):

N/A