ORDINANCE ___________

AN ORDINANCE relating to low-income housing; establishing the Multifamily Rehabilitation Loan Program; authorizing the execution of contingent loan agreements with the owners or developers of certain low-income housing; authorizing City participation in a program of the Washington State Housing Finance Commission; authorizing the Director of the Office of Housing to make, originate and service loans, to accept deeds of trust and other security in connection therewith and to sell or assign those loans; increasing an expenditure allowance in the 2002 Adopted Budget of the Office of Housing; authorizing the establishment of certain funds and accounts; and ratifying and confirming prior acts, all by a three-fourths vote.

WHEREAS, RCW 35.21.685 authorizes cities to assist in the development of publicly or privately owned housing for persons of low income by providing loans or grants of general municipal funds to the owners of developers of the housing; and

WHEREAS, the City desires to assist property owners, including those recovering from recent earthquake damage, to provide new or rehabilitated low-income housing, in the Chinatown-International District and Pioneer Square neighborhoods; and

WHEREAS, RCW 43.180.050 and other statutes authorize the Washington State Housing Finance Commission and other qualified issuers (collectively, the "Commission") to issue bonds to finance loans to finance the rehabilitation of multifamily housing, and to apply the proceeds of those bonds to purchase loans from mortgage lenders including, under RCW 43.180.020, the City; NOW, THEREFORE,

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. Establishment of Program. There is hereby established a Multifamily Rehabilitation Loan Program (the "Program") for the purpose of assisting property owners and developers, including owners and developers of buildings recovering from recent earthquake damage, to provide new or rehabilitated housing for lowincome persons in the Chinatown-International District and Pioneer Square neighborhoods, as shown on Exhibit 2 to this ordinance. The term "low-income persons" shall be as defined in RCW 35.21.685. The owners or developers of housing that qualifies under the Program ("Borrowers") will be required to commit to rent restrictions as follows: 40% of the residential units created will have rents that are affordable to households with incomes at 60% of the area median family income, as adjusted for household size based upon the number of bedrooms in the unit. The remaining residential units will have rents affordable to households with incomes at the low-income limit set by the United States Department of Housing and Urban Development ("HUD") for the Seattle area for the Section 8 program, but no higher than 80% of area median family income, adjusted as stated above. The affordability requirement will remain in effect for a minimum of 15 years from the date of construction completion. The Program shall be carried out substantially in accordance with the "Seattle Multifamily Rehabilitation Loan Program Description" attached as Exhibit 1 and incorporated herein by this reference, but in case of any conflict between Exhibit 1 and the provisions of this ordinance, the language of the ordinance shall control.

Section 2. Origination and Sale of Loans. To carry out the Program, the Director of the Office of Housing (the "Director") is authorized to make and/or originate not to exceed Ten Million Dollars ($10,000,000) of short-term loans and not to exceed Ten Million Dollars ($10,000,000) in long-term loans (collectively, the "Loans") to the owners or developers of housing that qualifies under the Program and to sell and assign those Loans to the Commission or the Commission's designee. The Loans may have fixed or variable rates of interest, and may be structured as long-term or short-term obligations (including lines of credit) or any combination thereof. Short-term Loans shall not be of more than three years duration. The maximum total term of the Loan or Loans on any property, including both the short-term Loan and long-term Loan if applicable, shall be eighteen (18) years. The interest rate on any Loan shall not exceed ten percent (10%) per annum. Loans shall be made to Borrowers on a recourse basis. The Director may waive the requirement for Loans being made on a recourse basis if the applicant is a limited partnership or limited liability corporation and the director makes a determination that non-city sources of funding can be more effectively leveraged without a recourse Loan.

The Loans in this Program may not be made from City funds except to the extent of any appropriations expressly for such purpose; however, nothing in this ordinance shall limit eligibility of any property for funding under other City programs. Loans may be funded from the proceeds of either tax-exempt or taxable obligations issued by the Commission. At the Director's discretion, after consultation with the members of the Housing, Human Services, Education and Civil Rights Committee of the City Council within 90 days of adoption of this ordinance, the Office of Housing may retain and carry out the servicing of those Loans or may sell and assign the Loans with servicing released. The Director may require and accept deeds of trust and other instruments to provide security for repayment of the Loans and to commit the housing to low-income use for a specified period. The Director is authorized to provide for costs of the Program (including without limitation fees paid to the Commission, any trustee or custodian and other transaction costs) from allowances in the Adopted Budgets of the Office of Housing, in an amount not to exceed Two Hundred Thousand Dollars ($200,000) of general municipal funds and other money of the City legally available therefor, which amount shall be recovered through loan origination, monitoring, servicing fees, or bond proceeds. All funds received by the City from Loan origination fees or otherwise as reimbursement for the costs of the Program and staff services authorized by this ordinance shall be deposited in the Low Income Housing Fund. Conditioned upon the receipt of such fees and other reimbursements, and only to the extent that they are received by the City and deposited in such Fund, the following increase in expenditure allowance in the 2002 Adopted Budget is hereby made and authorized:

Fund

Department

Line of Business

Amount

16400 Low Income Housing Fund

Office of Housing

Housing

$200,000

The Director may also set aside and retain in an account within the Low Income Housing Fund, an amount not to exceed One Million Dollars ($1,000,000) to serve as a reserve to fund loans under the contingent loan agreements authorized in Section 3 of this ordinance.

The Director is authorized to make or originate Loans that meet prudent underwriting standards, as established by the Director. Such underwriting standards shall include provisions that Loans made under the Program, in combination with any senior debt on the property, have a loan-to-value ratio of 80% or greater of the postrehabilitation value. Underwriting standards will also require that applicants demonstrate that, in the judgment of the Director, they have satisfactory ability directly or through contracted services, to oversee the rehabilitation and to perform sound property management of any property receiving a Loan under the Program. Loans funded through the Program are limited to a maximum of $90,000 per housing unit. The per unit loan limit may be adjusted annually in accordance with changes to the Consumer Price Index ("CPI"). The Director shall encourage applicants to leverage other non-city funding sources for the rehabilitation of their properties. Program Loans shall be awarded via a competitive, widely publicized, application process. In the event that applications for the Program exceed available Loan funds, the Director will give priority to properties that require significant rehabilitation to address building code and health and safety deficiencies, with further priority for such buildings that are occupied.

The Director is authorized to enter into an agreement with the Commission that provides for the City and Borrowers to participate in a multifamily housing finance program of the Commission and for the Commission's reservation of a sufficient amount of the private activity bond allocation under chapter 39.86 RCW as may be necessary to carry out the Program. That agreement may provide for, among other things, such Program requirements and Borrower covenants as may be necessary to maintain the exclusion from gross income of interest received on bonds issued by the Commission to purchase Loans made under the Program.

The Director may contract with the Commission or the Commission's designee (including without limitation any custodian or trustee) and arrange for the establishment of or use of funds or accounts so established or provided for the purpose of carrying out the Program. The Director of Finance of the City is authorized to establish such accounts within the Low Income Housing Fund for the deposit and expenditure of money of the City budgeted for the Program. To carry out the Program, the Director of Finance is further authorized to establish special accounts for the deposit and disbursement only of money other than money of the City.

The Director shall report to the City Council on the status of the Program no later than September 1 of each year.

Section 3. Contingent Loan Agreements. The Director may enter into contingent loan agreements with Borrowers and the Commission or its designee and/or with Borrowers and/or other public or private sector lenders (collectively "Contingent Loan Agreements"), under which agreements the City will provide an irrevocable commitment to fund long-term or short-term contingent loans to those Borrowers in the future to provide for the payment of principal and interest the event that such owners fail to make timely reserve or debt service payments on the Loans that have been made by or sold or assigned to the Commission or to other lenders. The Contingent Loan Agreements shall provide that the City will make contingent loans that will be funded at such time or times, if any, as a Borrower is unable, because of lack of specific revenues, to make or replenish a required payment into a reserve or to pay the principal of and interest on a Loan made under the Program. Any contingent loan may be funded in a series of advances, and shall be repaid, with such interest rates and under such terms and conditions as the Director may prescribe. Such terms shall require the repayment of principal of such advance and interest thereon from the first available net revenues of a project in excess of the amounts needed to provide the interest and principal payments then due under bonds issued by the Commission or to provide for debt service owing to other public or private lenders under the Program.

The obligation of the City to fund the contingent loan payments and to perform and observe the other obligations on its part in connection with the contingent loans and the Program shall be absolute and unconditional, and shall not be subject to diminution by setoff, counterclaim, abatement or otherwise. The obligation of the City to advance funds to the Commission or its designee under the Contingent Loan Agreements at the times and in the manner described therein shall be absolute and unconditional, and shall not be subject to diminution by setoff, counterclaim, abatement or otherwise.

The obligations of the City under the contingent loan agreements shall terminate upon payment in full of the principal and interest on all outstanding bonds issued by the Commission to finance the Loans and/or the retirement of other loans made by public or private lenders under the Program backed with contingent loan obligations.

The total amount of money to be loaned by the City pursuant to Contingent Loan Agreements shall not exceed the amounts required to make payments of interest and principal on Loans with a total principal amount of Ten Million Dollars ($10,000,000). The Director may require and accept deeds of trust and other instruments to provide security for repayment of such loans.

Nothing in Section 2 or 3 of this ordinance shall be deemed to create an indebtedness of the City as that term is used in Chapter 39.36 RCW.

Section 4. General Authorization.

The Mayor, the Director and the Director of Finance of the City and each of the other appropriate officers of the City are each authorized and directed to do everything as in their judgment may be necessary, appropriate or desirable in order to carry out the terms and provisions of, and complete the transactions contemplated by, this ordinance.

Section 5. Severability.

The provisions of this ordinance are declared to be separate and severable. If a court of competent jurisdiction, all appeals having been exhausted or all appeal periods having run, finds any provision of this ordinance to be invalid or unenforceable as to any person or circumstance, such offending provision shall, if feasible, be deemed to be modified to be within the limits of enforceability or validity. However, if the offending provision cannot be so modified, it shall be null and void with respect to the particular person or circumstance, and all other provisions of this ordinance in all other respects, and the offending provision with respect to all other persons and all other circumstances, shall remain valid and enforceable.

Section 6. Ratification of Prior Acts. Any action taken consistent with the authority but prior to the effective date of this ordinance and consistent with its terms, is ratified, approved and confirmed.

Section 7.

Section Headings.

The section headings in this ordinance are used for convenience only and shall not constitute a substantive portion of this ordinance.

Section 8. Necessary Expenditures; Effective Date.

The appropriation in this ordinance is made to meet actual necessary expenditures of the City for which insufficient appropriation has been made due to causes which could not reasonably have been foreseen at the time of the making of the 2002 Budget; Now, Therefore, in accordance with RCW 35.32A.060, by reason of the facts above stated, this ordinance shall take effect and be in force thirty (30) days from and after its approval by the Mayor, but if not approved and returned by the Mayor within ten (10) days after presentation, it shall take effect as provided by Municipal Code Section 1.04.020.

PASSED by a three-fourths (3/4) vote of all the members of the City Council the ____ day of _____________, 2001, and signed by me in open session in authentication of its passage this ____ day of ______________, 2001.

President of the City Council

Approved by me this ___ day of ____________, 2001.

Mayor

Filed by me this ____ day of ______________, 2001.

City Clerk

(SEAL)

Exhibit 1: Seattle Multifamily Rehabilitation Loan Program Description

Exhibit 2: Map of Pioneer Square and Chinatown-International District

ep/OH

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