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FC#l REFINANCING OF ANOKA COUNTY HRA BONDS RELATING TO THE SAVANNAH OAKS SENIOR HOUSING PROJECT By: Diana Lund, Finance Officer Background: In 1998 the City entered into a Joint Powers Agreement with the Anoka County Housing and Redevelopment Authority (HRA) to fund the construction of the City's Senior Housing project currently knoWn as Savannah Oaks. There was a total of$4,195,000 in debt issued to fund the project. The County HRA issued a $3,000,000 Revenue bond that was backed by the City's General Obligation Pledge (City's taxing/levying power) and the City issued a $1,195,000 Tax Increment Financing Bond currently being paid with rental revenue and an annual County HRA levy and backed by Tax Increment District #4. Both of these issues are paid with rental revenue and the HRA County levy. The City had a separate bond issue as a County HRA can only issue a maximum of three million. The Joint Powers Agreement between the Anoka County HRA and the City stated that first priority would be given to Ramsey residents if they chose to live in the Savannah Oaks building. Anoka County HRA contacted the City in December 2007 about refinancing the HRA bonds due to attractive interest rates. They were proposing to remove the City's general obligation pledge in exchange that the Ramsey resident priority be removed when there is a vacancy available. Thus, an opening would be open to all Anoka County residents. On January 8, 2008, Karen Skepper from the Anoka County HRA and Kathy Cardell from Ehlers and Associates were present at the City Council meeting to discuss the refinancing and the resident priority list. All members of the council, with the exception of Mary Jo Olson who was absent, voted yes to removing the priority list and allow the County to refinance the bonds. With the City's agreement of the refinancing, the Joint Powers Agreement with the County HRA and the City will need to be amended. As part of the amendment, the County is asking for a five- year operating deficit agreement, which is similar to what the County has with other HRA- financed senior housing projects. Under this agreement, if project revenues (rent fees) plus the HRA levy are insufficient to pay the operating expenses of the facility (not debt service), the City would be required to fund such a deficit for a period of five years only. The City has approximately $320,000 from prior year HRA levy collections, currently being held at the County, to cover these deficits. After the initial council presentation in January, the County HRA and the County's finance group (Ehlers) contacted the City about using the City's $320,000 as an equity contribution to pay down the debt. The County HRA states that their primary objective is to ensure long-term financial stability of Savannah Oaks and it is recommended that some of the City's levy balance be used to achieve this. The use of this balance may result in the reduction in the amount of the HRA County levy needed in future years. A memo from Ehlers is attached outlining this proposal and the County and Ehlers will be present to discuss this request at the Finance Committee meeting.