Marion council OKs $4.2 million in bonds for housing project


CROPSignofSeptemberApt
CROPSignofSeptemberApt

The Marion City Council, by a vote of 3-1 with one abstention, adopted a resolution April 15 indicating intent to issue $4.2 million in industrial revenue bonds for the renovation of 20 apartments and construction of nine new duplexes.

City Administrator Doug Kjellin said the improvements will be at September I Housing, 1500 E. Main St.

“September I has 20 units that will be renovated, with seven of which not being rented at all right now,” he said, because the living conditions are unsuitable.

“September II is not being considered in this program and Victory Plaza Addition (across from the football field) has one duplex built and is anticipating another nine duplexes, which would be 18 more units.”

Prior to the regular meeting Monday, a 90-minute public hearing took place with a few people asking questions, voicing concerns or expressing encouragement.

Ruth Herbel, with the Marion Planning Commission, asked several questions ranging from clarity about who owns the property and structure of the bonds.

Kjellin said Homestead Rural Rehabilitation is Homestead Affordable Housing’s property ownership entity, which is why HRR will own the ground.

Sarah Steele, with Gilmore & Bell in Wichita, said her company represents the city.

“Homestead Rural Rehabilitation has separate counsel to represent them,” she said.

The city will end up owning the real estate and for the duration of the bond issue.

At this time, Steele said she wasn’t sure who has title to the properties, but if HAH is still in the chain of title, she indicated that a request be made to transfer all properties to the entity that is going to be the tenant in the city’s bond transaction.

“Homestead Affordable Housing would have to transfer that property to Homestead Rural Rehabilitation prior to closing on the bond issue,” she said. “At the closing of the bond issue, HRR will convey both properties to the city and, the city will hold title to those as long as bonds are outstanding.”

The city of Marion would then lease all that property back to HRR, she said, and in that lease is where the city would provide for all the payments that need to be made to cover principal and interest.

“The city is the issuer of the bonds,” Steele said. “They issue the bonds and they are bought by a purchaser. The city doesn’t provide any financing on those.”

Under state law, she added, the city has to be the issuer of the bonds and they issue to the purchaser of bonds.

“The purchaser’s sole source of revenue to pay off those bonds is the lease from the city to HRR,” she said.

“In a nutshell that is the structure,” Steele said. “The city is the conduit lender. We look at them as the straw between the bond purchaser and HRR, but they have to be there in order to allow for these particular benefits to be available on this project.”

Mayor Mary Olson and councilors Chris Meierhoff and Jerry Dieter voted in favor of the resolution. Councilor Jerry Kline cast a dissenting vote and Councilor Todd Heitschmidt said he abstained because of his interest in the project.

Nature of the bonds

“In no way is the city of Marion responsible for buying the bonds or arranging for a purchaser of the bonds,” Steele said.

HRR is accountable for negotiating the transaction, finding the bond purchaser, setting terms and then bringing it back to the council, she said.

“The city will own the property at closing on the issuance of the bonds,” Steele said. “The property is deeded to the city and the city will hold the title for the duration of time the bonds are outstanding.”

She went on to explain that the city would then lease the project back to HRR pursuant to the lease, passing all the responsibilities and all the indicia of ownership back to HRR.

“The company is responsible for insurance, maintenance and liability,” Steele said. “The city passes all responsibility back to HAH, and it agrees to make payments under that lease sufficient to pay off the bonds.”

As part of the lease, the city in no way assumes liability for any part of the debt, she explained.

“The city is not required to, in any way, appropriate funds,” she said. “This will also not refect on the city’s credit nor outstanding debt.”

Marion is acting as a conduit between the bank and HRR, Steele said.

“The funds flow through, but the city is not obligated to the debt,” she said.

In other business, the council:

• heard a report from Cynthia Blount with the Marion Historical Museum.

• tabled discussion of financing options at 828 N. Roosevelt St.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Leave a Comment

You must be logged in to post a comment.