Travis County Commissioners Court
October 21, 2008
Item 1
>> now, number one on today's agenda, is a public hearing to receive comments regarding a proposed issuance of the capital trust agency multifamily housing revenue refunding bonds, series 2008 (american housing foundation project; no action will be taken). Today.
>> move that the public hearing be opened.
>> second.
>> there's been another circumstance that -- that we'll be told about. All in favor? That passes by unanimous vote.
>> good morning, I'm harvey Davis, manager of the housing finance corporation. I'm here with cliff blunt, our attorney. This request by american housing foundation is for the county to give approval for a -- for a florida issuer to issue approximately 70 million-dollar in tax exempt bonds to refinance five apartment complexes that american housing foundation owns in Travis County. The -- the request was made and considered by the court a year and a half ago, as you recall. And they were -- they were given approval to -- for the florida issuer to issue the bonds. But they -- american housing foundation was not able to close on the transaction at that time, they -- they indicated to us in late or made September that they were -- that things were back on track and they had secured a credit enhancement from fanny may and were ready to proceed on the transaction so we -- so we scheduled this -- this tefra hearing, this public hearing, but then since the time that we published the public hearing, they had -- they have run into some -- some difficulties with the financing and that's why we have requested that -- that the -- not for the county not to -- not to consider approval of the transaction because we didn't have the information for staff and our financial advisor and legal counsel to consider everything. So -- so -- so an official from american housing foundation was -- was scheduled to be here, but I was -- I was just provided information that he -- that he arrived in Austin and was taken ill. So I'm not sure that he's going to be showing up. But let me turn it over to cliff blunt, our attorney. He can give you a little more information about the public hearing notice.
>> sure. Just briefly, the notice was published in the statesman on October 6th, which is more than 14 days before today's date which is what is required by the internal revenue code. I think mr. Davis pretty well summed up the position that we're in in terms of timing on this transaction where american housing foundation is trying to work out a few issues that have arisen in the last couple of weeks.
>> do we know what schedule we are on now?
>> no, sir. I've been told by the underwriter that's they think this is only a delay of several weeks, but, you know, until they -- until they fixed the issues that have come up, I don't think we will know for sure.
>> okay.
>> so they're going to -- this is just taking care of the public hearing requirement that is required bylaw before we move forward, hear more testimony from these folks. I was really hoping that the -- that the representative from american housing foundation would be here because the last time they were here one thing that came to -- to -- to the surface was that they were interested in -- in doing something for our low income residents of Travis County. Which was to provide a -- scholarship program for young persons or low income persons. And, of course, that never did happen for whatever reason. In the past, as you stated earlier, however that's -- the closure, when it came to closing, there was something -- there was something that came up and -- and I just want to make sure that -- that if they have a chance to review this public hearing, the representative, that they actually realize that I'm still strongly advocating that they continue to hear the -- to ensure that we -- that some of the proceeds from this type of initiative is -- is earmarked toward low income -- low income persons in Travis County that can -- that can help them in their educational quest. Via scholarship and -- and I'm very interested in that, in that particular part of it.
>> the information that was provided me in -- in September was that the same offer was still being -- was still being made, that -- that there was -- there was to be funded a scholarship program, $300,000, at -- when the bonds close. And then $300,000 per year beginning in the 13th month after the closing of the bonds. That's when the -- when the second -- or actually a monthly payment of $5,000 towards the scholarship program would be made starting the 13th month.
>> so --
>> and the second part of the offer was that they -- that they were -- that were to -- that they were to donate 2% of their Austin unit free of charge, furnished, paid utilities, to -- to support.
>> senior citizens, wasn't it?
>> senior citizens, elderly.
>> right.
>> elderly or disabled or -- or battered -- battered women. And so -- so but those, that offer has already been implemented. And that -- and I have talked -- the -- those units are being managed by two non-profits, basic needs coalition and family elder care. I have talked to both of those non-profits. They are -- they are very happy with the arrangements. All the 31 units are being used and they have fulfilled that commitment that they made, which they said they were going to make the commitment --
>> when they have an opportunity to -- I hope they -- the person -- we would hope they have a speedy recovery. In the meantime I want to know that the radar screen is still up and running and realizing that we are still interested in those programs that we -- that we agreed upon earlier.
>> yes, sir. I can also confirm that scholarship agreement is part of the package that will be presented, assuming that they work out these issues and come forward for approval in a few weeks or --
>> I appreciate that.
>> we are posted for public hearing. Would anyone like to give testimony during this public hearing? If so, please come forward.
>> good morning,.
>> good morning.
>> judge, economics, my name is walter morrow, the director of foundation communities.
>> good morning.
>> I appreciate the opportunity to speak about this proposal. I heard a rumor Friday from a resident who had seen the notice in the paper, I talked to harvey just yesterday. I was very curious about what had changed from the proposal 17 months ago to now. Let me start out by saying to you that I -- my vocation indication, my passion -- vocation, is that projects be put together that are really high quality, affordable, that there be legitimate services there, that makes for successful investment of public funds. That's why I care very much about this transaction, why I am here. There is no new information available about the transaction. But the world has changed in the bond markets in the last 17 months. The world changed a month ago. We don't know who the buyer is. We don't know what the interest rate is. We don't know whether -- what the performance on the properties has been in 17 months, not just here in Travis County, but the whole portfolio in Texas. There's no due diligence on this transaction. Harvey has not had an opportunity to have that information available. I'm not sure that this could be a legitimate public hearing, an opportunity for myself or other members of the public to evaluate what's been put on the table, but this is it. My first request is that this not be the only public hearing. You've got to have a legitimate full understanding of what this transaction is. It is fiscally irresponsible to rubber stamp a $70 million bond transaction in today's environment without very complete and full due diligence. You have really got two people that work for you whose judgment you can rely on to dig into the devil in the details. You have got harvey and his team and he doesn't have the information yet. And then you've got a financial advisor in the bond transaction. With all due respect, they are paid by getting the deal closed. That's just the way the system works in Texas on bond deals. I think they have a professional responsibility to make a good -- good independent recommendation, but on all of the things that we have seen go on in wall street lately, I think the system has got some flaws because it's hard for them to give a full, independent analysis of the deal when they are set to make hundreds of thousands of dollars only if the deal goes through.
>> I think on this transaction, american housing foundation has paid an application fee, they have paid -- they paid that application fee several months ago, $11,000. Out of that application fee, is funds that is reserved for the financial advisor, so that's all that he would be our financial advisor would be paid on this transaction. So it's -- in this particular case it's not -- it's not -- his fee is not subject to -- to the bonds closing or not. Because we already have the application fee.
>> walter, I guess --
>> walter is right --
>> my recommendation is -- I think there's two fundamental principles on any bond transaction. One is sunshine. Bad deals, deals that don't make sense, they don't like it. Good deals don't mind it at all. They want to be fully disclosed, fully out there with everything that they are doing. You shouldn't consider any -- I don't care whether it's housing, health care, sunshine is number one. Number two, you need an independent review process. You need to be able to have somebody that you can rely on that you pay that looks at the transaction details. Maybe that's the structure that you have got now. To me those are just kind of fundamental guidelines for the way you should approach these deals, I'm sorry.
>> thank you very much.
>> I'm sorry.
>> thank you. Would anyone else like to give testimony during this public hearing.
>> I had a couple more comments.
>> please go ahead then
>> [laughter]
>> let me ask you, is it limited to
>> [indiscernible]
>> yes, sir.
>> and by the way, I don't know when this matter may come back again, but unless it comes next week, there will be a public hearing.
>> okay.
>> that seems to be your main point so far.
>> that's the main point. There were enough red flags, 17 months ago, that all those issues and concerns need to be out on the table.
>> the other thing is that our involvement comes about because these properties are located in Travis County. The entity doing the financing is some corporation in florida.
>> capital trust agency in gulf breeze florida, they have headlines in the paper about their transactions and what they do. Why they are using a florida issuer for a Texas portfolio.
>> we've had it on the agenda.
>> whole other issue.
>> four or five times, haven't we?
>> yes, sir, this is part -- the five properties in Austin are part of a transaction, properties in several states. There's properties in dallas, oklahoma, arizona, maybe even florida. I can't remember. It's three or four states. Williamson county.
>> one reason why -- capital area has some, too, one reason they are doing it inside one issuer rather than transaction costs for five different issuances.
>> we will get our financial advisor to look at the situation before taking action.
>> right.
>> let's let you finish, mr. Morrow.
>> I'm done. If you are going to have another public hearing, that's really what I hoped that you would at a minimum do
>> [multiple voices]
>> I was trying to -- when you came up, this is just as I stated earlier, it's just a requirement to have a public hearing on this issue. However, there's no action going to be taken today and of course even the applicants and the person that's overseeing it
>> [indiscernible] is ill today, so a lot of questions that I had that I was basically ready to ask, I can't ask those. But there will be other times that we'll be able to dig a little deeper and to -- into what's going on. So that's what I wanted to bring across to you. Just wasn't a cut-dry simple as, you know -- as -- as it appeared to be.
>> Commissioner Gomez?
>> I just had one -- it's my understanding that the money will be used for financing, refinancing acquisition, development, rehabilitation and ownership of affordable multi-family rental housing facilities, those are one, two, three, four and five where there may be some rehabilitation going on in those -- all of those units.
>> yes, one through five, the --
>> we don't know how much money is set aside for rehabilitation.
>> I don't have those figures, but we can get them --
>> okay. Just kind of out of the 70 million, how much is going to be for rehabilitation. And is this the same group that operates and owns fair way?
>> yes, it is.
>> how much money did they set aside for that in the past?
>> well, fairway is not part of this --
>> not part of this one. But in the past, how much money have they set aside for fairway for the rehabilitation of fairway, does that include plumbing and electrical work?
>> I don't know that amount.
>> I would like to know that about each of these because -- to see how the treatment of all of them goes and if it's like fair way, I have a problem.
>> thanks.
>> I can get those figures for you.
>> mr. Morrow?
>> I'm done.
>> thank you. Anybody else? To give testimony during this public hearing? Let's make sure that we -- post it for another public hearing.
>> yes, sir.
>> move that the public hearing be closed.
>> I don't know about advertising. If we need on to, so be it, but we can essential put it on our -- certainly put it on our agenda.
>> once they decide to move forward, from a tax code perspective we have to publish another public hearing. This may or may not work for that depending on how they decide to go forward and when.
>> second.
>> all in favor? That passes by unanimous vote.
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Last Modified:
Tuesday, October 21, 2008 1:38 PM