Travis County Commissioners Court
January 17, 2006
Health Facilities Development Corporation
Item no. 1 a public hearing related to proposed issuance of bond anticipation note for the purpose of financing preliminary development costs. For a continuing care retirement center project to be known as longhorn village. That passes by unanimous vote.
>> cliff bill clinton, general council for the corporation. Just wanted to state notice of this public hearing was published in the Austin american-statesman more than 14 days ago. I can talk a little bit about the project now or we can wait until the action item in a few minutes.
>> a one minute summary of the project may be helpful. Stieber ranch in northwest Austin. So at this point the financing is a 10 -- $11 million bond anticipation note which will finance certain soft costs, initial costs for the project. If things go well to the borrower, they will come back to us, I think in approximately 18 to 24 months to do a larger transaction to actually finance the construction. So this is a preliminary financing for this -- for this retirement project. Somewhat similar to the one that we financed three or four months ago out at Barton Creek.
>> we call it a bond anticipation note because?
>> because it is a note -- this is being structured as a note to j.p. Morgan that will -- that will be refinanced by the permit financing in 18 to 24 months assuming that does come to fruition.
>> it's done in anticipation of a project in permanent financing.
>> yes, sir.
>> at a later date. Our -- we are familiar with the voter approved bonds that they are -- where they asked them to consider from time to time. The purpose today is to give residents an opportunity to provide any input, comments that they deem necessary.
>> yes, sir.
>> would anyone like to give comments during this public hearing? Seeing none --
>> all in favor? That passes by unanimous vote. And next is the action item and that's number 2, to consider and take appropriate action to approve resolution authorizing the corporation's bond anticipation note, longhorn village project, series 2006, and authorizing the execution and delivery of all financing documents related to the issuance, sale and delivery of such note and other matters in connection therewith.
>> yes, sir, in both the applications and materials that have been delivered to you through the corporation manager's office, a lot more detail, this is just the action item for the project we had the public hearing for a few moments ago. To the extent that you have any questions or they want to make a presentation, jim boone with the borrower is here. Mike cook with jenkins and gilchrist who represents the borrowers here, mark johnson with fulbright and jaworski who are acting as bond counsel are here.
>> any questions from the board?
>> yes.
>> go ahead. This -- [indiscernible] chase is that something -- if action is taken this -- all of -- the current section will be -- the financing all -- all would that have gone through the j.p. Morgan, kind of explain that a little bit.
>> yes, sir. Jp morgan chase offered to purchase these notes in a no purchase agreement that is part of the backup, so they will be purchasing the notes directly from the corporation. And j.p. Morgan will also be acting as trustee for this, which is not unusual for -- for the bank that purchases the notes. Did that answer your question?
>> yes, it does.
>> and the main expense on the note is to -- is the purchase of the property. The proceeds would be the purchase of the property.
>> okay, okay.
>> and the property was secured?
>> yes.
>> by the part of the note that's the -- that the value covers. Commissioner Daugherty had a question, I believe.
>> cliff, either you or harvey, I -- I guess I’m a little confused or concerned about the difference between this project and the project called corincia is that this project will be asking for exemption of ad valorem taxes, is that correct?
>> yes, sir. I -- both projects, the bore reis a -- borrower is a 501 c 3 corporation. When they own the property, their 501 c 3 corporation would be tax exempt, exempt from ad valorem taxes. The corencia borrower volunteered to pay taxes. It was not really a point that was negotiated they did not even ask to take advantage of that. And it's borrower, I believe, is requesting that they be allowed to take advantage of that portion of state law I think is the fair way to say it. Is that --
>> well, I guess -- I certainly don't want somebody coming back and saying why does somebody get tax exemption, somebody doesn't. I probably would like to have -- to have had that brought -- maybe I’m the only one that it doesn't make any difference whether or not, you know, this corporation is not going to pay ad valorem taxes. I am concerned about that. I don't know how that fell through. Maybe the rest of the Commissioners court were fully aware of that. But I haven't been aware of that until very recently.
>> I think the difference for me is that they are absolutely entitled to the 501 3 c exemption. Therefore it's not asking for an exception to be made. Really it's the other like the question is were they fully aware that they could have, it's up to them as to whether they should have. So I don't see these folks, they are not asking for an exception, they are entitled to this and therefore there's no public policy moment here for me. But if you could fill me in on will they be having to pay a fee to the corporation in doing this or the permit financing in terms of coming through the corporation.
>> the policy guidelines were adopted I guess around a year ago. They would pay a fee, assuming that we have the -- we have the second closing, the fee above this closing will be $11 million in bonds would be $11,000. In -- the other one, the number that I have heard, I think still all projections, will be a $140 million project, I believe that would work out to about $120,000 fee basis points on anything over 50 right?
>> [inaudible - no mic]
>> substantial numbers.
>> even for an exempt organization having to pay that. That is good stuff that comes into the corporation and gets recycled into other good stuff.
>> we dent spend much time talking about it, it was indicated in the backup, last week or the week before.
>> I think it would be more like about 95,000 on that fee, if it's the second -- the project.
>> the liability for the corporation is what in our estimate?
>> there should be no liability to the corporation for the repayment of the bonds or -- we are being indemnified for any activities that occurred during the construction, that will -- that will be part. But any activities that happen or occur with the project or with the property will be indemnified from, will have no liability on this case, the notes or in the future on the bonds except to the extent that we receive payments. Why do you think corencia didn't ask for that, if they could. Because something is not right here. Somebody -- if you can -- if you are a 501 3 c you can do that, maybe we ought to go back and say hey why don't you guys make another run at us. I realize that --
>> when I raised that one, when we were going through all of this negotiation with the transaction, they just indicated that they had run the underwriting numbers, they werefully intend and planning on paying property taxes, that was the end of it. It wasn't an issue that they raised. The -- the way it was handled is in the loan agreement between the corporation and that borrower, they made a covenant that they would not apply or take advantage of the tax exemption and if they did, they agreed to repay all of the taxing jurisdictions the same amount that they would have paid if they had not applied for their exemption. I guess that's -- that is a document that if the board so chose, could be amended but that would be the way to fix that. But that was not -- that was not a source of contention, it was not a troublesome negotiation, it was just their position from the first time I talked to them about it. They could go back and say we would like for you all to --
>> [inaudible - no mic]
>> there's an unlevel playing field here somewhere.
>> but one that they chose to make unlevel. See what I’m saying?
>> I sure -- I understand what you are saying.
>> didn't bring it up. It wasn't even an issue. They chose to.
>> I -- I don't recall talking with the corencia people as far as why they made this election. And the assumption would be that they did it because they thought it would make the whole transaction a little smoother to -- to -- to complete. But -- but I don't have a specific answer to your questions.
>> do we think that this is the same kind of project that corencia --
>> I think we have more extensive services in our [inaudible - no mic]
>> is it the school of social work?
>> school of nursing.
>> I apologize, yeah.
>> it is kind of different.
>> it is different. Really kind of more of a public service and public outreach, also the other one, a lot more, to be honest financially stable, just based on where they would be, who they are marketing to, and the overall description of the project really.
>> longhorn village will have academic and clinical affiliations with the u.t. College of nursing and school of social work. So --
>> [indiscernible]
>> there's a lot more u.t. Connection here now. Yeah.
>> any questions since we have the longhorn representatives here before we vote? Did you all want to give any comments other than what you have given already? In the other the financial structure was clearly set forth in their backup documentation when I chatted with them on their own, they kind of offered that up. Reconfirmed it in court and I was just happy to get it. This situation, you know I did see in the backup that they -- you know, they planned to take advantage of what the 501 c 3 status offers. I looked at the project as being a bit more public service oriented than the other one. The question really was whether we thought we should facilitate this effort or not. And my position was if we put the corporation's policies in place and apply them and make sure that the law as to potential liability covers us, then I feel comfortable with it.
>> so we don't -- I mean it's not something that we could force and given the fact that they are a 501 3 c [sic] they have the ability to do this. They don't have to ask us. They could come in and say --
>> they have to ask you to finance their project on a tax exempt basis. If you agree to adopt the bond resolution and do this financing, and then they so choose to apply for their tax exemption, there's not anything that can be done about that. So the -- so the -- the I guess hammer, if you will, is -- is whether or not you agree to do the tax exempt financing.
>> we get fees out of that and those are -- they could wind up getting the same tax exemption and we get no fees.
>> well, I mean, I understand. I mean I -- a lot of people could come to you and want tax exemption for a number of things. It is -- it's a more difficult question for me to answer whenever somebody says why does somebody get it and somebody doesn't. Well, I mean in this -- my answer on this one will be because one didn't ask for it.
>> the federal law provides a tax exemption not us. Now, we have a choice of whether or not to do the project. We can say no we are not interested, find another entity, but I don't know that we can -- we have the ability to say or should try to exercise the right to say don't use the exemption that you are entitled to under federal law. You would -- I would think --
>> the previous transaction when they offered to pay the property taxes I certainly wasn't going to turn them down so --
>> this one is very firmly grounded and rooted in an institution of higher learning whose entire 40 acres or however many acres we are right now is tax exempt, I mean it's just -- this one truly is rooted in the university. In terms of --
>> does u.t. Own this property now?
>> no.
>> but in terms of the affiliations related to the school of nursing and the school of social work. Clearly there is going to be a partnership far different from what was on the other one. I mean, this really is one of a partnership where the -- with the public institution. Doing charity work.
>> it's a health facility for -- for health facility and residential accommodations for seniors. With a direct tie to the u.t. School of nursing.
>> let's call it what it is? What it is is just -- clearly know what corencia is and I think this is the same thing, not that we don't have -- some other attachments to u.t. That's understandable. Whenever there's a low dollar development, if you have been to the area, it is a pretty nice area. I mean, this is not -- now, granted -- I guess maybe we ought to -- you know, although at it from the standpoint of -- of from the school of nurtioning and all of the things that he's going to do. This is not something -- it would be a very nice housing area for people that -- that chooses to live in -- probably in pretty substantially -- a nice living arrangement for folks. So -- okay.
>> any more discussion? All in favor of the motion? Show -- show Commissioners Sonleitner, Gomez, Daugherty, yours truly voting in favor.
>> show me abstaining. It's not that I don't support your project, but you mentioned something, j.p. Morgan chase, dealing with some of the finest [indiscernible] a whole lot of stuff, relationship with them, we need to -- I need to abstain in that, but I do support your project, thank you.
>> thank you very much.
>> there's a companion item.
>> the Commissioners court, we will stick that on there.
>> move adjourn.
>> all in favor. Passes.
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Last Modified:
Wednesday, January 18, 2006 11:12 AM