City OKs bond application

Examiner-Enterprise (Bartlesville, OK)

Dec. 20--The Bartlesville Redevelopment Trust Authority agreed Wednesday to become the channel for developer Frank Rees to issue Internal Revenue Service tax exempt bonds to partially fund construction of a retirement community near the intersection of Nowata Road and Silver Lake Road.

The authority approved an inducement resolution in a 4-0 vote Wednesday at City Hall. Three authority board members were absent from the special meeting. Blair Ellis, David Nickel, Bill Covell and Mayor Dale Copeland were present. Copeland is the Bartlesville City Council representative on the authority's board of trustees.

Earlier Wednesday afternoon, the Bartlesville City Council held a special meeting and unanimously approved the start of bond issue process.

Jered Davidson, an attorney with The Public Finance Law Group, LLC, outlined the proposal and the federal requirements that accompany the private activity bonds to the City Council and Bartlesville Redevelopment Trust Authority during their meetings.

Background

The City Council approved a Tax Increment Finance District for the Wellington At Hillcrest Village development last year to help the development of the retirement community. The development will include independent living apartments, assisted care and memory care apartments and executive homes. It will be constructed in two phases.

The project pans are being finalized, and permits can be issued once the city approves civil engineering plans. A construction date has not been set. Davidson said construction could begin in the first quarter of 2019 if the bonds are approved.

What is a private activity bond?

The government can issue tax-exempt bonds to private entities for qualified purposes. The government sells the bonds to private investors and uses the money to fund projects by private investors. The private party repays the loan from revenue generated by the development, and the government uses this money to repay its bond holders.

One of those qualified purposes is low and moderate fixed-income housing. Wellington at Hillcrest Village will have to set aside at least 20 percent of its units to meet this requirement, Davidson said.

Annually, the state of Oklahoma receives $400 million from the federal government to fund private projects that will serve the public. Other qualified purposes are airports, student loans and manufacturing plants.

At the end of each year, Oklahoma opens an application period for money in the carry-forward pool. This year, Davidson said, the state has approximately $336 million of the $400 million available. The application period opens Thursday and closes Dec. 31.

"We believe we can submit a successful application when the window opens at 9:01 tomorrow morning," Davidson said.

The city of Bartlesville has been the conduit for private activity bonds in the past. The Bartlesville Development Authority has previously used this tool to assist the construction of Green Country Village senior living center.

What's next?

With the City Council and Bartlesville Redevelopment Trust Authority approvals in hand, an application for up to $55 million in private activity bond money will be submitted. The application will be approved or denied by the end of the year.

The developers only plan to use approximately $45 million of private activity bond money. A private equity investment of approximately $8 million also will be used.

If it is approved, Davidson said his firm will have to file a tax form immediately. Then, the trust authority and City Council must approve the transaction. A public hearing also would be held. All that would happen in mid-January or early February.

Neither the city of Bartlesville nor the Bartlesville Redevelopment Trust Authority would be responsible for repayment of the bonds. That responsibility falls solely on Rees as the developer.

The only trust authority requirement will be to show the private activity bond in its audit. The trust authority will receive an acceptance fee and an annual fee to cover its record keeping costs, Davidson said.

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