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HomeMy WebLinkAbout1978-12-18 - Minutes - • • MINUTES OF A RESIDENTIAL HOUSING FACILITIES BOARD MEETING A meeting of the City. of Fayetteville, Arkansas, Residential Housing Facili- ties Board was held on Monday, December 18, 1978, at 2:00 o'clock P.M. in the Chamber of Commerce Board Room, Fayetteville, Arkansas. MEMBERS PRESENT: Chairman F. H. Martin, Ron Pennington, George Faucette, Jr. , John Dominick and Dale Christy. MEMBERS ABSENT: None. OTHERS PRESENT: Jim McCord, Jim Buttry, Gail Biswell, Jim Stephens, Milby Pickell, John Carpenter, Beth Smith, and Scott VanLaningham. ROLL CALL: Roll call was made, and it being found that all members were present, the Chairman announced the meeting open for business. MINUTES: The Chairman asked that a reading of the minutes of the meeting of Decem- ber 12, 1978, be waived. However, he asked whether any corrections, additions or deletions should be made thereto. Dale Christy noted that on page 5 of said min- utes in Item (1) under the heading "Old Business" the word "Simmons" should be inserted immediately preceding "First National Bank of Pine Bluff, Arkansas." There being. no further corrections to be made to said minutes, the minutes were approved. SPECIAL REPORTS $ UNFINISHED BUSINESS: Chairman Martin stated that Jim McCord had previously been asked to contact David Lewis of Salomon Brothers in order that Mr. Lewis could contact his proposed purchaser as to whether said purchaser would be agreeable to allowing a higher mix of 90-95% financed loans in the loan pool. Mr. McCord reported that Mr. Lewis had returned his call this morning and had indicated that his purchaser could be more flexible in that regard, but that the man would want to come to Fayetteville personally and confirm for himself that real estate values are not as highly inflated here as they are in California. Mr. McCord stated that Mr. Lewis felt a mix of 50% of the pool being 80% financed loans and 50% being 90-95% loans "could be easily worked out." Mr. McCord also stated that Mr. Lewis wanted this Board to be aware of the fact that if a substan- tial number of 90-95% loans were made, this would adversely effect the interest rate to be paid in that it would be slightly higher. He stated that Mr. Lewis felt the underwriter discount would be 1 .25%, assuming an $8 million dollar issue, which is lower than the amount indicated in their written proposal (1.5 to 1 .9%) . Mr. McCord stated that Mr. Lewis had indicated that if the "deal" was larger than $8 millioi., their gross spread would be even smaller than that. Mr. Lewis had also indicated to him that if this issue went to market in the next few days it would probably receive a 7.6% interest rate. MiCROFILMD DATi REEL— ' I _ Residential Housing Facilities Board Meeting December 18, 1978 Page 2 Dale Christy noted that the 1.25% discount did not take into consideration expenses Salomon Brothers would incur. Mr. McCord stated that Mr. Lewis had indi- cated their expenses would not exceed .5%. Mr. Christy noted that, therefore, the actual discount they were looking at was closer to 1.75%. Mr. McCord added that Mr. Lewis had stated that his purchaser could come to Fayetteville later this week and at that time would like to meet with this Board and as many of the originating lenders as possible in order to ascertain such vari- ables as income limits, mortgage limits, etc. Chairman Martin questioned Mr. McCord whether Mr. Lewis' purchaser had under- stood that when they asked for a higher mix of 90-95% loans that the Board meant "insured loans." Mr. McCord responded that the purchaser understood this. Mr. McCord stated he had also discussed with Mr. Lewis and his purchaser the advisability of the City's involvement in obtaining construction money for local financial institutions. Mr. McCord stated that Mr. Lewis had consulted with people in his municipal department and it was the unanimous opinion of Salo- mon Brothers that "even if it could be done, it is a very high-risk program and would be subjecting the City to exposure it does not need." He said they defi- nitely would not recommend it. Mr. McCord commented that he had talked to John Lewis of First National Bank, Fayetteville, and it was John Lewis' opinion that construction money would be available should this issue come to market. A discussion ensued concerning the City and this Board's involvement in procuring construction money, and also concerning the Salomon proposal in general . Several comments were made concerning the lack of flexibility available should Salomon Brothers be chosen underwriter. It was the concensus of the Board that should they spend several weeks trying to put together an issue with Mr. Lewis' purchaser and the "deal" should fall through, the Board would have to start all over again, possibly with even a different underwriter since Mr. Lewis had indi- cated he was mainly interested in selling only a private issue to one particular buyer. Mr. Dominick and .Mr. Faucette agreed that the bare minimum of the mix should be 80% 90-95% financed loans in order for the bond issue to effectively assist people who could not otherwise purchase a home if they had to come up with a high downpayment. A discussion was had concerning this Board's authority to hire an underwriter. The Chairman noted that it was the concensus of the Board that they did not have authority to hire an underwriter, but that they should proceed with selection of an underwriter and preparation of a bond package with the understanding between the underwriter, this Board and the City Board that the City Board would have to _give final approval of each and every action taken. Further discussion ensued concerning the Salomon proposal. Mr. . Buttry F, Mr. McCord left the meeting in order to telephone Mr. Lewis and his purchaser in order to clarify whether an 80% mix of 90-95% loans could be worked out, and also to clarify whether Mr. Lewis' purchaser would agree to use of the "trigger" mecha- nism. Upon the return of Mr. McCord and Mr. Buttry, they announced that Mr. Lewis client had agreed' that a higher mix of 90-95% loans was a possibility he would consider, but that he could not give a definite answer at this time. The purchaser stated he,would like to come to Fayetteville and see for himself if home values here were comparable to home values as he knew them in other parts of the country. Gil Mr. Lewis' client also stated, reported Mr. Buttry, that the trigger mechanism would work fine, however, he would be willing to extend the 12-month life even without use of the mechanism. o 'x i ice Residential Housing Facilities Board Meeting December 18, 1978 Page 3 .;.. Chairman Martin stated that, during the time Mr. McCord and Mr. Buttry had been out of the room telephoning Mr. Lewis, the Board had taken written votes of the three underwriters they liked the best. Board Secretary, Ron Pen- nington, tabulated the recorded votes and submitted them to the Chairman. The Chairman noted thatthe following underwriters had received votes as follows: Rauscher - 5 votes UMIC — 4 votes ' Salomon - 3 votes Merrill-Lynch - 2 votes Shearson - 1 vote Stephens - 0 votes Chairman Martin then called for discussion of the top three underwriters. Discussion ensued on each underwriter and then George Faucette moved to select. the firm of Rauscher, Pierce, Refsnes, Inc. as underwriter. Dale -Christy seconded the motion, which passed unanimously. City Attorney Jim McCord agreed to contact the Rauscher firm and arrange a meeting with their representatives and the Board in the near future to discuss steps which should now be taken in order to prepare the bond issue. A discussion was had concerning whether or not the 75-25 distribution called for in the ordinance would be too restrictive. Mr. Dominick stated he felt a wider area should be used rather than the City and its growth area. Mr. Christy stated that the survey sent to the lending institutions by Mr. Faucette, as well as the opinion of the underwriter, would guide in determining whether the Board should ask the City Board for a change in this restriction. Mr. Faucette noted that he had mailed 6 surveys and personally delivered 4 to lending institu- tions, but that he had not yet received any replies. He stated that he felt the survey sent out did not adequate ask for opinions as to what effect the size of the bond issue and its coverage area might have on the issue as a whole. Mr. McCord agreed to send an addendum to the survey asking for opinions in these regards. There being no further business to come before the meeting, the meeting adjourned at 4:15 p.m. Ron Pennington, Secretary . ATTEST: F. H. M 'rtin, Chairman