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HomeMy WebLinkAbout1979-02-09 - Minutes - 14—*\N • MINUTES OF A RESIDENTIAL HOUSING FACILITIES BOARD MEETING A meeting of the City of Fayetteville, Arkansas, Residential Housing Facili- ties Board was held on Friday, February 9, 1979, at 2:00 o'clock P.M. in the Board of Directors Room, City Administration Building, Fayetteville, Arkansas. MEMBERS PRESENT: Chairman F. H. Martin, Ron Pennington, Dale Christy, George Faucette, Jr. and John Dominick (arrived late) . MEMBERS ABSENT: None. • OTHERS PRESENT: Jim McCord, Jim Buttry, John Rauscher, Don Grimes (Powell & Satterfield) , J. W. Gould, Jerry Niemec, Jim Bell, John Carpen- ter, Marie Clinton, Rick Briggs, Scott VanLaningham, Gail Biswell and other unidentified members of the audience. ROLL CALL: Roll call was made, and it being found that a quorum was present, the Chair- man announced the meeting open for business. MINUTES: The minutes of the previous meeting of January 29, 1979, were approved. NEW BUSINESS: The. Chairman stated that the Board had receivedproposals from several institutions concerning various types of administrative structures for the bond issue. He also stated that the underwriters had submitted an outline of the pro- posals, as well as recommendations concerning these and other aspects of the issue. (A copy of this document, entitled "Selection of Trustee, Custodian and/or '. Administrator" is attached hereto and made a part of the minutes of this meeting.) Chairman Martin stated that among the several recommendations made by the under- writers, recommendations were made that the First National Bank of Fayetteville be selected as Trustee and the Lomas F Nettleton Company be selected as Administra- tor. After a short discussion, Dale Christy moved to accept the underwriters' recommendations for Trustee and Administrator. Ron Pennington seconded the motion. Further discussion ensued. Mr. Christy clarified his motion, stating that he felt there should be some negotiations on the fees. He also stated that he would like to see the two major local banks (First National Bank and Mcllroy Bank E, Trust) involved as much as possible. He stated that he felt the underwriters should negotiate possible roles for these two banks (as trustee or paying agent) with the City Board of Directors. In response to inquiries from Chairman Martin, Mr. Rauscher stated that one of the banks could be "Paying agent" and also could be an originating lender, however he stated that the same bank could not be both Trustee and an originating lender. After further discussion, the Chairman called for a vote on Mr. Christy' s motion, and after a vote having been taken, the motion passed unanimously. MiCROFILME© DATE J 01U9 REEL Residential Housing Facilities Board Meeting (-) February 9, 1979 Page 2 John Rauscher, representing the underwriting firm, stated that he had also submitted to the Board members copies of a "Preliminary Plan of Financing" (a copy of which is attached hereto and made a part of the minutes hereof) which outlined the way the financing would work. He stated that the actual figures for most items (par proceeds, participation fees, interest rate for the bonds, etc.) had not been and could not be determined definitely at that time. Mr. Rauscher stated that this plan reflected a hypothetical mortgage rate to be paid by the homeowners of 8.52%. He stated that he had over-estimated many of the figures used in determining that rate. Also, he stated, since the money market had improved in the last few weeks, he felt confident that if the issue had gone to market "today", the final interest rate would have been "between 8.25% and 8.5%." Mr. Rauscher continued that the next step to be taken would be "to draw up the actual legal documents" for the issue. He stated that he felt they would be in a position to send out actual invitations to the various lending institu- tions within two weeks. He also stated that he felt they would be in an excel- lent position to be able to size the bond issue as soon as they received responses from the invitations. Mr. Rauscher explained that "the key to being able to size the issue is the actual number of mortgages that the institutions feel they can comfortably originate.." George Faucette stated that he was still wondering about the effect on the marketing of the bonds, flexibility of the interest rate, etc. that the 25% outside-the-city ordinance limitation would have. Mr. Rauscher responded that he felt that the only effect this had was that "it limits the market." He ex- plained that "if we didn't have those restrictions we would have a larger mortgage issue." He stated, however, that he felt "we can live with it," but added that if it became clear that all the money was not being utilized, they might want to lift the restriction sometime in the future (a "take-out" period) . Mr. Faucette responded that he liked the idea of the "take-out effect." Mr. Christy questioned whether a "take-out clause" would effect the bond's rating. Mr. Rauscher responded that, in his opinion, it would not add or detract from the rating. Chairman Martin noted that an amendment would need to be made to the ordinance if the Board desired to allow for a take-out. However, he stated, that if no one felt that the 25% limitation would materially affect the rating or the issue, and that if the lending institutions were comfortable with the limi- tation, he felt that "maybe we should just live with it." City Attorney Jim McCord stated: "Based on comments that the City Board of Directors have made, I question whether they would approve a take-out provision on the front end when the underwriters tell you that they think they can market the bonds without it. I think the alternative would be the trigger mechanism. I discussed with Buttry whether he had any problems with 'public purpose' with a take-out provision and he does have some problem with it. I think he would pre- fer a trigger mechanism since it would be a safe-guard mechanism against non-asset bonds." Further discussion ensued. The Chairman stated that he felt that, for the time being, they should not request that the City Board amend its ordinance by lifting the 25% limitation. M Residential Housing Facilities Board Meeting February 9, 1979 • Page 3 The Chairman then questioned whether the underwriters had any objections to Iraising from $28,000. the income limitations as discussed at the last meeting. - Mr. Rauscher stated that he had no objections whatsoever. . Discussion ensued. Dale Christy noted that he did not feel that they needed to set any maximum mort- gage limitation since "when a limit is put on the applicant's income you are in effect setting a lid on the size of the mortgage the applicant can get to approxi- mately two to two and one-half times his annual income." Further discussion ensued. George Faucette moved to raise the maximum mortgage limitation from $60,000. to $70,000. Dale Christy seconded the motion, which passed unanimously. _The Chairman questioned whether Mr. Buttry would fee uncomfortable with a • $30,000. income limitation and he replied that he would not be uncomfortable with that sum "when you take into consideration the local University situation." George Faucette moved to raise the income limitation to $30,000. Ron Pennington seconded the motion, which passed unanimously. The Chairman then led a discussion on other recommendations made by the underwriters concerning prepayment, origination and participation fees. He stated that the Board needed to approve or make changes in the recommendations so that the bond counsel could draw up the necessary documents needed before formal invitations are sent to the lenders. After discussion, Dale Christy moved ( to authorize the underwriters and bond counsel to prepare the necessary detailed proposals and invitations, based upon the general guidelines submitted at this meeting. George Faucette seconded the motion, which passed unanimously. Mr. Rauscher stated that he, Mr. Buttry and representatives from the Lomas & Nettleton company had worked out initial drafts of the basic documents and that they would get together for another drafting session and should have all the major documents and information put together within a couple of weeks. Mr. Buttry suggested that a progress report be made to the City Board of Directors in order to let them approve the substance of what this Board has done thus far (i.e. , the Board's choices of underwriter, trustee, administrator, pay- ing agent, and other general origination provisions) . A discussion ensued. • Mr. McCord stated that he would prepare an outline of the above material and sub- mit it as an informational item in the City Board's next regular agenda in order that they would have sufficient time to review this Board's actions prior to being asked for final approval . A discussion also ensued concerning the desirability of asking the lending institutions to respond to the formal invitations by making payment of a 2% com- mitment fee. It was suggested that the institutions not be asked to put up the 2% fee until the City Board has approved the bond package. After further discussion, Dale Christy moved to ask the lenders to respond to the formal invitations with written commitments only and to not require them to submit commitment fees until demand is made therefor. Ron Pennington seconded the motion, which passed unani- mously. A general discussion ensued concerning the appropriate time to ask the City Board to review the bond proposals and give its final approval . The Chairman stated that he felt the commitments from the lenders should first be obtained and tabu- lated so that the issue could be sized ,before the Board goes to the City Board for final approval. There being no further business to come before the meeting, said meeting adjourned at 4:00 o'clock P.M. ATTEST: F. H. Martin, Chairman Ron Pennington, Secretary