1 LONG TERM FINANCING OF TOM TAYLOR PLACE

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1 1 Report of the Commissioner of Finance Regional Council Meeting of January 22, 2009 THE REGIONAL MUNICIPALITY OF YORK REPORT NO. 1 OF THE COMMISSIONER OF FINANCE For Consideration by The Council of The Regional Municipality of York on January 22, LONG TERM FINANCING OF TOM TAYLOR PLACE 1. RECOMMENDATIONS It is recommended that: 1. The Region enter into loan agreements with Housing York Inc. to provide up to $4.434 million of long term financing for Tom Taylor Place located at 615 Fernbank Road in the Town of Newmarket. The loans would be subject to the following terms: (i) interest bearing at rates equivalent to those that would be incurred for long term debt financing by the Region; (ii) $2.334 million of the total would be repayable over a term not to exceed 30 years; (iii) $2.1 million of the total would be repayable over a term not exceed 20 years; and (iv) any other terms the Commissioner of Finance deems appropriate, including the requirement for security. 2. The Commissioner of Finance be authorized to issue long term debt financing in an amount up to $4.434 million for the terms noted above in accordance with the Region s Capital and Debt Financing Policy. 3. In the event that market conditions do not permit the issuing of debentures in the amount and term noted above by March 31, 2009, the Commissioner of Finance be authorized to apply to Infrastructure Ontario for the long term financing on behalf of Housing York Inc. in an amount not to exceed $4.434 million.

2 2 Report of the Commissioner of Finance Regional Council Meeting of January 22, The Chair and the Treasurer be authorized to execute all documents required to effect the foregoing, subject to the prior review of the Corporation s solicitor. 2. PURPOSE This report seeks authority for the Region to enter into loan agreements with Housing York Inc. in order to secure long term debt financing for the Tom Taylor Place affordable housing project located in the Town of Newmarket. 3. BACKGROUND York Region will provide long term financing for the capital cost of Tom Taylor Place The Board of Housing York Inc. at its January 14 th, 2009 meeting requested the Region to seek financing in the total amount of $ million to provide long term financing for Tom Taylor Place, a 50 unit affordable housing project in the Town of Newmarket that is now complete and occupied. This request is attached as Attachment 1 to this report. The approved capital budget for this project identified a number of funding sources including: Federal/Provincial Affordable Housing Program funding divided between an upfront capital contribution and a monthly provincial payment for 20 years; Long term financing to be repaid from project revenues; and, A contribution from the Social Housing Reserve Fund. There will be two repayment sources for the long term loans being requested. Tenant rents will be sufficient to pay the project s operating expenses and debt servicing, including principal and interest, on a $2.334 million loan over a period of 30 years. This term is standard in the multi-residential market and has been used in previous debentures issued by York Region for affordable housing. As part of the Canada-Ontario Affordable Housing Program funding approved for this project, the provincial government will be providing funding in the amount of $2,100 per unit plus interest for each of the next 20 years. This funding will be sufficient to service an additional loan of $2.1 million.

3 3 Report of the Commissioner of Finance Regional Council Meeting of January 22, ANALYSIS AND OPTIONS Housing York Inc. has an obligation to the Region for repayment of the financing for Tom Taylor Place In the past several years new social housing projects have been developed by the Region which retained ownership once the project was completed. The Region would enter into a long term lease with Housing York Inc. for the property which would operate the project. However, Tom Taylor Place is wholly owned by Housing York Inc. In these earlier projects the Region was responsible for all capital costs and Housing York Inc. repaid the Region from project revenues for the portion of those costs which were debentured based on terms in the leasing agreement. In the unique case of Tom Taylor Place, loan agreements are required to document Housing York Inc. s indebtedness to the Region for the portion of the capital costs that is to be retired through long term financing. Debenture issue postponed to 2009 due to financial market conditions The issuance of long term debt for this project was originally approved as part of the 2008 Regional Capital Budget and was expected to form part of a larger debenture issuance by the Region in the fall of As a result of the ongoing difficulties in the credit market however, the Region has deferred this debenture issue until 2009.The Region continues to closely monitor the financial markets and is expected to make a decision early in 2009 about seeking financing for a range of planned Regional capital projects. The Region could issue offsetting debentures in respect of the loans to Housing York Inc. with terms of the loans matching the terms of the Regionally issued debentures It is recommended the Region enter into two loans with Housing York Inc., one in the amount of $2.334 million with a term of 30 years, and the other in the amount of $2.1 million with a term of 20 years. At the time of its next debenture issuance the Region would issue debentures in these amounts. The loans to Housing York Inc. will match the terms of these debentures. The loans will be repaid from the revenues from net rents and provincial program funding made available to Housing York Inc. The loan proceeds will be used to service the corresponding debentures. Loan payments will be made concurrent with debenture payments. The Region could apply to Infrastructure Ontario to offset both or either loans if market conditions do not permit the Region to issue corresponding debentures in a timely manner The credit market may not be receptive to loans of a 20 or 30 year term given current volatilities in the market. If the Region cannot obtain long term financing through its own debenture issuance by March 31, 2009 it is recommended the Region apply on behalf of

4 4 Report of the Commissioner of Finance Regional Council Meeting of January 22, 2009 Housing York Inc. to Infrastructure Ontario for offsetting long term financing. Typically, Infrastructure Ontario loan rates are close to those that can be obtained by the region in today s financial markets. 5. FINANCIAL IMPLICATIONS The recommendations contained in this report will have no financial impact to the Region. The sources of funding available to Housing York Inc. through net rental revenues and provincial funding will be sufficient to service the long term financing obtained by the Region. 6. LOCAL MUNICIPAL IMPACT Tom Taylor Place will provide affordable housing options for York Region residents. 7. CONCLUSION This report provides the authority for the Corporation to execute the necessary loan agreements to document the indebtedness of Housing York Inc. to York Region for the Region s financing of the Tom Taylor Place affordable housing project. For more information on this report, please contact Len Bulmer, Reserve and Financing Specialist at ext The Senior Management Group has reviewed this report. Respectfully submitted, January 8, 2009 Newmarket, Ontario L. Russell Commissioner of Finance (Report No. 1 of the Commissioner of Finance was adopted without amendment, by the Council of The Regional Municipality of York at its meeting on January 22, 2009.)

5 THE REGIONAL MUNICIPALITY OF YORK Housing York Inc. Report of the General Manager LONG TERM FINANCING OF TOM TAYLOR PLACE 1. RECOMMENDATIONS It is recommended that: 1. The Corporation enter into a loan agreement with the Region to repay, from project revenues, up to $2.334 million of the total capital cost of the newly constructed Tom Taylor Place located at 615 Fernbank Road in the Town of Newmarket. Such loan to be: (i) interest bearing; (ii) for a 30-year term; and (iii) on such other terms that the Treasurer shall negotiate, including security, therefore. 2. The Corporation enter into a second loan agreement with the Region to repay, from the Provincial affordability payment, in the amount of $2.1 million for this project. Such loan to be: (i) interest bearing; (ii) for a 20-year term; and (iii) on such other terms that the Treasurer shall negotiate, including security, therefore. 3. The Corporation authorize the Region to seek long term debt financing of that amount on its behalf for the above loans. 4. The Chair and the Treasurer of the Corporation be authorized to execute all documents required to effect the foregoing, subject to the prior review of the Corporation s solicitor. 2. PURPOSE This report seeks authority for Housing York Inc. to enter into loan agreements with the Region in order to secure long term debt financing for the Tom Taylor Place affordable housing project located in the Town of Newmarket. Housing York Inc. 1

6 Long Term Financing of Tom Taylor Place 3. BACKGROUND York Region will provide long term financing for the capital cost of Tom Taylor Place Tom Taylor Place is a 50 unit affordable housing project in the Town of Newmarket that is complete and occupied and for which long term financing must now be put in place. The approved capital budget for this project identified a number of funding sources including: Federal/Provincial Affordable Housing Program funding divided between an upfront capital contribution and a monthly affordability payment for 20 years. Long Term Financing to be repaid from project revenues Contribution from the Social Housing Reserve Fund There will be two payment sources for the long term financing being requested. Tenant rents will be sufficient to pay the project s operating expenses and debt servicing, including principal and interest, on a $2.334 million loan over a period of 30 years. This term is standard in the multi-residential market and has been used in previous debentures issued by York Region for affordable housing. As part of the Canada-Ontario Affordable Housing Program funding approved for this project, the provincial government will be providing funding in the amount of $2,100 per unit plus interest for each of the next 20 years that would be sufficient to repay an additional loan of $2.1 million and has no impact on the Housing York Inc. operating budget for Tom Taylor Place. It is anticipated that the Region will issue two debentures in respect of both loans to Housing York Inc. and that the terms of loans will reflect the terms of the debentures. 4. ANALYSIS AND OPTIONS Housing York Inc. has an obligation to the Region for repayment of the financing for Tom Taylor Place Unlike previous new buildings developed for Housing York Inc. where the control of the land rests with the Region, which then enters into a lease with Housing York Inc. for the building, Tom Taylor Place is wholly owned by Housing York Inc. In these earlier projects the Region was responsible for all capital costs and Housing York Inc. repays the Region from project revenues for the portion of those costs which were debentured. This arrangement is documented in the lease agreement. In the unique case of Tom Taylor Place, loan agreements are required to document Housing York Inc. s indebtedness to the Region for the portion of the capital costs that is to be retired through long term financing. 2 Housing York Inc.

7 Long Term Financing of Tom Taylor Place Debenture issue postponed to 2009 due to financial market conditions The issuance of long term debt for this project was originally approved as part of the 2008 Regional Capital Budget and was expected to form part of a larger debenture issuance by the Region in the fall of As a result of the ongoing difficulties in the credit market however, the Region has deferred this debenture issue until Region s Finance Department is considering options for capital financing needs The Commissioner of Finance for the Region continues to closely monitor the financial markets and is expected to make a decision early in 2009 about seeking financing for a range of planned regional capital projects. In lieu of the usual course of issuing debentures, the Commissioner is also investigating the option of applying to Infrastructure Ontario for the Region s capital needs and will seek Council s approval for that strategy at the appropriate time. 5. FINANCIAL IMPLICATIONS The approved capital and operating budgets for this project provide for the debt financing and repayment of the principal and interest costs associated with this obligation. The capital budget for this project identified a number of funding sources including: Federal/Provincial Affordable Housing Program capital contribution - $1.4 million Federal/Provincial Affordable Housing Program funding paid monthly for 20 years - $2.1 million Contribution from the Social Housing Reserve Fund up to $4.15 million Long Term Financing to be repaid from project revenues - $2.3 million 6. LOCAL MUNICIPAL IMPACT Tom Taylor Place will provide affordable housing options for York Region residents. 7. CONCLUSION This report provides the authority for the Corporation to execute the necessary loan agreements to document the indebtedness of Housing York Inc. to York Region for the Region s financing of the Tom Taylor Place affordable housing project. For more information on this report, please contact Sylvia Patterson, Assistant General Manager, Housing York Inc. at Ext Housing York Inc. 3

8 Long Term Financing of Tom Taylor Place The Senior Management Group has reviewed this report. Recommended by: Approved for Submission: Sylvia Patterson Assistant General Manager Joann Simmons General Manager January 6, 2009 KK/hf Report Wizard v.8 May 8, Housing York Inc.