ACTION REQUESTED:
Title
Communication from the City Manager with a Request to APPROVE a HOME RULE VOLUME CAP ALLOCATION for PRIVATE ACTIVITY BONDS to Illinois Assist MCC Program and Tri-County River Valley Development Authority.
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BACKGROUND: The City of Peoria receives an annual Volume Cap allocation as a Home Rule Unit of government. The Volume Cap allocation for 2020 is $11,695,740. The calculation of the Volume cap for 2020 is based on $105 per resident. Based on Section 146 of the Internal Revenue Code of 1986, as amended (the “Code”), The number of residents for 2020 has been calculated based on 111,388 residents. The “Code” allows the volume cap to be allocated to certain tax-exempt private activity bonds.
In addition to the Code above the Illinois Private Activity Bond Allocation Act, (the “Act”), provides that a home rule unit of government may transfer its allocation of volume cap to any other home rule unit of government, the State of Illinois or any State agency, or any non-home rule unit of government.
Under the authority of the Statues above the City of Peoria has made Volume Cap allocation transfers to Illinois Assist MCC Program (IAssist) and Tri-county River Valley Development Authority (TRVDA) in the past. Both (IAssist) and TRVDA qualify as private activity bond program under the code.
IAssist is sponsored by communities throughout the State. IAssist promotes individual home ownership. The home buyer assistance features of the Assist program provide families with funds to pay all or most of their closing costs and down payment, enabling families with good credit but little capital to by their home. Additional benefits of the program include a mortgage credit certificate which reduces the homebuyers’ ongoing cost of borrowing in form of a credit that reduces the effective rate they pay on interest for the mortgage.
TRVDA is sponsored by communities in the Tri-County area. TRVDA issues bonds on behalf of the City of Peoria and our Private Activity allocation from the State of Illinois. These may also be referred to as Industrial Revenue Bonds (IRB). Interest to Bondholders on TRVDA Bonds is exempt from Federal and State income tax. Bonds issued by TRVDA promote and support Manufacturing projects and Multi-Family Housing Projects. Benefits of TRVDA are long-term financing of projects between 10-30 years, interest rates below conventional financing with rates m below prime rate in many cases, available financing for 100% of project.
The administrative function of the Illinois Assist Program requires each participating governmental agency to execute an Intergovernmental agreement (IGA) between each of other participating governments. The Town of Normal in McClean County will be added as a participating government in 2020. This will require the execution of an (IGA) The Town Normal as part of the administrative function. The attached presentation provides utilization data on IAssist. This provides the basis for funding recommendations See the attached table on utilization.
The recommendation is to continue the contribution of the Volume Cap into the Illinois Assist MCC Program using the 3-year average of $7,864,416 as a benchmark for the funding level for Illinois Assist MCC Program. 2020 Volume Cap allocation of $8,000,000 would sufficiently fund the demand for this program allowing for 1.7% increase. The balance of the Volume Cap of $3,695,740 should be allocated to Tri-County river valley development authority.
FINANCIAL IMPACT: If approved, the City will transfer its 2020 allocation to each of the programs. No further financial contribution is required.
NEIGHBORHOOD CONCERNS: Home ownership helps to stabilize neighborhoods.
IMPACT IF APPROVED: First-time home buyers seeking homes will have a tool that will reduce the cost of home ownership within the City of Peoria. IAssist supports homeowners by reducing the cost associated with home purchase as well as reducing the ongoing costs associated with homeownership. TRVDA will provide the resources necessary to facilitate financing of a significant development whether it is manufacturing or multi-family housing.
IMPACT IF DENIED: Home buyers in Peoria would need to find an alternative program to fill the void created by not funding IAssist. IAssist has been used to purchase on average 86 homes over the most recent 3year period. The average loan size has been $91,456. Additionally, developers seeking to multi-family housing projects would have to rely on more conventional l financing which in most cases is more expensive. This would make the properties within the City less competitive with alternative sites.
ALTERNATIVES: N/A
EEO CERTIFICATION NUMBER: N/A
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2017 - 2032 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Financially Sound City
2. Grow Peoria
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Grow employers and jobs.
2. Reinvest in neighborhoods.
3. Support sustainability.
DEPARTMENT: City Manager's Office