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Department Approval � �.�,c� �. Item Description: BACKGROUND l�'�, Jy REQUEST FOR COUNCIL ACTION Centennial Gardens Apartments Non-Compliance Date: 3/09/2009 Item No.: 12.a City Manager Approval � / In June of 2007, the Roseville City Council authorized the issuance of t�-exempt bonds for Centennial Gardens Apartments in the amount of $12M to Gardens East Limited Partnership in order to finance the acquisition and renovation of the buildings. The t�-exempt bonds are considered "conduit financing" and have no fiscal impact on the part of the City. As part of arrangement, Gardens East Limited Partnership agreed to keep at least 20% of the units as affordable as defined by the State of Minnesota. In August 2008, the City Council discussed concerns regarding rent increases and tenants not having their leases renewed. In the fall of 2008, there were several letters from Jack Cann of the Housing Preservation Project regarding the project's violation of state statutes governing the use of the tax- exempt bonds. Specifically, Mr. Cann alleged that the project did not meet the minimum threshold for providing affordable rents for at least 20% of the units since the developer failed to include utilities in their calculation of rents when determining the fair market rent. Upon review of Mr. Cann's assertions and in response to the City's inquiries, the developer's attorney recognized a mistake was made in the calculations and that the project was not in compliance with state statutes for a period of time. Subsequently, the developer reduced the rents to meet the affordability guidelines. In addition, Gardens East Partnership identified 31 households that were overcharged in rent and refunded a total of $1,687 to all of these parties. Although they were in compliance for the month of June, Gardens East Limited Partnership also rebated residents for that month. The rebates back to the individual tenants ranged from $10 -$180. The partnership also attempted to reimburse those tenants that no longer lived at Centennial Gardens. Of those that moved, they were able to reimburse 4 tenants. They were unsuccessful in locating three former residents. However, they were able to reimburse a total of 28 households for overpayment of rent. In order to confirm the developer's assertations, staff has requested and reviewed information regarding the rent charged to all of the units within the development from the time the bonds were issued (June 2007) to present to verify exactly when the project was not in compliance. The developer provided a spreadsheet detailing the rent each unit was being charged for rent between June 2007 to the present. Page 1 of 3