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CITY OF MUSKEGON
CONTRACT FOR HOUSING EXEMPTION
This Agreement between GenCap Nelson Limited Dividend Housing Association, LLC, a Michigan
LLC whose address is 6938 North Santa Monica Boulevard, Fox Point, WI 53217 (the "Sponsor") and
CITY OF MUSKEGON, whose address is 933 Terrace Street, Muskegon, Michigan (the "City") is made
pursuant to the following terms:
RECITALS
A. The City has adopted Chapter 82, Article II "Taxation" of the City Code of Ordinances,
providing for tax exemption (the "Ordinance") and providing for a service charge in lieu of taxes for a
housing project for low income persons and families to be financed with a Federally-aided Mortgage Loan
or an advance or grant from the Authority pursuant to the provisions of the State Housing Development
Authority Act of 1966 (1966 PA 346, as amended; MCL 125.1401, et seq.) (the "Act");
B. It is acknowledged that it is a proper public purpose of the State of Michigan and its
political subdivisions to provide housing for its low-income persons and families and to encourage the
development of such housing by providing for a service charge in lieu of property taxes in accordance with
the Act. The City is authorized by this Act to establish or charge the service charge to be paid in lieu of taxes
by any or all classes of housing exempt from taxation under this Act at any amount it chooses, not to exceed
the taxes that would be paid but for this Act. It is further acknowledged that such housing for low-income
persons and families is a public necessity, and as the City will be benefited and improved by such housing,
the encouragement of the same by providing real estate tax exemption for such housing is a valid public
purpose. It is further acknowledged that the continuance of the provisions of the Ordinance for tax
exemption and the service charge in lieu of all ad valorem taxes during the period contemplated in this
Agreement are essential to the determination of economic feasibility of the housing projects that is
constructed with financing extended in reliance on such tax exemption.
C. The City acknowledges that the Sponsor identified above has offered, subject to receipt
of an allocation of Low Income Housing Tax Credits and/or receipt of a Mortgage Loan, to
construct/acquire and rehabilitate, own and operate a proposed low-income housing project identified as
Nelson School Apartments on certain property located in the City at 550 West Grand (the "Project") to
serve low income persons and families, and that the Sponsor has offered to pay the City on account of this
housing project an annual service charge for public services in lieu of all ad valorem property taxes.
D. The Sponsor has entered into an agreement to form a limited dividend housing
association LLC to function as owner of the proposed low-income housing Project. The owning entity
is GenCap Nelson Limited Dividend Housing Association, LLC.
E. The City desires to encourage construction and financing of the low-income housing
Project which is identified by the working name of Nelson School Apartments.
F, To further enable and encourage the construction of the housing Project, the Sponsor and
the City enter into this Agreement.
G. The legal description of the Project is set forth in Exhibit A attached to this Agreement.
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NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. ‘Definitions.
1.1. "Authority" means the Michigan State Housing Development Authority.
1.2. "Annual Shelter Rent" means the total collections during an agreed annual period
from or paid on behalf of all occupants of a housing project representing rent or occupancy charges,
exclusive of Utilities.
1.3. "Contract Rents" means the total Contract Rents (as defined by the U.S.
Department of Housing and Urban Development in regulations promulgated pursuant to Section 8
of the U.S. Housing Act of 1937, as amended) received in connection with the operation of a
housing project during an agreed annual period, exclusive of Utilities.
1.4. "Low Income Persons and Families" means persons and families eligible to move
into a housing project.
1.5 ‘* LIHNTC" means the low-income housing tax credit administered by the Authority
under Section 42 of the Internal Revenue Code, as amended.
1.6. "Mortgage Loan" means a loan that is Federally-Aided Mortgage (as defined in
Section 11 of the Act) or a loan or grant made or to be made by the Authority to the Sponsor for the
construction and/or permanent financing of the housing project, and secured by a mortgage on the
housing project.
1.7. “Net Shelter Rent” means all collected rents on the subject project property
accounting for point-in-time vacancies:
1.8. "Sponsor" means GenCap Nelson Limited Dividend Housing Association, LLC
and any entity that receives or assumes a Mortgage Loan.
1.9. "Utilities" means charges for gas, electric, water, sanitary sewer and other utilities
furnished to the occupants that are paid by the housing project.
1.10. "Low Income Persons and Families" means persons and families eligible to move
into a housing project utilizing the area median income limits published by the U.S. Department of
Housing and Urban Development for the City of Muskegon MSA or Muskegon County, whichever
is applicable.
2, Grant of Exemption. As contemplated and pursuant to Act 346 of the Public Acts of 1966,
as amended, the State Housing Development Authority (the "Act"), the City hereby grants an exemption
from all ad valorem property taxes attributable to the buildings which consist of rental units offered to eligible
Low-Income Persons and Families as defined above.
3. Term of Exemption. This exemption shall begin on the tax day of the year in which a final
certificate of compliance or occupancy is issued by the City, and shall continue for the period the housing project
remains subject to income and rent restrictions pursuant to Section 42 of Internal Revenue Service Code of
1986, as amended (the "IRS Code"), or a Mortgage Loan remains outstanding, not to exceed 25 years. The
City agrees to be contractually bound by this Agreement to honor the exemption status of the proposed
project as provided herein and in this Agreement for the entire period during which the Project is subject to
the income and rent restrictions under Section 42 of the IRS Code or is subject to a Mortgage Loan, provided
that the said Mortgage Loan continues outstanding as more particularly set forth in Section 82-50 of the
Ordinance, not to exceed 25 years.
4, Responsibilities of the Sponsor. The Sponsor agrees to perform the following:
4.1 The Sponsor shall pay the service charge and payment in lieu of all ad valorem
taxes on or before July 1 of each year, beginning in the first year following the year in which the
exemption is first effective, and continuing throughout the time the exemption is in effect. The
service charge shall equal four percent (4%) of the Net Shelter Rents charged for all the LIHTC
certified units in the exempt housing project for the preceding calendar year, exclusive of the utility
charges paid by the project.
42 The Sponsor agrees to file all information required by the Ordinance and further
to meet its obligations to the Authority in connection with the Authority's administration of the
low-income housing tax credit program.
43 In lieu of the requirement to submit a statement of annual shelter rents and/or
contract rents within 30 days after December 31 of each year, as required by Section 82-55 of the
Ordinance, Developer shall submit an annual audit by April 1“. If not timely filed, or within 30
days after notice to Developer of said delinquency, a penalty of 1.25% of the service charge shall
be imposed. This penalty shall be collectible in the same manner provided in Section 82-54 of the
Ordinance.
5. Interpretation of Financing. The City agrees that it has reviewed the Sponsor's proposal for
the construction or rehabilitation of the Project, and that receipt of a Mortgage Loan from the Authority or
an allocation of low-income housing tax credits by the Authority will satisfy the eligibility requirements of
Section 82-50 of the Ordinance.
6. Contractual Effect of Ordinance. Notwithstanding the provisions of section 15(a)(5) of the
Act to the contrary, a contract between the City and the Sponsor with the Authority as third party beneficiary
under the contract, to provide tax exemption and accept payments in lieu of taxes, as previously described,
is effectuated by enactment of this Ordinance.
7. Payment of Service Charge. The annual service charge in lieu of taxes as established by
this Agreement shall be payable in the same manner as general property taxes are payable to the City and
distributed to the several units levying the general property tax in the same proportion as prevailed with the
general property tax in the previous calendar year. The annual payment for each operating year shall be paid
on or before July Ist of the following year. Collection procedures shall be in accordance with the provisions
of the General Property Tax Act (1893 PA 206, as amended; MCL 211.1, et seq.).
8. Limitation on the Payment of Annual Service Charge. Notwithstanding Section 4.1, the
service charge to be paid each year in lieu of taxes for the part of the housing project that is tax exempt but
which is occupied by other than Low Income Persons or Families as defined in Section 1.10 shall be equal
to the full amount of the taxes which would be paid on that portion of the housing project if the housing
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project were not tax exempt.
9. Counterparts. This Agreement may be executed in several counterparts and an executed copy
hereof may be relied upon as an original.
10. Binding and Benefit. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, administrators, personal representatives, successors and assigns.
11. Severability. The various sections and provisions of this Agreement shall be deemed to be
severable, and should any section or provision of this Agreement be declared by any court of competent
jurisdiction to be unconstitutional or invalid the same shall not affect the validity of this Agreement as a
whole or any section or provision of this Agreement, other than the section or provision so declared to be
unconstitutional or invalid.
12. Inconsistent Ordinances. All ordinances or parts of ordinances inconsistent or in conflict
with the provisions of this Agreement are of no effect to the extent of such inconsistency or conflict.
13. Choice of Law; Venue. This Agreement is executed in accordance with, shall be governed
by, and construed and interpreted in accordance with the laws of the State of Michigan. The parties agree
that for purposes of any dispute in connection with this Agreement, the Muskegon County Circuit Court
shall have exclusive personal and subject matter jurisdiction and venue.
IN WITNESS WHEREOF, the parties have signed this Agreement on the following page, on the
dates indicated.
CITY OF MUSKEGON
By:
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Ken Johnson
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EXHIBIT A
LEGAL DESCRIPTION
Parcel |
That part of Block 373,409 and 410, portions of vacated Monroe Avenue, Washington Avenue,
Johnson Street and an alley in Block 409, all in Revised Plat of 1903, City of Muskegon, Muskegon
County, Michigan, described as: Beginning at a point on the East line of said Block 409 being 110.00
feet North of the Southeast corner of said Block 409; thence North 02 degrees 10 minutes 29 seconds
East, 367.06 feet along said East line; thence South 76 degrees 22 minutes 19 seconds West, 768.54
feet; thence Southeasterly, 346.83 feet along the arc of a 1719.97 foot radius curve to the right, the
long chord of which bears South 36 degrees 46 minutes 53 seconds East, 346.24 feet to the North
right of way line of Grand Street, a 66 foot wide public roadway; thence South 87 degrees 59 minutes
19 seconds East, 371.27 feet along said North right of way line; thence North 01 degrees 06 minutes
34 seconds East, 109.67 feet (platted as 110.00 feet); thence South 87 degrees 59 minutes 19 seconds
East, 152.26 feet (platted as 150.00 feet) to the East line of 8th Avenue and the Point of Beginning.
Containing 5.23 acres of land, Subject to restrictions, easements and rights of way of record.
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