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CITY OF MUSKEGON
CONTRACT FOR HOUSING TAX EXEMPTION
This Agreement between CLAY COMMONS LIMITED DIVIDEND HOUSING ASSOCIATION
LIMITED PARTNERSHIP, a Michigan limited partnership, whose address is 330 West Spring Street,
Suite 430, Columbus, Ohio 43215 (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 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 (as identified above) has offered, subject to
receipt of an allocation of Low Income Housing Tax Credits by the Michigan State Housing Development
Authority, to construct/acquire, own and operate a proposed low-income housing project identified as Clay
Commons on certain property located in the City at 30 E Clay Avenue (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, or an affiliate of the Sponsor to be formed, has entered or will enter into an
agreement to form a limited dividend housing association limited partnership or limited liability company
to function as owner of the proposed low-income housing Project. The owning entity to be formed will be
identified as CLAY COMMONS LIMITED DIVIDEND HOUSING ASSOCIATION LIMITED
PARTNERSHIP.
E. The City desires to encourage construction and financing of the low-income housing
Project which is identified by the working name of Clay Commons
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.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
t. 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,
reduced by 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, reduced by Utilities.
1.4. "Low Income Persons and Families" means persons and families eligible to move
into a housing project governed by Section 42 of the Internal Revenue Code, as amended, 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.
1.5 "LINTC Program" means the Low Income Housing Tax Credit program 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 (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,
acquisition and/or permanent financing of the housing project, and secured by a mortgage on the
housing project.
1.7. “Net Shelter Rents” means Annual Shelter Rent.
1.8. "Sponsor" means CLAY COMMONS LIMITED DIVIDEND HOUSING
ASSOCIATION LIMITED PARTNERSHIP, 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.
2, Class of Housing Projects. It is determined that the class of housing projects to which the
tax exemption shall apply and for which a service charge shall be paid in lieu of such taxes shall be housing
projects for Low Income Persons and Families that are financed with a Mortgage Loan or the LIHTC
Program. It is further determined that Clay Commons is of this class.
3. Establishment of Annual Service Charge. As contemplated and pursuant to 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. Housing
projects within the eligible class set forth in Section 2 above and the property on which they are or will be
located shall be exempt from all ad valorem property taxes from and after the commencement of
construction or rehabilitation. The City acknowledges that the Sponsor and the Authority, in the case of a
Sponsor receiving an Authority-financed Mortgage Loan, or the Sponsor and the mortgage lender, in the
case of a Sponsor receiving a Federally aided Mortgage Loan, have established the economic feasibility of
the housing projects for exemption from al! ad valorem property taxes and a payment in lieu of taxes as
established in this Ordinance. Therefore, the City will accept payment of an annual service charge for the
public services in lieu of all ad valorem property taxes. The annual service charge shall be equal to 4% of
the Net Shelter Rents actually collected by the housing project during each operating year.
4, Term_of Exemption. This exemption shall begin from and after the commencement of
construction or rehabilitation, 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.
5. Responsibilities of the Sponsor. The Sponsor agrees to perform the following:
5.1 The Sponsor shall pay the service charge and payment in lieu of all ad valorem
taxes on or before July | 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.
5.2 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.
5.3 In lieu of the requirement to submit a statement of annual shelter rents or contract
rents within 30 days after December 31 of each year, as required by Section 82-55 of the Ordinance,
Sponsor shall submit an annual audit by April 1*. If not timely filed, or within 30 days after notice
to Sponsor 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.
6. 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.
7. 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.
8. Payment of Service Charge. The annual service charge in lieu of taxes as established by
3
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.).
9. 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 1.4 shall be equal
to the full amount of the taxes which would be paid on that portion of the housing project if the housing
project were not tax exempt.
10. Counterparts. This Agreement may be executed in several counterparts and an executed copy
hereof may be relied upon as an original.
11. Binding and Benefit. This Agreement shal! be binding upon and inure to the benefit of the
parties hereto and their respective heirs, administrators, personal representatives, successors and assigns.
12. 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.
13. 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.
14. 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: AS Ade’ Ken Johnson
Its) Mayor, 7 3.0
Dated: 7 ~*MABAY
‘. '
ee Ys oes ~ 4 .
By: Sa ee Ann 'Meisch
Its: City Clerk : ;
Dated VE
CLAY COMMONS LIMITED DIVIDEND
HOUSING ASSOCIATION LIMITED
PARTNERSHIP.
a Michigan limited partnership
By: Clay Commons GP, LLC,
Its: General Partner
By: Spire Real Estate Holdings, LLC,
Its: Managing Member
By, Be Lo tO !
Print Name: Tho mas, Gey wa\sk:
Its: Authorized Member
Dated: 2/23/2024
EXHIBIT A
LEGAL DESCRIPTION
Project Location: 30 E Clay Avenue, Muskegon, MI 49442
1.27 +/- acres
PIDN: 61-24-205-173-0002-00; 61-24-205-173-0005-00, 61-24-205-554-0001-20
OR 31 se
BR 2th
MJ DMS 31007846v10
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