Council briefed on Homestead Station new markets tax-credit unwind; assets to transfer to city pending audit and closing

City legal counsel and outside tax-credit counsel told the City Council on Tuesday that the seven-year compliance period for the Homestead Station New Markets Tax Credit (NMTC) transaction has concluded and that the transaction is scheduled to be unwound this fall. The closing is scheduled for Oct. 2, with a council resolution confirming the city's approval of closing documents to be considered on the Sept. 24 council agenda.

The transaction and the supporting entities Staff explained the NMTC structure used to finance and complete the Homestead Station project. In that structure an investor (Capital One Bank in this transaction) invested through community development entities (CDEs) that placed funds into a qualified active low-income community business (commonly called the QUALICB). The qualifying entity in Homestead was created by the council in 2018 via Resolution 2018-06-62 to facilitate gap financing for the project.

Timing and mechanics explained Counsel said the NMTC compliance period began in February 2018 and has now reached its end. Per the original transaction documents, the investor is exercising a put option and the parties will execute closing documents that unwind the NMTC arrangements. The closing documents are being exchanged among attorneys for all parties and were scheduled to be finalized and circulated to the city attorneys and council in advance of a September 24 resolution vote. Counsel said that if closing documents are received in time, the city council will vote to approve them at the Sept. 24 meeting.

What transfers to the city Counsel and staff described the mechanics after closing: Homestead Station QUALICB, Inc. (the tax-exempt supporting organization) will transfer assets to the city and, by council resolution, the city will forgive a note receivable reflecting a loan that the city previously extended to the QUALICB. Staff described that the entity currently shows a $30 million asset linked to the project and a corresponding note payable/receivable relationship with the city. Counsel said the typical post-closing step is for the QUALICB board to approve dissolution and contribute assets to the city; staff expects that remaining account balances—estimated in the agenda material at roughly $800,000–$1,000,000—would be swept back to the city, subject to the final audit and council approval.

Audit and closing schedule; contingencies The city manager requested a final audit of Homestead Station QUALICB up to the entity’s last day of operation; staff said they expect the audit to be completed by late October and will return to council with the audit results and the formal closing resolution. Outside counsel recommended that the audit be completed before final dissolution and suggested the audit could reasonably be completed by year-end. Counsel also advised that the unwind of the NMTC transaction itself is largely formulaic and must be coordinated among the investor, CDEs, and counsel; delays would be contingent on completion of closing documents and any issues discovered in the audit.

Funding and historical notes Staff clarified that the $30 million identified in the transaction represents project assets and corresponding financing arrangements (b-notes and other long-term instruments used in NMTC deals). The city provided funding and loans to the transaction in prior years (including bond proceeds and other pledged funds) and, for accounting, the amounts appear as notes receivable on the city's books and as assets/notes payable on the QUALICB books. Counsel and staff said, subject to the council vote and completion of the audit, the city will receive the asset interest and the remaining cash balances.

Next steps for council - Staff will seek a Sept. 24 resolution authorizing execution of the final closing documents and confirming the city's approval of the unwind transaction. - A final audit of Homestead Station QUALICB will be completed and delivered to staff prior to asset transfer; staff estimates audit timing in October–November and said they will return the audit to council with the closing resolution.

Ending note: If the council approves the closing documents and the audit reports are satisfactory, the supporting QUALICB entity will be dissolved and its assets and remaining funds will transfer to the city; councilmembers flagged questions about timing and asked staff to coordinate the audit and closing to preserve oversight and financial controls.