Present at the Monday, Jul 15 Village Council meeting were, from left, Council members Brian Housh, Carmen Brown, Vice President Gavin DeVore Leonard, President Kevin Stokes and Village Manager Johnnie Burns. Member Trish Gustafson phoned in virtually. (Video still)
Village Council talks ‘layers of encumbrances’ on Morgan Fields
- Published: July 23, 2024
At the most recent Village Council meeting, Monday, July 15, Council members again revisited the topic of pursuing a tax credit application that could one day lead to the creation of a 50-unit, low-income housing development on the YS school district-owned soccer fields.
As the group has supposed in past meetings, a number of land restrictions, financial encumbrances and lease agreements exist on the land — all of which may hamper the Village’s ability to one day purchase the 3.6-acre soccer fields from Yellow Springs schools.
However, at Monday’s meeting, Council members drilled down on just how encumbered the land really is.
Per past News reporting, Council granted $7,500 from the Village’s affordable housing fund to Bradley Ruwe, a bond attorney with Cincinnati-based law firm Dinsmore & Shohl LLP to advise Council on “any legal restraints on the Yellow Springs School District selling certain land to the Village for the possible development of low-income housing.”
Ruwe’s report, provided to the Village on July 8, outlined several general categories of challenges ahead.
Chief among those challenges, according to Ruwe, is the lease-purchase agreement into which the school district entered with Huntington National Bank in 2020, when the district placed a collateral lien on the land against the schools’ track and athletic stadium improvements project.
By virtue of the financial institution’s leasehold interest on the site, Huntington would have to grant consent to remove or modify that 2020 lease agreement — that is, should the school board agree to sell a portion of its land to the Village.
Another major obstacle are the many bondholders that also have a financial stake on the soccer fields.
In March of this year, the district entered into a separate transaction whereby certificates of participation, or COPs, were publicly sold to bondholders by Buckeye Leasing Services, thereby financing the ongoing school improvements project from the proceeds. Generally, COPs are a type of financing in which an investor purchases shares of lease revenues.
The structure of this lease-purchase agreement also involves Buckeye Leasing Services, which assigned its right, title and interest to the U.S. Bank Trust Company as a trustee.
All of the COPs are insured by Build America Mutual, or BAM, which, therefore, is the de facto bondholder by undertaking risk when it comes to the repayment or principal and interest on the COPs. BAM must approve any fundamental changes to the above transaction structures.
As Ruwe suggested in his memo, the school district could, possibly, request a release from BAM of the leasehold interest, which will likely require the creation of distinct parcels that separates the soccer fields from the rest of the district-owned property, which includes the middle and high schools.
Already, though, the district has begun the initial steps to re-parcel that land. At the most recent school board meeting, the group voted affirmatively to request that the Village rezone and “perform other actions to explore and facilitate the potential sale and purchase” of the soccer fields — a decision which can be read in Lauren “Chuck” Shows’ coverage of the board meeting in this week’s issue of the News.
All in all, from Ruwe’s findings, Village Solicitor Amy Blankenship told Council that, for the Village’s part, disentangling and eventually overcoming these complex “layers of encumbrances” on the soccer fields would require a great deal of outreach to the financial stakeholders and bondholders.
“In order to untangle the land,” Blankenship said, “the next step is to make phone calls — reaching out to BAM, Huntington and possibly also U.S. Bank — to determine what it would look like for these entities to restructure the agreements with them.”
Given that BAM is the primary bond insurer and with U.S. Bank as the trustee — representing, as Council President Kevin Stokes said, “an unknown number of entities” — conversations ought to start with those two institutions, Blankenship suggested.
“But BAM has no legal duty or responsibility to entertain this at all,” she cautioned. “Based on the advice we’ve gotten from our bond counsel, there’s nothing that requires them to engage.”
She continued: “If BAM is not willing to come to the table to have the conversations, then it becomes that much more difficult to unencumber the land. I’m standing here not 100% certain that we could overcome a ‘no’ from BAM.”
As Stokes later elaborated, “If BAM says ‘no,’ then we have to start ‘herding cats’ — finding and chasing down some unknown number of unknown entities, asking each of them for their permission.”
Present at Monday’s Council meeting was Board of Education President Judith Hempfling, who shared with Council members that the district’s legal counsel has already touched base with BAM and U.S. Bank regarding the district’s COPs agreement. According to Hempfling, “both entities have expressed openness to such a change.”
“But there are no guarantees,” Hempfling added from the podium.
Blankenship recommended that Council create what she called an “intergovernmental agreement” between the district and Village to better streamline joint efforts — especially communications between local stakeholders and the financial institutions with vested interests in the soccer fields.
In order, though, for such an intergovernmental agreement to be established, Blankenship requested the drafting of a “waiver of conflict” — a necessary step, she said, because she works for Dayton-based Bricker Graydon LLP, the same legal counsel firm that represents the school board.
“And once the waiver is signed [by Village Manager Johnnie Burns], it would be most efficient to have Bricker attorneys work with BAM and Huntington because they’re the ones who drafted the agreements to begin with,” Blankenship said.
Council member Brian Housh moved to authorize Manager Burns to sign the waiver of conflict — with all Council members voting affirmatively — which will now set into motion Bricker Graydon’s conversations with the financial stakeholders in the soccer fields.
Why the soccer fields?
As previously reported in the News, local affordable housing nonprofit YS Home, Inc. first approached Village Council last fall with a proposed plan to apply for $10 million in available federal tax credits that could finance the creation of a 50-unit, low-income, multifamily unit on the Village-owned Center for Business and Education, or CBE.
Located in the western reaches of Yellow Springs, the 35-acre CBE is home to Antioch University Midwest and marijuana producer Cresco Labs. Presently, the land is subject to restrictive covenants that allow for only commercial uses; residential uses — including the creation of a 50-unit housing development — are strictly prohibited.
Despite Council seeming to agree last year to table the possibility of locating Home, Inc.’s proposed development on the CBE — thus precluding the nonprofit’s 2024 application of the available tax credits — efforts to see if Cresco and Antioch University would be amenable to modifying the covenants for a future housing development have continued.
Recently, at Council’s June 17 meeting, the group agreed to send a formal letter to the two habitants on the CBE to ask for covenant modification. Per the letter, both Cresco and Antioch had until Tuesday, July 9, to respond to Village Council’s request.
At Monday’s Council meeting, Council member Brian Housh told his colleagues that Antioch University had responded.
On July 11, Chancellor William Groves wrote back, saying, “Given the significant potential impact a project of this nature would have on Antioch University, this is a matter that would require board approval. Our next regular board meeting is in late October. Therefore, I am unable to provide you with support for amending the restrictive covenants in the time frame you’re requesting.”
At press time, Cresco had not responded to Council’s request.
After Home, Inc. was encouraged to return to the drawing board last fall, the group suggested an alternative site for the proposed low-income housing development: the Morgan Fields, home to many hundreds of soccer players throughout the year, as the News reported last week.
Both the CBE and the soccer fields scored highly — a 94 on a scale of 100 — on the most recent opportunity index issued by the Ohio Housing Finance Agency, or OHFA, which therefore placed Home, Inc. in a competitive position to apply and potentially later receive the tax credits to finance the cost of building such a substantive housing development in Yellow Springs.
No other location within the municipal limits of the village scored as highly as those two parcels. And unlike the CBE, the Morgan Fields would qualify for $15 million in tax credits, as opposed to $10 million.
Over the last several months, many local groups — including elected bodies, local soccer organizations and even a newly formed political action group — have weighed in on the feasibility of the soccer fields, and in particular, the villagewide effort to overcome the encumbrances on the land. A number of these discussions, both formal and informal, have been marred by skepticism and criticism, but proponents of Home, Inc.’s vision are pressing ahead — perhaps, even, beyond the context of OHFA’s most recent scoring index.
“If we can’t get an application [for the tax credits] this February,” Housh told his colleagues at the dais, “then maybe the scoring will be just as good next year. The property that we’re hoping to untangle will not be a wasted effort.”
Additional coverage of the Monday, July 15, Village Council meeting will appear in a future issue of the News. Owing to the body’s annual summer break, Council will not reconvene until Monday, Aug. 19.
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