HomeMy WebLinkAbout1987-06-09; City Council; 7706-3; Revision to Assessment District FinancingCIT OF CARLSBAD - AGENC BILL
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MTG. 06/09/87
DEPT. AD
TITLE:
REVISIONS TO ASSESSMENT
DISTRICT FINANCING
COUNCIL POLICY NO. 33
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RECOMMENDED ACTION:
By minute motion, approve staff recommendations for
revisions to Council Policy No. 33.
ITEM EXPLANATION
On May 29, 1984, Council approved Council Policy No. 33
regarding the use of the 1915 Act bonds for Assessment
Districts. The policy was established for a number of
reasons:
1. To address the City's obligations in
cases of default;
2. To state policy and procedure on the
pass-through of bond obligations to the
property owners;
3. To provide procedures to handle requests
from developers desiring to use 1915 Act
bonds; and
4. To define the types of projects that
would be permitted to be financed by 1915
Act bonds.
The first three of these have been revised as follows:
1. In the case of default, the City was required to
institute foreclosures against any default and had
a liability to advance funds for any deficiency in
required payments. A revision to State law last
year allows the City to choose not to obligate
itself. The first revision changes Paragraphs 12
and 13 by removing City liability in cases of
default.
2. The second revision is to Paragraph 15 concerning
passing through of the bond obligation to the
prospective property owner. It was revised to
clarify that the City prefers that the developer
pay off the bonds before a lot is sold and, if a
pass through is desired, City Council approval is
required. The procedure for this is also
clarified.
3. The final revision affects Paragraph 1 under
PROCEDURE. Under the Project Review Committee,the
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PAGE 2 OF AGENDA BILL NO. 77«3k» ~
Land Use Planning Manager was changed to Planning
Director and Community Development Director,
Finance Director and City Assessment Engineer were
added.
FISCAL IMPACT
None.
EXHIBITS
1. Memo dated April 21, 1987 containing the revised
paragraphs.
2. Council Policy No. 33 as revised.
April 21, 1987
TO: ACM PATCHETT
FROM: CITY ASSESSMENT ENGINEER
REVISIONS TO COUNCIL POLICY NO. 33 - 1915 ACT BONDS
The following paragraphs have been revised as shown:
NOTE: *** Words deleted by revision.
Words added by revision.
POLICY
12. As part of the structuring of the financing for the dis-
trict, the City Council shall require that an adequate
reserve fund be established to cover *** any potential
defaults. The City is not required to advance monies to
the reserve fund to pay for delinquencies. It is the
City's intent that its general fund not be obligated in
any way for future delinquencies. (NOTE: Words deleted
are "City obligations for".)
13. The City Council may require the district proponents enter
into an agreement with the City to be individually and
jointly responsible for the cost of any foreclosures which
the City determines are necessary in regard to the assess-
ment district bonds. The City may, at its option, retain
an attorney to prosecute the foreclosures in a timely
manner in the name of the City and the proponents shall
agree to be responsible for all costs of such foreclosures.
If the City Council approves a pass through of a bond to
the purchaser of an individual lot, the proponents shall
be relieved of their obligations under the agreement for
such lot.
15. It is the City's desire that the proponents discharge the
assessment district bonds applicable to their property
prior to the sale of individual lots. The City Council
may approve a pass through of the bond obligation to a
prospective purchaser at their sole discretion. A devel-
oper wishing to secure approval of a pass through mus
ACM Patchett
Revisions to Council Policy No. 33
April 21, 1987 Page: 2
apply to the City in writing requesting permission to do
so. The letter must contain a plan of how the prospective
buyer will be notified and the steps taken to accomplish
the pass through. The required procedure shall include-
but not be limited to - all of the following;
a. Provide for full disclosure of this and any other
assessment financing applicable to the property to
prospective purchasers including principal. interest
rate, duration and amount of the monthly payments.
b. List the amount of the assessment lien in all sales
brochures. all advertising and all purchase documents
adjacent to the sales price of the property and in
the same size type.
c. Give the prospective purchasers an option to have the
assessment lien discharged prior to close of escrow
or to assume the assessment lien by a pass through
as a part of the sales price of the house or by a
reapportionment of the assessment.
Once the request is received from the developer, it will
be placed on the Council agenda for consideration.
PROCEDURE
1. It is the intention of the City Council that proponents
of a district have an early opportunity to have the pro-
posal reviewed by City Staff for compliance with this
policy. In that regard, the City Council hereby directs
the creation of the Project Review Committee. The Commit-
tee shall consist of the City Manager, City Attorney,
Community Development Director. Planning Director. City
Engineer, Finance Directorf Director of Utilities and
Maintenance, and City Assessment Engineer. The Committee
shall meet on request with proponents of a district to
review a project to determine whether or not the require-
ments of this policy have been satisfied. Committee
review shall take place prior to the presentation of an
assessment district project to the City Council. Whenever
any such project is presented to the council, it shall
be accompanied by a report containing the findings and
ACM Patchett
Revisions to Council Policy No. 33
April 21, 1987 Page: 3
recommendations of the Committee made in regard to such
project. The Committee may require the proponents to
furnish any information necessary to the evaluation of
the proposed district. The Committee may require all or
any part of the deposits provided for in this policy to
be made prior to commencing their review of the project.
Only the four (4) paragraphs above have been changed.
RICHARD H. ALLEN, JR.
City Assessment Engineer
RHArlch
CITY OF CARLSBAD
COUNCIL POLICY STATEMENT
GENERAL SUBJECT: ASSESSMENT DISTRICT FINANCING OF
PUBLIC IMPROVEMENTS
SPECIFIC SUBJECT: POLICY FOR USE OF 1915 ACT BONDS
Page 1 of 6
POLICY NO. 33
DATE ISSUED June 9. 1987
EFFECTIVE DATE June 9. 1937
CANCELLATION DATE None
SUPERSEDES DATE 5/29/84
COPIES TO: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
BACKGROUND;
The City Council has received several requests from property owners of major
planned developments to use 1915 Act assessment district bond financing for
public improvements to be constructed as a condition of such developments. The
City Council has determined that tax exempt financing and 1915 Act bonds should
only be used if a substantial public benefit to the City can be found. Council
has determined further that such a benefit can be found in the construction of
arterial streets that are necessary, not only to serve an individual development,
but also to link communities within the City. The use of assessment district
financing for arterial streets may include sewer and water lines when the City
Engineer determines it is necessary that they be located within the street right-
of-way. Projects may also include other incidental construction such as drainage
facilities located within an eligible arterial highway.
Council has also determined that it is necessary to establish circumstances under
which the City Council will approve assessment district financing as a guide to
those who would seek to request it.
PURPOSE;
To establish a policy regarding the requirements which must be met before the
City Council will approve the financing of public improvements using 1915 Act
assessment district bonds.
To establish a procedure for processing applications for assessment district
financing and a staff review committee to apply the requirements of this policy
to such applications. The committee may also consider recommending that the City
initiate a district.
This policy is primarily intended to apply to assessment districts proposed for
property which is predominantly undeveloped where the developers in the area
propose to use public financing in lieu of private financing for appropriate
public improvements.
POLICY;
1. The City may allow the financing of public improvements under the provisions
of this policy where the public facilities represent, in the City's opinion,
CITY OF CARLSBAD
COUNCIL POLICY STATEMENT
GENERAL SUBJECT: ASSESSMENT DISTRICT FINANCING OF
PUBLIC IMPROVEMENTS
SPECIFIC SUBJECT: POLICY FOR USE OF 1915 ACT BONDS
POLICY NO. 33
Page 2 of 6
DATE ISSUED June 9, 1987
EFFECTIVE DATE June 9, 1987
CANCELLATION DATE None
SUPERSEDES DATE 5/29/84
COPIES TO: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
a significant public benefit not only to the prospective residents of the
development but to the entire community.
2. Facilities which may be considered shall be public facilities in dedicated
rights-of-way or easements, and for which a public agency has on-going
responsibility to maintain and operate. The types of facilities to be
financed are limited to:
(a) Arterial streets identified on the circulation element of the Carlsbad
General Plan.
(b) Sewer and water lines to be located within the right-of-way of arterial
streets when the City Engineer determines it is necessary that they be
so located.
(c) Drainage facilities and public utilities may be included which are
appurtenant and incidental to such streets.
3. Project property value to lien ration should be 4:1 after the installation of
the improvements to be financed. A project may be approved with a ratio
between 4:1 and a minimum of 3:1 if the ratio is recommended by both bond
counsel and the underwriter and if the City Council finds the reduced ratio
to be within parameters acceptable to them. The value of the property
proposed to be assessed shall be determined by an M.A.I, appraisal,
performed by a appraiser selected by the City.
4. Projects shall be at the stage where all criteria of this policy can be
adequately assessed. Developments proposed for inclusion in a district shall
have already received environmental review and shall have already received
all legislative approvals such as zoning, master plans or specific plans.
The City Council may approve a district that includes some lands without
legislative approvals if the improvement to be constructed is consistent with
the general plan and if the City Council finds the improvement is required in
the public interest.
5. Assessment districts shall have the concurrence of the affected area's prop-
erty owners representing not less than 60 percent, by area, of the land
proposed to be assessed. The petition shall include an acceptance of this
policy and a waiver of the property owners' rights under the Majority Protest
Act.
1
CITY OF CARLSBAD
COUNCIL POLICY STATEMENT
GENERAL SUBJECT: ASSESSMENT DISTRICT FINANCING OF
PUBLIC IMPROVEMENTS
SPECIFIC SUBJECT: POLICY FOR USE OF 1915 ACT BONDS
Page 3 of 6
POLICY NO. 33
DATE ISSUED June 9. 1987
EFFECTIVE DATE June 9. 1987
CANCELLATION DATE None
SUPERSEDES DATE 5/29/84
COPIES TO: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
6. The City shall select the assessment engineer, bond counsel, and, if
required, the financial consultant. In making such selections the City will
take any suggestions from the project proponents into account. The design
engineer and underwriter may be selected by the proponent of the district in
consultation with and subject to approval of the City.
7. A sum sufficient to pay all fees and costs for the proposed assessment
district prior to award of contract shall be deposited with the City by the
proponents of the district. The proponents shall also be required to deposit
with City a sum sufficient to cover all City costs incurred in connection
with review of a proposed district including staff review, legal review,
administration, plan checking, investigation. City Council review and
inspection. These sums will be retained by City to the degree used if the
district is not successfully completed or if such costs are not recovered by
City from the district. If the district is confirmed any sum not retained by
City shall be refunded in cash or applied as a credit against the assessments
at the option of the proponents.
8. Improvements shall be constructed in accordance with the Municipal Improve-
ment Act of 1913, and the assessment district bonds shall be issued in
accordance with the Improvement Bond Act of 1915 unless the City Council
determines otherwise.
9. Generally, there shall be no overlapping bond assessments or tax liens on
the proposed special assessment district at the time assessments are to be
affirmed by the City. The City Council upon advice of bond counsel may
approve an overlap provided the combined assessments are within the property
value ratios of paragraph 3 of this policy.
10. The proponents of the district must demonstrate to the satisfaction of the
City Council that interim financing or other means is available for the
developments to be included within the district adequate to meet all assess-
ment obligations between the time the district is formed and the pay off of
the bonds or their assumption by the purchasers of the individual homes
within the proposed development. As part of the review the City Council may
also consider any indebtedness presently existing against the properties to
be assessed. The district proponents must bring all property tax bills
current and agree to keep them current prior to confirmation of the
district.
CITY OF CARLSBAD
COUNCIL POLICY STATEMENT
GENERAL SUBJECT: ASSESSMENT DISTRICT FINANCING OF
PUBLIC IMPROVEMENTS
SPECIFIC SUBJECT: POLICY FOR USE OF 1915 ACT BONDS
Page 4 of 6
POLICY NO. 33
DATE ISSUED .Tline 9.
EFFECTIVE DATE Jline 9.
1987
1987
CANCELLATION DATE Nonp
SUPERSEDES DATE 5/29/84
COPIES TO: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
11. If the City Council determines it is necessary a financial feasibility study
may be required by a consultant selected by the City to be accomplished at
the expense of the proponents of the district to ascertain whether or not
the proposed development will find market acceptance. The City Council may
accept a private sale bond purchase agreement from a qualified underwriting
firm on terms and conditions satisfactory to the City in lieu of such a
study.
12. As part of the structuring of the financing for the district the City Council
shall require that an adequate reserve fund be established to cover any
potential defaults. The City is not required to advance monies to the
reserve fund to pay for deliquencies. It is the City's intent that its
general fund not be obligated in any way for future deliquencies.
13. The City Council may require the district proponents enter into an agreement
with the City to be individually and jointly responsible for the cost of any
foreclosures which the City determines are necessary in regard to the
assessment district bonds. The City may, at its option, retain an attorney
to prosecute the foreclosures in a timely manner in the name of the City and
the proponents shall agree to be responsible for all costs of such
foreclosures. If the City Council approves a pass through of a bond to the
purchaser of an individual lot the proponents shall be relieved of their
obligations under the agreement for such lot.
14. It is the policy of the City Council in approving basic legislative authori-
zation for developments such as master plans for planned communities, to give
such approvals as part of the City's ongoing planning process. That is, the
City reserves the right to modify the approvals in the future as they deter-
mine the public interest may require. Such approvals when given are subject
to a condition that the construction of any part of a development does not
vest any rights to complete other portions of the development. Construction
of public improvements pursuant to an assessment district in undeveloped land
shall not vest any rights to the existing legislative approvals for the
property to be assessed or to any particular level, type or intensity of use.
Proponents of a district shall include an acknowledgement of this policy as
part, of their petition and shall expressly waive on their behalf and on
behalf of their successors and assigns any cause of action based on the case
of Fury v. County of Sacramento which might be applicable to properties to be
assessed.
7
CITY OF CARLSBAD
COUNCIL POLICY STATEMENT
GENERAL SUBJECT: ASSESSMENT DISTRICT FINANCING OF
PUBLIC IMPROVEMENTS
SPECIFIC SUBJECT: POLICY FOR USE OF 1915 ACT BONDS
POLICY NO. 33
Page 5 of 6
DATE ISSUED June 9. 1987
EFFECTIVE DATE June 9. 1987
CANCELLATION DATE None
SUPERSEDES DATE 5/29/84
COPIES TO: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
15. It is the City's desire that proponents discharge the assessment district
bonds applicable to their property prior to the sale of individual lots. The
City Council may approve a pass through of the bond obligation to a
prospective purchaser at their sole discretion. A developer wishing to
secure approval of a pass through must apply to the City in writing
requesting permission to do so. The letter must contain a plan of how the
prospective buyer will be notified and the steps taken to accomplish the pass
through. The required procedure shall include, but not be limited to, all of
the following:
a. Provide for full disclosure of this and any other assessment financing
applicable to the property to prospective purchasers including principal,
interest rate, duration and amount of monthly payments.
b. List the amount of the assessment lien in all sales brochures, all
advertising and all purchase documents adjacent to the sales price of the
property and in the same size type.
c. Give prospective purchaser an option to have the assessment lien
discharged prior to close of escrow or to assume the assessment lien by a
pass through as a part of the sales price of the house or by a
reapportionment of the assessment.
Once the request is received from the developer, it will be placed on the
Council agends for consideration.
16. The principal purpose for the City Council's approval of assessment district
financing is to complete the links in the City's circulation system. The
City Council in that regard will not favor a proposed district which
contemplates the construction of a portion of an arterial street without
extending it in a logical way to connect to the City's existing circulation
system. The City may require that proponents of a district presenting a
petition to expand the area to be included within a proposed district as may
be necessary to complete such circulation links.
CITY OF CARLSBAD
COUNCIL POLICY STATEMENT
GENERAL SUBJECT: ASSESSMENT DISTRICT FINANCING OF
PUBLIC IMPROVEMENTS
SPECIFIC SUBJECT: POLICY FOR USE OF 1915 ACT BONDS
POLICY NO. 33
Page 6 of 6
DATE ISSUED June 9. 1987
EFFECTIVE DATE June 9. 1987
CANCELLATION DATE None
SUPERSEDES DATE 5/29/84
COPIES TO: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
PROCEDURE:
It is the intention of the City Council that proponents of a district have an
early opportunity to have the proposal by City staff for compliance with this
policy. In that regard, the City Council hereby directs the creation of the
Project Review Committee. The Committee shall consist of the City Manager,
City Attorney, Community Development Director, Planning Director, City
Engineer, Finance Director, Director of Utilities and Maintenance and City
Assessment Engineer. The Committee shall meet on request with proponents of
a district to review a project to determine whether or not the requirements
of this policy have been satisfied. Committee review shall take place prior
to the presentation of an assessment district project to the City Council.
Whenever any such project is presented to the Council it shall be accompanied
by a report containing the findings and recommendations of the Committee made
in regard to such project. The Committee may require the proponents to
furnish any information necessary to the evaluation of the proposed district.
The Committee may require all or any part of the deposits provided for in
this policy to be made prior to commencing their review of the project.
Upon review of the proposed assessment district and after considering the
report of the Committee the City Council shall determine whether or not to
approve proceeding with the formation of the district. It is the policy of
the City Council of the City of Carlsbad to limit projects to the criteria
set forth in this policy. The City Council reserves to itself the authority
to approve or disapprove any proposed improvement district based upon the
evidence received at the hearings held by the City Council. Any exceptions
to the criteria of this policy will be approved only upon an express finding
by the City Council that the project is so affected with a public interest
that the City should assist in providing tax free financing for the
improvement in order to satisfy a public need. If the City Council approves
proceeding with the formation of the district City staff and the proponents
shall proceed to do that in accordance with State law and the requirements of
this policy.
Where there are multiple proponents of a proposed district they shall
designate a spokesman authorized to act for the proponents in their dealings
with the City. The spokesman shall be responsible for collecting any fees
for deposit with the City, providing any necessary information to the City,
and for communicating as necessary back to the proponents.