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HomeMy WebLinkAbout1987-06-09; City Council; 7706-3; Revision to Assessment District FinancingCIT OF CARLSBAD - AGENC BILL AR* 7 7o&> —<3 MTG. 06/09/87 DEPT. AD TITLE: REVISIONS TO ASSESSMENT DISTRICT FINANCING COUNCIL POLICY NO. 33 DEPT. HP ffffl£ r\n ATTYY&3 CITY MGR^y OC£LO- O < 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 OO 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.