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HomeMy WebLinkAbout97-60 - Land Secured Financing for Community Facilities District No. 97-1 (Sunflower Ave Utility Undergrounding)RESOLUTION NO. jQ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, APPROVING POLICIES AND PROCEDURES FOR LAND SECURED FINANCING FOR THE CITY OF COSTA MESA COMMUNITY FACILITIES DISTRICT NO. 97-1 (SUNFLOWER AVENUE UTILITY UNDERGROUNDING) THE CITY COUNCIL OF THE CITY OF COSTA MESA DOES HEREBY RESOLVE that the Policies and Procedures for Land Secured Financing, attached hereto as Exhibit 1, is hereby approved. PASSED AND ADOPTED at the regular meeting of the City Council of the City of Costa Mesa, State of California, on this 7th day of July, 1997. ATTEST: aj�c� -77 1144 -1 - Deputy City rk of the City of Costa Mesa Mayor of the City o ossa Mesa i%VED AS TO FORM STATE OF CALIFORNIA) �/ COUNTY OF ORANGE ) ss °�^^�a►� CITY OF COSTA MESA) CITY ATTORNEY I, MARY T. ELLIOTT, Deputy City Clerk and ex -officio clerk of the City Council of the City of Costa Mesa, hereby certify that the above and foregoing Resolution No. 7_ C) was duly and regularly passed and adopted by the said City Council at a regular meeting thereof held on the 7th day of July, 1997, by the following roll call vote: AYES: IJu.FFA, IT)ON4�YA11) NOES: N6tii;: ABSENT: t�oN,E �IZ � G K SoN j CGc�J�4n� �am E�.S IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the City of Costa Mesa this 8th day of July, 1997. Deputy City erk and ex -officio Clerk of the City Council of the City of Costa Mesa EXHIBIT 1 CITY OF COSTA MESA POLICIES AND PROCEDURES FOR LAND SECURED FINANCINGS I. GENERAL. The purpose of these Policies and Procedures (the "Policies") is to provide guidance and conditions for the conduct by the City of proceedings and the issuance of bonds for public financing secured by land. The Policies are intended to be general in nature and the specific details will depend on the nature of each particular financing. The Policies are applicable to special assessment and to special tax financing and are intended to comply with section 53312.7(a) of the California Government Code. The Policies are subject to amendment by the City at any time. II. KINDS OF PROJECTS -PRIORITIES. A. New Development. Except as otherwise provided, only those public improvements that benefit not only the particular development, but also the City at large will be considered for financing. Such improvements include trunk water, sanitary and storm sewer and related facilities, freeway interchanges, bridges, major collector or "spine" streets, including related landscaping and lighting. Unless an exception is specifically approved by the Board based on the other provisions of those Policies, in -tract utilities, streets, landscaping and lighting serving individual properties will not be financed in new development. Finally, the acquisition of rights-of-way, lands and easements for public improvements for new development will not be financed without specific authorization by the Board. B. Existing Development. The restrictions of II A above shall not apply if the Board shall determine that the public necessity requires the improvements. Such improvements include the installation, construction, replacement or renovation of domestic water, sanitary sewer and storm drainage systems, pedestrian walkways, paths and/or over -crossings and the improvement of streets to correct unsafe conditions. Priority will be given for improvements required for public health and safety, such as sanitary sewer, safe drinking water and storm drainage facilities. C. Combined. Projects containing both new and existing development will separately apply the above to each type, with priority given to projects affecting existing development. D. School Facilities. School facilities will not be financed except under appropriate joint exercise of powers agreements created between 'the City and school districts. III. APPLICATION FOR FINANCING. A. Filing. Any person seeking to use land -secured financing (an "Applicant") must first file a written application (the "Application") with the City Clerk's Office, 77 Fair Drive, Costa Mesa, California 92626. The Application must: 1. Identify the applicant and identify his or her relationship to the project (owner, developer, etc.); 2. Specify the kinds of public improvements sought to be financed, the proposed method of provision (See VIII hereof) and an estimate of the costs (excluding any financing costs); 3. Provide an explanation of why any part of the request differs from these Policies, if at all; 4. If a particular kind of financing is requested (e.g., Mello -Roos), the reasons for it; and 5. Be accompanied by the required Deposit (see below). B. Deposit. The costs of processing an application and, if approved the proceedings for land -secured financing shall be borne by the Applicant unless otherwise waived as provided herein. The estimated costs are called the "Deposit." The rules for the Deposit are: 1. The Deposit must be submitted with the application. The Deposit may be waived only by the Board and only for improvements under II B above. No action shall be taken on the Application unless and until the Deposit is made. 2. The Deposit shall be sufficient to cover City staff time and the costs of non -contingent outside consultants retained for the financing, recordings, filings, duplication, mailing and messenger costs. In general, the Deposit shall not be less than $18,000 and may be more, as required by the City. 3. The Deposit shall be increased upon demand of the City if at any time the City determines that the amount remaining is not sufficient. If the additional amount is not paid within ten (10) business days of the mailing of a written demand by the City to the applicant, the City shall cease all activities with respect to the financing unless and until the additional amount is paid. 4. The Deposit and any additional amounts shall be held by the City in a trust account, separate from all other funds of the City and 'used only for the costs of the financing. The City shall not be required to invest the trust account or to assure any rate of return if funds in the account are invested. Any interest earnings on the account shall be retained in the account and be used for the costs of the financing. Any unused balance remaining in the trust account shall be returned to the applicant. The use of the Deposit and/or establishment of the trust account shall in no way be construed as requiring the City to issue land -secured indebtedness or to provide reimbursement from the proceeds thereof for expended portions of the Deposit. C. Financing Team. The City shall select all consultants to be retained by the City for the financing, including, but not limited to, appraiser, bond counsel, bond paying, fiscal agent or trustee, disclosure counsel, engineer of work, financial advisor, special tax consultant and underwriter. Providers of letters of credit, surety bonds or other credit enhancements are also subject to City approval. Consultants, including legal counsel, to any financing team member and the Applicant (except disclosure counsel retained directly by the City) shall be chosen and paid by such member and not from the proceeds of the financing. The City shall designate one City official as the contact person for contacts with the members of the financing team. D. Processing the Application. Upon filing the Application, the Public Services Director and Finance Director of the City shall review the Application for completeness, return it if not and if it is complete will convene a meeting of financing team to discuss the Application. This first meeting is the "Initial Review" and its results will be given to the Applicant in writing, detailing what changes or other requirements , if any, must be made and/or met for the City to continue to process the financing, including any increases in the Deposit for additional work required to process the Application. If the Applicant wishes to proceed and comply with any conditions of the Initial Review, he or she must inform the City in writing. Before commencing any financing proceedings, a second "Final Review" will be held with the Applicant, City and Financing Team representatives to cover any final conditions, including Economic Viability Review (below). IV. ECONOMIC VIABILITY REVIEW -CREDIT QUALITY A. General. While the kind of bonds or other indebtedness generally issued will not require City contingent or direct liability and will be secured only by land, defaults in land -secured financing will potentially adversely affect financial market perceptions, and, thus, the City wishes to avoid, to the extent possible, defaults in land -secured financing. To help assure that goal, and as part of the Application process, the City will review each proposal on its own merits and on its own facts and circumstances for economic viability and the criteria contained in this Part IV for evaluating the credit quality of the financing. B. Required Information. The City will (unless clearly unnecessary under the circumstances) require each of the following as a condition of processing an Application. Failure to supply any required information in a timely manner shall be cause for the City to cease processing the Application: 1. Title Evidence. The Applicant must submit a current (not older than three months) CLTA or ALTA lender's title insurance policy or preliminary title evidence showing the vesting of title to the land that will secure the financing and showing the interests of any lenders, creditors, etc., as well as any easements, rights of way or other encumbrances that may impact the value of the land. The title evidence will also be used to verify ownership for any owner's petition for the financing. The Applicant will supply copies of any documents related to the title evidence as requested by the City. 2. Financia/ Information. Any Applicant or other owner of property within the proposed financing City who will be responsible for 20% or more of annual debt service on bonds shall submit financial statements (preferably audited) for the current and two prior fiscal years, together with other financial information requested by the City's financial advisor and/or underwriter as part - required financing due diligence. Updated financial information will be required as a part of bond sale activities. 3. Equity Participation. The City will take into account the degree of the Applicant's (or other major owner's) equity contribution as of the time of Application and any possible increases through the anticipated date of bond sale. 4. Administrative Approvals. The Applicant must furnish information as to the completeness of the approval process, including, but not limited to environmental clearances, land use planning approvals, rights to capacity or ability to use water, sewer and storm drainage facilities, availability of special permits (Army Corps of Engineers, California Fish and Game, Caltrans, Division of Dam Safety, etc.). Failure or inability to obtain any approval deemed necessary by the City shall be cause for delaying or suspending the Application or proceedings, including any bond sale activities. 5. Value of Land. The Applicant must submit evidence that the value of the land that will secure the bond issue is at least three times the amount of bonds to be sold and any overlapping special assessment and/or community facilities bonded debt on the property as of the anticipated date of sale of the bonds under the Application. The evidence may consist of: a. Full cash value as shown on the most current ad valorem assessment roll for the property; or b. An appraisal performed by an appraiser retained by the City and consistent with Attachment A hereto, which Attachment contains definitions, standards and assumptions to be used for such appraisals. C. Sufficiency of Revenues. In determining whether the financing which is the subject of the Application is viable, the Applicant must demonstrate that the annual amount of debt service is reasonable for kind of property in its final, developed state. For commercial or industrial property, comparable numbers for similar uses shall be provided. For residential property, the maximum annual debt service for the expected financing, together with all other charges collected or to be collected on the annual tax bill for each developed parcel shall not exceed two percent (2%) of such parcel's expected assessed value. Based on these criteria, bond issues and, hence, financing, shall be sized accordingly. Apart from this basic rule, the following shall also apply: 1. Administrative Expenses. Anticipated annual revenues to be collected on the tax roll shall take into account the City's estimates of annual administrative costs, including, as appropriate, costs of bond registration, arbitrage and rebate calculation, preparation and up -dates of debt collection schedules and special tax computations. 2. Residential Properties. For residential properties only, the following special considerations apply: a. Debt service (including administrative expenses) shall be substantially level throughout the life of a bond issue, so substantial increases in debt service because of issuance of additional phases of bonds or "back -loading" debt service to later years shall not be permitted. b. Special taxes for community facilities districts may escalate not more than two percent (2%) per year. C. Prepayments of assessments or, if permitted, special taxes, shall not be done at the expense of the City or the financing district. V. CITY PROCEEDINGS. A. Petition. For new development projects, a petition meeting the requirements of the applicable authorizing law will be required. The Applicant is urged to obtain unanimous waivers of cash payment (for assessment districts) or election waiting period (for community facilities districts). The Applicant must specify in the Application any reasonably expected impediments to obtaining petitions, including from co-owners and/or lenders of record (where required). Waiver of the petition shall be made only upon showing of extraordinary hardship. For existing development, petitions are preferred, but may be waived, depending on the nature of the project and degree of public importance. B. Representatives. The City and the Applicant shall each designate a representative for each financing district proceedings. The representatives shall be responsible for coordinating the activities of their respective interests and shall be the spokespersons for each such interest The purpose of this requirement is to avoid duplication of effort and misunderstandings from failure to communicate effectively. In the case of the City, it allows the City's consultants to report to a single official who will, in turn, communicate with other staff members. C. Time Schedule. The final schedule of events for any proceeding shall determined by the City, in consultation with its financing team and the Applicant. Any changes will require approval by the appropriate City official. Time schedules will (unless specific exceptions are allowed) observe established Board meeting schedules and agenda deadlines. To the extent possible, financing will be scheduled to allow debt service to be placed on the tax rolls with a minimum of capitalized interest. VI. FINANCING TERMS A. Limited Obligation. Unless specifically found to be required for particular kind of financing, bonds issued for land secured financing shall be limited obligations, payable solely from special assessments or taxes or other identified sources other than general funds or revenues of the City and do not require the use of such general funds or revenues to replenish any reserves or to bid at any foreclosure sale. B. Debt Service. Except for commercial or industrial property financing with no residential components, debt service shall be substantially level throughout the life of the bond issue. Phased bond issuance shall not result in increased debt service to existing residential homeowners. Unless determined to be specifically required, debt service shall not exceed twenty-five (25 years) from the date of bond issuance. C. Bond Redemption. Maximum redemption premiums shall not exceed three percent (3%). No call provisions shall exceed five (5) years and no provision shall be made restricting the ability of the City to refund any bond issue. Provision shall be made to allow redemption of bonds at par (without premium) with surplus construction funds. Provision shall be made to allow the City to purchase bonds on the open market at par plus accrued interest, in lieu of redemption of bonds. D. Reserve Funds. A reserve fund shall be required (unless specifically exempted for cause) for every land -secured financing. The reserve fund will be sized by the City with the advice of the financing team, and, for tax-exempt financing, will not exceed maximums prescribed by applicable federal tax law. Reserve fund earnings beyond maximum reserve fund size should be used to credit debt service and may be used to pay applicable rebate obligations under federal tax law. E. Capitalized Interest. The City, with the advice of the financing team, will determine, on a case by case basis, the amount of capitalized interest for a particular financing. The amount of such interest will be determined based on factors such as the length of the construction period, the earliest date upon which tax roll collection may commence and the amount such interest will add to the total amount of the financing, taking into account the restrictions on value to lien expressed herein and the ability of the owner(s) to defray the debt service. F. Foreclosure Covenants. Every land -secured financing bond issuance document shall provide for the judicial foreclosure of delinquent payments of assessments or special taxes. Such covenants may vary with particular financing, but shall at the minimum provide for the institution of foreclosure not more than 150 days from April 10 of a calendar year and shall authorize the City's Counsel or delegate thereof to commence foreclosure without further Board action upon notification of a delinquency. Provision may be made to allow deferral of foreclosure in the event the City advances funds to the reserve fund to maintain any specific reserve requirement. G. Discounts. In competitive bond sales, the amount of discount shall be determined by the City with the advice of its financial advisor. In negotiated sales, it shall be the burden of the underwriter to justify its discount as competitive and such justification must take into account any other compensation being paid to the underwriter. Original issue discount will be allowed only if the City determines that it results in a lower true interest cost and will not adversely affect the ability to construct the public improvements. VII. DISCLOSURES A. General. As a minimum, any disclosures mandated by applicable state law shall apply to each financing district to inform prospective purchasers of their obligations under the financing districts. In addition, there may be additional requirements mandated by the City for particular kinds of financing on a case-by- case basis. B. Forms. The City may prescribe specific forms to be used to disclose the existence and extent of obligations imposed by financing districts. VIII. PERFORMING THE WORK A. General. Facilities being financed may be provided by either the construction of them by a developer or other person and acquired ("Acquisition") or by public contract let by the City or other public agency ("Construction") or, in appropriate cases, both. B. Acquisition. Acquisition will be permitted only for improvements or facilities to be constructed entirely upon land owned or controlled by the Applicant and then dedicated or sold to the City or other public agency. Priority will be given to "turn -key" projects that do not require advances as work progresses. Components will be acquired only if the City determines that such acquisition is to the economic advantage of the City. Any work performed by Acquisition must be done under prevailing wage contracts and the Applicant shall be responsible for such compliance. In Acquisition projects, the City will allow for construction overhead, management and related costs of not to exceed 20% of the contract amount. All Acquisition will be done by suitable agreement which shall provide for adequate retentions, performance bonds and which shall not be assigned to the Applicant or any private lender. C. Construction. Construction will be required for any work done on public lands or public rights-of-way and for projects involving existing development. The usually applicable public bidding rules of the City shall apply and any financing time schedule shall take into account a suitable period for the preparation•of plans and specifications, bidding and notices thereof and bid opening. Mandatory bid hold periods shall take into account any applicable cash payment or comparable financing preparation periods.