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HomeMy WebLinkAbout10 Grays Crossing Bonds 2005 Agenda Item # " M Morro To: Board of Directors From: Peter Holzmeister and Steve Hollabaugh Date: April 13, 2005 Subject: Gray's Crossing Community Facilities District, No. 04-1, Series 2005 Bonds Why this matter is before the Board — This matter concerns the issuance of a second series of bonds (Series 2005) to fund construction costs for PUD regional facilities and project-related public infrastructure for the Gray's Crossing Community Facilities District, No. 04-1. Debt issuance is a matter that only the Board can authorize. History — In 2003, East West Partners asked the Board to consider the formation of a Community Facilities District (Mello-Roos) to finance PUD regional facilities and project-related public infrastructure associated with their Gray's Crossing and Old Greenwood projects. After considerable discussion of the advantages and disadvantages of engaging in Mello-Roos type financing, the board decided to sponsor formation of two Mello-Roos Community Facility Districts (CFD). The board recognized that the CFD mechanism, if structured properly, offered significant financial benefits to TDPUD. The District retained the services of two firms with extensive experience in CFD formations and financing. Larry Rolapp of Fieldman, Rolapp & Associates is considered one of California's foremost experts in Mello-Roos formation. John Murphy of Stradling Yocca Carlson & Rauth in an attorne who specializes in bond financing. The Stradling firm has served as bond counsel to our District for many years. Larry Rolapp and John Murphy have been key members of our team throughout the CFD process. The first CFD was formed in 2003 and is associated with Old Greenwood. That CFD financing was completed in late 2003 in the amount of approximately $12.5 million. The second CFD associated with Grays Crossing was formed in 2004, In July 2004, the Board authorized the issuance of approximately $35 million in debt to finance the expansion and improvement of certain public facilities within the Gray's Crossing Community Facilities District, No. 04-1. In August 2004, the first series (Series 2004) of bonds was issued in the amount of approximately $12.4 million. We are now moving forward to issue the second financing related to Grays Crossing. 1 s } New Information — A PowerPoint presentation has been prepared by Larry Rolapp and John Murphy. The presentation provides the background surrounding the District's prior CFD-related activities, a proposed schedule of events for the issuance of the Series 2005 bonds and, subject to the Board's approval to move forward with the issuance of the Series 2005 bonds, a description of documents the Board would consider prior to the Series 2005 bond sale. Larry and John will attend the meeting on Wednesday evening to walk through the PowerPoint presentation and answer questions. The amount of the proposed Series 2005 bonds is approximately $14.7 million. The net proceeds from this bond issuance will fund improvements and expansion of public infrastructure facilities for water supply and distribution, fire suppression, and electrical supply and distribution, and others, for the District, the Town of Truckee and the Truckee Sanitary District. The Board's motivation for forming the Gray's Crossing Community Facilities District, No. 04-1 and issuing the Series 2004 bonds was the significant benefit we would receive from the expansion and improvement of these public infrastructure facilities. I will be attending the meeting Wednesday to explain the benefits in greater detail. Recommendation — This is a workshop to remind the directors of our involvement in the CFD process. At the conclusion of the workshop I recommend that the Board direct staff and consultants to complete the documents necessary for the Gray's Crossing Series 2005 debt issuance and return to the board for the customary approvals. s' s 2 4 � IM Usual Sequence of Events for Mello-Roos Community Facilities Districts (CFDs) A. BACKGROUND Prior to Proposition 13, the average property tax rate in California was approximately 3.0% of the property's assessed value. At the time, California was experiencing record high rates of inflation. Property taxes were levied each year based on the market value of the property. There was no limit to increases in annual tax rates or property tax assessments. Tax rates were determined by local elected legislative bodies based on the need to fund local programs and services. In 1978, California voters approved Proposition 13 which effectively capped base property tax rates to 1% of assessed value. Property tax rates were set at 1% of the 1975-1976 assessed values not to exceed 2% annual increases until the property changed ownership. Proposition 13 also required two-thirds voter approval for any changes to the property tax rate at both the state and local levels. As a direct result of the Iegislation, local taxes were reduced by 57% and the ability for local agencies to levy taxes were drastically restricted. Local agencies sought new financing methods to help build and improve infrastructure. In response, the California legislature passed the Mello-Roos Community Facilities Act of 1982 (California Government Code Section 53311 et. seq.) which allows local governments to establish a special tax district in a developing area to finance specific public facilities and services needed by that particular area. A community facilities district is authorized to fund and finance the purchase, construction, expansion, improvement, or rehabilitation of any real or other tangible property with an estimated useful life of five years or longer. The authorized facilities need not be physically located within a community facilities district. A community facilities districts may also fund certain services however, if a community facilities district special tax for services is approved by a vote of the landowners, the services must be in addition to those provided in the territory of the CFD before the CFD was created. f { I J B. PRE-FORMATION & FORMATION OF A CFD 1. Initiation A community facilities district can be initiated by one of the following methods: (1) a petition signed by the landowners of 10% of the area in the proposed CFD; (2) a petition signed by 10% of the registered voters in the proposed CFD; (3) a written request from at least two members of the legislative body governing the CFD; or (4) majority approval from the legislative body governing the CFD. 2. Legal Proceedings to form a CFD—Resolution of Intention Within 90 days after either a written request by two members of the legislative body or a petition requesting institution of proceedings for the establishment of a CFD, the legislative body shall adopt a resolution of intention (ROI) to establish a CFD. This meeting of the legislative body is often referred to as the meeting to approve the Resolution of Intention (ROI) which collectively refers to all of the documents/actions described below. In order to form the proposed CFD, the local agency or legislative body governing the CFD must adopt/approve the following: - Local Goals and Policies: A document outlining the provisions under which the proposed CFD and future CFDs may be formed and administered. - Resolutions that describe and include: o Boundaries: Details the boundaries of the proposed CFD. o Name: Names the proposed CFD. o Facilities and Services: Identifies the proposed facilities and services that will be funded by the proposed CFD. o Intention to,form: Declares the legislative body's intent to form the proposed CFD. o Levy special tax: Declares the legislative body's intent to levy a special tax on the property owners within the proposed CFD. o Issuance of bonds: Declares the legislative body's intent to issue bonds to fund the specific facilities and services as outlined in the CFD resolutions. - Public Hearing: The legislative body sets the time and place for the public hearing. - Voting: The legislative body establishes the voting procedures that will be used at the time of the election. After these documents are approved, a CFD Report is prepared which summarizes all of these agreed-upon provisions. s s z 3. Public Hearing A public hearing on the matter of the CFD formation must be held within 30-60 days after the legislative body approves the ROI. Notice for this hearing must be published in local papers no less than seven days before the public hearing is held. The Notice may be mailed to property owners within the proposed CFD but must be received no later than 15 days before the public hearing. The legislative body must hold the public hearing and shall review any written protests it receives. The public hearing can be continued but not more than 30 days however, with a special finding it may be continued for up to six months. If more than 50% (six or more) of the registered voters or landowners in the proposed CFD protest its formation, then the CFD is abandoned for a period of one year. If the majority is protesting specific facilities, services or provisions of the special tax, then formation may proceed, once said facility, service or tax is withdrawn. 4. Adoption Absent the case of a majority protest as cited above, the legislative body governing the CFD forms the CFD by approving the following documents: - Boundary Map: A document establishing the CFD's boundaries. - Resolutions: o Necessity to Incur Bonded Indebtedness: Outlines the legislative body's decision, on behalf of a majority of the landowners and/or registered voters in the proposed CFD, to incur debt. o Authorize levy of special tax: Details the legislative body's decision, on behalf of a majority of the landowners and/or registered voters in the proposed CFD, to levy the special tax, including the method of calculation and manner in which it will be collected. o Approval of facilities and services: Describes the purpose, specific facilities and services, for which the CFD will be formed. Election: Sets the date and time for the election. This meeting of the legislative body is often referred to as the meeting to approve the Resolution of Formation (ROF) which collectively refers to all of the above documents. 5. Election Unless 100% of the electorate decides on a shorter time frame (usually waived for development/single landowner CFDs), the general election or special election will be held no less than 90 days and no more than 180 days from the adoption of the Resolution of Formation. If there are less than 12 registered voters or if it is a landowner election and there is no tax on residential property, then at least a two- thirds majority is required to approve the formation of the CFD. At the election, the electorate: - Considers the levy of the special tax; - Establishes an appropriations limit; and - Authorizes the issuance of bonds. 6. Post-Election At the conclusion of the election, the legislative body certifies the results of the election. If the results are in favor of CFD formation, then the legislative body: - Enacts the ordinance to levy the special tax D. POST-FORMATION Once the CFD is formed, the Notice of the Special Tax Lien is recorded and a 30-day statute of limitations begins. In addition a 30 day referendum period commences upon the final reading of the Special Tax Ordinance E. BOND ISSUANCE Once the statute of limitations and the referendum period has expired, CFD special tax bonds may be sold. The bonds may be sold at different times (in multiple series) and in different principal amounts, all repaid by special taxes levied on property in the CFD according to the rate and method of apportionment of special tax. The legislative body of the CFD adopts a Resolution of Issuance which: - Authorizes the issuance of bonds; The legislative body also: - Approves the Preliminary Official Statement and Continuing Disclosure Agreement(s); and - Approves various financing documents (Indenture/Fiscal Agent Agreement, Bond Purchase Agreement, etc.) The Preliminary Official Statement is used a tool to market the bonds to potential investors. This document describes the CFD (boundaries, acreage, and existing development), the bonds, the development project, the facilities and services being funded and/or financed, special tax, the bondowner risks and other financing information relevant to the marketing of the debt. The Continuing f Disclosure Agreement(s) legally bind both the governing legislative body of the e CFD and the developer to provide regular disclosure of information that could affect payment of the bonds (principal and interest) to allow bondowners to have current information on their investment. 1 Once the bonds are sold, the final Official Statement is printed, and the bonds are delivered the legislative body governing the CFD receives the proceeds from the bond sale to pay for construction or acquisition of the authorized facilities. The levy and collection of the special tax as well as the administration of the bonds (payments of interest and principal) are the responsibility of the governing body. The annual special tax levy is usually submitted to the County Auditor Controller in July of each year. The County Treasurer-Tax Collector will include the special tax amount as part of the normal property tax bill sent to property owners subject to the special tax in the CFD. The legislative body governing the CFD must also provide materials and information on a regular basis in order to remain in compliance with the Continuing Disclosure Agreement (see above) and to disseminate required information to oversight agencies (CDIAC). In most cases, a special administration consultant is retained to assist the governing body in performing the tasks described in this paragraph. f S 3 3 r i:, _ _ <<S .Z. p7pg