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HomeMy WebLinkAbout10 Foreclosures and CFD Action Grays Crossing and Old Greenwoodenda Item a ACTION To: Board of Directors From: Jeremy Popov Date. October 05, 2016 Subject: Consideration of Foreclosures in the Communities Facilities Districts and Consideration of Certain Actions Therewith; and Delinquency Updates for Old Greenwood and Gray's Crossing 1. WHY THIS MATTER IS BEFORE THE BOARD 10 This matter concerns updating the Board on the Gray's Crossing and Old Greenwood Communities Facilities Districts (CFD) delinquencies and consideration of adopting a foreclosure resolution and contracting with a foreclosure attorney in order to facilitate the collection of delinquent CFD assessments. This matter also -concerns the consideration of exercising certain authorities granted to the legislative body of the CFD and authorizing staff to implement provisions thereto of the Mello -Roos Communities Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California. 2. HISTORY In 2003, the Board formed a CFD for the Old Greenwood development. In 2004, the Board formed a CFD for the Gray's Crossing development. Both CFDs were formed for the purpose of selling bonds to finance infrastructure for the developments. The property owners in each CFD have been annually assessed through their property tax bill to pay the principal and interest on the bonds. Each year since 2010, and consistent with the Bond covenant requirements, the Board has adopted a foreclosure resolution authorizing staff and special counsel to proceed with the foreclosure process on all parcels with delinquent assessments in both CFDs. Last year, there were 18 parcels with delinquencies. Three of those parcels were large undeveloped multi -family parcels owned by developers. The previous Sheriff's sales failed to obtain the minimum bid on those parcels. The remaining parcels were single family residential lots owned by individuals. 3. NEW INFORMATION STATUS OF PRIOR DELINQUENCIES Of the remaining 15 parcels, 11 parcels have since paid their delinquent assessment. NEW DELINQUENCIES Attachment 1 lists the parcels that did not pay their assessments this past year. There are 18 delinquent parcels in Gray's Crossing and 4 delinquent parcels in Old Greenwood. The three largest delinquent assessments from Gray's Crossing are again the three largest multi -family parcels mentioned above. Attachment 2 is a map of the delinquent parcels in Gray's Crossing. Attachment 3 is a map of the delinquent parcels in Old Greenwood. FORECLOSURE CRITERIA The bond covenant defines when the foreclosure proceedings apply. The criteria for when the Board must proceed with foreclosure are. A) A parcel or property owner is past due more than $7,500, or B) If more than 5% of the amount billed is past due, all past due parcels are subject to foreclosure. There are 18 property owners in Gray's Crossing that are delinquent. The delinquent assessments totaling $523,900 exceeds 59/o of the amount billed. The Board must proceed with foreclosure on all the parcels, per bond covenant. There are 4 property owners in Old Greenwood that are delinquent. The delinquent assessments totaling $9,346 does not exceed 510 of the amount billed Cl"d no owner is past due more than $7,500. The Board may proceed with foreclosure (but is not required by covenant) on all the parcels. All of the property owners have received reminder letters and demand letters prepared by Cl" Financial, the third party firm that administers the collection of the assessments. CFD UPDATE The Old Greenwood development is mature and mostly developed, and overall delinquency percentage is low. This results in a low overall risk of insufficient funds to make debt service payments. On January 15, 2014, the Board authorized the District to refinance the bonds of the Old Greenwood CFD, saving the Old Greenwood property owners over $3 million over the term of the bonds ending in 2032. The Gray's Crossing development, specifically the multi -family and commercial parcels, remain largely undeveloped. Although Gray's Crossing has proven to be a desirable community, an overall significant delinquency percentage remains. As a result, the administration of the CFD remains a significant challenge. Many years ago, the initial developer, East West Partners, defaulted on their development agreement and filed for bankruptcy. As a result of that and other complications, the three large multi -family parcels mentioned above remain undeveloped and have over the years contributed as the majority cause of the overall CFD delinquency. Special Tax assessments for these parcels have remain unpaid since the 2009/2010 tax year. As a result of these three parcels and some others, the CFD has had to draw from reserve funds in order to make the debt service payments to bond holders. Staff has invested significant time, hosted dozens of internal working meetings, and engaged with concerned parties to review the financial condition of the CFD. Staft has worked diligently to explore potential solutions to stabilize the CFD for the benefit of the bond holders and for the community at large. These efforts are above and beyond the District's basic CFD administration responsibilities, and these efforts exemplify the District's commitment to fully exploring and vetting potential solutions. Stabilizing the Gray's Crossing CFD, after the initial developer bankruptcy, ongoing lack of development, and over 7 years of unpaid assessments on several parcels, results in a very complex task. In addition to the goal of stabilizing the CFD, the District has recognized an indirect but related community goal. Specifically, the District recognizes that providing housing in the Truckee Tahoe community is a current top priority of the Town of Truckee, Tahoe Truckee Community Foundation, and of the community at large. Housing in our local community is also a concern of the District, as over 50% of our employees currently commute from outside Town limits. Based on a very recent study completed by Bay Area Economics (sponsored by the Tahoe Truckee Community Foundation) the housing need is critical and has been covered widely by local media as a "housing crisis". The Gray's Crossing development was originally intended to provide a portion of housing inventory that was envisioned to be more affordable and originally included the concept of providing 89 smaller footprint "Cottages" units in addition to over 80 Townhome (or similar) units. These units were intended to meet different income levels for both market sales and rental opportunities. So, while this community need is not specifically a concern of the CFD, and while it does not in any manner affect or influence the District's responsibilities for administration of the CFD, it does provide the District the opportunity to participate in potential community wide conversations by working withing the District's responsibilities to administer the CFD and to consider solutions to ensure timely collection of Special Taxes, which, in turn, may promote completion of development and thereby align to the community housing need. Although the District's administration responsibilities are fairly basic and transactional, and although the District is a separate legal entity from the CFDs and not legally or fiscally responsible for any losses, the District does acknowledge the community housing concerns of the community and can conclude from the concerns that a successful and stable CFD, when, and if, fully developed, would offer some relief to the community "housing crisis" by providing the additional housing inventory mentioned above. For these compelling reasons, and for the benefit of the bond holders, Staff has invested time to explore solutions to stabilize the CFD, and should a viable solution develop, Staff will bring forth any such potential solution for Board review and consideration at a later meeting of the Board of Directors. There are, however, near term actions for Board consideration that support the long term stabilization effort. Potential actions are explained hereafter and would authorize the Board, acting as the legislative body of the CFD, to exercise certain authorities granted to the legislative body of the CFD by the Mello -Roos Communities Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State, and also to authorize staff to implement steps and provisions thereto. Unpaid Special Tax by December 10 and/or April 10 of each year results in the application of a delinquency penalty of ten percent (10%) of the delinquent amount, and delinquent amounts accrue redemption penalties at the rate of one and one-half percent (1.50%) per month from the first day of July following the date on which the delinquency occurred until paid. As mentioned above, several parcels have been delinquent for a significant period of time with the result that substantial amounts of delinquency and redemption penalties are due in addition to the delinquent amounts of the Special Tax. The aforesaid accumulations of delinquency and redemption penalties (a) make it more expensive for the potential purchasers of the subject parcels to acquire them, bring all applicable taxes (including the Special Tax) current and develop the properties, (b) provide a disincentive to potential purchasers to undertake such activities and (c) tend to impede the recovery of the past due Special Tax and contribute to further delinquencies in the payment of the Special Tax and increases in the unpaid delinquency and redemption penalties, thereby impairing the credit -worthiness of the Bonds; and even in the case of properties that have been conveyed to new owners since the occurrence of the initial Special Tax delinquencies, the accumulations of delinquency and redemption penalties tend to create a disincentive for the new property owners to pay the past due Special Tax, thereby also contributing to a worsening of the problem. This problem, which compounds and worsens each year as additional delinquencies, penalties, interest, legal, and foreclosure fees accrue, for those certain parcels, has ultimately resulted in a significant financial burden thereby creating a significant disincentive for a future purchaser to acquire those certain parcels and bring current the amounts owed. For these reasons, certain parcels have failed to secure minimum As at foreclosure auction. Without near term consideration of action, the financial burden respective to certain parcels will increase further and any resolution thereafter is unlikely, thus contributing to a continued worsening of the problem and impairing the credit -worthiness of the bonds. Staff has identified the certain parcels of concern to be those which have been delinquent for more than six (6) years. In order to provide a potential remedy to situations such as this, the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California, includes certain provisions that authorize the Legislative Body to consider waiver of all or part of redemption penalties and accumulated interest. The conditions for such waiver are narrowly defined and ensure that those responsible for the delinquency do not benefit from any determination for waiver of redemption penalties and interest. Parcels that the Board may find to qualify for determination are included as Exhibit A of Resolution 2016-25. Although other delinquencies exist, those parcels have been delinquent for fewer than 6 years and do not and/or are not reasonably expected to meet the criteria of the Mello -Roos Act for consideration of waiver of redemption penalties and interest specifically under the terms and provisions of Government Code Section 53311 and following. SPECIAL COUNSEL Stradling Yocca Carlson & Rauth has six offices throughout California and they have done an excellent job in collecting most of the delinquencies from last year. 4. FISCAL IMPACT There is no fiscal impact to the Truckee Donner Public Utility District with this action item. All charges incurred related to the judicial foreclosure process are the responsibility of the property owners within the CFD. The waivers of delinquency and redemption penalties that the Board may consider to authorize by Resolution do not have any negative fiscal impact to the District or to the CFD, because (1) the delinquency and redemption penalties are not part of the "Net Revenues" that are pledged to secure the Bonds, so a waiver thereof will not result in a reduction of "Net Revenues" and (2) the waivers will increase the likelihood that both the delinquent installments of the Special Tax and the future installments thereof will be paid thereby increasing the amount of "Net Revenues" with which to pay debt service on the Bonds and enhancing their credit -worthiness. Approximately $415,720 was drawn from the Gray's Crossing Reserve Fund to make the $1.4 million bond payment because of the accumulated delinquencies. Most of the total assessment delinquencies, as mentioned above, are due to the three large undeveloped multi -family parcels. Drawing from the Reserve Fund is a reportable event to the bond holders and a report was completed by the District. 5. REC®MMENDATION a) Adopt the attached foreclosure Resolution 2016-23 (Attachment 4) authorizing staff and special counsel to proceed with the foreclosure process on all parcels with delinquent assessments within the CFDs as required by Bond covenant. b) Authorize the General Manager to execute the agreement for legal services with Stradling Yocca Carlson & Rauth for their work relating to the foreclosure on delinquent parcels. c) Adopt the attached Resolution 2016-25 (Attachment 5) permitting the waiver of redemption penalties under certain findings and determinations as authorized under Section 53340(f) of the California Government Code. f- Jeremy Popov Administrative Services Manager 61, G Ac Michael D. Holley General Manager CFD Delinquent Assessments as of 9.21.16 (Excludes penalty, interest and fees) Grays Crossing CFD ATTACHMENT 1 2015/2016 Prior Years Total APN Owner Past Due Past Due Past Due Notes 19-770-02 Gray's Station 207,845 1,0191130 11226,975 Failed Auction - Undeveloped 19-780-03 Douglas & Eleanor Sumaraga 31730 11828 51559 In Foreclosure Process 19-780-20 Manuel & Juanita Delarroz 31854 3,854 New Delinquency 19-800-15 Endeavor Assets LLC 21,591 21,591 Sold at Auction, in collection process with new owner for prior year assessment 19-800-25 Manuel & Juanita Delarroz 3,854 31854 New Delinquency 19-840-18 LAL Real Estate & Dev LLC 41507 41419 81926 In Foreclosure Process 19-870-09 Drake & Nannette Niven 41663 17,580 22,243 Failed Auction 19-870-13 Innovative Custom Homes 21254 21254 New Delinquency 19-870-20 Ridgewood Enterprises 21254 21254 New Delinquency 19-890-06 Manuel &Juanita Delarroz 4,663 41663 New Delinquency 19-890-08 Manuel & Juanita Delarroz 41974 41974 New Delinquency 19-890-09 John Wheeler 41663 - 4,663 New Delinquency 19-900-20 John Wheeler 21487 - 2,487 New Delinquency 19-910-02 Bank of America 21487 - 2,487 New Delinquency 19-910-16 Manuel & Juanita Delarroz 41818 - 41818 New Delinquency 19-910-17 Manuel & Juanita Delarroz 41507 - 41507 New Delinquency 43-010-05 LDK GC 81 LLC 96,600 473,661 570,261 Failed Auction - Undeveloped 43-010-07 LDK GC 81 LLC 165,741 812,681 978,422 Failed Auction - Undeveloped 18 523,900 2,350,891 2,874,790 Old Greenwood CFD 2015/2016 Prior Years Total APN Owner Past Due Past Due Past Due Notes 19-740-19 Kevin Kassekert 11558 1,558 New Delinquency 19-750-14 Truckee Lahontan Equity Group 31115 3,115 New Delinquency 19-750-35 Truckee Lahontan Equity Group 31115 3,115 New Delinquency 19-750-43 Cynthia & Charles Anderson 11558 1,558 New Delinquency 4 91346 - 9,346 Gray's Crossing ® Failed Auction N New Delinquency In Foreclosure Process cQ - 00 .Gt z o Labei\e Q"ae~�c�e//C �. Ch;�.C.. ,rc�Q t a Hinton•L-n - �5Q' Q� O C �O �Bottcher-Lp e�y mod. �� �e Old Greenwood - Failed Auction N New Delinquency In Foreclosure Process stir Fairway pr CookoutLp TRUCKEE DONNER Public Utility District RESOLUTION NO. 2016 - 23 RESOLUTION OF THE BOARD OF DIRECTORS OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT ACTING ON ITS OWN BEHALF AND AS THE GOVERNING BODY OF ALL OF ITS COMMUNITY FACILITIES DISTRICTS (OLD GREENWOOD No. 03-1 AND GRAYS CROSSING No. 04-1) AUTHORIZING RETENTION OF SPECIAL COUNSEL WHEREAS, the Truckee Donner Public Utility District (the "TDPUD") has conducted proceedings resulting in the formation of Community Facilities Districts ("CFDs"; the District and the CFDs are collectively referred to as "District") and the issuance and sale of bonds or debt pursuant to the Mello -Roos Community Facilities Act of 1982 (Cal. Gov. Code Section 53311, et seq.; the "Act"); and WHEREAS, pursuant to the Act, the District has duly recorded Notices of Special Tax Lien and has duly and regularly levied CFD special taxes, which special taxes and interest and penalties thereon constitute a lien against the parcel of the land against which it was levied until the same are paid, which liens secure in whole or part debt issued pursuant to the Act; and WHEREAS, certain installments of the special taxes have not been paid when due, and certain special taxes may not be paid when due in the future; and WHEREAS, pursuant to Section 53356.1(a) of the Act, the District is authorized to order the special taxes collected by an action brought in the Superior Court to foreclose their liens; and WHEREAS, pursuant to Section 53356.1(b) of the Act, the District covenanted for the benefit of owners of the debt to file such foreclosure actions on behalf of the debt holders and are authorized to order the County Auditor to credit the delinquent special taxes upon the secured tax roll, thus relieving the County Tax Collector of further duty and regard thereto; and, WHEREAS, the District wishes to retain experienced, qualified counsel to prosecute such judicial foreclosure actions, NOW THEREFORE, BE IT RESOLVED by the Board of Directors of the TDPUD acting on its own behalf and as the Legislative Body of all of the District CFDs that: 1. The Board finds that the Act authorizes the commencement of judicial foreclosure proceedings to collect delinquent special taxes, and hereby orders that the delinquent special taxes listed on the attached Exhibits 1 and all future delinquent special taxes as to such property, be collected by action brought in the appropriate Superior Court to foreclose the liens thereof. Resolution 2014-19 1 2. The District President of the Board is authorized to retain Stradling Yocca Carlson & Rauth, a law firm, as special counsel on the terms set forth in the agreement presented to the Board to prosecute the foreclosure actions and to collect on behalf of the CFDs all amounts due on account of the special taxes listed in Exhibits 1 and any subsequent delinquent special taxes. 3. The Board finds that the Act provides for the payment of the costs and attorneys fees for prosecution of the foreclosures authorized by the District and hereby authorizes Attorneys to require payment on its behalf of all costs and all attorneys fees incurred as to each delinquent parcel as a condition of such redemption as provided in the agreement. Adopted by the Board of Directors of the Truckee Donner Public Utility District acting on its own behalf and as the Legislative Body of all of its Community Facilities Districts at a regular meeting held on October 5, 2016, by the following vote: AYES: NOES: ABSTAIN: ABSENT: TRUCKEE DONNER PUBLIC UTILITY DISTRICT Joe Aguera, President ATTEST: Michael D. Holley, P.E. Clerk of the Board Resolution 2013-XX 2 Attachment 5 RESOLUTION NO. 2016-25 RESOLUTION OF THE BOARD OF DIRECTORS OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT, ACTING AS THE LEGISLATIVE BODY OF TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 044 (GRAY'S CROSSING), PERMITTING THE WAIVER OF DELINQUENCY AND REDEMPTION PENALTIES UNDER CERTAIN CONDITIONS AND MAKING CERTAIN FINDINGS AND DETERMINATIONS IN CONNECTION THEREWITH WHEREAS, the Board of Directors (hereinafter sometimes referred to as the "legislative body of the Community Facilities District") of the Truckee Donner Public Utility District (the "Public Utility District") has heretofore undertaken proceedings to form Truckee Donner Public Utility District Community Facilities District No. 044 (Gray's Crossing) (the "Community Facilities District") pursuant to the terms and provisions of the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California; and WHEREAS, the Community Facilities District is authorized to levy and collect a special tax he "Special Tax") on parcels located within its boundaries in order to pay debt service on its outstanding bonds (the "Bonds"); and WHEREAS, the failure of an owner of properly to pay an installment of the Special Tax by December 10 and/or April 10 of each year results in the application of a delinquency penalty of ten percent (10%) of the delinquent amount, and delinquent amounts accrue redemption penalties at the rate of one and one-half percent (1.50%) per month from the first day of July following the date on which the delinquency occurred until paid; and WHEREAS, installments of the Special Tax applicable to certain of the parcels within the Community Facilities District have been delinquent for some period of time with the result that substantial amounts of delinquency and redemption penalties are due in addition to the delinquent amounts of the Special Tax; and WHEREAS, pursuant to its covenant for the benefit of the owners of the Bonds, the Community Facilities District has undertaken judicial proceedings to foreclose the lien of the Special Fax with respect to some of the properties whose Special Tax was delinquent and has successfully obtained judgments in certain cases in which the delinquencies were not cured; however, in some cases there have been no satisfactory bids for the applicable properties at the respective foreclosure sales and the delinquent amounts applicable to those properties have continued to accrue penalties; and WHEREAS, the aforesaid accumulations of delinquency and redemption penalties (a) make it more expensive for potential purchasers of the subject properties to acquire them, bring all applicable taxes (including the Special Tax) current and develop the properties, (b) provide a disincentive to potential purchasers to undertake such activities and (c) tend to impede the recovery of the past due Special Tax and contribute to further delinquencies in the payment of the Special Tax and increases in the unpaid delinquency and redemption penalties, thereby impairing the credit- worthiness of the Bonds; and WHEREAS, even in the case of properties that have been conveyed to new owners since the occurrence of the initial Special Tax delinquencies, the accumulations of delinquency and redemption penalties tend to create a disincentive for the new owners to pay the past due Special Tax, thereby also contributing to a worsening of the problem; and WHEREAS, Section 53340(f) of the California Government Code authorizes the legislative bodies of community facilities districts to waive delinquency and redemption penalties under certain conditions; and WHEREAS, the legislative body of the Community Facilities District intends to consider various possible methods to help assure that there will always be sufficient Special Tax revenues available to pay debt service on the Bonds when due, and incentivizing the payment of Special Taxes that have been delinquent for extended periods of time by waiving delinquency and redemption penalties under certain conditions will materially assist in that effort; and WHEREAS, accordingly, the legislative body of the Community Facilities District desires to exercise the authority granted to it by said Section 53340(f) and to waive delinquency and redemption penalties as set forth herein; NOW, THEREFORE, THE BOARD OF DIRECTORS OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT, ACTING AS THE LEGISLATIVE BODY OF TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 044 (GRAY'S CROSSING), DOES HEREBY RESOLVE, DETERMINE, AND ORDER AS FOLLOWS: Section 1. Each of the above recitals is true and correct. Section 2. The properties listed on Exhibit A hereto (each, an "Eligible Property") are currently delinquent in the payment %J the Special Tax for more than six years, and each of them is eligible for a waiver of delinquency and redemption penalties, subject to complying with the terms requirements set forth herein. Section 3. A waiver of delinquency and redemption penalties shall be available to an Eligible Property only if all past due and currently due installments of the Special Tax applicable to such Eligible Property and all other costs due from it are paid in full on or before December 31, 2017; provided that if a plan for the payment in full of all such past due and currently due installments of the Special Tax satisfactory in form and substance to the Administrative Services Manager of the Public Utility District (the "Administrative Services Manager") is then in effect and if all payments required pursuant to said plan are made when due, the Administrative Services Manager may extend the aforesaid period for such additional time as he deems appropriate, but not beyond December 31, 2018. Section 4. A waiver of delinquency and redemption penalties shall be available to an Eligible Property only if the Eligible Property has been sold or otherwise transferred to a new owner 2 unrelated to the owner responsible for the delinquency as determined by the Administrative Services Manager. Section 5. The Administrative Services Manager is hereby authorized to such steps as are reasonable and necessary in order to implement the provisions of this Resolution, including but not limited to notifying the Treasurer -Tax Collector of Nevada County (to provide for the removal of the amount waived from the tax roll pursuant to 53340(f)(2) of the California Government Code and the owner or owners of each Eligible Property of the amount of any waiver granted to such Eligible Property pursuant hereto. Section 6. The waivers of delinquency and redemption penalties authorized by this Resolution are in the best interests of the owners of the Bonds because (1) the delinquency and redemption penalties are not part of the "Net Revenues" that are pledged to secure the Bonds, so a waiver thereof will not result in a reduction of "Net Revenues" and (2) the waivers will increase the likelihood that both the delinquent installments of the Special Tax and the future installments thereof will be paid thereby increasing the amount of "Net Revenues" with which to pay debt service on the Bonds and enhancing their credit -worthiness. Section 7. This Resolution shall take effect from and after its adoption. ADOPTED and APPROVED by the Board of Directors of the Truckee Donner Public Utility District, acting as the legislative body of the Truckee Donner Public Utility District Community Facilities District No. 044 (Gray's Crossing), on this 5th day of October, 2016 by the following vote: AYES: NOES: ABSENT: TRUCKEE DONNER PUBLIC UTILITY DISTRICT By: ATTEST: Michael D. Holley, District Clerk Joe Aguera, President of the Board of Directors EXHIBIT A LIST OF ELIGIBLE PARCELS ASSESSOR PARCEL NOS. 43-010-OS-000 43-010-07-000 19-770-02 19-800-15 19-870-09