HomeMy WebLinkAbout12 MOU for Gray's Crossingenda Item #
ACTION
12
To: Board of Directors
From: Jeremy Popov
Date. January 19, 2017
Subject: Consideration of Approving the Memorandum of Understanding
(MOU) for the Gray's Crossing Community Facilities District
1. WHY THIS MATTER IS BEFORE THE BOARD
This item concerns consideration of approval of a Memorandum of Understanding by
and among Truckee Donner Public Utility District (PUD), Truckee Donner Public Utility
District Community Facilities District No. 04-1 (Gray's Crossing CFD), Triumph
Development LLC (Triumph) and LDK GC 81, LLC (LDK).
2. HISTORY
The Gray's Crossing community was originally entitled by the Town of Truckee for a
mountain resort community consisting of 408 single family lots, a 92 unit income
restricted apartment complex, 89 single family freestanding cottages, 115 attached
townhomes, 21 residential lofts, approximately 40,700 square feet of commercial
space and various community space.
TDPUD formed the Gray's Crossing CFD in 2004 to help finance backbone public
infrastructure related to the development of the land within the Gray's Crossing CFD's
boundaries. The CFD includes approximately 757 gross acres on the north side of
Interstate 80 along both the east and west sides of Highway 89 in the Town of
Truckee.
The CFD issued an initial series of bondsprincipal amount of $15,375,000 in
2004 and a second series of bonds in a principal amount of $15,155,000 in 2005. The
bonds financed water, electric, sewer, natural gas utilities; roads, storm drains, and
more. Bonds are repaid over time by property owners through a Mello -Roos (Special
Tax) assessment.
With the largest share of utilities financed TDPUD agreed to administer the CFD. It is
important to note that TDPUD is a separate legal and financial entity from the CFD
and the CFD is not a liability of TDPUD ratepayers. The TDPUD Board is the
legislative body of the CFD.
As of September 2016, the bonds have an aggregate principal amount of
approximately $31,675,000 outstanding.
The CFD bonds are secured by, and are payable from, the revenues derived from the
Special Taxes. The Special Taxes are levied pursuant to a rate and method of
apportionment.
Prior to FY 10-11, delinquencies in the payment of the Special Taxes were relatively
minor and did not impact the timely payment of debt service on the bonds. However,
commencing in FY 10-11, the amount of the delinquencies rose to approximately 18%
of the total annual levy; and since then they have continued to rise to the point that, for
FY 14-15, they represented approximately 20% of the total annual levy.
At those levels, the revenues available from the Special Taxes were insufficient to pay
debt service on the bonds on September 1 2014, 2015 and 2016; and, as a result,
those deficiencies had to be addressed by draws on the reserve fund. At this time the
reserve fund remains below the minimum required level.
The overwhelming majority of the delinquencies in the payment of the Special Taxes
is attributable to three large undeveloped multi family parcels: APN 19-770-02 (the
"Cottages Parcel"); APN 43-010-05 ("Parcel D"); and APN 43-010-07 ("Parcel F" ). A
map is provided as Attachment 1.
The ad valorem taxes and other taxes and assessments applicable to these three
parcels of interest that are collected on the property tax bills administered by the
County of Nevada are also significantly delinquent.
Each delinquent installment of Special Taxes is levied a 100/ penalty and then the
penalty accrues interest at the rate of 1.5% a month, or 18% annually. The total past
due Special Taxes, penalties, and interest, which have compounded over nearly a
decade, have created a significant financial barrier to development.
For these reasons the properties remain delinquent and undeveloped, and the
situation continues to worsen. Resolution is unlikely absent significant restructuring of
the debt service on the properties. Without such restructure it does not appear likely
that the owners will cure the existing tax delinquencies or that any of the three parcels
of interest will be successfully sold at foreclosure in the near future, especially since
the amounts of the respective delinquencies and delinquency and redemption
penalties are constantly increasing.
Each of the three parcels has been the subject of judicial foreclosure proceedings
(which is required by bond covenant) in which a judgment in favor of the CFD has
been obtained; but none of them have been successfully sold at foreclosure sale due
to the significant delinquencies that would need to be paid current.
As a result of the inability to remedy the situation through the standard foreclosure
process, and as a result of the continued failure of the owners of the parcels to pay
the applicable Special Taxes, it is most probable that continued draws on the reserve
fund will be necessary. At some point such draws are expected to deplete the
Reserve Fund and could cause a payment default on the bonds.
Staff has been working diligently over the last year to explore solutions to stabilize the
CFD and avoid default.
During the October 5, 2016 Board Meeting staff explained the ongoing challenge of
the CFD administration. During that same meeting the Board approved several near
term actions in support of the continued exploration of a long term solution. The
Board, acting as the legislative body of the CFD, exercised 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 authorized staff to implement steps and provisions
thereto. Specifically, the Board approved Resolution 2016-25 permitting the waiver of
redemption penalties under certain findings and determinations as authorized under
Section 53340(f) of the California Government Code, an essential first step towards
stabilization of the CFD.
During the same presentation, staff informed the Board that any further potential
action towards stabilization would be brought forward for future Board consideration.
3. NEW INFORMATION
Staff explored and vetted dozens of potential solutions to stabilize the CFD. Staff has
drafted a potential path forward. The complex problem has resulted in a complex
solution. The potential solution was drafted into the form of a Memorandum of
Understanding (MOU) in order to outline the overall plan envisioned to stabilize the
CFD as well as to outline roles and responsibilities of parties signatory to the MOU.
The MOU summarizes the entire basic framework of the plan forward and, if approved
by the Board, is the formal agreement between the TDPUD, the CFD, and two
developers to commence a series of actions to effect a comprehensive stabilization of
the CFD.
The MOU facilitates an agreement that is based on several key tenets developed to
ensure fairness, equality, and transparency in the process, and importantly, to ensure
that any path forward is in the best interest of the bondholders as is required by
statute.
The MOU is an effort to enact a plan to avoid a failed bond issue in our community.
Although not a financial liability of TDPUD, a failed bond issue could be a blemish for
any future land secured financing and development activity in Truckee.
According to recent housing studies there is a severe shortage of housing. To remedy
the crisis, the report identifies that housing must be built for locals, and it is reasonable
to expect that developers will likely require financing, in various forms, to build such
housing. Thus, directly or indirectly, a defaulted land secured bond issue in this
community could make future financing more challenging to obtain and/or be more
expensive, and a default could result in a true and/or perceived higher risk of default
for development in this area. Further, a default may have negative consequence,
tangible or intangible, to the existing property owners and others who have invested in
the Gray's Crossing community. Last, a default is likely to have a negative
consequence for bondholders.
For these compelling reasons, staff recommends the Board consider approval of the
MOU to ensure continued efforts towards a more positive outcome.
Staff developed several key tenets prior to drafting the MOU which guided the
formation of the document. Staff and bond counsel worked together adhering to those
key tenet highlights, which are summarized here: (a) understanding that the CFD
delinquency will only be remedied with payment of Special Tax by the multi -family
parcels, which (b) practically requires development of the three large multi -family
parcels, (c) the solution should ideally diversify ownership and engage new developers
who are committed to progress, (d) the solution must not have a negative financial
consequence for parcel owners who have paid timely; ideally it should provide some
savings, and (f) any solution should comply with all statutory provisions and should not
be unfair or'bail out' initial developers.
TDPUD has facilitated dozens of meetings with the Town of Truckee, prospective
developers, non -profits, legal counsel, financial counsel / underwriters, and concerned
citizens to find a solution that could stabilize the CFD by eliminating upfront financial
barriers and thus promote diversified housing development (that best aligns to current
community needs).
A basic overview of MOU content is provided within this report. The MOU is attached
for review as Attachment 2.
The MOU contemplates a plan that achieves the key tenets outlined above by
"reseting the clock" and significantly restructuring the up -front financial barrier. The
plan maintains an equitable lien of the bonds by parcel and also provides significant
savings for the existing CFD property owners.
The plan outlined by the MOU essentially explains that (a) under current bond market
conditions, if the three parcels were effectively removed from the CFD then the
existing bonds could be refunded through the issuance of refunding bonds with
reduced annual debt service, thereby enabling a reduction in the amount of the
Special Taxes required to be levied on some or all of the property remaining in the
CFD and benefiting the owners of such property; and (b) the three multi -family parcels
could be removed from the CFD if (i) their delinquent Special Taxes were paid, (ii) the
associated delinquency and redemption penalties were waived or paid, and (iii) their
future Special Taxes were prepaid; and (c) one method by which it might be possible
to provide for the payment of the delinquent Special Taxes and the prepayment of the
future Special Taxes in question would be to include the parcels in a new community
facilities district which would issue bonds, the net proceeds from the sale of which
would be used to make the prepayment to the existing CFD. This provides the three
parcels a longer maturity to finance their share of the indebtedness incurred.
Thus, the plan provides for a re -amortization of the debt on these undeveloped
parcels and promotes development by minimizing land acquisition costs.
This plan recognizes that the three large multi -family undeveloped parcels of concern
are unlikely to be developed unless their share of debt can be re -amortized over a
new term, and further, to ensure that their lien of the bonds best aligns with the
development potential.
TDPUD is also aware of the significant affordable housing shortage in our community,
and has been working with the Town of Truckee and other local non -profits to facilitate
a collaborative process that considers TDPUD's path forward for CFD stabilization and
the possible resultant housing opportunities (development) of these parcels. The
three parcels were entitled to provide diversified housing. It is possible that these
parcels could provide a near term solution to ease the housing burden by providing
several hundred diversified housing units for sale and/or rent. It is important to note
that the parcels are already entitled for such housing and utilities are already at the
street to support such development.., development is nearly infill at this time and is
arguably a responsible use of existing land entitlements and installed infrastructure.
Although some entitlement changes are anticipated to be required to reflect current
needs (as a decade has passed from original Specific Plan approval), it is envisioned
that the parcels can provide a very real near term opportunity for diversified housing if
TDPUD's stabilization efforts are successful. The result is a complicated plan that
could provide a much needed relief not only to bondholders and Special Tax payers,
but to the community at large.
As further outlined in the MOU, the plan does meet the aforementioned key tenets by:
(a) providing for transfer of land to new developer(s), (b) does not shift debt to other
Special Tax payers, (c) eliminates the financial barrier of entry by waiving (in full or
)art) accrued Special Tax penalties and interest (which are not anticipated to be
collected and are impeding development), and (d) will only waive penalties and
interest that have accrued on delinquent installments for which current or prospective
owner(s) were not responsible.
Although the MOU envisions a practical solution to stabilize the CFD, it should be
noted that a positive outcome is uncertain due to the complexity of (a) the many
parties involved, (b) uncertainty regarding ability to update land use/ entitlements, (c)
uncertainty of the financial viability to develop the land, and (d) market uncertainty
regarding the ability to enact the plan through the eventual sale of bonds at a public
offering.
If successful, the District will not only avoid default of the existing bonds and stabilize
the CFD, it will also be able to simultaneously issue refunding bonds at an improved
rate with the potential to provide significant savings to the existing CFD. Refunding
bonds have not been issued to date due to the significant and concentrated
delinquencies on the undeveloped land which results in a low value to lien. These
conditions practically prohibit such refunding opportunity unless a larger effort, as
envisioned in the MOU, is successful.
The MOU contemplates the steps necessary to effect a positive outcome. These
steps include identification of the potential legal structure, the anticipated land
conveyance, and the expectations and timeline for each party to complete certain
actions. Although the TDPUD is largely facilitating the stabilization effort, the
contributions from the developers are critical to the overall plan.
The two developers who are signatory to the MOU are Triumph Development LLC
(Triumph), a Maryland and Colorado based developer, and LDK GC81, LLC, (LDK) a
Sacramento, CA based developer. Both developers are experienced in multi -family
development.
TDPUD partnered with the Town of Truckee to identify possible developers and
hosted several meetings with different developers to introduce the plan and, as it
evolved, narrow the field. This process introduced Triumph Development to the CFD
and further engaged LDK (an existing property owner who acquired two of the three
distressed parcels). Both developers have been supporting the effort to create a
financially viable plan to develop diversified housing.
The MOU anticipates that Triumph will develop two of the three parcels, and LDK will
develop one. Both developers are working on development concepts and initial pre -
submittals are in work and/or already submitted to the Town of Truckee. As
mentioned, TDPUD and the Town of Truckee are working together to understand next
steps that may be required to update conceptual site plans, land use entitlements, etc.
TDPUD's core effort in working with the Town of Truckee and developers is to ensure
that any proposed development responsibly aligns to the anticipated lien of the bonds.
This effort ensures an alignment of housing development concepts with the ability of a
prospective resident to afford the total cost of housing including the Special Taxes.
The MOU contemplates many actions that the Board may consider to effect the
overall plan. The MOU provides for termination at any time by any party and is written
to fairly protect the interests of all parties considering that ultimate success is
contingent on so many variables.
Finally, it should be noted that the MOU requires the developers to make a series of
deposits to be held by the TDPUD as necessary to (a) initially fund the immediate
CFD formation costs and (b) to later fully satisfy outstanding County of Nevada
property taxes, penalties, and Special Tax penalties as is appropriate per the MOU.
Both Triumph and LDK have approved the MOU.
4. FISCAL IMPACT
There is no direct fiscal impact to the TDPUD as the TDPUD is legally and fiscally
independent of the CFD.
There is no negative fiscal impact to continue our efforts as the developers are
required to fund an initial deposit to cover immediate CFD formation costs.
There is a positive fiscal impact and opportunity to significantly save existing property
owners within the CFD. Savings are anticipated to exceed $2,000,000 over the term
of the bonds (based on current bond market conditions).
5. RECOMMENDATION
Approve the Memorandum of Understanding by and among Truckee Donner Public
Utility District (PUD), Truckee Donner Public Utility District Community Facilities
District No. 04-1 (Gray's Crossing CFD), Triumph Development LLC (Triumph) and
LDK GC 81, LLC (LDK).
Jeremy Popov
Administrative Services Manager
Michael D. Holley
General Manager
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Attachment 2
HSMDraft of
12/22116
MEMORANDUM OF UNDERSTANDING RE POTENTIAL
DEVELOPMENT OF CERTAIN PROPERTIES IN TRUCKEE DONNER
PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT
N0. 04-1 (GRAY'S CROSSING)
This Memorandum of Understanding ("this MOU") is made and entered into as of
January _, 2017, by and among Truckee Donner Public Utility District (the "PUD"), Truckee
Donner Public Utility District Community Facilities District No. 04-1 (Gray's Crossing) (the
"CFD"), Triumph Development LLC ("Triumph") and LDK GC 81, LLC ("LDK" and, together with
Triumph, the "Owners").
Background. The PUD formed the CFD in 2004 to help finance backbone public
infrastructure related to the development of the land within the CFD's boundaries. The CFD
includes approximately 757 gross acres on the north side of Interstate 80 along both the east and west
sides of Highway 89 in the Town of Truckee.
The CFD issued an initial series of bonds in a principal amount of $15,375,000 in 2004 and a
second series of bonds in a principal amount of $15,155,000 in 2005 (collectively, the "Existing
Bonds"). All of the net spendable proceeds from the sale of the Existing Bonds have been expended
on the acquisition or construction of the backbone infrastructure. As of September 2, 2016, Existing
Bonds in an aggregate principal amount of approximately [$31,675,000] remain outstanding.
The Existing Bonds are secured by, and are payable from, a portion of the revenues derived
from special taxes (the "Special Taxes") levied by the legislative body of the CFD pursuant to a rate
and method of apportionment approved by the owner of the property within the CFD at the time of
its formation (the "Existing RMA"). Prior to fiscal year 201041, delinquencies in the payment of
the Special Taxes were relatively minor and did not impact the timely payment of debt service on the
Existing Bonds. However, commencing in fiscal year 2010-11, the amount of the delinquencies rose
to approximately 18% of the total annual levy; and since then they have continued to rise to the point
that, for fiscal year 201445, they represented approximately 20% of the total annual levy. At those
levels, the revenues available from the Special Taxes were insufficient to pay debt service on the
Existing Bonds on September 12014, 2015 and 2016; and, as a result, those deficiencies had to be
addressed by draws on the reserve fund held by the trustee for the Existing Bonds (the "Reserve
Fund").
The overwhelming majority of the delinquencies in the payment of the Special Taxes is
attributable to three parcels: APN 19-770-02 (the "Cottages Parcel"), which is currently owned by
Gray's Station LLC ("Gray's Station") but which is expected to be conveyed, directly or indirectly,
to Triumph; APN 43-010-05 (the "LDK-1 Parcel"), which is owned by LDK but which is also
expected to be conveyed to Triumph; and APN 43-010-07, which is also owned by LDK (the "LDK-
2 Parcel" and, together with the Cottages Parcel and the LDK-1 Parcel, the "Parcels of Interest").
The ad valorem taxes and other taxes and assessments applicable to the Parcels of Interest that are
collected on the property tax bills administered by the County of Nevada (the "County") are also
delinquent.
Each of the Parcels of Interest has been the subject of judicial foreclosure proceedings in
which a judgment in favor of the CFD has been obtained; but none of them have been successfully
sold at foreclosure sale. Absent significant increases in the value of the Parcels of Interest and/or
decreases in the amounts required to cure their respective tax delinquencies and/or a restructuring of
the debt service on the Existing Bonds payable from Special Taxes applicable to the Parcels of
Interest, it does not appear likely that the Owners will cure the existing tax delinquencies or that any
of the Parcels of Interest will be successfully sold at foreclosure in the near future, especially since
the amounts of the respective delinquencies and delinquency and redemption penalties are constantly
increasing. In the absence of something that either motivates the Owners to cure the tax
delinquencies or induces satisfactory bids at a foreclosure auction, the continued failure of the
owners of the Parcels of Interest to pay the applicable Special Taxes will most probably necessitate
continued draws on the Reserve Fund. At some point such draws could deplete the Reserve Fund
and cause a payment default on the Existing Bonds.
The parties to this MOU wish to avoid a payment default on the Existing Bonds and
accordingly agree to take the various actions described herein.
Bond Restructuring -General. The Board of Directors of the PUD, acting on behalf of the
PUD and as the legislative body of the CFD (the "Board"), has been advised that: (a) under current
bond market conditions, if the Parcels of Interest were effectively removed from the CFD, the
Existing Bonds could be refunded through the issuance of refunding bonds (the "Refunding Bonds")
with reduced annual debt service, thereby enabling a reduction in the amount of the Special Taxes
required to be levied on some or all of the property remaining in the CFD and benefitting the owners
of such property; (b) the Parcels of Interest could be removed from the CFD if (i) their delinquent
Special Taxes were paid, (ii) the associated delinquency and redemption penalties were waived or
paid, and (iii) their future Special Taxes were prepaid; and (c) one method by which it might be
possible to provide for the payment of the delinquent Special Taxes and the prepayment of the future
Special Taxes in question would be to include the Parcels of Interest in a new community facilities
district (the "New CFD") which would issue bonds (the "New CFD's Bonds") the net proceeds from
the sale of which would be used to make said payment and prepayment. Depending on bond market
conditions at the time, it might be possible for the New CFD's Bonds to have a longer final maturity
than the Existing Bonds and to reflect some level of reduced annual debt service during the first
several years following their issuance, thereby providing a temporary reduction in the cost of carry
for the Owners and a longer period of time in which to pay their share of the indebtedness incurred
by the CFD to finance the aforesaid backbone infrastructure.
It is the goal of the parties to this MOU that the Existing Bonds be restructured as described
in the preceding paragraph. However, it is understood and agreed by them that any such
restructuring will be completely dependent on, among other things, the bond market conditions
existing at the time of the proposed issuance of the Refunding Bonds and the New CFD's Bonds and
that there can be no assurance of any kind that those conditions will be favorable to such a
restructuring. They also understand and agree that the Board cannot commit to form the New CFD
prior to the public hearing required pursuant to the provisions of the Mello -Roos Community
Facilities Act of 1982, as amended (the "Act"). Subject to the foregoing, the parties will use their
best efforts to attempt to implement such a restructuring.
Bond Restructuring —New CFD. Within 10 days of the execution and delivery of this MOU
by all parties, the Owners will file with the Board a petition (the form of which will be supplied by
the PUD), signed by Gray's Station and LDK, requesting the formation of the New CFD and the
issuance of the New CFD's Bonds and waiving all otherwise applicable requirements pertaining to
the election required in connection with the formation of the New CFD. The proposed boundaries of
the New CFD shall be co -terminus with the boundaries of the Parcels of Interest. The requested
principal amount of the New CFD's Bonds shall be at least sufficient, along with other available
funds, to: (a) provide the funds necessary, together with the payment by each Owner of any
delinquency and redemption penalties attributable to delinquencies of Special Taxes occurring during
its ownership of a Parcel of Interest, to pay the Special Taxes applicable to the Parcels of Interest that
are estimated to be delinquent as of the close of business on April 10, 2017 and to prepay the
remainder of such Special Taxes, (b) fund a reasonably required debt service reserve fund for the
New CFD's Bonds, (c) pay (or reimburse, as the case may be) the costs of forming the New CFD and
issuing the New CFD's Bonds and (d) fund an administrative expense account for the New CFD.
The petition shall be accompanied by a proposed rate and method of apportionment (the
New RMA") of the special tax to be authorized to be levied within the New CFD (the "New Special
Tax"). The New RMA shall establish a maximum annual New Special Tax for each Parcel of
Interest that bears the same ratio to the aggregate maximum annual New Special Tax for all Parcels
as the sum of (i) such Parcel of Interest's Special Taxes that are estimated to be delinquent as of the
close of business on April 10, 2017 and (ii) the amount required to prepay the remainder of its
Special Taxes bears to the sum of (i) all of the Parcels of Interest's Special Taxes that are estimated
to be delinquent as of the close of business on April 10, 2017 and (ii) the amount required to prepay
all of the remainder of their Special Taxes. The actual amount of the aggregate maximum annual
New Special Tax for all Parcels of Interest shall be acceptable to the Owners and to the Board. The
New RMA shall provide that, in the event a Parcel of Interest is subdivided, the maximum annual
New Special Tax applicable to such Parcel of Interest shall be allocated substantially equally to each
subdivided parcel that is expected to be developed with one or more residential structures. The New
RMA shall also provide that the New Special Tax may not be levied unless and until the New CFD's
Bonds have been issued and obligations of the Parcels of Interest to make past due and future
payments pursuant to the Existing RMA have been extinguished.
The petition shall also be accompanied by a deposit of $25,000 for each Parcel of Interest.
The deposit shall be payable by the prospective Owners, as defined herein, with the result that
Triumph shall deposit $50,000 for the LDK-1 Parcel and the Cottages Parcel and LDK shall deposit
$25,000 for the LDK-2 Parcel. The PUD shall apply the amounts so deposited to pay costs of
forming the New CFD and issuing the New CFD's Bonds. In the event this MOU is deemed to have
been terminated as provided for herein, or in the event the New CFD's Bonds are not issued, the
PUD shall return any unspent portion of the deposits to the respective Owners; and, in in the event
the New CFD's. Bonds are issued, the Owners shall be reimbursed for the portion of the deposits
expended by the PUD if and to the extent that proceeds from the sale of the New CFD's Bonds are
available therefor.
The proceedings for the formation of the New CFD will be conducted in accordance with the
Act and will be consistent with the usual and customary procedures applicable thereto. The parties
understand and agree that such proceedings involve both an election by the Owners and discretionary
approvals by Board and that neither any of the Owners nor the Board is obligated to vote or to act in
a manner favorable to the formation of the New CFD.
Bond Restructuring —Delinquent Taxes. An absolutely essential part of the bond
restructuring described above is the curing of the delinquent taxes, including the delinquent Special
Taxes, applicable to the Parcels of Interest. As described above, the parties contemplate that all of
the Parcels of Interest's Special Taxes that are estimated to be delinquent as of the close of business
on April 10, 2017 will be paid with proceeds from the sale of the New CFD's Bonds. However, the
3
payment of the associated delinquency and redemption penalties that are not waived as described
below and of the delinquent ad valorem taxes and special assessments that have been included in the
County's tax bills is the sole responsibility of the Owners; and they agree to do so in the manner
outlined below.
The CrD is not authorized to waive delinquency and redemption penalties applicable to the
ad valorem taxes and special assessments collected by the County. However, pursuant to California
Government Code Section 53340(f), the Board may waive delinquency and redemption penalties
applicable to the Special Taxes under certain conditions; and the Board has heretofore authorized the
PUD's Administrative Services Manager (the "Administrative Services Manager") to grant such
waivers to the Owners if and to the extent the statutory conditions are satisfied.
Within 15 days after the formation of the New CFD each Owner will deposit with the PUD
the amount estimated by the Administrative Services Manager to be sufficient to pay the sum of (a)
all delinquent taxes and assessments then applicable to the Owner's property other than the Special
Taxes that are estimated to be delinquent as of the close of business on April 10, 2017 (which
delinquent Special Taxes are expected to be paid with proceeds from the sale of the New CFD's
Bonds); (b) the administrative and legal expenses incurred by the CFD in connection with its efforts
to collect the applicable delinquent Special Taxes; (c) all delinquency and redemption penalties then
applicable to the Owner's Parcel(s) of Interest; and (d) all delinquency and redemption penalties that
are expected to accrue thereon with respect to the Owner's Parcel(s) of Interest until the issuance of
the Refunding Bonds and the New CFD's Bonds, but excluding in the case of clauses (c) and (d)
delinquency and redemption penalties that are attributable to Special Tax delinquencies that occurred
prior to the Owner's acquisition of the subject Parcel of Interest. In the event the Refunding Bonds
and New CFD's Bonds are not issued by the date used by the Administrative Services Manager in
calculating the amount of the initial deposit, within ten days after receiving a written request therefor
from the Administrative Service Manager the Owner will deposit with the PUD in same -day funds
such additional amounts as the Administrative Services Manager may from time to time request in
order to assure that the applicable delinquency and redemption penalties will be paid in full
concurrently with the issuance of the Refunding Bonds and New CFD's Bonds. The deposits called
For in this paragraph shall be made by the prospective Owners, as defined herein, with the result that
Triumph shall deposit sufficient funds as outlined herein for the LDK-I Parcel and the Cottages
Parcel and LDK shall deposit sufficient funds as outlined herein for the LDK-2 Parcel. If any
Owner fails to deposit with the PUD the amount requested by the Administrative Services Manager
on or before the date such deposit is required pursuant hereto (each a "Deposit Delinquency"), the
PUD shall provide such Owner with a written delinquency notice (a "Delinquency Notice"). In the
event of any Deposit Delinquency that is not cured by the applicable Owner within fifteen (15) days
following said Owner's receipt of a Delinquency Notice, unless such failure is waived by the PUD
this MOU shall be deemed to have been terminated, and the PUD shall return the deposits theretofore
received by it to each of the Owners that made such deposits.
As long as this MOU remains in effect, each amount so deposited with the PUD will be held
by the PUD and applied by it in connection with the issuance of the Refunding Bonds and New
CFD's Bonds and/or returned to the Owner that made the deposit as set forth below.
If the Refunding Bonds and New CFD's Bonds are issued:
(1) The Administrative Services Manager will waive the delinquency and redemption
penalties that are attributable to the Special Tax delinquencies that occurred prior
to the date on which the Owner acquired the subject property and take such steps
as are reasonable and necessary in order to give notice thereof to the County's
Treasurer -Tax Collector in order to provide for the removal of the amount waived
from the tax roll pursuant to 53340(f)(2) of the California Government Code;
(2) The PUD will forward to the County' a Treasurer -Tax Collector the amount
necessary to pay in full (y) all delinquent taxes and assessments then applicable to
the Owner's property other than delinquent Special Taxes and (z) all delinquency
and redemption penalties then applicable to the Owner's property other than those
attributable to delinquent Special Taxes;
(3) The PUD will credit to the CFD's administrative expense fund the amounts
necessary to reimburse it for administrative and legal expenses incurred by the
CID in connection with its efforts to collect the applicable delinquent Special
Taxes;
(4) The PUD will return to each Owner any amount deposited with it pursuant to the
foregoing provisions that is in excess of the un-waived delinquency and
redemption penalties attributable to delinquencies in the payment of Special
Taxes that actually accrued to the date of issuance of the Refunding Bonds; and
(5) Net available proceeds from the sale of the New CFD's Bonds (which will be
issued concurrently with the issuance of the Refunding Bonds) will be used to
pay and prepay in full the remaining Special Taxes obligation of the Parcels of
Interest, and a notice of such prepayment will be recorded with the County's
Recorder.
Bond Restructuring —New CFD's Bonds. Assuming the New CFD has been formed, the
New Special Tax has been approved and the New CFD's Bonds have been authorized to be issued by
the vote of the Owners, several conditions will still have to be satisfied prior to any attempt to offer
the New CFD's Bonds for sale. These conditions include: (a) Triumph shall have completed its
acquisition of the Cottages Parcel and the LDK4 Parcel; (b) satisfactory entitlement for the
development of the Parcels of Interest shall have been granted by the Town and no challenges to such
entitlement shall be pending or threatened; (c) each Owner shall have supplied all information
requested by any appraiser engaged by or on behalf of the New CID in connection with the proposed
offering of the New CFD's Bonds; (d) each Owner shall have executed and delivered a continuing
disclosure undertaking reasonably satisfactory to the underwriter/placement agent/purchaser of the
New CFD's Bonds; and (e) each Owner shall have disclosed, and certified as to the accuracy and
completeness of such disclosure for purposes of federal and state securities laws, among other things,
the structure of its organization, background information concerning its principals, its experience as a
land developer, its plans for the development of its property within the New CFD, the financial
resources available to it implement those plans, and any and all other information of any kind
deemed by the CID, its disclosure counsel or its bond underwriter, placement agent or bond
purchaser to be relevant and material to a purchase of the New CFD's Bonds.
Assuming that all of the foregoing conditions have been satisfied and that the Board
determined that an attempt to sell the New CFD's Bonds would be appropriate under the
circumstances, the Board, acting as the legislative body of the New CID will use its best efforts to
sell the New CFD's Bonds on terms that provide, among other things, a longer final maturity than
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that of the Existing Bonds and some level of reduced annual debt service during the first several
years following their issuance. Such a sale may be attempted either on a stand-alone basis or through
a joint powers agency in combination with the sale of the Refunding Bonds; and the manner of any
sale, its timing and the professionals to be engaged to implement it will all be determined by the
Board in its sole discretion.
In connection with the foregoing the Owners understand and agree that, in light of the history
of property tax delinquencies associated with the Parcels of Interest, the anticipated low ratios of the
values of the Parcels of Interest to their respective shares of the indebtedness that will be represented
by the New CFD's Bonds, and the concentration of ownership of the Parcels of Interest, (a) the
Board may determine that the minimum denominations of the New CFD's Bonds should be
substantially higher than the usual denominations of land -secured bonds and that the sale thereof
should be limited to qualified institutional buyers, each of which determinations might well increase
the interest rate that would otherwise be borne by the New CFD's Bonds; and (b) there can be
absolutely no assurance of any kind that the New CFD's Bonds will be successfully sold.
Bond Restructuring —Refunding Bonds. The Refunding Bonds will be issued only i£ (a) all
of the requirements of the Act have been satisfied, (b) the New CFD's Bonds are issued concurrently
therewith and (c) the Board determines that such issuance is in the best interest of the residents and
taxpayers of the Existing CFD. If issued, the Refunding Bonds will be secured by, and be payable
from, the Special Taxes applicable only to the taxable property within the Existing CFD other than
the Parcels of Interest. All aspects of any sale of the Refunding Bonds shall be as determined by the
Board in its sole discretion.
Termination. Each Owner may terminate this MOU at any time prior to the date on which
the Board approves the sale and issuance of the Refunding Bonds and the New CFD's Bonds by
delivering written notice of such termination to the PUD, the CFD and each other Owner. In the
event of such a termination, or if the Refunding Bonds and the New CFD's Bonds have not been
issued prior to [December 31, 2017] or such later date as shall have been agreed to by all of the
Owners (in which case this MOU will be deemed to have been terminated), the Board will take all
actions reasonable and necessary to dissolve the New CFD and any unspent portion of the amounts
deposited with the PUD will be returned to the Owners that made the deposits.
In witness whereof, the parties have executed this MOU as of the date indicated above.
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
By:
ATTEST:
Clerk of the Board of Directors
President of the Board of Directors
0
ATTEST:
Clerk of the Board of Directors
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
COMMUNITY FACILITIES DISTRICT NO, 04-1
(GRAY'S CROSSING)
By:
President of its Board of Directors
TRIUMPH DEVELOPMENT LLC
By:
Steve Virostek, Principal
LDK GC 81, LLC
By:
Denton Kelley, Managing Principal
E