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HomeMy WebLinkAbout12, Grays Crossing MOU ACTION ITEM #12(MOU) for the Gray’s Crossing CFDMemorandum of Understanding Consideration of Approving the (MOU) for the Gray’s Crossing CFDMemorandum of Understanding Consideration of Approving the January 19, 2017 Gray’s Crossing MOU$31,675,000 currently outstanding•Financed backbone public infrastructure through two bond issues•TDPUD had largest share of utilities financed and agreed to administer•TDPUD formed the Gray’s Crossing CFD in 2004 •Various community spaces•40,700 square feet of commercial space •21 residential lofts •115 townhomes •89 single family freestanding cottages •92 unit income restricted apartment complex••Gray’s Crossing was originally entitled for:•BACKGROUND / HISTORY Gray’s Crossing MOU Gray’s Crossing MOU Apportionment Special Taxes are levied pursuant to a Rate and Method of •derived from the Special TaxesThe CFD bonds are secured by, and payable from, the revenues •BACKGROUND / HISTORY Gray’s Crossing MOU Gray’s Crossing MOU The reserve fund is currently below the minimum required level•September 2016 •September 2015 •September 2014 •Draws on the reserve fund have been required on•Taxes has been insufficient to pay debt service on the bonds At these delinquency levels the revenues available from the Special •And have continued to increase, currently 20% of the total annual levy•11 delinquencies rose to 18% of the total annual levy-In FY 10•11 the amount of delinquencies increased -Beginning in FY 10•11 the delinquencies were relatively minor-Prior to FY 10•BACKGROUND / HISTORY Gray’s Crossing MOU Gray’s Crossing MOU delinquency Of the 20% overall delinquency, these parcels represent >80% of that •07 (“Parcel F”)-010-APN 43•05 (“Parcel D”)-010-APN 43•05 (the “Cottages Parcel”)-010-APN 43•family parcels-The majority of the delinquencies is attributable to three large multi•BACKGROUND / HISTORY Gray’s Crossing MOU Gray’s Crossing MOU“Parcel D”“Parcel F”“The Cottages”BACKGROUND / HISTORY Gray’s Crossing MOU Gray’s Crossing MOU front cost to acquire the property(s) is prohibitive-The up•development taxes, penalties and interest has created a financial barrier to The significant past due Special Taxes, penalties, interest, ad valorem •The penalty accrues interest at 1.5% per month (18% annually)•Each delinquent installment of Special Taxes is levied a 10% penalty•applicable are also significantly delinquent For these three parcels, the ad valorem taxes and other assessments •BACKGROUND / HISTORY Gray’s Crossing MOU Gray’s Crossing MOU were no bids sufficient to remedy the past due taxesAlthough a judgment in favor of the CFD has been obtained there •proceedingsProperties have already been subject of judicial foreclosure •The parcels will be sold at auction •The existing owners will cure the delinquencies •Absent a major restructuring of the debt service, it is unlikely that:•Delinquencies and penalties continue to compound •Situation continues to worsen as time goes by •undevelopedFor these reasons the three parcels remain in default and •BACKGROUND / HISTORY Gray’s Crossing MOU Gray’s Crossing MOU could cause payment default on the bondsAt some point such draws are expected to deplete the reserve fund and •draws on the reserve fund will be necessaryAs this problem continues to worsen it is probable that continued •BACKGROUND / HISTORY Gray’s Crossing MOU Gray’s Crossing MOU stabilization would be brought forward for future Board considerationStaff informed the Board that any further potential action towards •An essential first step towards stabilization of the CFD•Government Codedeterminations authorized under Section 53340(f) of the California waiver of redemption penalties under certain findings and 25 permitting the -Specifically, the Board approved Resolution 2016•longer term plan was developedThe Board took action to authorize near term stabilization efforts while a •challenge of CFD administration, as summarized again here At the October 5, 2016 Board meeting staff explained the ongoing •BACKGROUND / HISTORY Gray’s Crossing MOU NEW INFORMATION bondholders To identify that the plan is in the best interest of all parties and •To ensure transparency in the plan •Formal agreement between the TDPUD, the CFD, and two developers •Outlines roles and responsibilities of parties signatory to the MOU•Outlines the overall plan envisioned to stabilize the CFD •The potential solution has been drafted into the form of a Memorandum of •A complex problem has resulted in a complex solution •Staff explored dozens of potential solutions to stabilize the CFD•Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION A default would have negative consequences for bondholders•A default could consume TDPUD staff time •Crossing property owners Tangibly or intangibly, a default could be adverse to existing Gray’s •more difficult to finance future development Could further exacerbate the existing housing crisis if it becomes •Could be a blemish for future land secured financing •It endeavors to avoid a failed bond issue in our community •liability of TDPUD, the MOU plan is beneficial because: Although the CFD is independent of TDPUD and not a legal or financial •The MOU facilitates a plan that could avoid a default of the CFD •Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION Should be in the best interest of the bondholders•adverse financial impact to existing property owners No •transparency Must comply with all statutory provisions and demonstrate fairness and •Must restructure existing financial barrier to development•Development requires owners who are committed to progress•payment of the Special Taxes Practically, development on those parcels is required to ensure •family parcels -by the three large multiThe CFD delinquency will only be remedied with payment of Special Tax •Several key tenets guided the formation of the MOU:•Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION Provides a significant savings to the existing property owners•Maintains an equitable lien of the bonds by parcel •front financial barrier to development -•Financially “resets the clock”•contemplates a plan to achieve the key tenets outlined above that:As a result of those meetings, staff was able to draft a MOU that •financial counsel / underwriters, HOA, other concerned citizensprofits, legal counsel, -Town of Truckee, prospective developers, non•Staff facilitated dozens of meetings with concerned parties •Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION without adversely impacting other property owners front financial barriers without a ‘bail out’ and -Would eliminate upII.Likely a longer maturity to amortize the parcels lien of the bonds I.CFD and the issuance of new bonds must be paid otherwise) could be made through the formation of a new The payments required to prepay the obligation (except penalties which 3.Their future taxes were prepaid III.Their associated penalties were waived and/or paid II.Their delinquent taxes were paidI.The three parcels of interest could be removed from the CFD if:2.savings for existing owners with no change to maturity CFD, then the CFD could issue refunding bonds to secure substantial Explains that if the three parcels of interest could be removed from the 1.The MOU outlines a plan that: •Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION More likely delinquencies will decrease and default will be avoided •If successful, it is more likely the parcels will be developed •Provide substantial savings to existing property owners •front financial barrier to development -Restructuring the up•Diversifying ownership •As a result, the proposed plan is able to meet the key tenets by:•Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION property owner who has been supportive of the stabilization effortA California based developer and existing –LDK GC81, LLC (LDK) •developer introduced to TDPUD by the Town of TruckeeColorado / Maryland based –Triumph Development, LLC (Triumph) •the properties actions to enact the plan and who are anticipated to finally develop The MOU also identifies two developers who must complete certain •Expectations of each party to complete certain actions •Anticipated land conveyance / future ownership •Legal structure•positive outcome The MOU explains the potential actions necessary to effect a more •Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION parties TDPUD also working to facilitate the collaboration between the many •with the lien of the bonds TDPUD’s role is to ensure the proposed development responsibly aligns •are necessary conceptual site plans and consider whether any entitlement changes Both developers are working with the Town of Truckee to review •LDK –Parcel F •Triumph –Parcel D & The Cottages •parcels and that LDK will develop one: The MOU anticipates that Triumph will develop two of the three •Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION penalties, and Special Tax penalties as is appropriate per the MOUFully satisfy the outstanding County of Nevada property taxes, 2.Initially fund the near term CFD formation costs 1.The MOU requires the developers to make a series of deposits to:•The MOU can be terminated at any time by any party •effect the overall planThe MOU contemplates many actions that the Board may consider to •Gray’s Crossing MOUGray’s Crossing MOU NEW INFORMATION engaged to make this effort successful At this time both developers have approved the MOU and are fully •Bond market uncertainty •limited schedule reserve–Aggressive timeline •Development plans are preliminary and financial viability still unknown•Land use/entitlement issues are not within the purview of the CFD•The many parties involved must all align interests •is uncertain because: Although the MOU contemplates a favorable outcome, such outcome •Gray’s Crossing MOUGray’s Crossing MOU FISCAL IMPACT CFD over $2,000,000 in interest cost over the term of the bondsThere is a positive fiscal impact and opportunity to save the existing •deposit to cover immediate CFD formation costsoutlined in the MOU as developers are required to fund an initial There is no negative fiscal impact to the CFD to continue the efforts •independent of the CFDThere is no direct fiscal impact to the TDPUD as the TDPUD is fiscally •Gray’s Crossing MOUGray’s Crossing MOU RECOMMENDATION 1, Triumph Development LLC, -Community Facilities District No. 04Donner Public Utility District, Truckee Donner Public Utilities District Approve the Memorandum of Understanding by and among Truckee •Gray’s Crossing MOUGray’s Crossing MOU