The URL can be used to link to this page

Home My WebLink About04/13/2004 PFA Reports /"" AGENDA PUBLIC FINANCE AUTHORITY MEETING CITY OF LAKE ELSINORE 183 NORTH MAIN STREET LAKE ELSINORE, CALIFORNIA TUESDAY, APRIL 13,2004 -7:00 P.M. ......................................................................... CALL TO ORDER ROLL CALL PUBLIC COMMENTS - AGENDIZED ITEMS CONSENT CALENDAR /"" 1. Minutes a. March 23,2004. RECOMMENDATION: Approve. 2. Amendment to Land Development Agreement and Temporary Land Transfer Agreement with South Shore Properties, LLC. RECOMMENDATION: Concur with City Council Action. PUBLIC COMMENTS - NON-AGENDIZED ITEMS EXECUTIVE DIRECTOR COMMENTS AUTHORITY MEMBER COMMENTS LEGAL COUNSEL COMMENTS ,,-- ADJOURNMENT MINUTES ~ PUBLIC FINANCE AUTHORITY MEETING CITY OF LAKE ELSINORE 183 NORTH MAIN STREET LAKE ELSINORE, CALIFORNIA TUESDAY, MARCH 23, 2004 ............................................................................... CALL TO ORDER The Public Finance Authority Meeting was called to order by Chairman Magee at 9:42 p.m. ROLL CALL PRESENT: AUTHORITY MEMBERS: BUCKLEY, KELLEY, MAGEE,SCHIFFNER, HICKMAN /'"' ABSENT: AUTHORITY MEMBERS: NONE Also present were: Executive Director Watenpaugh, Assistant Executive Director Best, Legal Counsel Leibold, Administrative Services Director Pressey, Community Development Director Brady, Community Services Director Sapp, Fire Chief Gallegos, Lake/Aquatic Resources Director Kilroy, Police Chief Walsh, Engineering Manager Seumalo, Information/ Communications Manager Dennis, Parks & Open Space Manager Fazzio, Recreation and Tourism Manager Fazzio, City Treasurer Weber and Clerk of the Authority Kasad. PUBLIC COMMENTS - AGENDIZED ITEMS None Requested. CONSENT CALENDAR ~ MOVED BY SCHIFFNER, SECONDED BY BUCKLEY AND CARRIED BY UNANIMOUS VOTE TO APPROVE THE CONSENT CALENDAR AS PRESENTED: AGENDA ITEM NO.J \ Ct. ' PAGE-L OF ').... Page Two - Public Finance Authority Minutes - March 23,2004 .., 1. The following Minutes were approved: a. February 24, 2004. 2. Concurred with Council Action to Approve the Amendment to Land Development Agreement, Temporary Land Transfer Agreement and Irrevocable Escrow Instructions with Wasson Canyon Investment, L.P, and authorized the Chairperson to execute any necessary documentation. PUBLIC COMMENTS - NON-AGENDIZED ITEMS No Comments. EXECUTIVE DIRECTOR COMMENTS No Comments. AUTHORITY MEMBER COMMENTS .., No Comments. LEGAL COUNSEL COMMENTS No Comments. ADJOURNMENT THE PUBLIC FINANCE AUTHORITY MEETING WAS ADJOURNED AT 9:43 P.M. ATTEST: ROBERT MAGEE, CHAIRMAN PUBLIC FINANCE AUTHORITY VICKI KASAD, CMC, CLERK OF THE AUTHORITY PUBLIC FINANCE AUTHORITY ......, AENoA ITEM NO. J "Qt) . , ", PAGE ~ OF A ,,--. CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL AND PUBLIC FINANCE AUTHORITY TO: MAYOR AND CITY COUNCIL CHAIRPERSON AND MEMBERS OF THE PUBLIC FINANCE AUTHORITY FROM: RICHARD J. WATENPAUGH, CITY MANAGER DATE: APRIL 13, 2004 SUBJECT: AMENDMENT TO LAND DEVELOPMENT AGREEMENT AND TEMPORARY LAND TRANSFER AGREEMENT WITH SOUTH SHORE PROPERTIES, LLC. BACKGROUND In 1993, the City Council acting on behalf of Communities Facilities District No. 90-3, authorized the issuance of $4,162,928 in bonds. The bonds were to be repaid from special taxes assessed on ,,--. undeveloped land within CFD No. 90-3 that is located in Wasson Canyon. As the Council knows, the land development stalled and the bonds were ultimately consolidated with the other underperforming CFD debt in a long term work-out plan. However, the properties within CFD No. 90-3 remained subject to the special tax burden which has been in a continued state of delinquency for several years. In an effort to facilitate development of these properties, the City Council and Public Finance Authority approved, on November 11,2003, agreements with Wasson Canyon Investments, L.P. and South Shore Properties, LLC which provided for partial relief ofthe delinquent special tax obligation on certain properties within CFD No. 90-3. With respect to South Shore Properties, the parties agreed to the following payment schedule: I. South Shore was to immediately deliver a non-refundable payment of $35,500 (the "First Payment"); 2. $319,500.00 after the earlier of (i) December 3, 2005 or (ii) City's approval of the first tentative tract map on the applicable parcels; and 3. $1,420,000.00 after the earlier of (i) December 3,2007 or(ii) City's approval of the first final tentative tract map on the applicable parcels (the "Final Payment"). The developer has already made the First Payment. However, an unexpected difficulty arose when ,,--. the developer attempted to obtain relief from the County Tax Assessor for accumulated penalties and interest on delinquent ad valorem taxes. While the County was amenable to releasing the developer from these penalties and interest, it could only do so upon two conditions. AGENDA ITEM NO. __?- PAGEJ_ OF "3 First, the County pointed to Revenue and Taxation Code section 4986.3 which would allow the County to release such penalties and interest only if the City is the fee owner of the properties. "'-"" Second, the County would only accept payment of the unreleased ad valorem taxes if the developer cleared all of the past due special taxes. Of course, as originally proposed, the existing special tax lien for CFD No. 90-3 would not have been cleared until receipt of the fmal $1,420,000 payment. Accordingly, South Shore faces the same problems encountered by Wasson Canyon Investments, L.P. and addressed by the Council at its March 23, 2004 meeting. Pursuant to the agreement approved by the City Council in connection with Wasson Canyon's parcels within CFD No. 90- 3, the City will temporarily take title to the properties for the sole purpose of satisfying the County's ownership requirement to forgive the penalties and interest on delinquent ad valorem taxes. The second component of the Wasson Canyon agreement provides for an unconditional developer obligation to deposit $732,400 into an irrevocable escrow to be paid to the City/Public Finance Authority upon the earlier of December 2,2005 or the City's approval of the first tentative tract map on the properties. Because South Shore lacks the liquidity of Wasson Canyon and cannot escrow sufficient funds, they have requested a different financial arrangement discussed in greater detail below. DISCUSSION As with the Wasson parcels, the proposed Temporary Land Transfer Agreement requires that the City take temporary title to the properties for the sole purpose of satisfying the County's ownership requirement to forgive the penalties and interest on delinquent ad valorem taxes. However, rather than deposit funds to an escrow, South Shore has proposed to execute a promissory note and deed of trust (with the Public Finance Authority serving as the beneficiary) to secure payment. The promissory note will be in the full amount of the delinquent special taxes to be released. The developer is currently obtaining the exact amount but it is estimated to exceed $2 million. "'-"" A first lien deed of trust will be recorded against the parcels as security for the promissory note subordinate to only future ad valorem taxes (as all delinquent ad valorem taxes will be paid off as part of the work out). Any existing lenders must agree to subordinate their security interest to the Authority's deed of trust. The proposed promissory note will be fully satisfied if South Shore makes two payments. The first payment is for $319,500, payable within ten (10) days following approval of Tentative Map 31593 but in not event later than December 31, 2004. The second payment is for $1,420,000 payable within ten (l0) days following approval of Tentative Map 31593 but in no event later than December 31, 2007. In the event this final payment is made before December 31, 2004, a 15% discount will be applied, reducing the final payment by $213,000. Failure to make these payments will result in the full amount ofthe promissory note becoming due and payable. "'-"" AQENDA ITEM NO. 2 PAGE2.OF.'l ~ Although the proposed structure here does not offer an assured cash payment as provided by an escrow, the Finance Authority's position is benefited by the significant reduction in delinquent ad valorem taxes that will be accomplished as part of the land transfer. Therefore, in the event of a foreclosure sale, the County tax assessor's claim on sales proceeds will be dramatically reduced. As noted in the November 11, 2003 staff report, City staff and the finance team had not expected development to occur for several more years in CFD No. 90-3. While the City's level of involvement in the work-out has been increased beyond that originally contemplated, the currently proposed structure provides safeguards against City liability and provides strong incentives for ultimate payment. FISCAL IMPACT The properties will be relieved of both special tax delinquencies and future special taxes related to CFD No. 90-3; however, those taxes rendered the properties unviable for development such that the prospect of payment was extremely remote. Under the proposed amended buy-out, the City will receive at least $1,526,000 (in addition to the already deposited $35,500) and will also receive $15,000 for City administrative and attorneys' fees related to the additional City assistance as contemplated in the attached documents. RECOMMENDATION ~ 1. That the City Council approve the First Amendment to the Land Development Agreement, the Temporary Land Transfer Agreement subject to any minor modifications as may be approved by the City Attorney and authorize the Mayor to execute the same. 2. That the City Council authorize the Mayor to execute the quitclaim deed substantially in the form set forth in Attachment No.2 to the Temporary Land Transfer Agreement and further authorize the City Manager to execute the Certificate of Acceptance substantially in the form set forth in Attachment No.1 to the Temporary Land Transfer Agreement. 2. That the Public Finance Authority concur with the City Council and approve the attached agreements and attachments thereto subject to any minor modifications as may be approved by the City Attorney and, further, that the Chairperson is authorized to execute the Temporary Land Transfer Agreement. PREPARED BY: David H. Mann, Assistant City Attorney APPROVED BY: Barbara Leibold, City Attorney " ll1LUJ]J;;1;!a<<~ CIty Manager's Office/ExecUtIve DIrector ~ APPROVED FOR LISTING BY: ~ AGENDA ITEM NO. 3 " PA"'C 3 OF VL-___