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Home My WebLink AboutRes 09-61 - CFD No. 2005-1 (University Park) - Delinquent Special Taxed CITY OF PALM DESERT FINANCE DEPARTMENT Staff Report REQUEST: CONSIDERATION OF INITIATION OF ACTION NECESSARY TO FORECLOSE CERTAIN DELINQUENT SPECIAL TAX LIENS BY CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) (THE "CFD") SUBMITTED BY: PAUL S. GIBSON, FINANCE DIRECTOR DATE: AUGUST 27, 2009 CONTENTS: RESOLUTION NO. 09- 61 Recommendation: That the City Council, as legislative body of the CFD, adopt a resolution entitled: Resolution No. 09- 61 , A Resolution of the City Council of the City of Palm Desert, as Legislative Body of the City of Palm Desert Community Facilities District No. 2005-1 (University Park), Declaring Its Intention to Remove Certain Delinquent Special Taxes From the County Tax Roll and Ordering Judicial Foreclosure Proceedings Against Certain Delinquent Property Within the Community Facilities District Executive Summary: In the authorizing resolutions and the Indenture with respect to the bonds issued by the CFD, the City (on behalf of the CFD) has covenanted to commence judicial foreclosure proceedings against any parcel with delinquent special taxes in excess of $10,000 by October 1 following the close of the fiscal year in which such special taxes were due. Two parcels, APNs 694-190-011 and 694-190-032, each had delinquent special taxes for the second installment of 2008-09 taxes in excess of $10,000. Approval of the attached resolution and authorization of the actions contemplated thereby are required in order for the City/CFD to timely commence judicial foreclosure proceedings by October 1, 2009. Backqround: On May 9, 2006 and May 23, 2007, pursuant to the Mello-Roos Community Facilities Act of 1982, Government Code Sections 53311, et seq. (the "Mello-Roos Act"), the CFD issued, respectively, its $50,000,000 aggregate initial principal amount Special Tax G:\Finance\Niamh Ortega\Staff Reports\SR Removal of Special Taxes from Tax Roll(University Park CFD)082709.docx �Staff Report Adopt a Resolution Removing CFD Delinquent Taxes from Tax Roll August 27, 2009 Page 2 of 4 Bonds, Series 2006A, and its $17,915,000 aggregate initial principal amount Special Tax bonds, Series 2007 (collectively, the "Bonds"), to finance certain public facilities to serve the property within the CFD. The repayment of the Bonds is secured by special taxes levied and collected by the CFD. The City Council initially undertook proceedings to form the CFD in response to a petition requesting the City to do so, dated October 12, 2005, and filed by five business entities, who were at the time the owners (collectively) of approximately 85% property within the boundaries of the CFD (then proposed). Among these owners was Desert Wells 237, LLC ("Desert Wells 237"), a California limited liability company whose principal and manager is Michael S. Marix. At the time, Desert Wells 237 co-owned the majority of the property within the CFD. On January 12, 2006, pursuant to the Mello-Roos Act, the City Council held an election to determine whether the qualified electors within the CFD (the landowners) approved by at least a 2/3 vote certain ballot propositions to issue one or more series of bonds in the maximum aggregate principal amount of $70 million to finance certain specified facilities to serve the property within the CFD, and whether a special tax be levied annually to pay for the facilities, including the principal and interest on any bonds issued therefor. As declared in Resolution 06-9, adopted on January 12, 2006, the ballot propositions were approved by 100% of the qualified electors within the CFD. By the time of this CFD election, Desert Wells 237 had sold a large portion of its property within the CFD to Palm Desert Funding Company, LP, a Delaware limited partnership ("PDFC' — the current "Master Developer" with respect to backbone infrastructure to serve the CFD), and Desert Wells 237's ownership interest was reduced to less than 50% of the property within the CFD. At that time, another affiliated entity of Michael S. Marix and Desert Wells 237, called Palm Desert Forum, LLC, a California limited liability company ("Palm Desert Forum"), also owned approximately 8 acres within the CFD. By the time the Series 2007 Bonds were issued, Desert Wells 237 had sold most of its property within the CFD to PDFC, and Palm Desert Forum had also transferred some property. Therefore as of April 2007, according to the Official Statement for the Series 2007 Bonds, Desert Wells 237 and Palm Desert Forum together owned property responsible for approximately 3.44 percent of the special taxes levied by the CFD. Based on the most recent Special Tax Delinquency Report prepared by the CFD's special tax consultant, Willdan Financial Services (the "Special Tax Consultant"), on April 10, 2009, approximately $56,301.33 in special taxes levied by the CFD with respect to APN 694-190-011, owned by Palm Desert Forum, became delinquent by reason of non-payment on the second installment of 2008-09 taxes. On April 10, 2009, approximately $22,822.82 in special taxes levied by the CFD with respect to APN 694- 190-032, owned by Desert Wells 237 and Palm Desert Forum, became delinquent by reason of non-payment on the second installment of 2008-09 taxes. G:\Finance\Niamh Ortega\Staff Reports\SR Removal of Special Taxes from Tax Roll(University Park CFD)082709.docx �Staff Report Adopt a Resolution Removing CFD Delinquent Taxes from Tax Roll August 27, 2009 Page 3 of 4 As a result, approximately $79,124.15 in delinquent special taxes and approximately $7,912.41 in penalties are presently owing on account of these 2 parcels. Interest is continuing to accrue at the statutory rate of 1.5% per month (18% per annum). In addition to the delinquent installments, penalties, and interest, the CFD is additionally entitled under the Mello-Roos Act to collect its administrative costs in seeking to resolve these delinquencies, including attorneys' fees, roll removal fees, and costs of the litigation guarantees to be obtained from a title company. Pursuant to Section 53356.1 of the Mello-Roos Act, in the event of any delinquency in the payment of special taxes, the City Council, as legislative body of the District, may order the institution of a superior court action to foreclose the special tax lien within specified time limits in order to preserve the security for the Bonds. In addition, pursuant to Resolutions 06-33 and 07-13, adopted on March 23, 2006 and March 8, 2007, respectively, to authorize the issuance of the Bonds, and Section 5.2(c) of the Indenture with respect to the Bonds, the City Council (on behalf of the CFD) has covenanted to commence judicial foreclosure proceedings (and diligently pursue such foreclosure proceedings) when either of two thresholds have been met: (i) if any parcel or parcels have delinquent special taxes in excess of $10,000 (per parcel), the CFD must commence judicial foreclosure proceedings against such parcel or parcels by the October 1 following the close of each fiscal year in which such special taxes were due; or (ii) if in any fiscal year, the CFD receives aggregate special taxes in an amount which is less than 95% of the total special taxes levied against all parcels within the CFD and the amount on deposit in the Reserve Account is at less than the Reserve Requirement, the CFD must commence judicial foreclosure proceedings against all parcels with delinquent special taxes by the October 1 following the close of such fiscal year. With respect to APN 694-190-011 and APN 694-190-032 owned by Desert Wells 237 and Palm Desert Forum, the first foreclosure covenant has been met as of June 30, 2009; greater than $10,000 in delinquent special taxes are owed for each such parcel from Fiscal Year 2008-09, so the CFD must commence judicial foreclosure proceedings against each of these parcels by October 1, 2009. The aggregate delinquencies for Fiscal Year 2008-09 do not exceed the 5% delinquency rate permitted in the second foreclosure covenant, and the amount in the Reserve Account is currently higher than the Reserve Requirement — an amount approximately equal to 1 year of debt service on the Bonds. Therefore, no additional action needs to be taken against the other delinquent parcels within the CFD at this time, which are a few parcels owned by individual residential property owners. The attached resolution authorizes the Special Tax Consultant, on behalf of the CFD, to remove from the County tax rolls only the delinquent installments of special taxes of G:\Finance\Niamh Ortega\Staff Reports\SR Removal of Special Taxes from Tax Roll(University Park CFD)082709.docx �Staff Report Adopt a Resotution Removing CFD Delinquent Taxes from Tax Roll August 27, 2009 Page 4 of 4 APN 694-190-011 and APN 694-190-032 described above, and Bond Counsel with respect to the Bonds, Richards, Watson & Gershon, A Professional Corporation, on behalf of the CFD, to commence judicial foreclosure proceedings against APN 694-190- 011 and APN 694-190-032 pursuant to the Mello-Roos Act. Fiscal Impact: The delinquent special taxes, penalties, and interest, once recovered, will be used to satisfy the debt service requirement on the outstanding Bonds. Administrative costs of the CFD (and the City on behalf of the CFD) in seeking to resolve these delinquencies, including attorneys' fees, roll removal fees, and costs of the litigation guarantees to be obtained from a title company, will be added to the respective delinquency payoff amounts, as authorized under the Mello-Roos Act. Submitted by: Approval: � � Paul S. Gibson Jo n M. Wohlmuth City Treasurer/ Director of Finance ity Manager � CITY COUNCIL�CTION APPROVED �� DENTED EIVE OTHER C�. - oZ MEETING DATE "� ` AYES: � ��1? � ��Sv ner�Z I! c � �c NOES: �� • ..,� ABSENT: /Ua��' _.._... ABSTAIN: VERIFIED BY: �- Original on File with City rk's Office G:\Finance\Niamh ORegalStaff Reports\SR Removal of Special Taxes from Tax Roll(University Park CFD)082709.docx RESOLUTION NO. 09-61 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT, AS LEGISLATIVE BODY OF THE CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK), DECLARING ITS INTENTION TO REMOVE CERTAIN DELINQUENT SPECIAL TAXES FROM THE COUNTY TAX ROLL AND ORDERING JUDICIAL FORECLOSURE PROCEEDINGS AGAINST CERTAIN DELINQUENT PROPERTY WITHIN THE COMMUNITY FACILITIES DISTRICT RECITALS: WHEREAS, the City Council (the "City Council") of the City of Palm Desert (the "City"), located in Riverside County, California (hereinafter sometimes referred to as the "legislative body of the District"), has heretofore pursuant to Resolution No. 06-6 adopted on January 12, 2006, formed the City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the "District") pursuant to 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 (the "Act"), to finance certain public facilities which the District is authorized to finance; and WHEREAS, pursuant to Resolution Nos. 06-8 and 06-9 adopted by the legislative body of the District on January 12, 2006, certain bond propositions and a proposition to levy a special tax within the District, among other things, were submitted to the qualified electors within the District, and were approved by more than two-thirds of the votes cast at the elections held within the District on January 12, 2006; and WHEREAS, based upon Resolution Nos. 06-8 and 06-9 and the elections and in accordance with Section 53340 of the Act, the legislative body of the District adopted Ordinance No. 1107 on February 9, 2006, authorizing the levy of a special tax (the "Special Tax") on the taxable property within the District at the maximum rates described therein; and WHEREAS, based upon Resolution Nos. 06-8 and 06-9 and the elections, and pursuant to Resolution No. 06-33, adopted by the legislative body of the District on March 23, 2006, and Resolution No. 07-13, adopted by the legislative body of the District on March 8, 2007, the District issued, respectively, its Special Tax Bonds, Series 2006A, in an aggregate initial principal amount of $50,000,000, and its Special Tax Bonds, Series 2007, in an aggregate initial principal amount of $17,915,000 (collectively, the "Bonds"), pursuant to the Act to finance authorized public facilities, the repayment of which is secured by the net Special Tax received by the District, as further described in the indenture with respect to the Bonds (the "Indenture"); and WHEREAS, pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax, the legislative body of the District may G:\Finance\Niamh Ortega\Resolutions\RES-Declaring Intention to Remove Delinquent Special Taxes(University Park CFD).docx 'Resolution No. 09- 61 Page 2 of 4 order the institution of a superior court action to foreclose the lien of the Special Tax within specified time limits; and WHEREAS, pursuant to Resolution 06-33, Resolution 07-13, and the Indenture, the legislative body of the District has covenanted to commence judicial foreclosure proceedings when certain circumstances have occurred (the "Foreclosure Conditions"), by October 1 following the close of the Fiscal Year in which such delinquent installments of Special Tax were due, and to diligently pursue such foreclosure proceedings until such delinquent installments of Special Tax have been paid; and WHEREAS, there exist delinquent installments of the Special Tax due in Fiscal Year 2008-09 by property owners of certain parcels located within the District (the "Delinquent Parcels") and with respect to such Delinquent Parcels, the Foreclosure Conditions have occurred (the assessor parcel numbers of such Delinquent Parcels being set forth in Exhibit "A" and incorporated herein by reference); and WHEREAS, given the Foreclosure Conditions, the legislative body of the District desires to commence foreclosure proceedings against the Delinquent Parcels pursuant to Section 53356.1 of the Act in order to comply with the Indenture and to preserve the security for the Bonds. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT ACTING AS THE LEGISLATIVE BODY OF CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) DOES HEREBY RESOLVE AS FOLLOWS: 1. Each of the above recitals is true and correct. 2. Pursuant to Section 53356.1 of the Act, the legislative body of the District hereby orders that judicial foreclosure proceedings against the Delinquent Parcels be commenced by Richards, Watson & Gershon, A Professional Corporation (bond counsel with respect to the District), and that such foreclosure proceedings be diligently pursued until the related delinquent installments of Special Tax are paid. 3. In connection therewith, the legislative body of the District hereby declares that it is its intention remove delinquent Fiscal Year 2008-09 installments of Special Tax relating to the Delinquent Parcels from the County tax roll pursuant to Section 53356.2 of the Act and hereby authorizes Willdan Financial Services (the special tax consultant with respect to the District) to cause such removal of delinquent installments of Special Tax from the County tax roll. 4. All actions heretofore taken by the officers and agents of the City and the District with respect to the Delinquent Parcels are hereby approved, confirmed, and ratified. Each of the Mayor of the City, the City Manager of the City, and the officers and staff of the City and the District responsible for the fiscal affairs of the District are hereby authorized and directed to take any actions, and execute and deliver any and all documents as are necessary to accomplish the collection of the delinquent installments of Special Tax relating to the Delinquent Parcels. G:\Finance\Niamh Ortega\Resolutions\RES-Declaring Intention to Remove Delinquent Special Taxes(University Park CFD).docx J Resolution No. 09- 61 Page 3 of 4 5. This Resolution shall take effect upon its adoption. The City Clerk of the City shall certify to the passage and adoption of this Resolution and enter it into the book of original resolutions. PASSED, APPROVED, AND ADOPTED this 27th day of August, 2009, by the following vote to wit: AYES: NOES: ABSENT: ABSTAIN: Robert A. Spiegel Mayor ATTEST: Rachelle D. Klassen, City Clerk Palm Desert, California G:\Finance\Niamh Ortega\Resolutions\RES-Declaring Intention to Remove Delinquent Special Taxes(University Park CFD).docx Resolution No. 09-61 EXHIBIT "A" ASSESSOR PARCEL NUMBERS OF DELINQUENT PARCELS 694-190-011 694-190-032 P6401.1032U 158546.1 A-1 City of Palm Desert ArcIMS Map Output Page 1 of 1 Resolution No. 09-61 APN 694-190-011 ��A� :cr�� `��{�a�',�,�� ,� ''?Ci �',�,� �t';��. e ��-�,��' 'Y�� k G�E�ALC7 FC>RC� C��t'",�'.� �� y�� " � � � �'"`'° � � � � � m � � �� J�ELI�LN; �Ut„� ��„ ��g � � �� '� ��# � � � -"+�� . � �^�3 . * u� � � ,� 2 4 � � �-* � y �A"� � � t'� � � � C.� � � � Gg �"" T'y�' �'",�� a, � � �� r� � �� '��0�� I��F`� �� >, http://cpdgis/servlet/com.esri.esrimap.Esrimap?ServiceName=CityOverview_local&Client... 8/14/2009 City of Palm Desert ArcIMS Map Output Page 1 of 1 Resolution No. 09-61 APN 694-190-032 :��},,� �� `�'Y p � � „:'��rfi�^ � . �r��a��' �S' � ��`, �'�',�,� �� EFtA LD FQR D 67 F�' �" �;� �'�,.� ,�, c� "� 'f� 'c� � � � � � rn � a C��. 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