HomeMy WebLinkAboutRes 2010-64 - CFD No. 2005-1 (University Park) 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 26, 2010
CONTENTS: Resolution No. 2010-�
Recommendation
Waive further reading and adopt Resolution No. 2010-64
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.
Four parcels, APNs 694-190-022, 694-190-049, 694-190-050 and 694-200-020, each
have delinquent special taxes for Fiscal Year 2009-10 in excess of $10,000. In addition,
the developer owning the first three of such parcels also owns two additional parcels
located within the District that are similarly delinquent in installments of the special taxes
due in Fiscal Year 2009-10: APNs 694-190-019 and 694-190-021. 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 and to preserve the security for the bonds issued by the CFD.
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
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 prope�ty within the CFD. The repayment of the Bonds is secured by special
taxes levied and collected by the CFD.
G:\Finance\Niamh Ortega\Staff Reports\SR-Initiation Of Foreclosure Action To Recover Delinquent Special Taxes Univ Park CFD
082610.Docx
Staff Report
Consideration of Initiation of Action Necessary to Foreclose Certain Delinquent Special
Tax Liens — University Park CFD
August 26, 2010
Page 2 of 4
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 the petitioning owners was
The University Village Partnership, a real estate developer now known as Palm Desert
University Village LLC ("PD University Village"), a California limited liability company.
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, including
PD University Village and Sinatra & Cook Project, LLC ("Sinatra & Cook"), a California
limited liability company, another developer of property within the CFD.
According to the Official Statement for the Series 2007 Bonds, the parcels within the
CFD owned by PD University Village are responsible for approximately 5.32 percent of
the special taxes levied by the CFD, and the parcels within the CFD owned by Sinatra &
Cook are responsible for approximately 7.55 percent of 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 ConsultanY'), on
the December 10, 2009 and April 10, 2010 due dates for installments of CFD special
taxes, the following amounts became delinquent by reason of non-payment on the
respective installments of 2009-10 taxes for parcels owned by PD University Village and
Sinatra & Cook, and such amounts are still currently delinquent:
APN Propert Owner Due Date Amount
694-190-019 PD University Village April 10, 2010 $ 5,912.77
694-190-021 PD University Village April 10, 2010 7,969.39
694-190-022 PD University Village April 10, 2010 12,596.78
694-190-049 PD University Village December 10, 37,260.00
2009
PD University Village April 10, 2010 37,260.00
694-190-050 PD University Village December 10, 34,155.00
2009
PD Universit Villa e April 10, 2010 34,155.00
Subtotal (PD Universit Villa e Parcels : $169,308.94
694-200-020 Sinatra & Cook April 10, 2010 $260,820.00
Total (All Parcels): $430,128.94
2
Staff Report
Consideration of Initiation of Action Necessary to Foreclose Certain Delinquent Special
Tax Liens — University Park CFD
August 26, 2010
Page 3 of 4
As a result, approximately $430,128.94 in delinquent special taxes and approximately
$43,012.89 in penalties is presently owing on account of these 6 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 3 parcels owned by PD University Village (APNs 694-190-022, 694-190-
049, and 694-190-050) and the 1 parcel owned by Sinatra & Cook (APN 694-200-020),
the first foreclosure covenant has been met with respect to the 2009-10 Fiscal Year;
greater than $10,000 in delinquent special taxes are owed for each such parcel from
Fiscal Year 2009-10, so the CFD must commence judicial foreclosure proceedings
against each of these parcels by October 1, 2010. Also, as shown in the table above,
PD University Village owns 2 additional, smaller parcels within the CFD that are also
delinquent in Fiscal Year 2009-10 special taxes (APNs 694-190-019 and 694-190-021).
Therefore, as a prudent fiscal measure and to comply with the City's foreclosure
covenant in the Indenture for the Bonds, staff recommends that the City Council order
the commencement of foreclosure proceedings against these parcels owned by PD
University Village and Sinatra & Cook within the CFD.
3
Staff Report
Consideration of Initiation of Action Necessary to Foreclose Certain Delinquent Special
Tax Liens — University Park CFD
August 26, 2010
� Page 4 of 4
As to the second foreclosure covenant, the aggregate delinquencies in the CFD for
Fiscal Year 2009-10 exceed the 5% delinquency rate stated, but 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 action is
required under the Indenture to be taken against the other delinquent parcels within the
CFD at this time (2 parcels owned by individual residential property owners). The
delinquent amounts on these individually-owned parcels are, respectively, $1,161 and
$2,106, and it is not cost-effective for the City to foreclose on these 2 parcels before the
second foreclosure covenant is triggered. Additionally, once the delinquencies on the 6
parcels owned by developers PD University Village and Sinatra & Cook are paid
through the foreclosure process, the aggregate outstanding delinquency rate will drop
from 9.36% to 0.07%, which is well below the 5% threshold of the second foreclosure
covenant.
The attached resolution authorizes the Special Tax Consultant, on behalf of the CFD, to
remove from the County tax rolls only the delinquent 2009-10 installments of special
taxes of APNs 694-190-019, 694-190-021, 694-190-022, 694-190-049, and 694-190-
050 owned by PD University Village and APN 694-200-020 owned by Sinatra & Cook. .
The resolution also authorizes Bond Counsel with respect to the Bonds, Richards,
Watson & Gershon, A Professional Corporation, on behalf of the CFD, to commence
judicial foreclosure proceedings against such parcels 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, Finance Director n . Wohlmuth, Ci nager
CITY COUNCILACTION
APPROVED � DFNTED
RECEIVED OTH R � A���—
I
NIEETING DATE �� �
AYES: 'e '�
NOES: r' �
AssrNT: � 4
Ai3STAIN:
YER�F,IED BY: �
Ori�inaCon File with ity Clerk's Office
RESOLUTION NO. 2010- 64
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 "AcY'), 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 ttie 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
Resolution 2010-64
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 2009-10 by property owners of certain parcels located within the District, and with
respect to four of such parcels (the "Major Delinquent Parcels"), the Foreclosure
Conditions have occurred (the assessor parcel numbers of such Major Delinquent
Parcels being set forth in Exhibit "A" and incorporated herein by reference); and
WHEREAS, three of the Major Delinquent Parcels are owned by a single
developer, and such developer owns two additional parcels located within the District
that are also delinquent in installments of the Special Tax due in Fiscal Year 2009-10
(the "Additional Delinquent Parcels") (the assessor parcel numbers of such Additional
Delinquent Parcels being set forth in Exhibit "A" and incorporated herein by reference);
and
WHEREAS, given the Foreclosure Conditions and such common ownership of
three of the Major Delinquent Parcels with the Additional Delinquent Parcels, the
legislative body of the District desires to commence foreclosure proceedings against the
Major Delinquent Parcels and the Additional Delinquent Parcels (together, the
"Foreclosure Parcels") pursuant to Section 53356.1 of the Act, 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 (UNIVERSfTY 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 Foreclosure 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 2009-10 installments of Special Tax
relating to the Foreclosure Parcels from the County tax roll pursuant to Section 53356.2
of the Act and hereby authorizes Willdan Financial Services (the special tax consultant
2
Resolution 2010-�
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 Foreclosure 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 Foreclosure Parcels.
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 26th day of August, 2010, by the following
vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Cindy Finerty, Mayor
ATTEST:
Rachelle D. Klassen, City Clerk
City of Palm Desert, California
3
EXHIBIT "A"
ASSESSOR PARCEL NUMBERS OF FORECLOSURE PARCELS
694-190-019���
694-190-021���
694-190-022�z�
694-190-049�Z�
694-190-050�2�
694-200-020��� �
(1) Additional Delinquent Parcel
(2) Major Delinquent Parcel
A-1