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Home My WebLink AboutWells Fargo Written Instructn - SEC29 AD No. 2004-02 _ � CITY OF PALM DESERT STAFF REPORT REQUEST: Direct the City Treasurer to provide written instructions to Wells Fargo Bank, National Association, as Fiscal Agent for the Section 29 Assessment District (No. 2004-02) Limited Obligation Improvement Bonds, Series 2007, to use surplus monies remaining in the improvement fund to call and redeem bonds SUBMITTED BY: Paul Gibson, Director of Finance DATE: November 14, 2013 CONTENTS: Certificate �f the City Engineer Recommendation: By Minute Motion, that the City Council: 1. Direct the City Treasurer to provide written instructions to Wells Fargo Bank, National Association, as fiscal agent (the "Fiscal Agent") for the Section 29 Assessment District (No. 2004-02) Limited Obligation Improvement Bonds, Series 2007 (the "Bonds"), to use surplus monies remaining in the Improvement Fund to call and redeem a portion of the outstanding Bonds; and - 2. Authorize the City Treasurer to execute any ancillary documents necessary to effectuate the actions taken herewith. Executive Summary: The public improvements and acquisitions to be financed by the Section 29 Assessment District (No. 2004-02) (the "District") are now complete. Surplus monies of approximately $2,852,215 remain in the Improvement Fund held by the Fiscal Agent under the Fiscal Agent Agreement, dated March 1, 2007 (the "Fiscal Agent Agreement"), relating to the Bonds. Of the options available under the Municipal Improvement Act of 1913 (the "1913 Act"), using the surplus monies to call and redeem Bonds will have the most equitable outcome for property owners within the District. Backqround: On April 12, 2007, the City issued the Bonds in an aggregate principal amount of $29,430,000 to finance certain public improvements and acquisitions authorized to be financed by the District. The Bonds are secured by and payable solely from special assessments levied on taxable property within the District, The special assessment G:\Finance\Niamh Ortega\Staff Reports\Call And Redeem Bonds-Surplus Funds In Improvement Fund(Section 29 AD) 111413.Docx Section 29 Assessment District Surplus Improvement Fund Monies Staff Report November 14, 2013 Page 2 of 3 installments are collected through the consolidated County property tax bill (and paid to the City by the County), and the last maturity of the Bonds is September 2, 2037. As reflected by the attached Certificate of the City Engineer, the public improvements and acquisitions to be financed by the District are now comptete. Pursuant to (i) Resolution No. 06-151 adopted by the City Council, (ii) the Fiscal Agent Agreement, dated as of March 1, 2007 (the "Fiscal Agent Agreement"), relating to the Bonds, and (iii) the 1913 Act, surplus funds remaining in the Improvement Fund may be used for one or more of the following purposes, as determined by the City Council: (a) For transfer to the City's General Fund, provided that the amount transferred does not exceed the lesser of $1,000 or 5% of the total amount expended from the Improvement Fund; (b) As a credit upon the assessment; (c) For the maintenance of the improvements; and/or (d) To call bonds, thereby reducing outstanding assessments and subsequent assessment installments. As option (a), in this case the maximum amount that can be transferred to the City's General Fund is $1,000. As to option (c), the City currently has sufficient budgeted funds to maintain the improvements financed by the District. Both options (b) and (d)would result in a reduction in the special assessment installments being levied on taxable property within the District. However, due to provisions in the 1913 Act governing how the surplus funds must be applied to accomplish such reduction, options (b) and (d) have a different impact on the future assessment installments to be levied by the District (and therefore, a different impact on future property tax bills). As to option (b), the 1913 Act requires that a credit upon the assessment must be applied against the next occurring installment or installments. Therefore, under option (b), the credit would offset the entire assessment installments for fiscal year 2014-15 and approximately 17% of the assessment installments for fiscal year 2015-16. In fiscal year 2016-17, assessment installments would go back to approximately the same levels as in fiscal year 2013-14. In other words, owners of taxable property in the District in fiscal years 2014-15 and 2015-16 would receive the bulk of the benefit of the surplus funds, and owners of the same properties in future years would receive no benefit of the surplus funds. As to option (d), the 1913 Act requires that, in connection with the bond call, the City Treasurer must select bonds for retirement in such a way that the ratio of outstanding Staff Report Section 29 Assessment District Surplus Improvement Fund Monies September 26, 2013 Page 3 of 3 bonds to issued bonds will be approximately the same in annual series insofar as possible. The effect of this method is that debt service on the Bonds (and therefore, future assessment installments) would be reduced proportionately across all remaining bond years. Property owners would see a proportionate reduction in the assessment installments for all future years through the last bond maturity in 2037. Under the Fiscal Agent Agreement, Bonds may be called and redeemed each March 2 or September 2, and if Bonds are redeemed on or before September 2, 2015, a portion of the surplus monies must be used to pay a redemption premium equal to 3% of the principal amount of Bonds being called. Notwithstanding the 3% redemption premium, staff recommends option (d), because it would have the most equitable outcome for property owners within the District for all future years in which the assessment installments must be levied. When the City Council determines to use the surplus Improvement Fund monies to call bonds, the 1913 Act requires the City Treasurer to also (i) cause the Reserve Fund held under the Fiscal Agent Agreement to be reduced as necessary in accordance with federal tax laws (with released monies being used toward the bond call), (ii) cause any assessment previously paid in cash to received a credit in cash for the proportionate share of the surplus, in accordance with the 1913 Act, and (iii) cause the preparation of new records to reflect the adjusted principal amount of the remaining assessments as a result of the bond call and these actions. If the City Council approves the use of surplus monies to call bonds, these related actions will also be taken. Fiscal Analvsis: There is no significant fiscal impact to the City as a result of this request. Sub � ted by: , CITY COUNCILACTION APYROVED ✓ DENiF.D RECEIVED OTHER �aul G' son, Director of Finance MF.F.TING DATE ��"��-�C�3 Approval: AYES:✓��)�r�r�..5',n�w�� T nnPi-. �d�2�� NOF.S: r.1r,��_ AI3SF.NT: �Dne_ AI3STAIN: tion�- n M. Wohlmuth, City Manager VF,ittFtF.D I3Y: /�-�K(�� Origin�l on File with City Cterk's Oftice Certificate of the City Engineer Pursuant to Section 4.04(c) of the Fiscal Agent Agreement by and between City of Palm Desert and Wells Fargo Bank,National Association Dated as of March l, 2007 Relating to Section 29 Assessment District(No. 2004-OZ) Limited Obligation Improvement Bonds Series 2007 I, �J� �� , City Engineer of the City of Palm Desert(the"City"), HEREBY CERTIFY as follows: 1. I am the City Engineer of the City of Palm Desert. 2. The Project(as defined and described in Section 1.03 of the above- referenced Fiscal Agent Agreement)has been completed and a11 costs of the Praject have been paid or are not required to be paid from the Improvement Fund established by Section 4.04 of that Fiscal Agent Agreement. IN WITNESS WHEREOF, I have hereunder set my hand this 15�'day of October, 2013. Ci y gin r City of Palm Desert -1- P6401-1033\1620550v l.doc