HomeMy WebLinkAboutSubordination Request - Statutory Pass-Through Pymnts CITY OF PALM DESERT
STAFF REPORT
REQUEST: REQUEST FOR THE CITY COUNCIL TO APPROVE A SUBORDINATION
REQUEST FROM THE SUCCESSOR AGENCY FOR THE COUNTY OF
RIVERSIDE FOR THE CITY TO SUBORDINATE CERTAIN STATUTORY
PASS-THROUGH PAYMENTS TO PROPOSED REFUNDING BONDS
OF THE COUNTY SUCCESSOR AGENCY
SUBMITTED BY: PAUL S. GIBSON, FINANCE DIRECTOR
DATE: JUNE 26, 2014
ATTACHMENTS: Request Letter, dated May 28, 2014, from Rohini Dasika of the Successor
Agency for the County of Riverside, including form of City
Acknowledgement (the "County Request Letter")
Recommendation
By Minute Motion, that the City Council:
1. Approve the subordination request from the Successor Agency for the County of
Riverside (the "County Successor Agency") for the City to subordinate statutory
pass-through payments deriving from the County's Redevelopment Project Area
No. 4 (Desert Communities Redevelopment Project Area) to proposed refunding
bonds of the County Successor Agency; and
2. Authorize the Finance Director/Treasurer to complete, execute, and return to the
County Successor Agency the form of City Acknowledgement attached to the
County Request Letter
Executive Summary
On May 29, 2014, the City received the County Request Letter, which informs the City about the
County Successor Agency's proposed issuance of refunding tax allocation bonds (the "County
Refunding Bonds")for debt service savings, as authorized under Health and Safety Code Section
34177.5 ("Section 34177.5"), which is part of the Dissolution Act for California redevelopment
agencies. The proposed County Refunding Bonds will be issued to refinance existing
indebtedness of the County Successor Agency secured by, and payable from, a pledge of tax
increment generated by the County Successor Agency's Redevelopment Project Area No. 4
(Desert Community Redevelopment Project Area) ("County Project No. 4").
Pursuant to a process specified in Section 34177.5, the County Request Letter also requests that
the City subordinate Statutory Pass-Through Payments (defined below) payable to the City and
attributable to County Project No. 4. The Dissolution Act only provides a limited basis upon which
the City may disapprove the subordination request, which is not satisfied here. Thus, staff
recommends that the City Council approve the County Successor Agency's request and authorize
the Finance Director/Treasurer to complete, execute, and return to the County Successor Agency
the form of City Acknowledgement attached to the County Request Letter.
Staff Report
Approval of Request to Subordinate Certain Statutory Pass-through Payments to Proposed
Refunding Bonds of the County Successor Agency
June 12, 2014
Page 2 of 3
Backqround
In 1993, the State legislature enacted AB 1290 which allocates a portion of all tax increment funds
generated from redevelopment project areas created or amended in certain ways after December
1993 to affected taxing entities that did not previously enter into a tax sharing agreement with the
redevelopment agency, in accordance with a statutory formula (the "Statutory Pass-Through
Payments"), generally summarized as follows:
Statutory Pass-Throu�
Tier A(Years 1-10) 25%
Tier B (Years 11-30) 21% + Tier A
Tier C (Years 31-40) 14% +Tiers A & B
(1) Section 34183(a)(1) provides that the amount of Statutory Pass-Through Payments computed for
distribution by the County Auditor-Controller to the affected tax entities will be computed as though the
requirement to set aside funds for the Low and Moderate Income Housing Fund were still in effect.
The amounts calculated in accordance with this formula are then allocated among the various
affected taxing entities in proportion to certain property tax payments made under the Revenue
and Taxation Code.
Based upon the AB 1290 amendments to the Community Redevelopment Law, a number of
taxing entities with jurisdictional territory within County Project No. 4, including the City, receive
Statutory Pass-Through Payments. According to a tax increment summary posted by the
Riverside County Auditor-Controller for the six-month period ended December 31, 2013, the
January 2, 2014 distribution of Statutory Pass-Through Payments for County Project No. 4
included a Statutory Pass-Through Payment in the amount of$331 ($330 plus $1 interest) to the
City. Moreover, the Riverside County Auditor-Controller's tax increment summary shows that
residual amounts were available from the County Successor Agency's Redevelopment Property
Tax Trust Fund after payment of all enforceable obligations of the County Successor Agency, and
thus were distributed to affected taxing entities on January 2, 2014 in accordance with the
Dissolution Act. The City's share of these residual amounts for this six-month period was $1,692.
Pursuant to paragraph (c) of Section 34177.5, the County Successor Agency requests that
Statutory Pass-Through Payments required to be made to the City(as well as other taxing entities)
for County Project No. 4 in the future be subordinated to the debt service payments on the
proposed County Refunding Bonds. In other words, if in the future there is a shortage of property
tax revenue allocated to the County Successor Agency from County Project No. 4 in any six-
month calendar period ending June 30 or December 31, for such period the County Refunding
Bonds would be paid before the Statutory Pass-Through Payments to the City and other affected
taxing entities could be made, to the extent provided under Health and Safety Code Section
34183.
The Dissolution Act, and in particular Section 34177.5(c), provides a limited basis upon which the
City may disapprove the subordination request. Specifically, the City would need to make a
finding, based upon substantial evidence, that the County Successor Agency will not be able to
pay the debt service payments and the Statutory Pass-Through Payments being subordinated.
This does not appear to be the case here.
Staff Report
Approval of Request to Subordinate Certain Statutory Pass-through Payments to Proposed
Refunding Bonds of the County Successor Agency
June 12, 2014
Page 3 of 3
Pursuant to Section 34177.5, the County Successor Agency has included with the County
Request Letter projections (the County Projections ), prepared by its fiscal consultant, Urban
Analytics LLC, which include calculations of tax increment revenues derived from County Project
No. 4, debt service payments on the proposed County Refunding Bonds and other senior
indebtedness of the County Successor Agency, and senior tax sharing agreement payments for
County Project No. 4. The County Projections use a 2% growth rate for assessed valuation
growth after fiscal year 2014-15, which is typical among the industry. The County Projections also
calculate the Statutory Sharing Payments based on these assumptions, as well as the balance of
tax increment revenues available for the Statutory Pass-Through Payments to all affected taxing
entities that are proposed to be subordinated to the County Refunding Bonds.
The County Projections show that the coverage of (a) tax increment revenues available for
Statutory Pass-Through Payments, after payment of senior obligations, over (b) the Statutory
Pass-Through Payment amounts for each fiscal year through the proposed maturity date of the
County Refunding Bonds of 2036-2037, is projected to range from 625% to 1694% over this
period.
As indicated in the County Request Letter, Section 34177.5 further states that if the City does not
act to approve or disapprove the subordination request within 45 days after its receipt of the
County Request Letter (i.e., by July 13, 2014), the County Successor Agency's request to
subordinate shall be deemed approved and shall be final and conclusive.
The City's bond counsel, Richards Watson & Gershon, has reviewed the County Request Letter
and has recommended that the City approve the subordination request. Thus, for the reasons
stated above, staff recommends, that the City Council approve the County Successor Agency's
subordination request.
Fiscal Analvsis
Based on the County Projections, there is expected to be no impact to the City's General Fund
due to the requested subordination. The projections provide substantial evidence that sufficient
funds will be available to pay both the debt service on the proposed County Refunding Bonds and
on all tax sharing payments required to be paid with respect to affected taxing entities in County
Project No. 4, including the Statutory Pass-Through Payments to the City.
Submitted by:
� �,,,� CiTY COUNCILAC ON
APPROVED .�DF.NiF,D
Paul S. Gibson, Director of Finance RECEIVED OTHER
Mi:ETI GDA E �f2'I
roval: qyr�; �KiL '
N�ES: �
Ai3Si�.NT:
A1��T-1IN: ��
J hn M. Wohlmuth, City Manager ���;�aE�:'��) ➢�Y: IG� Yl�
(��•��irr,il on i'ilc with Cily Clcrk's Oft7cc
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�� ° '� COUNTY OF RIVERSIDE
RECEIVED
�'�'°°�,R ECONOMIC DEVELOPINB�II AGENCY
"�"���,;."
.� .. � :. � � ��aY� ��9 2oi4
CITY OF PALM DESERT
Economic Development
May 28, 2014
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert,_CA 92260
Re: Subordination Request Relating to Proposed Refunding Bond Issue for Redevelopment Project Area
No. 4 (DCPA} of the Successor Agency for the County of Riverside
To Whom It May Concern:
AB 1484 allows successor agencies to refund the bonds of their former redevelopment agencies to provide
debt service savings. I am writing to you on behalf of the Successor Agency for the County of Riverside (the
"Agency") pursuant to Section 33607.5(e) and Section 34177.5(c) of the California Health and Safety Code (the
"Code"). As you are aware, the Agency may, with a taxing entity's approval, subordinate amounts (payable from
tax increments of a redevelopment project area) that the Agency is required to pay such taxing entity pursuant to
Section 33607.5 and Section 34183 of the Code (the "Statutory Pass-through Payments") to the debt service bonds
issued by the Agency for the same project area. At this time, the Agency is expecting to issue a series of refunding
bonds (the `Bonds") to be secured by the Agency's tax increment revenues from the Agency's Redevelopment
Project Area No. 4 (the "Project Area"). The issuance of these bonds will lower the total debt service payments for
the project area without increasing the term of the bonds. By this letter, the Agency requests that the City of Palm
Desert agree to the subordination of Statutory Pass-through Payments that the Agency is required to pay the City of
Palm Desert in connection with the Project Area to the Agency's payment obligations for the Bonds.
The Agency is planning to issue the Bonds prior to the end of fiscal year 2014-15. Enclosed for your review,
pursuant to Section 33607.5(2)(e) of the Code, is a tax increment revenue projection summary, which includes a
debt service coverage analysis prepared by Urban Analytics LLC (the "Fiscal Consultant"). The Fiscal Consultant's
report shows that the Agency can reasonably expect to have sufficient funds available to pay both debt service on the
Bonds and all of the Agency's Statutory Pass-through Payments owed to the various affected taxing entities for the
Proj ect Area.
a � � . .
Administration Housing Economic Development Parking
Aviation Housing Authority Edward-Dean Museum Project Management
Business Intelligence Information Technology Environmental Planning Purchasing Group
Cultural Services Maintenance Fair&National Date Festival Real Properfy
Community Services Marketing Foreign Trade Redevelopment Agency
Custodial Graffiti Abatement Workforce Development
S:\Templates\EDA-006a-Letterhead-Color.doc Updated 08/2010
For the benefit of the Agency's records, please complete the attached Acknowledgement and return it
to me no later than July 18, 2014. The Agency also requests that the governing board of the City of Palm
Desert take official action, by resolution or motion, to formally approve the subordination of your Statutory
Pass-through Payments to the Bonds (including the escrow Bonds).
Please note that, in accordance with Section 33607.5(e)(3) and Section 34177.5(c)(3) of the Code, if the City
of Palm Desert does not respond to the requested subordination within forty-five (45) days of this letter, the
subordination will be automatically deemed approved by the City of Palm Desert and such approval shall be final
and conclusive. Furthermore, to disapprove this subordination, the City of Palm Desert must find, based on
substantial evidence, that the Agency will not be able to pay the debt service on the Bonds and the Statutory Pass-
through Payments that it is required to pay the City of Palm Desert .
Thank you in advance for your cooperation in this matter. If you have any questions regarding this matter,
please do not hesitate to contact me at(951) 955-1110.
Sincerely,
Successor Agency for the County
of Riverside
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Encl's.
ACKNOWLEDGEMENT
(Successor AQencv for the Countv ofRiverside Redevelopment Proiect Area No. 4)
In response to the request by Successor Agency for the County of Riverside (the "Agency") set forth in a
letter dated May 28, 2014 from , the Agency's (the "Subordination
Request"), to approve the Agency's subordination of Statutory Pass-through Payments, the City of Palm Desert
hereby confirms its approval of the subordination of the Agency's obligation to pay Statutory Pass-through
Payments to City of Palm Desert in connection with the Redevelopment Project Area No. 1 to the Agency's
payment obligations for the Bonds.
The governing board of the City of Palm Desert has taken formal action on , 2014, to
acknowledge and approve this subordination. A copy of the related [resolution/minute order] is enclosed.
All capitalized terms used but not defined in this Acknowledgement have the meaning ascribed to them in
the Subordination Request.
IN WITNESS WHEREOF, the undersigned has caused this Acknowledgement to be signed by its authorized
representative on this day of , 2014.
City of Palm Desert
By:
Name:
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