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Home My WebLink About06 - Disposition of Excess Special Improvement District Fund BalancesCITY OF NEWPORT BEACH City Council Staff Report TO: FROM: PREPARED BY: PHONE: TITLE: ABSTRACT: April 10, 2018 Agenda Item No. 6 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL Dan Matusiewicz, Finance Director - 949-644-3123, dmatusiewicz@newportbeachca.gov Trevor Power, Sr. Accountant tpower@newportbeachca.gov 949-644-3125 Disposition of Excess Special Improvement District Fund Balances Upon the defeasance of Special Improvement District No. 95-1 (CIOSA) Special Tax Refunding bonds in September 2017, approximately $2.3 million of excess funds remain. Staff recommends approval of Resolution No. 2018 -XX to distribute the excess fund balances. Upon approval of the attached resolution, staff will take the necessary actions to disburse the balance to parcel owners who paid the special taxes by direct refunds. RECOMMENDATION: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) Adopt Resolution No. 2018-21, A Resolution of the City Council of the City of Newport Beach, California, Authorizing the Payment of Extra Monies held in Connection with Special Improvement District No. 95-1 to Property Owners Located Therein, which authorizes staff to refund net special tax proceeds on a pro rata basis based on each property owners proportional share of special taxes collected in excess of amounts required to pay debt service and administrative costs of Special Improvement District No. 95-1 (CIOSA) to property owners located therein. FUNDING REQUIREMENTS: The refunds are solely funded by excess funds related to Special Improvement District No. 95-1 (CIOSA). The property owners within the designated area bore the cost of the improvements and there was, and currently is, no financial burden placed on the City for the improvements and associated reimbursement of excess fund balances. 6-1 Disposition of Excess Special Improvement District Fund Balances April 10, 2018 Page 2 DISCUSSION: Background In 1993, the City entered into a Circulation Improvement and Open Space Agreement (CIOSA) with a developer whereby the developer would give the City a $14 million cash advance of future Fair Share Fees. This advance could only be used for specified transportation and circulation improvements outlined in the agreement. In turn, the City agreed to repay the advance using 50% of future Fair Share Fees collected through February 2016. Any outstanding balance of the advance at that date would be forgiven with no additional financial obligation to the City. While the original 1993 CIOSA development agreement contemplated a direct cash advance, the developer elected to finance the cash advance through the formation of Special Improvement District (SID) No. 95-1 CIOSA. A SID is similar to a community facilities district in that it is formed by property owners within a designated area to finance specific public improvements. The financing is accomplished by the City, which acts as the legislative body for the SID, issuing bonds and collecting an annual special assessment from each property owner within the SID until the bonds are retired. The City uses the amount collected from the special tax to pay the debt service obligations of the bonds. Therefore, the property owners within the designated area bear the cost of the improvements with no financial burden placed on the City to pay for the improvements. In June of 1995, Council approved the formation of SID No. 95-1 CIOSA and declared the intention to issue bonds and levy special taxes on properties within the SID. Additionally, in December of 1995, the City and the Developer entered into a Protocol Agreement further outlining the financing mechanisms. Financing In 1995 and 1997, the City issued SID No. 95-1 CIOSA Special Tax Series A and Series B bonds, respectively. The two bond issuances totaled $16.8 million, of which $14.4 million represented the cash advance for the transportation and circulation improvements specified in the CIOSA agreement. The remaining amount was used to fund capitalized interest, a Reserve Fund and to pay the financing costs of issuance. The Series A bonds were set to mature in 2020, and Series B were to mature in 2022. In 2001, the City issued $15.5 million of SID No. 95-1 CIOSA Special Tax Refunding Bonds to refund the aforementioned Series A and Series B bonds. The Refunding Bonds were set to mature in 2022. As specified in the Protocol Agreement and bond documents, upon the first issuance of bonds in 1995, the City began levying and collecting the annual special assessment from property owners within the SID to pay the debt service obligations of the bonds. The City also began contributing 50% of total Fair Share Fees collected in each fiscal year towards the repayment of the $14.4 million cash advance. These additional Fair Share Fees contributions were primarily used to retire a portion of the outstanding bonds. As a result, the bonds, which were to mature in 2022, were defeased approximately 5 years early in September of 2017. 6-2 Disposition of Excess Special Improvement District Fund Balances April 10, 2018 Page 3 Current Action At this time, staff has determined that approximately $2.3 million of excess funds remain after the September 2017 defeasance of the CIOSA Bonds. None of the 1993 CIOSA Agreement, the 1995 Protocol Agreement, the Municipal Code or the bond indentures specifies how to treat excess funds upon the defeasance of the CIOSA bonds. Staff believes the equitable solution is to refund the surplus to the property owners within the District who paid the Special Tax in Fiscal Year 2015-2016 net of any costs incurred by the City in connection with making such refund, pro rata based on each such property owner's share of the Special Tax collected from the Fiscal Year 2015-2016 Special Tax levy. In the first year a special tax was levied on the properties within the SID, the developer owned all 16 parcels that were assessed. In the course of developing the property, the developer transferred ownership of various portions of the property and some parcels were split into smaller parcels. In the last year, approximately 273 parcels were assessed when a special tax was levied on properties within the SID. City staff will make the surplus monies available for refund on a proportional basis to the property owners within the District who paid the Special Taxes in furtherance of the intentions expressed in the attached Resolution. ENVIRONMENTAL REVIEW: Staff recommends the City Council finds the adoption of this resolution is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENT: Attachment A — Resolution No. 2018-21 6-3 Attachment A Resolution Authorizing the Payment of Extra Monies Held in Connection with Special Improvement District No. 95-1 to Property Owners Located Therein 0 RESOLUTION NO. 2018- 21 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, AUTHORIZING THE PAYMENT OF EXTRA MONIES HELD IN CONNECTION WITH SPECIAL IMPROVEMENT DISTRICT NO. 95-1 TO PROPERTY OWNERS LOCATED THEREIN WHEREAS, the City Council of the City of Newport Beach ("City") formed Special Improvement District No. 95-1 ("CIOSA") ("District") on June 12, 1995, pursuant to the City's Special Improvement District Financing Code for the purpose of financing certain facilities for the benefit of the District ("Facilities"); WHEREAS, between 1995 and 2001, the City issued three series of bonds (collectively, "Bonds") on behalf of the District to finance the Facilities, which Bonds were secured by the levy of a special tax against certain taxable parcels in the District ("Special Tax"); WHEREAS, the City levied the Special Tax in each Fiscal Year through Fiscal Year 2015-16 for the purpose of paying off the Bonds and paying certain administrative expenses; WHEREAS, the City made a final payment and defeased the outstanding Bonds in September 2017; and WHEREAS, because the Special Tax levy, when combined with existing funds held in connection with the Bonds, produced an amount of money greater than what was needed to defease the Bonds, the City now desires to make the surplus monies available for refund to the property owners within the District who paid the Special Taxes on a proportional basis; NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The City Council does hereby determine that the property owners within the District who paid the Special Tax shall be entitled to a refund of a portion of the surplus monies, net of any costs incurred by the City in connection with making such refund, pro rata based on each such property owner's proportional share of the Special Tax collected by the City for those fiscal years determined by City staff to have been levied in excess of the amounts required to pay debt service and administrative costs of the District. Section 2: The City Council hereby authorizes City staff to determine the best method for making such refund available to the District's property owners in furtherance of the intentions expressed in this resolution. The City Council hereby further authorizes City staff to take any and all actions necessary to effect such refunds and all actions taken to date by City staff in connection therewith are hereby ratified and confirmed. 6-5 Resolution No. 2018 - Page 2 of 2 Section 3: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. Section 4: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional. Section 5: The City Council finds the adoption of this resolution is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Section 6: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution. ADOPTED this 10th day of April, 2018. Marshall "Duffy" Duffield Mayor ATTEST: Leilani I. Brown City Clerk APPROVED AS TO FORM: CITY ATTORNEY'S OFF CE aron C. Harp City Attorney