PURPOSE:

To Obtain City Council approval to close out Improvement District No. 83-1 (Rockmore Subdivision).

BACKGROUND:

In 1983, the City of Burbank established the Improvement District No. 83-1 (Rockmore Subdivision) for the purpose of issuing 20 year bonds to build streets, gutters, and sidewalks in the hillside area above Brace Park.  The $6.2M bond issue equated to a $50,983 assessment on each of the 122 parcels.  In 1993, the City refunded the existing 1983 bonds due to a favorable interest rate environment, and issued new bonds with a shortened maturity that ended in 2001.  When the refunding was done, there were only 85 parcels that remained unpaid, as many homeowners, through sales or refinancing their property, paid off their assessments.  

DISCUSSION:

As of December 2003, funds remained in the district redemption fund in the amount of $280,396. Financial Services staff contacted Muni Financial, the firm that administered this district from 1991 until conclusion, for input on how to properly close out the remaining funds of the district.  Correspondence from Muni Financial, provided a number of options, and at the same time, raised additional questions.  Direction was needed related to the following issues:

• Should we transfer the funds to the General Fund or refund to property owners?

• If the amounts are retained for City use, what can they be used for?  Can amounts be used for any General Fund purpose?  Should we restrict the funds for any other purpose? 

• Should we wish to do a refund to the property owners, would it be to the original district in 1983 [122 parcels], or to the property owners that existed in 1993 [85 parcels] when the original bond issue was refunded and a new district was formed?

We requested clarification from the City Attorney�s office related to our options.  Additionally, these issues were discussed with the 1993 Bond Counsel, Quint & Thimmig.  Subsequent to these discussions, Quint and Thimmig provided an opinion letter containing the legal options on the disposition of both reserve funds (if any exist), and redemption fund balances. For redemption fund amounts, there are a lot of options; however, reserve fund amounts, if over $1,000 must be refunded to property owners.  Based on our review of the balances and discussions with Muni Financial, we are confident that all the remaining funds are redemption fund dollars.

To that end, based on all the input that we have received, below are options for the disposition of the redemption fund amounts.

SUMMARY OF OPTIONS:

1.      Transfer all the remaining funds into the City�s General Fund.  Bond Counsel recommends this approach because of the potential difficulties that are described in option #2 below. Council could use these dollars for any purpose, or they could earmark them for improvements in the district, or any combination there of.  Public Works staff can survey the district to compile a list of specific uses of these funds which might include slurry seal or other infrastructure work.  Other potential projects that may be funded could include brush clearance from the hill sides, flood control maintenance, or other area related work.

2.      Refund all the remaining redemption funds to property owners that remained in the 1993 refunded district. The process is extremely difficult because the refunds would have to be made proportionately to all the property owners who paid assessments between 1993 and 2001, and not just parcel owners at the time of the last levy in 2001. This can be a very labor intensive and time consuming process to attempt to track down all the property owners of this time period.  Many properties have been sold, some multiple times, so allocating the proper amounts, and then actually finding the individual may not be possible. For this reason, Bond Counsel recommends against this option due to the difficulty in facilitating this process. Additionally, staff has discussed this refunding process with Muni Financial, and while they are willing to provide this service to the City, they cannot provide an accurate cost estimate without investing considerable time and effort, however, it could easily range between $30,000 and $50,000. This fee, as well as internal City costs associated with this refunding process would be taken out of the redemption funds prior to refunding is this option was selected.

3.      A combination of the 2 options listed above: refund a portion of the remaining funds, and transfer the balance to the General fund.

FISCAL ANALYSIS:

There is no negative fiscal impact to the close-out of the Improvement District No. 83-1 (Rockmore Subdivision).  The General Fund could be positively impacted if the City Council chose to transfer the remaining funds to the General Fund.

RECOMMENDATION:

Staff recommends that due to the current General fund budget crisis the remaining Improvement District 83-1 (Rockmore Subdivision) Funds be transferred to the General Fund and dedicated for brush removal in the hillsides. Should the City Council agree with Staff�s recommendation the related budget appropriations will be included within the mid-year financial update report scheduled for February 10th.

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