Council Agenda - City of Burbank

Tuesday, September 13, 2005

Agenda Item - 4


 

 
 
 

 

DATE: September 13, 2005
TO: Mary J. Alvord, City Manager
FROM:

Bob Elliot, Interim Financial Services Director

Susan M. Georgino, Community Development Director

SUBJECT:

FORMATION OF COMMUNITY FACILITIES DISTRICT NO. 2005-1 (THE COLLECTION PUBLIC PARKING FACILITY) AND ISSUANCE AND SALE OF 2005 SPECIAL TAX BONDS


 

PURPOSE

 

The purpose of this report is to request that the City Council take the initial steps to form the City of Burbank Community Facilities District No. 2005-1 and to issue and sell special tax bonds in an amount not to exceed $8,000,000 to finance certain costs of The Collection Public Parking Facility, and authorize related actions.

 

BACKGROUND

 

On November 23, 2004, the City Council, following a joint public hearing before the City Council and Redevelopment Agency Board, approved an Amended and Restated Owner Participation Agreement (Champion Development, Inc.) (the �Champion OPA�), a Second Implementation Agreement to the Owner Participation Agreement (Burbank Entertainment Village, LLC-AMC), and other documents relating to the proposed development of the Phase II site of the Burbank Entertainment Village Project (the �Project�) by Burbank Collection, LTD. (the �Developer�), a California limited partnership formed by Champion Development, Inc.

 

Under the Champion OPA, the Developer is required to construct a mixed-use, 118-unit residential/commercial project, which includes a six-level parking structure on the Phase II site.   The parking structure will consist of parking spaces required for the condominium and commercial components of the project and 276 public parking spaces (the �Parking Facility�). The Parking Facility will be subdivided into three legal components: a component to be owned by condominium owners, a component to be owned by the owner of the Project�s commercial components and the public parking component to be owned by the City�s Parking Authority. Once the construction of the Parking Facility is completed, the Developer is required to convey the public parking component of the Parking Facility to the Parking Authority for $1. The commercial component of the Parking Facility, despite its private ownership, will be required to be open to the public on a non-reserved, non-exclusive basis for those hours designated for public parking in accordance with Downtown parking standards. The Parking Facility will connect to the existing Orange Grove parking structure.

 

Under the Champion OPA, the Developer is required to pay the costs of all improvements on the Phase II site, including the Parking Facility. However, the Agency is required to provide for Community Facilities District (�CFD�) financing that will generate $5 million in net proceeds  (exclusive of reserve funds, issuance costs and capitalized interest) to finance a portion of the costs of constructing the public parking spaces in the Parking Facility. Following the completion of the Parking Facility, annual debt service on the CFD financing will be paid from 75% of the tax increment generated by the Phase I and Phase II projects (estimated at $376,700 for the current fiscal year for Phase I and expected to increase to approximately $952,000 in FY 2008 after Phase II is completed). To the extent that tax increment revenues are insufficient to pay all CFD obligations, annual debt service will be paid from special taxes levied by the City on certain property in the CFD. The Agency�s obligation to contribute tax increment will be triggered upon completion of the Parking Facility.

 

To implement the CFD financing, the following financing team has been selected:

 

Peter Ross, Ross Financial                         Financial Advisor

Paul Thimmig, Quint & Thimmig                  Bond Counsel

Steve Heaney and Sara Oberlies,              Underwriter

Stone & Youngberg                                     

Andrea Roess, David Taussig &                Special Tax Consultant

Associates

Ben Tunnel, BTI Appraisal                           Appraiser

 

ANALYSIS

 

Community Facilities District financing, also known as �Mello Roos� or special tax bonds, typically involves the issuance of bonds that are payable from a special tax levied on the property owners in the CFD. The tax rate is set at a level that will generate sufficient special tax revenues to pay annual debt service on the bonds. The special tax is collected on the same bill as the private property owner�s ordinary ad valorem property taxes, or by direct billing of the property owners in the CFD. The special tax is secured by the recordation of a continuing first lien on all non-exempt property in the CFD. If the property owner does not pay its special tax on a timely basis, the City is obligated to commence foreclosure proceedings to collect the delinquent special taxes. The credit of a CFD is often based on its �value to lien� ratio, which compares the appraised value of the private property in the CFD to the principal amount of the CFD bonds. The minimum value to lien ratio of CFD bonds (exclusive of escrowed funds) is typically at least 3 to 1. CFD bonds of this type are usually unrated.

 

Before the City can issue special tax bonds to satisfy the Agency�s obligations to  the Developer under the OPA, it must form the CFD to be known as �City of Burbank Community Facilities District No. 2005-1 (The Collection Public Parking Facility)� and have the special tax approved by the property owners in the CFD. The sole property owner in the CFD is Burbank Entertainment Village, LLC, an AMC entity, which will sell the property to the Developer for the development of the project by December 6, 2005. Once approved, the special tax is levied by ordinance. This process involves both a public hearing and a special election among the CFD property owners and requires three separate Council meetings. The property owner has submitted a petition requesting that the City take the necessary actions to form the CFD. A copy of that petition is attached to this staff report as Exhibit A.

 

At the first Council meeting, the City Council takes certain actions that are preliminary to the CFD formation and bond issuance. These actions include:

  • Adopting a Resolution of Intention to Establish the CFD (which, among other things, approves a Rate and Method of Apportionment of special taxes and a Boundary Map), and

  • Adopting a Resolution of Intention to Incur Bonded Indebtedness.

The City Council is requested to adopt two resolutions of intention. The first one evidences the City�s intention to form the CFD. This resolution: 1) describes the proposed boundaries of the CFD, the improvements (i.e., the Parking Facility) to be financed by the District, the proposed levy of the special tax described in the Rate and Method of Apportionment, and the proposed issuance of bonds; 2) directs the Interim Financial Services Director to make a report regarding the proposed financing (the �CFD Report�); 3) sets a public hearing date; and 4) designates certain firms to represent the City.

 

The Rate and Method of Apportionment of special taxes establishes the special tax formula (the maximum tax rate and method of apportionment of the special tax to be levied among the property owners of the CFD). The rate must be sufficient to cover expected debt service on the special tax bonds and the reasonable expenses of the City in administering the CFD. For Community Facilities District No. 2005-1, the Rate and Method of Apportionment is being structured to result in only the commercial owners, and not the condominium owners, in the CFD being subject to the special tax levy.  The Agency�s pledge of 75% of the tax increment generated by Phase I and Phase II, as required by the OPA, will likely offset the annual special tax requirement for annual bond debt service.  However, under the OPA, the pledge of such tax increment will not occur until the Parking Facility is completed. The CFD�s boundaries are shown on the accompanying boundary map attached to this report as Exhibit B.

 

The second resolution evidences the City�s intention to issue bonds for the CFD. The resolution limits the bond issuance to $8,000,000 and the bond term to a maximum of 50 years (the maximum permitted by the City�s special tax financing  procedural code, although it is expected that the final maturity will not exceed 25 years). The difference between the maximum bond size and the amount of the improvements to be funded ($5,000,000 pursuant to the OPA) allows for the funding of a reserve fund and issuance costs (needed to market the bonds), the potential use of �discount� bonds and other unforeseen adjustments. Because the Developer intends to fund capitalized interest with its own funds rather than bond proceeds, the expected bond size should be closer to $6,250,000 based on current market conditions and an expected final bond maturity in 2022. The estimated average annual debt service, in the current market, is approximately $640,000. The $5,000,000 of bond proceeds to finance a portion of the Parking Facility costs will be escrowed with a fiscal agent and released once the Parking Facility is completed and the ratio of the value of the property in the CFD (subject to the special tax levy) to the bond lien ratio (based on the initial bond size) is at least 3:1.

 

At the second Council meeting, which is expected to occur on October 25, 2005, the CFD will be formed and authorization requested for the issuance of the special tax bonds.  The City Council will be asked to take the following actions:

  • Accept the CFD report

  • Conduct the public hearing

  • Adopt the Resolution of Formation of the CFD

  • Adopt the Resolution to Incur Indebtedness

  • Adopt the Resolution Calling for the Special CFD Election

  • Hold the Election

  • Introduce an Ordinance Levying the Special Tax

  • Adopt the Resolution Approving the Legal and Disclosure Documents necessary to issue the bonds

At the third Council meeting anticipated for November 1, 2005, the second reading and adoption of the special tax ordinance will occur.

 

FISCAL IMPACT

 

The proposed actions are preliminary to the formation of the CFD and the issuance of special tax bonds for the Parking Facility. Under the Champion OPA, the Agency is required to contribute tax increment generated from Phase I and II in an amount not to exceed $5 million to pay debt service on the special tax bonds only after the Parking Facility is completed.

 

RECOMMENDATION

 

Staff recommends that the City Council approve the resolutions entitled:

 

�RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK DECLARING INTENTION TO ESTABLISH A COMMUNITY FACILITIES DISTRICT AND TO AUTHORIZE THE LEVY OF SPECIAL TAXES�.

 

�RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK DECLARING INTENTION TO INCUR BONDED INDEBTEDNESS OF THE PROPOSED CITY OF BURBANK COMMUNITY FACILITIES DISTRICT NO. 2005-1 (THE COLLECTION PUBLIC PARKING FACILITY)�.

 

EXHIBITS

 

Exhibit A         Petition from Burbank Entertainment Village, LLC

Exhibit B         Boundary Map

 

 

 

 

go to the top