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HomeMy Public PortalAbout08) 7E Adoption of Resolution 14-5044 Approving Assignment of Delinquent Tax ReceivablesAGENDA ITEM 7.E ADMINISTRATIVE SERVICES DEPARTMENT JA1:11J,►Bill J, DATE: November 4, 2014 TO: The Honorable City Council FROM: Bryan Cook, City Manager By: Tracey L. Hause, Administrative Services Director SUBJECT: ADOPTION OF RESOLUTION NO. 14-5044 OF THE CITY COUNCIL OF THE CITY OF TEMPLE CITY APPROVING ASSIGNMENT OF DELINQUENT TAX RECEIVABLES TO THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY FOR PRIOR FISCAL YEARS, AND AUTHORIZING EXECUTION AND DELIVERY OF RELATED DOCUMENTS AND ACTION RECOMMENDATION: It is recommended the City Council approve the Resolution No. 14-5044 (Attachment "A"), authorizing the City's participation in a program to fund property tax delinquencies (Program). BACKGROUND: 1. On May 13, 2013, the Administrative Services Director became aware of this Program during a presentation at the San Gabriel Valley Chapter of California Society of Finance Officers (CSMFO) meeting. 2. On September 9, 2014, the City was contacted and invited to participate in this Program. ANALYSIS: The City is entitled to revenues from property tax levies made for a variety of different purposes. The 1% "Ad Valorem" levy is levied county -wide and allocated to public agencies county -wide in accordance with certain allocation factors and other applicable City Council November 4, 2014 Page 2 of 4 state laws. Other levies, like those made for weed abatement, nuisance abatement, sewer or refuse service, special taxes and levies made in any landscape and lighting districts, and so on, are considered "direct levies," the proceeds of which belong 100% to the City. Each year, a small percentage of property owners (usually between 2% and 5% of all properties) fail to pay their property taxes and those taxes thereafter become "delinquent." Each year the County produces a "Delinquent Property Tax Roll" showing all of the delinquent property taxes County -wide. Generally the fact that some property taxes are delinquent does not impair the City's entitlement to those tax revenues, along with penalties and interest accrued thereon, if and when the delinquent taxes are eventually collected. One way to view these delinquent taxes is as a "receivable" of the City. As such, it is a City asset that the City cannot yet use. Staff has identified this Program being offered by the California Statewide Community Development Authority (a statewide joint powers authority sponsored by the League of California Cities and the California State Association of Counties) (CSCDA) under which qualified tax delinquencies will be advanced in full by the CSCDA, along with a 10% premium, in exchange for an assignment or sale of the rights to the payments later made by the property owners, if and when such payments are ever made, along with all penalties and interest thereon. CSCDA finances the Program by pooling the tax delinquencies of different local agencies, and selling one or more Certificates of Participation for the amount of all of the accumulated delinquencies to Tower Capital Management (Tower), each year. It is anticipated the City of Temple City will participate in the pool of Certificates of Participation to be sold in February 2015. In the first year of an agency's participation, CSCDA will purchase delinquencies that are up to 6 years old, meaning CSCDA will pay the City 100% of the qualified taxes remaining delinquent from any time during the last 6 years. So the City is able to immediately realize cash for this otherwise stagnant asset. The City also receives a 10% Premium on the purchase delinquencies which can be used in any lawfully available fund, including the General Fund. CSCDA requires a three-year commitment to sell the delinquencies. If the attached resolution is approved, Tower will then conduct due diligence to determine which delinquencies qualify for the Program, and on what terms. Thereafter, the results will be reviewed with such qualified officers as the City may desire (usually the City Manager, Finance Director and/or City Attorney) and then set a schedule to proceed to closing, at which point the City receives its money for the sold delinquencies. After the first year, and each year thereafter, Tower will likely request the City to extend the agreement for one additional year. This way a 2 to 3 year "evergreen" term always exists. If the City ever wants to exit the program, it need only decline to extend the term and wait out the completion of the existing term. City Council November 4, 2014 Page 3 of 4 The benefits to the City to proceed with this Program are: • The receipt during this year, of all of the qualified delinquent 1 % ad valorem tax revenues up to 6 years old on the delinquent tax roll for the City, plus a 10% premium on that amount, all of which can go into the General Fund; • The receipt of all qualified delinquencies resulting from direct levies made by the City during the last 6 years for various funds, the proceeds of which should go into the fund for which it was levied, but the premium from which can be placed in the City's general fund or any other legally available fund; and Because the program purchases the delinquencies on a "non-recourse" basis, if properties cannot be sold by the County Tax Collector, then the failure to receive those revenues for those delinquencies lies with Tower, and there would be no recourse to City funds to make up that difference. The risk of this loss is shifted from the City to Tower. The attached resolution authorizes the City Manager, to execute amendments as necessary to each of the Fiscal Agent Agreements (or other agreements) governing the bonds issued on behalf entity, or any general obligation or other bonds (if applicable), to approve the Purchase and Sale Agreement between the City and CSCDA for the transaction (the "Agreement") and authorizing staff to execute the Agreement and any other documents, and to perform such acts as are necessary or appropriate, to consummate the sale and assignment of the qualified delinquencies to CSCDA for the Fiscal Year (FY) 2013-14 (including all prior year delinquencies for the prior 5 years on the tax roll) and granting an option to the CSCDA to purchase future delinquencies of levies made for FY 2014-15 and FY 2015-16. Each of the amendments will be reviewed by Bond Counsel to the Authority (i.e., Jones Hall, San Francisco) and the consummation of the transaction is contingent upon the agreement of the bond trustees or fiscal agents (and their counsel) if appropriate under existing agreements and the City's receipt of an opinion from Bond Counsel to the effect that the amendments being made in the attached resolution comply with the requirements of each respective Bond Indenture or Fiscal Agent Agreement, as applicable. CONCLUSION: This Program will allow the City to realize the immediate collection of delinquent property tax receivables, providing for additional resources to the General Fund on an on-going basis. City Council November 4, 2014 Page 4 of 4 FISCAL IMPACT: If this Program is approved and the City Council adopts the resolution, it is anticipated the City will receive approximately $125,000 in the Spring of 2015, representing six fiscal years of delinquencies (FY 2007-08 through FY 2013-14). In subsequent years, the City can expect to receive approximately $20,000 annually, representing FY 2015- 15 delinquencies and beyond. There is no cost to the City to participate in this Program. ATTACHMENT: A. Resolution No. 14-5044 ATTACHMENT A RESOLUTION NO. 14-5044 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMPLE CITY APPROVING ASSIGNMENT OF DELINQUENT TAX RECEIVABLES TO THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY FOR PRIOR FISCAL YEARS, AND AUTHORIZING EXECUTION AND DELIVERY OF RELATED DOCUMENTS AND ACTIONS WHEREAS, under Section 6516.6 of the Government Code of the State of California (the "Law"), a city is authorized to sell and assign to a joint powers authority any or all of its right, title, and interest in and to the enforcement and collection of delinquent and uncollected ad valorem property taxes, special taxes and assessments, and property -related fees and charges that have been levied by or on behalf of such city for collection on the secured, unsecured, or supplemental property tax rolls (collectively, "Delinquent Taxes and Assessments") in accordance with such terms and conditions as are set forth in an agreement with the joint powers authority; and WHEREAS, the California Statewide Communities Development Authority (the "Authority") is an existing joint powers authority and, as such, is authorized under the Law to issue its bonds, notes, certificates of participation or other obligations for the purpose of providing funds to purchase Delinquent Taxes and Assessments in accordance with the Law upon terms and conditions which are acceptable to the local agency from whom such Delinquent Taxes and Assessments are acquired; and WHEREAS, the Authority has requested the City to authorize the sale of its Delinquent Taxes and Assessments to the Authority for the fiscal years ending June 30 in each of the years 2009 through 2016 (the "Covered Fiscal Years") at a purchase price equal to 110% of the principal amount of Delinquent Taxes and Assessments which are eligible for sale and assignment; and WHEREAS, the Authority has made arrangements to issue and sell one or more series of certificates of participation representing a participation interest in all of the Delinquent Taxes and Assessments received from the City and from other participating local agencies, which will be sold to a designee of Tower Capital Management, LLC, a Delaware limited liability company (`Tower Capital'); and WHEREAS, the City Council wishes at this time to approve the foregoing financing plan and authorize the execution and delivery of all related documents and actions; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Temple City as follows: Section 1. Authorization of Sale of Delinquent Taxes and Assessments. The City Council hereby approves and authorizes the sale of Delinquent Taxes and Assessments, in whole or in part, for any one or more of the Covered Fiscal Years, to the Authority for a minimum purchase price of 110% of the amount thereof. Section 2. Authorization to Execute Financing Documents. In order to implement the financing plan approved under Section 1, the City Council hereby authorizes the City -1- Manager (an "Authorized Officer of the City"), to execute and deliver one or more agreements between the Authority and the City whereby the City sells Delinquent Taxes and Assessments to the Authority upon terms and conditions which are acceptable to an Authorized Officer of the City. An Authorized Officer of the City is hereby authorized and directed to execute such agreements in the name and on behalf of the City. The material terms of each such agreement shall include the following: (a) the Delinquent Taxes and Assessments shall be sold to the Authority for a purchase price at least equal to 110% of their par amount, which shall be paid to the City upon the closing of the transaction in funds that are immediately available to the City; (b) as a result of such sale, the Authority shall be entitled to receive all amounts collected in respect of such Delinquent Taxes and Assessments, including applicable interest and penalties, provided that all such collections shall continue to be made in the manner prescribed by law; (c) such sale of Delinquent Taxes and Assessments shall be without recourse to the City, and the City shall not incur any liability or assume any responsibility to the Authority for the collection of the Delinquent Taxes and Assessments; (d) all costs of financing the purchase of Delinquent Taxes and Assessments by the Authority shall be the sole responsibility of the Authority, and the City shall not have any liability for payment of such costs; and (e) in order to provide funds for the financing of the Delinquent Taxes and Assessments, the Authority shall be authorized to sell one or more series of certificates of participation to Tower Capital. Section 3. Official Actions. The Mayor, the City Manager, the Director of Finance, the City Clerk and all other officers of the City are hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all actions, including execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, amendments to existing bond indentures or similar instruments, instruments of conveyance, warrants and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the sale of Delinquent Taxes and Assessments to the Authority for the Covered Fiscal Years. Whenever in this Resolution any officer of the City is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf if such officer is absent or unavailable. Section 4. Effective Date. This Resolution shall take effect from and after the date of approval and adoption thereof. -2- PASSED AND ADOPTED this _ day of 2014, by the following vote: F.Ym NOES: ABSENT: ATTEST: City Clerk -3- Mayor