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
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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
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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
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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.
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PASSED AND ADOPTED this _ day of 2014, by the following vote:
F.Ym
NOES:
ABSENT:
ATTEST:
City Clerk
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Mayor