The Process for Municipal L.I.D.s

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Cameron Robinson
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1 The Process for Municipal L.I.D.s The why and how of Local Improvement Districts and the practical application of the L.I.D. process for municipalities. Maren Ericson Assistant City Attorney Rachelle Castleberry Caldwell City Accounting Services Specialist Carol Mitchell Caldwell City Deputy Treasurer

2 Local Improvement Districts and How to Begin An important and useful tool for the funding of public improvements Designates a distinct boundary in which improvements need to be made, and assesses property owners who are receiving the benefits of the improvement within that boundary in order to cover the costs Initiated either by: A petition signed by 60% of resident owners, or 2/3 of the owners of property subject to assessment, authorizing Council to charge the petitioners fees to cover expenses A resolution adopted by affirmative vote of a majority of members of the Council After initiation, the Council adopts a resolution giving notice of its intention to create the district, to make the improvements, and to levy assessments

How to Create a L.I.D. The Council must approve an ordinance creating the L.I.D., which requires: That the L.I.D. is in the best interest of the property affected and the municipality, That there is reasonable probability the obligations of the L.

3 How to Create a L.I.D. The Council must approve an ordinance creating the L.I.D., which requires: That the L.I.D. is in the best interest of the property affected and the municipality, That there is reasonable probability the obligations of the L.I.D. will be paid, and That the value of the property within the proposed L.I.D., including the proposed improvements, is sufficient. Include all property within the District; set forth the boundaries; describe improvements; and state that the total cost will be assessed on all benefitted property according to the calculation in the Notice of Intention

How to Begin Construction A municipality may either purchase, acquire, or construct the improvements The procurement must follow the process in Chapter 28, Title 67, Idaho Code, for competitive

4 How to Begin Construction A municipality may either purchase, acquire, or construct the improvements The procurement must follow the process in Chapter 28, Title 67, Idaho Code, for competitive bidding After the contract is awarded, the chosen engineer will report to Council with the total cost and expense of the improvements Will prepare a form of assessment roll with the names of each parcel or lot owner assessed, and the amount chargeable to each

How to Confirm Assessments Resolution Setting Hearing on Assessment Roll: after Council receives report from engineer, it becomes available for the public to review Notice of Hearing: the Council

5 How to Confirm Assessments Resolution Setting Hearing on Assessment Roll: after Council receives report from engineer, it becomes available for the public to review Notice of Hearing: the Council will then hear all objections to the assessment roll at a stated and noticed date, time, and place (property owners will receive notice via mail) Hearing on Assessment Roll: aggrieved property owners may file written objections with the clerk, and Council will consider all objections, the engineer s report, and the assessment roll Council may modify the assessment roll at that time Ordinance Confirming Assessment Roll: after the hearing, the Council will pass an ordinance confirming the assessment roll as corrected by them that confirms each lot or parcel is benefited to the amount of assessment levied thereon

proposed boundaries at least 10 days before protest hearing Ordinance Creating publish in the same manner as other ordinances are published Notice of Hearing on

6 Remember, you must follow notice and publication requirements! Notice of Intention publish in newspaper in 3 consecutive daily issues, not less than 10 days before the protest hearing, AND mail copy of notice to each owner within proposed boundaries at least 10 days before protest hearing Ordinance Creating publish in the same manner as other ordinances are published Notice of Hearing on Assessment Roll publish in newspaper in 3 consecutive daily issues; first publication not less than 15 days before, AND mail copy of notice to each owner at least 15 days before Ordinance Confirming Assessment Roll publish in the same manner as other ordinances are published

7 Summary of Procedural Steps for Set-up: Petition or initiating resolution Resolution of Intention Publication and Mailing of Notice of Hearing Hearing on Creation of L.I.D. Adoption of Ordinance Creating L.I.D. Publication of Ordinance Creating L.I.D. Publication of Call for Bids Resolution Awarding Contract Interim Financing Engineer s Report Resolution Setting Assessment Roll Hearing Publication and Mailing of Notice of Hearing Hearing on Assessment Roll Adoption of Ordinance Confirming Assessment Roll Publication of Ordinance Confirming Assessment Roll Filing of Notice of Confirmation Assessments with County Recorder

LID Lien Filing: Lien Filing: The clerk at this time will file with the county recorder a lien for each parcel in the amount of the assessed value of the LID for said property.

8 LID Lien Filing: Lien Filing: The clerk at this time will file with the county recorder a lien for each parcel in the amount of the assessed value of the LID for said property. Lien Release: It is important to make sure that the lien release is filed upon full payoff of each assessment. If there are still outstanding assessments within the LID a Partial lien release will be filed. If it is the final assessment to be paid within the district a Full lien release will be filed.

9 Example of Lien Releases:

Filing with the Treasurer Filing with Treasurer - Upon filing the notice of confirmation assessment with the county recorder, a copy of the assessment roll must be filed with the treasurer of the

10 Filing with the Treasurer Filing with Treasurer - Upon filing the notice of confirmation assessment with the county recorder, a copy of the assessment roll must be filed with the treasurer of the municipality. Letter from Treasurer The treasurer shall mail out a letter to each property owners stating the total amount of the assessment, assessments due and terms of payment set forth by the ordinance. The Assessment then becomes due within 30 days from the date of the adoption of the ordinance. If any assessment is not paid in full within the (30) day period it can become delinquent and collected on began accruing interest and penalties.

11 Example letter sent by Treasurer:

Choosing Installments: Choosing Installments - Council may, in the alternative, determine to make assessments unpaid at the end of the (30) days, payable in installments.

12 Choosing Installments: Choosing Installments - Council may, in the alternative, determine to make assessments unpaid at the end of the (30) days, payable in installments. If counsel chooses to accept installments it shall be stated in the ordinance of the LID that the property owner is presumed to have chosen to pay the amount in installments. This ordinance shall establish the number of years the installments shall run, not to exceed 30 years, the dates of payment, and the rates of interest it shall bear which shall not be less than the rate of interest borne by the warrants or bonds payable. It shall also establish the due date of the 1 st installment. It is the duty of the municipality to bill each LID yearly in proportion to the first billing date thereon as listed on the ordinance as well as asses penalties when appropriate for each delinquent installment. Early payoff - After it has been presumed that they will pay through installments an early payoff shall include the full amount of the unpaid assessment plus any interest and penalties payable at that time as well as additional interest thereon at the same rate provided on the bonds from the date of the last installment due to 1 year after the next interest date of the bonds.

Bonding LID s: If the Council decides to make assessments payable in installments pursuant to the Confirming Ordinance, it may issue local improvement bonds (the Bonds ) payable from assessments

13 Bonding LID s: If the Council decides to make assessments payable in installments pursuant to the Confirming Ordinance, it may issue local improvement bonds (the Bonds ) payable from assessments levied against the property within the LID. Bonding Process 1. City Council approves bond sale and adopts Bond Ordinance. 2. Preparation of closing documents by a bank or bonding agency 3. Pre-closing; execution of all documents 4. Delivery of Bonds. NOTE: LID Bonds have higher interest costs yet payments are based on relative benefits derived by the project. Recommend a reserve or guaranty fund Cannot Issue LID bonds through the Idaho Bond Bank

14 Creation of the LID Funds: Bond Funds and Interest Funds Funds paid as installment payments of assessments pledged to the payment of the bonds shall be kept in a fund know as the bond fund of the LID. Any funds paid as interest payments of assessments shall be known as the interest fund. Maturing bonds shall be paid from the bond fund and the interest on the bonds, when due, shall be paid from the interest fund CLID- Consolidated local improvement districts can be created solely for the purpose of issuing bonds, registered warrants, or interim warrants. A consolidated bond fund and interest fund shall be created to be used to pay the principal of and interest on the consolidated outstanding bonds or warrants. Guarantee Fund The guarantee or Reserve fund is a fund for the purpose of guaranteeing the payment of bonds or warrants and interest on them, issued against any local improvements: This fund shall be more than sufficient to pay the outstanding warrants and maintain a balance, which the combined levy and appropriation in any 1 year shall not exceed 5% of the outstanding obligations guaranteed.

Installment Docket Installment Docket When Bonds are issued, the treasurer MUST also create an installment docket, showing which assessments have

15 Installment Docket Installment Docket When Bonds are issued, the treasurer MUST also create an installment docket, showing which assessments have been paid, and the date of each payment. An Installment Docket can be a program like excel or other program that can be used to track this information.

16 Delinquencies Delinquent - If any installment is not paid within 20 days of the due date a 2% penalty shall be added. The council MAY certify delinquent installments to the tax collector which if certified shall be extended on the tax rolls and collected as are property tax. When bonds have not been issued and said assessments have been provided, such assessments shall be collected, or the property therein shall be foreclosed and sold for such assessments and costs, in a suit for that purpose by the municipality. Delinquent Certificates As soon as any assessment or installment of an LID becomes delinquent, the treasurer shall mark that assessment delinquent on the assessment roll installment docket and shall add a 2% penalty thereon. Within 10 days the treasurer shall prepare and issue to the municipality a delinquency certificate to the property which includes the date the installment/assessment becomes delinquent and list the amount due plus penalties, the name of the person assessed and the lid district. This certificate shall have the force and effect of a sale of said property. Certificates shall be made in duplicate, bound together in books in numerical order and filed in the office of the treasurer. Whenever any installment shall become delinquent the treasurer will mark this in the installment docket and notate the penalty amount in the docket and it will draw interest at the rate of 10% per year from the date of delinquency until the end of the month in which it is paid.

17 Delinquency (cont.) Delinquent Certificate Register - Within 20 days after preparing and issuing any delinquency certificate the treasurer shall enter the same in a book to be kept by the treasurer know as the LID Delinquency Certificate Register. The register should contain in proper columns 1) the number of the assessment 2) name of the LID 3) home owner 4) description of property 5) amount of the assessment 6) penalty. Each entry must be numbered and each redemption must be recorded with the date and the redemption amount. Deed - If an LID delinquency is not redeemed within 2 years from the delinquency date the treasurer may deed the property. Proof of notice - A notice of expiration of time of redemption must be sent out at least 1 month and not more than 3 month prior to the expiration of the time of redemption of any property. Such proof shall be filed in the office of the treasurer and remain permanent.

Fees / Redemption / Disposition Fees of the treasurer The treasurer can charge the following fees:.25 cents to be included for issuing any delinquency certificate. 1.00 for making any deed.

18 Fees / Redemption / Disposition Fees of the treasurer The treasurer can charge the following fees:.25 cents to be included for issuing any delinquency certificate for making any deed..50 cents for giving each notice to the mortgagee or lien holder for giving notice of expiration of period of redemption. Redemption At any time within the 2 years from the date of any delinquency certificate, the owner of the property may redeem such property by paying the amount stated on the certificate plus 10% per year to the end of the month in which it is paid in full. Disposition of Funds Any money left in the Bond or Interest fund funds for said LID shall be credited to the general fund of the municipality.

19 ANY QUESTIONS?

PUBLIC ACT 123 OF 1999 (as amended 2001, 2003)

THE GENERAL PROPERTY TAX ACT (EXCERPT) 1893 PA 206 PUBLIC ACT 123 OF 1999 (as amended 2001, 2003) 211.57 Statement of unpaid taxes; return of delinquent taxes; extension of time; rules; notices. Sec. 57.