County of Sonoma Agenda Item Summary Report

Transcription

1 Revision No County of Sonoma Agenda Item Summary Report Agenda Item Number: 6 (This Section for use by Clerk of the Board Only.) Clerk of the Board 575 Administration Drive Santa Rosa, CA To: Board of Supervisors of Sonoma County, Board of Directors of Sonoma County Water Agency Board Agenda Date: October 24, 2017 Vote Requirement: Majority Department or Agency Name(s): Auditor-Controller-Treasurer-Tax Collector/ Water Agency Staff Name and Phone Number: Paul Cocking: Michael Gossman: Title: Supervisorial District(s): All Districts Letter of Consent to allow City of Healdsburg, Sotoyome Community Development Project to allow the refinancing of their bonds. Recommended Actions: Approval of the Sonoma County Board of Supervisors, concurrent with the Board of Directors of the Sonoma County Water Agency, to allow the subordination of pass-through payments for the Successor Agency to the RDA of the city of Healdsburg, and authorize the Chair to execute a letter of consent. Executive Summary: The Successor Agency to the Redevelopment Agency of the City of Healdsburg (Agency) has proposed an issuance of a tax allocation bond financing (2017 Bonds) for the purpose of refinancing the previously issued and outstanding 2010 tax allocation bonds (2010 Bonds), as authorized by the Dissolution Act (Act). As required by the Act, the Agency has asked that the County and the Sonoma County Water Agency (Water Agency) subordinate their pass-through payment entitlement to debt service on the 2017 Bonds. As explained below, the County and Water Agency have very limited authority to deny this request. Staff recommends approval of the request. Discussion: The Agency has proposed the issuance of the 2017 Bonds for the purpose of refinancing the previously issued and outstanding 2010 Bonds to take advantage of reduced interest rates. The Act authorizes successor agencies to refund bonds for certain purposes, including debt service savings to taxing agencies (H&S Code ). In order to do this and achieve the best possible rate, the Agency must ask that the County and the Water Agency subordinate their pass-through payment entitlement to debt service on the 2017 Bonds. In the case of the Agency, this process is governed by a 1984 Settlement Agreement (Agreement). In accordance with this agreement, the Agency must seek written consent of the Board of Supervisors (Board) to authorize the subordination of pass-through payments. The only reason the Board is allowed to withhold approval is if the County is able to demonstrate that the tax increment revenues payable to the Agency are judged to be insufficient to enable the Agency to make

2 Revision No the pass-through payments to the County. It is outside the authority of the Board to evaluate the refinance request on any other basis. Staff from the Auditor-Controller-Treasurer-Tax Collector have reviewed information provided on behalf of the Agency and concluded that they can confirm that the taxing agencies would not be harmed by subordination of their pass-through payments. This conclusion was arrived at by modeling a scenario in which the assessed value of the property in the Project Area remains flat through Therefore, the Board is obliged to provide consent to authorize subordination of pass-through payments. In the case of the role for the Board of Directors of the Water Agency, the requirements are slightly different. For the Board of Directors, subordination requests are deemed approved if the affected agencies do not respond within 45 days. However, staff is taking the additional step in this item of requesting affirmative approval for consistency and clarity. In 2010 and 2014 the Board and the Water Agency subordinated their pass-through payments to debt service on the Agency s outstanding debt relating to the 2002 Bonds and the 2003 Bonds. Staff recommends the Board and Water Agency approve the request to allow the subordination of passthrough payments for the Successor Agency to the RDA of the City of Healdsburg, and authorize the Chair to execute a letter of consent, contingent on California Department of Finance approval. Prior Board Actions: October 26, 2010 Item #14, Board approved subordination of pass-through payments for Healdsburg s RDA. April 22, 2014 Item #15, Board approved subordination of pass-through payments for Healdsburg s RDA. Strategic Plan Alignment Not Applicable

3 Revision No Fiscal Summary Expenditures FY Adopted FY Projected FY Projected Budgeted Expenses Additional Appropriation Requested Total Expenditures Funding Sources General Fund/WA GF State/Federal Fees/Other Use of Fund Balance Contingencies Total Sources Narrative Explanation of Fiscal Impacts: Staffing Impacts Position Title (Payroll Classification) Monthly Salary Range (A I Step) Additions (Number) Deletions (Number) Narrative Explanation of Staffing Impacts (If Required): Attachments: 1) Subordination Request of Pass-through Payments County 2) Subordination Request of Pass-through Payments Water Agnecy Related Items On File with the Clerk of the Board:

4 JONES HALL Attachment #1 August30, Sansome Street Suite 1700 San Francisco, CA t f Jonathan Kadlec, Assistant Treasurer Auditor-Controller-Treasurer-Tax Collector County of Sonoma 585 Fiscal Drive, Room 1 OOF Santa Rosa, CA Re: Subordination Request Relating to Proposed Bond Issue by the Successor Agency to the Redevelopment Agency of the City of Healdsburg Pursuant to Section (a)(1) of the California Health and Safety Code Dear Mr. Kadlec: Our firm is serving as bond counsel to the Successor Agency to the Redevelopment Agency of the City of Healdsburg (the "Agency") with respect to its proposed issuance of its 2017 tax allocation refunding bonds (the "2017 Bonds"), which will be used to refinance previously issued and outstanding 2010 tax allocation bonds (the "2010 Bonds") in order to take advantage of reduced interest rates. In order to issue the 2017 Bonds at the lowest possible interest rates, the Agency seeks to present the bond investor with the most senior lien possible on the Agency's tax increment revenues. Please note that this is the same process as was undertaken in 2014 and 2015; however, in this case the Agency will be issuing 2017 Bonds to refund the outstanding 2010 Bonds (rather than the 2002 tax allocation bonds and 2003 tax allocation bonds that were refunded in 2014 and 2015, respectively). Enclosed please find a copy of the "Agreement Regarding the Sotoyome Community Development Plan" (the "Tax Sharing Agreement"). As set forth in Section 3 of the Tax Sharing Agreement ("Section 3"), upon the written consent of the County Board of Supervisors, the passthrough payment entitlement of the County may be subordinated to debt service on the 2017 Bonds. The purpose of this letter is to request the written consent of the County Board of Supervisors to the subordination of the County's pass-through payment entitlement to debt service on the 2017 Bonds. Such subordination is essential to achieving the Agency's goal of establishing the strongest possible senior lien and, as a result, the lowest possible interest rates for the 2017 Bonds. Please note that the County has previously subordinated its pass-through payments to debt service on the Agency's outstanding debt (including with respect to the 201 O Bonds, which the 2017 Bonds are refinancing and the 2014 tax allocation refunding bonds and 2015 tax allocation refunding bonds, which will be outstanding). As a result, this consent would serve as a A PROFESSIONAL LAW CORPORATION

5 Jonathan Kadlec, Assistant Treasurer County of Sonoma August 30, 2017 Page 2 continuation of the subordination of the County's pass-through payment entitlement to outstanding Agency debt, and since the 2017 Bonds are a refinancing of existing debt, to do so at the lowest borrowing costs would function to increase the pass-through payments to the County. In furtherance of the Agency's request, we have enclosed a financial analysis (the "Financial Analysis"), prepared by the Agency's fiscal consultant, Fraser & Associates, Inc., which demonstrates that (a) the Agency can reasonably expect to pay its pass-through payment obligations and debt service on outstanding Agency debt (including the 2017 Bonds and excluding the 2010 Bonds, which are anticipated to be refunded, in full, by the 2017 Bonds) and (b) upon issuance of the 2017 Bonds, the Agency will be in compliance with the requirements and limitations prescribed by subsections (c) and (d) of Section 3. Based upon the Financial Analysis, the Agency does not foresee that it will be required to use tax increment revenues representing any of its pass-through payment obligations, including the obligation to the County, for debt service. Specifically, the projected tax increment after the payment of bond debt service and property tax administration fees is projected to exceed by a significant amount the pass-through payments payable to the County under the Tax Sharing Agreement, resulting in a strong projected debt service coverage ratio (last column on right in bold). The subordination would come into play only if there was a substantial and unforeseen decrease in tax increment revenues, and in that event, as provided by subsection (a) of Section 3, the amount unpaid to the County due to such subordination would be paid by the Agency thereafter from the first tax increment revenues coming available for such purpose from any revenue source of the Agency. In the event that the County Board of Supervisors authorizes written consent to subordination as requested by this letter, please so confirm by having a copy of this letter signed by an authorized representative and returned to me at your first convenience. Thank you in advance for your cooperation in this matter. If you have any questions regarding this matter, please do not hesitate to call the undersigned at Sincerely, ACCEPTED: James A. Wawrzyniak, Jr. County of Sonoma By: Date: A PROFESSIONAL LAW CORPORATION

6 II JONES HALL Attachement #2 August30, Sansome Street Suite 1700 San Francisco, CA t f Board of Directors Sonoma County Water Agency c/o Mr. Grant Davis, General Manager 404 Aviation Boulevard Santa Rosa, California Re: Subordination Request Pursuant to Section (c) of the California Health and Safety Code Relating to Proposed Bond Issue by the Successor Agency to the Redevelopment Agency of the City of Healdsburg Pursuant to Section (a)(1) of the California Health and Safety Code Dear Mr. Davis: I am writing to you on behalf of the Successor Agency to the Redevelopment Agency of the City of Healdsburg (the "Agency") pursuant to Section (c) of the California Health and Safety Code (the "Code"). Under Section (c) of the Code, the Agency may, with a taxing entity's approval (which must be granted except as provided below), subordinate amounts payable from property tax revenue (formerly tax increment revenue) of a redevelopment project area that the Agency is required to pay such taxing entity pursuant to Section 34183(a)(1) of the Code (the "Statutory Pass-through Payments") to bonds or other indebtedness issued or incurred by the Agency pursuant to Section (a) of the Code to achieve debt service savings by refinancing outstanding bonds. At this time, the Agency is expecting to issue its Successor Agency to the Redevelopment Agency of the City of Healdsburg 2017 Tax Allocation Refunding Bonds (the "2017 Bonds"). The 2017 Bonds will result in a refinancing of outstanding bonds issued in 2010, which are currently outstanding in the aggregate principal amount of $19,545,000 (the "2010 Bonds"). As permitted by Section (g), the 2017 Bonds will be secured by a pledge of, and lien on, and will be repaid from moneys deposited from time to time in the Agency's Redevelopment Property Tax Trust Fund, consisting of property tax revenues from the Sotoyome Community Development Project Area (the "Project Area"). By this letter, the Agency requests that the Sonoma County Water Agency (the "Taxing Entity") agree to the subordination of Statutory Pass-through Payments that the Agency is required to pay the Taxing Entity in connection with the Project Area to the payment of debt service on the 2017 Bonds. A PROFESSIONA'- LAW CORPORATION

7 Iii Board of Directors Sonoma County Water Agency August 30, 2017 Page 2 of 2 Enclosed for your review, pursuant to Section (c)(2} of the Code, is a financial analysis (the "Financial Analysis") prepared by the Agency's fiscal consultant, Fraser & Associates, Inc. The Financial Analysis shows the following: a projection of the property tax revenues that will be deposited in the Redevelopment Property Tax Trust Fund during the term of the 2017 Bonds, including property tax revenues from the Project Area; and a debt service coverage analysis showing (i) the Agency's Statutory Pass-through Payments and (ii} projected debt service for the 2017 Bonds. The Financial Analysis shows that the Agency can reasonably expect to have sufficient funds available to pay both the payments that are expected to be due for the 2017 Bonds and all of the Agency's Statutory Pass-through Payments owed to the various affected taxing entities for the Project Area. In the event that the Agency does not have sufficient funds to make the required Statutory Pass-through Payments in a given year, the Agency's obligation to make such payments shall continue and shall be paid for from the first available property tax revenues of the Agency not pledged to the payment of debt service on the 2017 Bonds. Please note that, in accordance with Section (c}(3) of the Code, ifthe Taxing Entity does not respond to the requested subordination within forty-five (45) days of this letter, the subordination will be automatically deemed approved by the Taxing Entity and such approval shall be final and conclusive. Furthermore, to disapprove this subordination, the Taxing Entity must find, based upon substantial evidence, that the Agency will not be able to make the payments due on the 2017 Bonds and the Statutory Pass-through Payments that it is required to pay the Taxing Entity. Thank you in advance for your cooperation in this matter. If you have any questions regarding this matter, please do not hesitate to call the undersigned at A PROF~SS I ONA L LAW CORP ORAT!ON

8 Table 1 Healdsburg Successor Agency Sotoyome Project Area TAX INCREMENT PROJECTION AND DEBT SERVICE CASH FLOW (OOO's Omitted) (4) (6) (1) (2) Value Total Property (5) Net (7) (8) Remaining Fiscal Real Other Total Over Base Of Tax(3) TaxAdmin. Debt Tax AB 1290 Subordinated Net Tax Year ProE!!!~ Proee~ Value 107,760 Increment Fees Service Revenues. Tax Sharlns TaxSharins Increment $1,350,125 $60,865 $1,410,990 $1,3Q3,229 $13,179 $183 $3.848 $9,148 1,674 3,284 $4, ,377,127 60,865 1,437,992 1,330,232 13, ,718 $9,547 1,740 3,356 4, ,404,670 60,865 1,465,535 1,357,774 13, ,759 $9,779 1,808 3,428 4, ,432,763 60,865 1,493,628 1,385,868 14, ,800 $10,017 1,877 3,502. 4, ,461,419 60,865 1,522,284 1,414,523 14, ,823 $10,278 1,948 3,578 4, ,490,647 60,865 1,551,512 1,443,751 14, ,826 $10,566 2,020 3,655 4, ,520,460 60,865 1,581,325 1,473,564 14, ,818 $10,870 2,094 3,733 5, ,550,869 60,865 1,611,734 1,503,974 15, ,821 $11,169 2,169 3,814 5, ,581,887 60,865 1,642,751 1,534,991 15, ,818 $11,480 2,245 3,895 5, ,613,524 60,865 1,674,389 1,566,629 15, ,812 $11,800 2,323 3,979 5, ,645,795 60,865 1,706,660 1,598,899 16, ,812 $12,120 2,403 4,064 5, ,678,711 60,865 1,739,576 1,631,815 16, ,809 $12,450 2,484 4,151 5, ,712,285 80,865 1,773,150 1,665,389 16, ,807 $12,786 2,567 4,239 5, ,746,531 60,865 1,807,396 1,699,635 17, ,806 $13,126 2,652 4,330 6, ,781,461 60,865 1,842,326 1,734,566 17, ,765 $13,515 2,738 4,422 6, ,817,090 60,865 1,877,955 1,770,195 17, ,319 $14,314 2,852 4,516 6, ,853,432 60,865 1,914,297 1,806,537 18, ,315 $14,679 2,969 4,611 7, ,890,501 60,865 1,951,366 1,843,605 18, ,209 $17,153 3,089 4,709 9,355 Footnotes (1) Prior year real property increased by 2 pen:ent per year. (2) Includes the value of secured and unserured personal property, and state-assessed raffroad and non-unitary property. (3) Based on the application of Project Area tax rates to incremental taxable value, plus estimated unitary revenue. (4) Per SB 2557, reflects Project Area share of the County's property tax administrative costs. (5) Refects actual existing debt service for and estimated debt service on the 2017 Refunding Bonds starting In (6) Tax revenues net of property tax administration fees and bond debt servlce (7} Mandatory tax sharing payments per AB (8) Payments required per agreement with Sonoma County. Fraser AasoclalM 812W2017 t ol for sub Healdsburg 1'>rol 17-18

9 County of Sonoma Agenda Item Transmittal Report To: Board of Supervisors of Sonoma County As: P' Consent Regular Board of Directors of Sonoma County Water Agency Board Agenda Date: October 10, 2017 j Supervisorial District All Department or Agency Name{s): Auditor-Controller-Treasurer-Tax Collector/Water Agency Title: Subordination of pass-through payments relating to the City of Healdsburg, Sotoyome Community Development Project to allow the refinance of bonds Recommended Action: Approval of the Sonoma County Board of Supervisors, concurrent with the Board of Directors of the Sonoma County Water Agency, to allow the subordination of passthrough payments for the Successor Agency to the RDA of the City of Healdsburg, and authorize the Chair to execute aletter of consent, contingent on California Department of Finance approval. This Item Requires: (Check appropriate boxes) r Requests Gold Resolution r Presented at Board r Off-site presentation r Public Appearance Anticipated r Yes r No If yes, Lobby chairs needed? For all Regular agenda items, or if one of the two boxes above are checked, you must complete item 1 and 2 under "Special Instructions". r Budgetary Adjustment Resolution r Position Allocation List Change(s) If one of these two boxes are checked, please see appendix D for specific Action Language, r PowerPoint If a PowerPoint presentation is planned, please see Section 6 of the instructions for printing requirements, and submit the PowerPoint as an attachment with your original submission. Special Instructions to Clerk of the Board: 1. Presenters names and titles: 2. Anticipated length of item: 3. Publication Instructions: 4. Document Processing: Please have the Chair sign 2 copies of each of the 2 letters of consent. 5. Other: County Counsel approval: Revision No Signature: f I l(;{/jt, "'

10 Printed Name: Department Head approval: Printed Name: Erick Roeser Date: Signature: Date: Department Head approval-if Joint Item: Signatur ed Name: Michael Thompson Date: Department Head approval-if Joint Item: Printed Name: Department Head approval-if Joint Item: Printed Name: Signature: Date: Signature: Date: Revision No