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HomeMy WebLinkAbout05 AMEND PROMISSORY NOTE W/ TUSTIN COMMUNITY REDEVELOPMENT AGENCYAgenda Item 5 Reviewed: AGENDA REPORT City Manager Finance Director MEETING DATE: JANUARY 21, 2014 TO: JEFFREY C. PARKER, CITY MANAGER AND EXECUTIVE DIRECTOR FROM: SUCCESSOR AGENCY AND FINANCE DEPARTMENT SUBJECT: AMEND PROMISSORY NOTE BETWEEN THE CITY OF TUSTIN AND THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY SUMMARY: In accordance with the first paragraph of the December 31, 2008 Promissory Note ( "Note ") between the City of Tustin ( "City ") and the Successor Agency to the Tustin Community Redevelopment Agency ( "Successor Agency "), the City and Successor Agency are amending the Note. RECOMMENDATION: 1. It is recommended that the City Council adopt Resolution No. 14 -06, amending the December 31, 2008 Promissory Note between the City of Tustin and the Successor Agency to the Tustin Community Redevelopment Agency and authorize the City Manager to execute the amended Promissory Note. 2. It is recommended that the City Council, acting as the Successor Agency, adopt Successor Agency Resolution No. 14 -01, amending the December 31, 2008 Promissory Note between the City of Tustin and the Successor Agency to the Tustin Community Redevelopment Agency and authorize the Executive Director to execute the amended Promissory Note. FISCAL IMPACT: The Promissory Note with a final principal and interest amount of $22,894,121.88 was due and payable by the City to the Successor Agency on December 1, 2013. Amending the Agreement will provide the City with additional time to sell the land which was purchased with the Promissory Note and use the proceeds from sales to pay back the Note as originally intended when issued. 976740.1 Agenda Report January 21, 2014 Page 2 CORRELATION TO THE STRATEGIC PLAN: Amending the Promissory Note addresses Goal C — Financial Strength, sustaining long- term financial strength with adequate reserves and enhanced capacity to provide a sustainable level of City Services. BACKGROUND: On December 2, 2008, the City Council authorized the issuance of a Promissory Note in the principal amount of $18,881,750 to be purchased by the former Tustin Community Redevelopment Agency on behalf of the City of Tustin. These funds were used as partial payment towards the purchase of approximately 34 acres adjacent to the 55 freeway, south of Edinger Avenue. The property was acquired for the new freeway ramps and extension of Newport Avenue. It was anticipated the property not needed for the project, approximately 26.59 acres would be sold prior to the Note's due date of December 1, 2013 and the proceeds would pay off the Note. To date, 7.53 acres have been sold to R.D. Olson Development for $8,710,000 and approximately 19.06 acres remain for future sale and development. The Note grants both parties the opportunity to extend and amend the Note. Due to the dissolution of Redevelopment, the Successor Agency has not had the authority to extend or amend existing agreements. The Successor Agency believed authority would be granted upon the State Department of Finance ( "DoF ") issuing a "Finding of Completion" ( "Finding ") under Health and Safety Code ( "HSC ") Section 34179.7. On May 10, 2013, the Successor Agency remitted what it believed to be its last remaining unencumbered funds to the Orange County Auditor - Controller and on May 13, 2013, requested a Finding from DoF. The Finding would allow the Successor Agency to reinstate loan agreements between the Agency and the City and allow bond funds currently restricted from use to be freed up for the purposes for which they were sold. On July 3, 2013, DoF informed the Successor Agency that a Finding would not be issued until after the Successor Agency remitted the principal and interest due on December 1, 2013 for the Promissory Note. DoF's failure to issue the required finding of completion is contrary to the requirements under HSC Section 34179.7, includingy their failure to provide a response within five business days of the Agency's May 13t request. In response to this matter and others, the City, the Successor Agency and the Tustin Housing Authority have filed a "Petition for Writ of Mandate and Complaint for Declaratory and Injunctive Relief' with the Superior Court of the State of California in Sacramento County. In anticipation of the upcoming March court hearing and in consultation with our City's attorneys, Staff believes it is prudent to amend the Promissory Note prior to the Judge hearing the case. In consideration the parties entered into the Original Note with the payoff being tied to the sale of the purchased parcels, the proposed amended payment schedule is dependent upon whichever occurs first: 1) the reinstatement of the 976740.1 Agenda Report January 21, 2014 Page 3 Affordable Housing Reimbursement Agreement, Public Works Agreement, and South Central Project Area Working Capital Loan Agreement; or 2) the sale of the remaining parcels for which the Original Note was issued. The amended Note will revise the following: 1. Should the reinstatement of the Agreements occur first, the payment schedule will comply with HSC Section 34191.4(b)(2)(A). a. In recognition that the City has sold 7.53 acres for $8,710,000, the City will make a payment of $2,438,800 against the Note, reflecting the Note's contribution as a percentage (28 %) towards the original purchase. Payment will be made upon State of California Department of Finance issuing a Finding of Completion ( "Finding ") and will leave a balance of $16,442,950 plus interest accrued from the Original Note date of December 31, 2008. b. A five year payment schedule will be established with the first payment commencing six months from receiving a Finding. The annual payments will be $3,288,590 per year plus accrued interest. In the event Redevelopment Property Tax Trust Funds ( "Trust Funds ") received as a result of the Reimbursement Agreements do not equal $3,288,590 plus accrued interest, the City will only pay the actual amount received in Trust Funds. c. Corresponding to the payment schedule once it is initiated, the Successor Agency will provide Semi - Annual Reports to the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency detailing the payments made against the Note. d. If parcels are also sold during this time, the City will make a payment against the Note that reflects the Note's contribution as a percentage (28 %) towards the original purchase. e. The City will pay off the balance of the Note in the fifth year, regardless of whether or not Trust Funds have amounted to $3,288,590 plus accrued interest in each of the previous four years. 2. If the Agreements are not reinstated, the payment schedule and due date will correspond with the sale of the remaining parcels. a. In recognition that the City has sold 7.53 acres for $8,710,000, the City will make a payment of $2,438,800 against the Note that reflects the Note's contribution as a percentage (28 %) towards the original purchase. Payment will be made on December 1, 2014. b. As each parcel is sold, the City will make a payment against the Note that reflects the Note's contribution as a percentage (28 %) towards the original purchase. c. Upon the sale of the final parcel, the City will pay off the balance of the Note. d. As parcels are sold, the Successor Agency will provide Reports to the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency detailing the payments made against the Note. 976740.1 Agenda Report January 21, 2014 Page 4 3. In accordance with HSC Section 34191.4(b)(2), the interest rate is revised from 4.25% per annum, compounded semiannually on June 1 and December 1 in each year, to correspond with the interest rate earned by funds deposited into the Local Agency Investment Fund. Upon City Council and Successor Agency approval, the amended Promissory Note will be submitted to the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency on January 28, 2014 for their consideration. Should the Oversight Board approve the amended Note, it will be submitted to DoF for review. Staff will be available to respond to any questions the City Council may have. Pamela Arends -King v Jerry Crai Finance Director Econom' D el ent & Housing Manager Finance Department Succe Agency to the Tustin Community Ro velopment Agency Attachment: 1. 2. 976740.1 City Council Resolution No. 14 -06 Successor Agency Resolution No. 14 -01 RESOLUTION NO. 14 -06 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, AMENDING THE DECEMBER 31, 2008 PROMISSORY NOTE BETWEEN THE CITY OF TUSTIN AND THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY The City Council of the City of Tustin hereby finds, determines and declares as follows: A. The Tustin Community Redevelopment Agency ( "Agency") is a community redevelopment agency organized and existing under the California Community Redevelopment Law, Health and Safety Code Sections 33000, et seq. ( "CRL ") and has been authorized to transact business and exercise the powers of a redevelopment agency pursuant to action of the City Council ( "City Council ") of the City of Tustin ( "City "); and B. The City of Tustin is a municipal corporation of the State of California ( "City "); and C. Assembly Bill X1 26 added Parts 1.8 and 1.85 to Division 24 of the California Health and Safety Code, which laws cause the dissolution and wind down of all redevelopment agencies ( "Dissolution Act "); and D. On December 29, 2011, in the petition California Redevelopment Association, et al v. Ana Matosantos, et al ( "Matosantos Decision "), the California Supreme Court upheld the Dissolution Act and thereby all redevelopment agencies in California were dissolved as of and on February 1, 2012 under the dates in the Dissolution Act that were reformed and extended thereby ( "Supreme Court Decision "); and E. The Agency is now a dissolved community redevelopment agency pursuant to the Dissolution Act; and F. On December 2, 2008, the City Council adopted Resolution No. 08 -83, authorizing the issuance of a Promissory Note in the principal amount of $18,881,750 to be purchased by the former Tustin Community Redevelopment Agency; and G. The $18,881,750 in funds was used by the City as partial payment towards purchasing approximately 34 acres for public right -of -way; and H. Under the terms of the Note and in anticipation repayment would be made from the proceeds of selling the portion of the 34 acres not required for right -of -way, Resolution No. 14 -06 976739.1 the City was to repay the principal and interest on December 1, 2013 unless amended by both parties; and During the term of the Note, the City has only sold 7.53 acres of 26.59 acres available for development due to an economy which has suffered through what most economists refer to as the "Great Recession "; and J. The City has determined it is necessary and appropriate to amend and restate the Original Promissory Note entered into by and between the City of Tustin and the former Tustin Community Redevelopment Agency on December 31, 2008. K. In accordance with the Dissolution Act, the amended Promissory Note will also require the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency approval. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF TUSTIN: Section 1. The foregoing recitals are incorporated into this Resolution by this reference, and constitute a material part of this Resolution. Section 2. The City Council approves amending the December 31, 2008 Promissory Note between the City of Tustin and the former Tustin Community Redevelopment Agency. Section 3. The City Council authorizes the City Manager to execute the First Amendment to the Promissory Note, in substantially the form attached to this Resolution 14 -06. Section 4. This Resolution shall take effect immediately upon its adoption by the City Council, and the Clerk of the Council shall attest to and certify the vote adopting this Resolution. PASSED AND ADOPTED at a regular meeting of the Tustin City Council held on the day of , 2014. ELWYN A. MURRAY, Mayor ATTEST: JEFFREY C. PARKER, City Clerk Resolution No. 14 -06 Page 2 of 3 976739.1 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) SS CITY OF TUSTIN ) I, Jeffrey C. Parker, City Clerk and ex- officio Clerk of the City Council of the City of Tustin, California, do hereby certify that the whole number of the members of the City Council of the City of Tustin is five; that the above and foregoing Resolution No. 14 -06 was duly passed and adopted at a regular meeting of the Tustin City Council, held on the 21 st day of January, 2014, by the following vote: COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER ABSENT: JEFFREY C. PARKER, City Clerk Attachment No. 1 First Amendment to the Promissory Note Resolution No. 14 -06 976739.1 ATTACHMENT NO. 1 FIRST AMENDMENT TO THE PROMISSORY NOTE [Attached] Resolution No. 14 -06 Page 4 of 3 976739.1 SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY RESOLUTION NO. 14 -01 A RESOLUTION OF THE CITY OF TUSTIN, ACTING AS THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY, AMENDING THE DECEMBER 31, 2008 PROMISSORY NOTE BETWEEN THE CITY OF TUSTIN AND THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY The City of Tustin, acting as the Successor Agency to the Tustin Community Redevelopment Agency, finds, determines and declares as follows: A. The Tustin Community Redevelopment Agency ( "Agency ") was a community redevelopment agency organized and existing under the California Community Redevelopment Law, Health and Safety Code Sections 33000, et seq. ( "CRL ") and had been authorized to transact business and exercise the powers of a redevelopment agency pursuant to action of the City Council ( "City Council ") of the City of Tustin ( "City "); and B. Assembly Bill X1 26 added Parts 1.8 and 1.85 to Division 24 of the California Health and Safety Code, which laws cause the dissolution and wind down of all redevelopment agencies ( "Dissolution Act "); and C. On December 29, 2011, in the petition California Redevelopment Association, et al v. Ana Matosantos, et al ( "Matosantos Decision "), the California Supreme Court upheld the Dissolution Act and, thereby, all redevelopment agencies in California were dissolved as of and on February 1, 2012 under the dates in the Dissolution Act that were reformed and extended thereby ( "Supreme Court Decision "); and D. The Agency is now a dissolved community redevelopment agency pursuant to the Dissolution Act; and E. The City of Tustin previously took action on September 20, 2011 with adoption of Resolution No. 11 -71 electing to become and to act as the Successor Agency to the Tustin Community Redevelopment Agency ( "Successor Agency "); and F. On December 2, 2008, the Agency Board adopted RDA Resolution No. 08 -06, authorizing the purchase of a Promissory Note issued by the City of Tustin in the principal amount of $18,881,750; and G. Under the terms of the Note and in anticipation repayment would be made from the proceeds of selling the portion of the 34 acres not required for right -of -way, the City S.A. Resolution No. 14 -01 Page 1 of 3 976741.1 was to repay the Agency principal and interest on December 1, 2013 unless amended by both parties; and H. During the term of the Note, the City has only sold 7.53 acres of 26.59 acres available for development due to an economy which has suffered through what most economists refer to as the "Great Recession "; and I. The City, acting as Successor Agency, has determined that it is necessary and appropriate to amend and restate the Original Promissory Note entered into by and between the City of Tustin and the former Tustin Community Redevelopment Agency on December 31, 2008; and J. In accordance with the Dissolution Act, the amended Promissory Note will also require the Oversight Board of the Successor Agency approval and State of California Department of Finance approval. NOW, THEREFORE, BE IT RESOLVED BY THE TUSTIN CITY COUNCIL SERVING AS THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY: Section 1. The foregoing recitals are incorporated into this Resolution by this reference, and constitute a material part of this Resolution. Section 2. The City acting as Successor Agency to the Tustin Community Redevelopment Agency approves amending the December 31, 2008 Promissory Note between the City of Tustin and the former Tustin Community Redevelopment Agency. Section 3. The Executive Director is hereby authorized to execute the First Amendment to the Promissory Note, in substantially the form attached to this Resolution. Section 4. This Resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk on behalf of the Successor Agency shall attest to and certify the vote adopting this Resolution. PASSED AND ADOPTED this 21 st day of January, 2014. ELWYN A. MURRAY, Mayor on behalf of Successor Agency ATTEST: JEFFREY C. PARKER, City Clerk on behalf of the Successor Agency S. A. Resolution No. 14 -01 Page 2 of 3 976741.1 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF TUSTIN ) I, JEFFREY C. PARKER, City Clerk of the City of Tustin, acting as the Successor Agency to the Tustin Community Redevelopment Agency, hereby certify that the foregoing resolution was duly adopted by the City of Tustin, acting as the Successor Agency to the Tustin Community Redevelopment Agency, at its regular meeting held on the 21 st day of January 21, 2014, and that it was so adopted by the following vote: AGENCYMEMBER AYES: AGENCYMEMBER NOES: AGENCYMEMBER ABSTAINED: AGENCYMEMBER ABSENT: Jeffrey C. Parker, City Clerk on behalf of Successor Agency Attachment No. 1 First Amendment to the Promissory Note S.A. Resolution No. 14 -01 Page 3 of 3 976741.1 ATTACHMENT NO. 1 FIRST AMENDMENT TO THE PROMISSORY NOTE [Attached] 976741.1 FIRST AMENDMENT TO PROMISSORY NOTE Initial Principal Amount: $18,881,750.00 Tustin, California 12014 FOR VALUE RECEIVED, the undersigned City of Tustin, a municipal corporation and public body corporate and politic of the State of California ( "City") and the Successor Agency to the Tustin Community Redevelopment Agency, a public body corporate and politic ( "Successor Agency ") by this FIRST AMENDMENT TO PROMISSORY NOTE hereby amend that certain Promissory Note dated as of December 31, 2008 between the City and the former Tustin Community Redevelopment Agency in the amount of Eighteen Million Eight Hundred Eighty -One Thousand Seven Hundred Fifty Dollars and No /100 Dollars ($18,881,750.00) ( "Original Note "). A. Modification to the Original Note. The following sections of the Original Note shall be amended as follows: a. The introductory paragraph is hereby deleted and replaced as follows: The City of Tustin (together with any and all of its successors, the "City ") hereby promises to pay to the Successor Agency to the Tustin Community Redevelopment Agency (together with any and all of its successors and assigns, the "Successor Agency ") in accordance with the payment schedule outlined below ( "Maturity Date "), in lawful money of the United States of America, at 300 Centennial Way, Tustin, California, or at such other address as may be specified by the Agency, the principal amount of $18,881,750.00, together with interest accrued thereon from December 30, 2008 to the Maturity Date at the rate corresponding with the interest rate earned by funds deposited into the Local Agency Investment Fund ( "LAIF "). The Original Note, as amended by this First Amendment to Promissory Note, and any subsequent renewals or extensions hereof and as the same may be amended, restated or'supplemented from time to time, is referred to herein as this "Note." In recognition the parties entered into the Original Note with the payoff being tied to the sale of the purchased parcels, the payment schedule is dependent upon whichever occurs first: 1) the reinstatement of the Affordable Housing Reimbursement Agreement, Public Works Agreement, and South Central Project Area Working Capital Loan Agreement (together, "Agreements "), or 2) the sale of the remaining parcels for which the Original Note was issued. 1) Should the reinstatement of the Agreements occur first, the payment schedule will comply with HSC Section 34191.4(b)(2)(A) as follows: i. In recognition that the City has sold 7.53 acres for $8,710,000, the City will make a payment of $2,438,800 against the Note, reflecting the Note's contribution as a percentage (28 %) towards the original purchase. Payment will be made upon State of California Department of Finance issuing a Finding of Completion ( "Finding ") and will leave a balance of $16,442,950 plus interest accrued from the Original Note date of December 31, 2008. ii. A five -year payment schedule will be established with the first payment commencing six months from receiving a Finding. The annual payments will be $3,288,590 per year plus accrued interest. In the event Redevelopment Property Tax Trust Funds ( "Trust Funds ") pursuant to the ROPS process and received as a result of the Reimbursement Agreements do not equal $3,288,590 plus accrued interest, the City will only pay the actual amount received in Trust Funds. iii. Corresponding to the payment schedule once it is initiated, the Successor Agency will provide Semi - Annual Reports to the Oversight Board detailing the payments made against the Note. iv. If parcels are also sold during this time, the City will make a payment against the Note that reflects the Note's contribution as a percentage (28 %) towards the original purchase. V. The City will pay off the balance of the Note in the fifth (5th) year, regardless of whether or not Trust Funds have amounted to $3,288,590 plus accrued interest in each of the previous four years. 2) If the Agreements are not reinstated, the payment schedule and due date will correspond with the sale of the remaining parcels as follows: In recognition that the City has sold 7.53 acres for $8,710,000, the City will make a payment of $2,438,800 against the Note that reflects the Note's contribution as a percentage (28 %) towards the original purchase. Payment will be made on December 1, 2014. ii. As each parcel is sold, the City will make a payment against the Note that reflects the Note's contribution as a percentage (28 %) towards the original purchase. iii. Upon the sale of the final parcel, the City will pay off the balance owed on the Note, notwithstanding whether the payment is less than or greater than 28% of the sale. iv. As parcels are sold, the Successor Agency will provide Reports to the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency detailing the payments made against the Note. b. Section 3. Is hereby deleted and replaced as follows: Section 3. Events of Default and Remedies. The failure of the City to pay the Accreted Value hereof, as and when due, shall constitute an event of default under this Note (an "Event of Default "). If an Event of Default shall occur and be continuing, the Agency may, at its option, without prior notice or demand, and is hereby authorized and empowered by the City to, at any time and from time to time, exercise all or any one or more of the rights, powers or other remedies available to the Agency against the City under applicable law. Upon the occurrence and during the continuance of an Event of 2 Default, interest shall accrue on the Accreted Value hereof at the rate corresponding with the interest rate earned by funds deposited into the Local Agency Investment Fund. C. Section 7. Is hereby deleted and replaced as follows: Section 7. Notices. All written notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the City: City of Tustin 300 Centennial Way Tustin, California 92680 Attention: City Manager If to the Agency: Successor Agency to the Tustin Community Redevelopment Agency 300 Centennial Way Tustin, California 92680 Attention: Executive Director Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if given by courier or delivery service or if personally served or delivered, upon delivery, (b) if given by telecopier, upon the sender's receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, or (d) if given by any other means, upon delivery at the address specified in this Section. Except as amended hereby, all other terms and conditions of the Original Note shall remain in full force and effect. IN WITNESS WHEREOF, the parties have duly executed this Note as of the date first above written. Date: SUCCESSOR AGENCY: SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a public body corporate and politic Jeffrey C. Parker Executive Director APPROVED AS TO FORM: Celeste Brady Special Counsel to the Successor Agency APPROVED AS TO FORM: David E. Kendig City Attorney CITY: CITY OF TUSTIN 2 Jeffrey C. Parker City Manager