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HomeMy WebLinkAbout02 AMENDED PROMISSORY NOTEAgenda Item Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency MEETING DATE: JANUARY 28, 2014 SUBJECT /ACTION: ADOPT OVERSIGHT BOARD RESOLUTION NO. 14 -01, APPROVING THE AMENDED PROMISSORY NOTE BETWEEN THE CITY OF TUSTIN AND THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY zqt r7 i7 IT, I J, l A LI 17 a 11 III us] F1 U 0C 0ei-9 4 7 t C � 3 i [elk, It is recommended the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency adopt Oversight Board Resolution No. 14 -01, approving the Amended Promissory Note between the City and the Successor Agency, subject to the following condition: a) Should any subsequent modifications be required, the City Manager and /or Finance Director, or their authorized designee, shall be authorized to make any augmentation, modification, additions or revisions as may be necessary subject to certification by the Oversight Board Chair. (Note: This Resolution shall be effective after transmittal of this Resolution to the Department of Finance ( "DoF ") and the expiration of five (5) business days pending a request for review by DoF within the time periods set forth in Assembly Bill No. 1484. In this regard, if DoF requests review hereof, it will have 40 days from the date of its request to approve this Oversight Board action or return it to the Oversight Board for reconsideration and the action, if subject to review by DoF, will not be effective until approved by DoF.) 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. Agenda Report January 28, 2014 Page 2 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 believes 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, including their failure to provide a response within five business days of the Agency's May 13 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 that 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 Affordable Housing Reimbursement Agreement, Public Works Agreement, and South Central Redevelopment 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. Agenda Report January 28, 2014 Page 3 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, notwithstanding whether the payment is less than or greater than 28% of the sale. 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. 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. Pursuant to HSC Section 34180(a) and 34191.4(b), the Oversight Board has the authority to reinstate loan agreements between the City and the Successor Agency. On January 21, 2014, the City Council, acting as the Successor Agency, approved the First Agenda Report January 28, 2014 Page 4 Amendment to the Promissory Note. Should the Oversight Board approve the amended Note, it will be submitted to DoF for review. A copy of the First Amendment to the Promissory Note is attached to Oversight Board Resolution No. 14 -01 for Oversight Board approval. Staff is available to answer any questions the Oversight Board may have. Attachment: Oversight Board Resolution No. 14 -01 OVERSIGHT BOARD RESOLUTION NO. 14 -01 A RESOLUTION OF THE OVERSIGHT BOARD OF 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 Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency 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. As of February 1, 2012, the former Agency was dissolved pursuant to the Dissolution Laws and as a separate public entity, corporate and politic the Successor Agency administers the enforceable obligations of the former Agency and otherwise unwinds the former Agency's affairs, all subject to the review and approval by a seven - member oversight board ( "Oversight Board "); and F. Section 34179 provides that the Oversight Board has fiduciary responsibilities to holders of enforceable obligations and the affected taxing entities that benefit from distributions of property tax and other revenues pursuant to Section 34188 of Part 1.85 of the Dissolution Laws; and G. Pursuant to Section 34179, the Successor Agency's Oversight Board has been formed and the initial meeting occurred on March 13, 2012; and H. Section 34179(e), as amended by Assembly Bill 1484 ( "AB 1484 "), requires all actions taken by the Oversight Board to be adopted by resolution; and Oversight Board Resolution 14 -01 Page 1 of 3 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 J. 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 K. 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 was to repay the principal and interest on December 1, 2013, unless amended by both parties; and L. 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 M. The City and Successor Agency have 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; and N. The Oversight Board has duly considered all other related matters and has determined that the approval of the First Amendment to the Promissory Note and submission to the State of California Department of Finance is in the best interest of the City and Agency and in the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable state and local laws and requirements. NOW, THEREFORE, BE IT RESOLVED BY A RESOLUTION OF THE OVERSIGHT BOARD OF 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 Oversight Board approves the First Amendment to the Promissory Note attached hereto as Attachment No. 1 and incorporated herein, and further authorizes the Successor Agency to transmit this Resolution to the State Department of Finance ( "DoF "). Section 3. The Executive Director of the Successor Agency or his authorized designee is directed to post this Resolution on the City /Successor Agency website. Section 4. This Resolution shall be effective after transmittal of this Resolution to DoF and the expiration of five (5) business days pending a request for review by DoF within the time periods set forth in Assembly Bill No. 1484, which amended the Dissolution Act and was approved by the Governor on June 27, 2012. In this request, if DoF requests review hereof, it will have 40 days from the date of its request to approve this Oversight Board action or return it to the Oversight Board for reconsideration and the action, if subject to review by DoF, will not be effective until approved by DoF. Oversight Board Resolution 14 -01 Page 2 of 3 Section 5. The Secretary of the Oversight Board shall certify to the adoption of this Resolution. APPROVED AND ADOPTED this 28th day of January, 2014. Doug Davert, Chairman Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency ATTEST: Charles E. "Chuck" Puckett, Secretary Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency STATE OF CALIFORNIA ) COUNTY OF ORANGE )SS CITY OF TUSTIN ) I, CHARLES E. "CHUCK' PUCKETT, Secretary of the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency, do hereby certify that the whole number of the members of the Agency Board is seven; that the above and foregoing Resolution No. 14 -01 was duly passed and adopted at a regular meeting of the Oversight Board, held on the 28th day of January, 2014, by the following vote: :6_C9 a I A u: I WWI ��l F. t:9 u_ u: - • : ,- i 9 BOARD MEMBERS ABSENT: Charles E. "Chuck" Puckett, Secretary Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency Attachment No. 1 — First Amendment to the Promissory Note Oversight Board Resolution 14 -01 Page 3 of 3 ATTACHMENT NO. 1 FIRST AMENDMENT TO THE PROMISSORY NOTE [Attached] FIRST AMENDMENT TO PROMISSORY NOTE Initial Principal Amount: $18.881.750.00 Tustin, California , 2014 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: 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 rime, 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 (5a') 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: 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 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 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. SUCCESSOR AGENCY: SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a public body corporate and politic Date: By: Jeffrey C. Parker Executive Director APPROVED AS TO FORM: Celeste Brady Special Counsel to the Successor Agency APPROVED AS TO FORM: 0 David E. Kendig City Attorney CITY: CITY OF TUSTIN Jeffrey C. Parker City Manager