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Home My WebLink AboutLTR KATZ HOLLIS 09-07-82KatzHollis September 3, 1982 Mr. William A. Huston City Manager City of Tusttn 300 Centennial Way Tustin, California 92680 Katz Hollis Coren & Associates, Inc. Financial Consultants The Oviatt Building 617 South Olive Suite 710 Los Angeles, CA 90014 (213) 629-3065 Dear Mr. Huston: Enclosed is an updated ten year projection of incremental tax revenues and revised bonding capacity scenarios for the Town Center Redevelopment Project. The revenue revisions reflect actual 1982-83 taxable values for the Project Area as reported by the Orange County Auditor-Controller's office. The 1982-83 reported taxable values for the Town Center Project are approximately $8.5 million greater than that estimated in our projection of July 19. It is appropriate to note the basic elements of the valuation differ~nce and their causative factors. First, land value increased approximately $4.0 million from 1981-82 to 1982-83. The Katz Hollts projection made a basic assumption based on available data from staff and the developers that the land on which the developments were to occur was in private ownership by the respective developers and that no public ownership (agency or city) of developable land existed. Transfers of ownership and increased values were consequently not assumed to occur. Second, the Katz Hollis projection assumed no increase for utility and personal property values between 1981-82 and 1982-83. Utility values are assessed on a unitary basis statewide and the complexity of estimating annual fluctuations in local utility values defeats any realistic estimates. Personal property was held constant because the new development scheduled for completion by 1982-83 did not have significant personal property value to be added. The combined increase in valuation of these two categories of roperty between 1981-82 and 1982-83 totaled approximately 3.3 million. KatzHollis City of Tustin September 3, 1982 Page 2 These elements of valuation total approximately $7.3 million and represent 86% of the valuation difference. The balance of approximately $1.2 million was apparently development value added through assessor appraisals which assigned a greater percentage of development completion on the roll as of the March lien date. Additionally, personal property added to existing office, retail and industrial uses was not possible to project with any accuracy based on the available data base. The adjusted 1982-83 tax revenues are estimated to be $1,277,000 which is a $103,000 increase over previous calculations. This adjustment impacts revenues throughout the projection with $1,908,000 in tax increment now estimated in 1991-92 as opposed to the $1,812,000 previously projected. The detailed revised tax increment projection has been enclosed as Schedule 1. The increased estimate of incremental tax revenues coupled with the recent decline in interest rates significantly affect the bonding capacity of the Town Center Project. Recently marketed tax allocation bond issues in California have sold at an interest rate of slightly less than 11%. Further, the discounting of such bonds has in some cases been reduced to 2.5%, down from a level of 5%. We have adjusted these two factors in the enclosed bonding capacity calculations. Net bond funds from a bond issue based on 1982-83 tax increment is shown on Schedule 2. Tax revenues available for bonding, after allowing for a coverage factor of 25%, is $1,021,600, which would support a gross bond issue of $8,135,000. This amount reduced by bond insurance, issuance costs, discounts, and reserve fund requirements results in net bond proceeds of $8,597,000. Schedule 3 indicates the estimated bonding capacity of projected 1988-87 incremental tax revenues, which reflects full build-out and assessment of all developments assumed to occur in the tax increment projection of July 19. Bondable tax increment in 1986-87 is projected to be $1,498,400, which would support a gross bond issue of $11,930,000. The issuance cost factors noted above would yield net available funds of $9,744,750. In recomputing the tax increment and resultant bonding capacities, we have assumed no changes in the new development values or schedules in ghe July 19 projection. It should also be noted that the bonding capactiy analyses shown here reflect updated information concerning the tax-exempt bond market. Fluctuations which are occurring frequently in the current market could alter these bonding estimates. Katzttollis City of Tustin September 3, 1982 Page 3 As we have previously noted, the Agency's Bond Consultant will be providing the Agency with more refined bonding capacity analyses, reports on current market conditions, recommendations on when to market an issue and preparation of issuance documents related to the sale. We are available to answer any questions you may have. Yours very truly, KATZ, HOLLIS, COREN & ASSOCIATES, INC. Ketth M. Bresktn GGJ:KMB: cjw o o ~ o ~ ~ o o o ~ ['... 0,1 ,--I 0 co cq 0 ~'~ 0~ o,1o~ ~ ~, 00 00 00 ~0 00 oO Schedule 1-A Tustin Redevelopment Agency Town Center Redevelopment Project NOTES TO TAX INCREMENT PROJECTION (1) (2) (3) (4) (5) Reflects increase of 2% above prior year's total real property for valuation increases allowable under Pro- position 1S. See report of July 19, 1982, SchedulesB and C, for assumptions of new development timing and valuation estimates. Includes locally assessed personal property and public utility value assessed by the State Board of Equalization. Projected tax rate reflects annual decrease equivalent to 10% of the 1981-82 override tax rate. Assumed to remain constant due to uncertainty of State budgetary constraints. (6) Reflects removal of $8,160 in business inventory value as shown on the 1982-83 tax roll. KatzHollis Schedule 2 Tustin Redevelopment Agency Town Center Redevelopment Agency BONDING CAPACITY OF 1982-83 TAX INCREMENT 1982-83 Tax Allocation Bond Issue Incremental Tax Revenues Less: 25% .Coverage (1) Net Amount to Size Bond Issue Gross Bond Issue (20 Yrs, 11%) Less: 2.5% Discount Insurance Issuance Costs Sub-Total Less: 1 Year's Debt Service in Reserve Fund $ (203,000) (163,000) (150,000) Net Bond Funds Available $ 1,277,000 (255,400) $ 1,021,600 $ 8,135,000 (516,000) $ 7,619,000 (1,021,600) $ 6,~97,000 (1) Funds from coverage factor assumed to be retained in reserve trust funds. KatzHolli$ Schedule 3 Tustin Redevelopment Agency Town Center Redevelopment Project BONDING CAPACITY 'OF 1986-87 'TAX INCRENENT 1986-87 Tax Allocation Bond Issue Incremental Tax Revenues Less: 25% Coverage (1) Net Amount To Size Bond Issue Gross Bond Issue (20 Yrs, 11%) Less: 2.5% Discount Insurance Issuance Costs Sub-Total Less: 1 Year's Debt Service in Reserve Fund Net Bond Funds Available $ (298,250) (238,600) (150,000) (1) Funds from coverage factor assumed to be retained in reserve trust funds. $ 1,873,000 (374,600) $ 1,498,400 $11,930,000 (686,850) $11,243,150 1,498,400 $ 9,744,750