Loading...
HomeMy WebLinkAbout1993-09-14 - AGENDA REPORTS - GOLDEN VALLEY DR ASMT DIST (2)AGENDA REPORT City Manager Approve Item to be presented Ken Pulskamp UNFINISHED BUSINESS DATE: September 14, 1993 SUBJECT: GOLDEN VALLEY ROAD ASSESSMENT DISTRICT DEPARTMENT: CITY MANAGER Background The Golden Valley Road Assessment District was formed In cooperation with five developers for the purposes of building Golden Valley Road from 1.14 to Sierra Highway. The five developers are: Tract 45022, G. H. Palmer Associates, 103 units - Vesting Tentative Map approved March 27, 1990 Tract 43145, Watt/Parker, 82 units - Vesting Tentative Map approved May 1, 1990 Tract 48893, Showcase Homes, 161 units - Vesting Tentative Map approved July 3, 1990 Tract 48892, Hunt/Heeber (AFA COMMM, 108 units -Vesting Tentative Map approved August 21, 1990 Tract, 48117, AMCAL, 104 units - map recorded The Planning Commission recently extended the life of the Golden Valley Road developers'tentative maps and associated entitlements, to June 1, 1994. The Commission granted one previous time extension to each map in 1992 and also modified the condition related to Golden Valley Road to allow for the finalization of the funding and acquisition agreement and the subsequent formation of the assessment district. The Planning Commission has conducted a total of five hearings related to the time extension and modification requests for the projects. The Planning Commission has approved the applicants' requests in all cases in an effort to allow the projects to move forward. The developers have represented to the City that these extensions and modifications were necessary to allow for the bond sale to occur. The City has established the District and has been ready to proceed with the sale of bonds since approximately June 1992, under the terms of the funding and acquisition agreements approved by the City Council on April 2, 1992. The City has hired bond counsel, an underwriter and a financial consultant. to finalize the sale of bonds. Several significant concessions have been made along the way by the City to facilitate and finalize the District and the sale of bonds. The City has worked diligently with all five developers overthe past three years; Important schedules and deadlines have been set and reset to accommodate the developers. For example: ' Jan. 1992 Tract 48117 (AMCAL).- Modification to the Golden Valley Road condition approved by Planning Commission Feb. 1992 Hearing before Planning Commission related to time extensions and modification to the Golden Valley. Road condition for each remaining project APPROVEDAgeie a fleet: Golden Valley Road Assessment District - September 14, 1993 - Page 2 (Tracts 45022, 43145, 48893, and 48892). Item Is continued to the first Commission meeting In March at the request of the applicants. March 1992 Planning Commission approves condition modification and grants each project a one year time extension. April 1992 Funding and acquisition agreements of remaining developers signed. June 1992 Deadline for sale of bonds per request of developers. Sept, 1992 Deadline for sale of bonds extended; developers still not met their conditions. Nov. 10, 1992 City Council status report; sureties still not provided. Nov. 24, 1992 City attempted to proceed with $880,000 single issue for Amcal; blocked by litigation threats from remaining developers. Dec. 4, 1992 Comprehensive letter sent documenting over 31 meetings and 13 Council/Commission meetings City has worked on to make the Golden Valley Road a reality (attached). 1st Qtr. 1993 All outstanding district formation costs and staff costs reimbursed by developers. New appraisal report ordered. (Note: Becomes "stale" again September 1993.) New schedule drawn up for bond sale. May 1993 Commission considers applicants'second time extension request, continuing the Item to the first meeting in June. June 1993 Commission grants the time extension request, extending the life of each map to June 1, 1994. July 1993 Another new schedule for bond sale drawn up; all developer deadlines missed, including provision of sureties. Developer Needs The City's repeated efforts to make construction of Golden Valley Road a reality Is evidenced by the City's willingness to be flexible and accommodate developers' needs at difficult stages of the project. For example: A. Repeated extensions In administrative and procedural deadlines. B. Granted a reduction in the adopted public financing guidelines of a minimum value to lien ratio from 3.5:1 to 3:1. C. Agreed to support phased district as proposed by Dan Palmer In Feb. 1992, rather than a single district as originally envisioned. Golden Valley Road Assessment District • September 14, 1993 - Page 3 D. Agreed to capitalize Interest for a period of 12 months Instead of 6 months as originally discussed. E. Granted one. year tentative tract map time extensions for each developer after having previously stated no time extensions would be granted unless the District was complete. F. Granted vesting status to the Hunt/Heeber tract, thereby conferring additional property rights." G. Agreed to an Innovative approach suggested by the developers to meet the surety requirements. H. Hired bond underwriter and bond counsel at key points during district formation to facilitate completion. I. Postponed public hearing dates on at least four occasions at the request of the developers. J. Extended deadlines for provision of sureties and adequate financial disclosure information numerous times over a 17 month period. K. Again extended vesting maps so all expire June 1994. L. Conceded City position on capitalized Interest allowed from 12 months to 24 months. Financial Considerations While numerous concessions have been made to accommodate the developers and to facilitate the construction of Golden Valley Road, there remains some financial Issues which still have not been adequately resolved. They are: A. Surety commitments from the developers were to be provided to the City by August 3,1993. A non-binding; letter was dated August 13, 1993, was received from Amwest Surety Company, which letter was not a commitment but rather a conditional commitment provided sufficient collateral was given to Amwest Surety Company. A surety agreement has not been provided. B. Financial statements and due diligence forms from the developers were due to the City by July 27,1993. Financial statemenWand due diligence forms for Hunt/Heeber and Showcase Homes were not received until mid-August. The underwriter has reviewed these financial statements and due diligence forms and believes certain factors disclosed in these documents would adversely affect the sale of the bonds and call Into question the prudence of their Issuance at this time. C. The City agreed to a 24 month capitalized Interested provided that the developers pay an additional $336,000 to cover the additional capitalized Interest period. The developers have Indicated that they are unable to pay the additional amount of money and have proposed an Increase to the principal amount of the bonds or move the proposed park to Phase 11 of the development. Both of these proposals are not acceptable to the City due to the fact that they would: Golden Valley Road Assessment District - September 14, 1993 - Page 4 7. Adversely affect the marketability of the bonds if the size of the bond Issue Is Increased. 2. Negatively affect the value to lien ratio further by increasing the bond issue and thereby Increasing the amount of the sureties if the size of the bond Issue is Increased. 3. Require amendments to the Engineer's Report, thus creating additional public hearings If the size of the bond Issue Is increased. 4. Require an updated appraisal of.the land due to additional time delays. 5. Result In larger assessments to the homeowners If the size of the bond Issue is Increased. 6. Require additional map revisions to allowthepark to be moved to Phase 11, which would involve additional public hearings before the Planning Commission. D. One of the developers, HunUHeeber, has been delinquent on Its property taxes for Golden Valley for the past 18 months. This fact must be disclosed to the potential bondholders, which will adversely affect the marketability of the bonds. The City has exercised its good faith efforts In the performance of the obligations under the Funding and Acquisition Agreements and in the planning of the Issuance of the bonds. Many concessions and time extensions have been made to facilitate the developers and the construction of the Golden Valley Road. Staff has concerns that the sale of the bonds under the existing circumstances would potentially jeopardize the City's credit rating and its Image in the bond market. Under the recommendation of the City's financial advisor and underwriter, It would be imprudent for the City to proceed with the Issuance of the bonds at this time given the many issues still unresolved. Legal Considerations Vista -Terrace Properties, Ltd., Watt -Parker, Inc., H&H Enterprises and Showcase Homes, Inc. (defined collectively as the "Developers" In their respective Funding and Acquisition Agreements, each dated as of April 8, 1992) have repeatedly failed within a reasonable time to perform obligations specified in the Funding and Acquisition Agreements. At this time, such failure operates to relieve the City of Its obligation to issue bonds consistent with the requirements of the Funding and Acquisition Agreements. By contrast, Amcai appears to have met Its obligations under its Funding and Acquisition Agreement, however, Issuance of bonds on its behalf Is not feasible In view of the fact that the "Developers" have threatened litigation. Amcal continues to press the City for a resolution of this Impasse. Recommendation Refer to City staff for appropriate action to pursue the means for possible resolution of the Impasse. Attachment Letter to Developers' Representative dated December 4, 1992 cdmounditg1dnv1y." City of Santa Clarita Jill Icajic Mayor Jan Heidt MayorPro-Tem Can Boyer Counalmember Jo Anne Darcy Counalmember George Pederson Coundimember 1 23920 Valenclvd. Suite 300 City of Santa Clarita I California 91355 December 4, 1992 I I Phone (805)259-2489 Fax (805) 259-8125 Mr. Steven J. Krueger Showcase Homes. 14482 Beach Blvd., Suite W Westminster, CA 92683 Re: Golden Valley Road Assessment District Dear Steve, This letter is to address the issues 'raised in Mr. Lamport's November correspondence and conversations held over the last few weeks with Mr. Lamport and the developers. On November 10th, the City Council reviewed the status of the Issuance of bonds for the developers involved in Golden Valley Road Assessment District. Based upon the comments received that evening, the Council took the following actions: . a. Directed staff to proceed with a single issue of bonds for AMCAL, unless other developers could give deposits, letter withdrawing threat of litigation, and surety by December 1; b. Directed all staff and consultants to suspend work on future issues of bonds for the remaining developers; C. Directed staff to calculate all costs and expenses Incurred to date and send invoices to the developers; and d. Directed staff to proceed with future bond sales forthe remaining developers upon their request only if sufficient and fiscally sound surety and credit enhancement instruments are provided, sufficient time exists for a complete and thorough review, and letter Is received withdrawing threat of litigation. This action was based on months of working towards an acceptable single bond Issue for all five.developers. There was no attempt to "ambush" the developers before the Council, but rather to receive direction in light of the actions taken over the last few months regarding the increased insistence by the developers for the Issuance of bonds for AMCAL individually. There have been status reviews to the Council of the progress of the Issuance of bonds in July and September. The November status report was very much in order given the expectation that has been created previously that we were very close to finalizing the bond sale. With no effective response from the developers on meeting surety requirements and on the numerous requests for an additional deposit to cover the costs and expenses of the City and the readiness of AMCAL to move forward, having met all qualifications, it was appropriate to bring this matter before the Council. In this situation, it was not prudent for the City to carry and further incur costs, especially consultant costs, without receiving Council direction. Mr. Steven Krueger December 4, 1992 Page 2 On November 24, 1992, the City Council, in response to Mr. Lamport's November 24 correspondence, further directed staff to allow you one more opportunity to perform as a part of a parity series issue for the district. A deadline of December 1 was set and a comprehensive listing of all outstanding items was sent to you on November 25. No response or documentation was received by us by the close of business December 3. The Council's November 24,1992 action again demonstrates ourattempts to proceed as originally envisioned and to compromise with the unqualified developers at every opportunity. While Percy Vaz contemplated a separate issue over a year ago, and had formally requested his own bond issue back in June 1992, the City held off to give other developers every opportunity to perform and have only one issue for the initial phase. SinceJune, we have received nine letters requesting the City to proceed with issuing a separate series of bonds for AMCAL. (June 30, 1992 letter from Lew Feldman to Mark Adler; July 2 letter from Stan Lamport to Lynn Harris; July 10 letter from Stan Lamport to Ken Pulskamp; July 23 letter from Percy Vaz to Lynn Harris; July 30 letter from Stan Lamport to Lynn Harris; July 30 letter from Stan Lamport to Ken Pulskamp; August 25 letter from Percy Vaz to Lynn Harris; September 11 letter from Stan Lamport to Assistant City Attorney; and October 16 letter from Percy. Vaz to Assistant City Attorney.) It should be noted that, contrary to Mr. Lamport's public statements, it is the City's understanding that Cox, Castle & Nicholson no longer represents AMCAL. Mr. Vaz had notified us In writing previous to the November meetings that this is the case and he further verbally notified us again the morning of November 10, 1992 that Cox, Castle & Nicholson was not his representative. The Funding and Acquisition Agreement for AMCAL provides that the City shall have discretion and approval of each step in the process of forming the district and the Issuance of bonds, including the principal amount and timing of the sale of the bonds and whether the bonds shall be issued in phases or series after consultation with AMCAL. The City has no Intention of forming separate assessment districts, but, as referenced in the November 10th and November 24th City Council meetings, has discussed certain terms of the bonds relating to AMCAL's property. The City feels that tt has very viable and defensible reasons for these terms. Section 4(a) of the Funding and Acquisition Agreement states that the City need not proceed with the issuance of the bonds until required advances have been made, which they have not Nevertheless, the City has worked in good faith with the developersto achieve a marketable and reasonable solution to the current situation. Again, the City Council action of November 10 and 24 is consistent with the Funding and Acquisition Agreement, of which you were a part and at which represented the developers as capable and willing to perform under, these Agreements. These Funding and Acquisition Agreements contain similar language giving the City discretion as to the timing, phasing, and terms of the bonds secured by property of the remaining developers. 0 0 Mr. Steven Krueger December 4, 1992 Page 3 Since May 1992, the City has requested that appropriate sureties and credit enhancement be provided so that the City may issue the consolidated bonds. Such requests were made numerous times, verbally and in writing. A partial listing of these written communications include: May 22 from Ken Pulskamp to Cox, Castle; June 17 from Ken Pulskamp to Cox, Castle; July 2 from Ken Pulskamp to Cox, Castle; July 2 from Lynn Harris to Cox Castle;. July 10 from Ken Pulskamp to Cox, Castle; July 28 from Lynn Harris to Steve Krueger; September 9 from Ken Pulskamp to Steve Krueger; October 16 letter from Lynn Harris to Steve Krueger, which contained a copy of the October 2letter from PaineWebber and the October 16 letter from Fieldman, Rolapp & Associates. As referenced by the City Council at the November 10 meeting through its action, there is no intention on the part of the City to preclude the developers from compliance with the' requirements for a successful bond sale. Beginning with late 1989, the City has participated in over 31 meetings and 13 appearances before the City Council and/or Planning Commission to help the developers comply with their existing requirements. (City staff meetings and all hands meetings were held on, Including but not limited to, during the 1990 year: January 22, February 15 and 20, March 7, April 12, May 7, June 19, July 10, August 14, September 11, 21 and 25, November 1 and December 11; during the 1991 year: January28, February8 and 13, March 12, May 22, October 22, November 1 and December 3; and in the 1992 year: February 11 and 26, April 29, June 4 and 29, July 2 and 13, and September 11 and 17. City Council and Planning Commission meetings include January 1, 1990, January 16, 1991, December 5, 1991, and January 7 and 28, March 3 and 24, April 7 and 21, June 23, July 14, September 8 and November 10 and 24of the 1992 year.) During this time, the City has made numerous concessions to agreed upon conditions to the issuance of bonds. For example, modification of map conditions, reduction of required value to lien ratio from 3:5:1 to 3:1, phasing of construction of Improvements and selling of bonds, and reduction in the amount and duration of the sureties. Due dates and deadlines have been established by the City in order for the City to properly monitor the situation and resolve the Issue of AMCAL readiness to move forward. While the developers have Imposed deadlines for the City to meet, i.e., June 2,1992, to forth the assessment district, and September 2,1992 to Issue bonds, which the City has in good faith been attempting to meet, the developer. deadlines have not been met asstatedin the numerous correspondence to date. Note, for example, that the district was formed on June 23 after two continuances requested by the developers. These continuances were granted after the developers assurances to the City that these continuances would not impact our ability to issue bonds by the September deadline. The City has not taken any action regarding the status of the developers' maps and, In accordance with Its policies, will not until such time as the appropriate requests for extensions are submitted in the exercise of its discretion as provided for under the Subdivision Map Act. At that time, the City will review, analyze and legislatively determine the merit of such applications. Mr. Steven Krueger December 4, 1992 Page 4 We have periodically discussed lines of communication and have, in writing, a confirmation that you, not Cox, Castle & Nicholson representatives, are the developers' official representative. Mr. Lamport's recent charges that phone calls have been unanswered, etc., are untrue in that I personally tried to contact,you on an almost daily basis in an effort to reach resolution of all items prior to making recommendation that the City move forward with the AMCAL bonds. Mr. Lamporl's attempts to claim the City has made certain commitments based solely on his communications directly to consultants is not accepted business practice, nor is it consistent with our previously established lines of communication. The consultants must receive direction from the City and claims of "approvals" from the consultants puts those consultants in an untenable position as to matters of policy. After 3:00 p.m. on December 4, we received a FAX dated December 2,.1992, from Mr. Lamport, as a partial response to George Caravalho's letter dated November 25, 1992; referred to above. This letter contains substantially the points you raised in a meeting with me and Lynn Harris yesterday. I responded verbally to those points at that time. In an effort to curtail the paperflow, I will not reiterate them now unless you would like me to do so. 1 therefore feel you now have enough information and response from the City, as well as clarification of City Council direction, in orderto proceed. The City has requested and continues to request an additional deposit from the developers to cover its ongoing costs and expenses. We shall implement the City Council direction of November 10, 1992 and November 24,1992, and are proceeding accordingly. I hope this letter clears up the misunderstandings and other issues raised by your counsel. Please advise on how you wish to proceed. It is my hope and desire that the developers submit the requested materials to the City In a timely manner so that we can proceed with this project and get Golden Valley Road constructed. I hope the letterwriting can cease, that these issues can get resolved, and construction can begin. KP:LMH:scw gv123 cc: See attached list