HomeMy WebLinkAbout8.1 Dublin Ranch Assess Plan
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CITY CLERK
File # D[3][(d[Q]-[2]QJ
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AGENDA STATEMENT
CITY COUNCIL MEETING DATE: (April 20, 1999)
SUBJECT:
Public Financing Plan for the Proposed Dublin Ranch Assessment
District
(Report Prepared by: Richard Ambrose, City Manager)
ATTACHMENTS:
1. Public Financing Plan for the Proposed Dublin Ranch
Assessment District.
RECOMMENDATIO~ ~:
Approve and accept the Public Financing Plan report.
Authorize staff to begin the preparation of documents to create
an assessment district for the South Dublin portions of the
Dublin Ranch property and to take steps necessary to secure the
services of a Financial Advisor and Underwriter to assist the
City in the district formation.
FINANCIAL STATEMENT:
The cost to the City for services rendered in conjunction with the
assessment district will be reimbursed by the proceeds of assessment
district bonds.
. DESCRIPTION:
F or the past two years, the City staff has been working with property owners in the Eastern Dublin area to
discuss possible ways to fund critical freeway interchanges, major streets, drainage, water, sewer, and
reclaimed water improvements for the City of Dublin's Eastern Dublin Specific Plan Area. In June 1998,
the City Council authorized staff to undertake an evaluation of a proposed fmancing plan for a portion of
the Dublin Ranch property owned by the Lin Family, and to retain an independent Financial Advisor and
Bond Counsel to provide the City with an independent evaluation of this proposal.
During the past year, staffhas met with various property owners adjacent to the area proposed for the
financing program, worked with the proponents of the fmancing program to ascertain the most appropriate
financial vehicle to use to finance major improvements and involved the Dublin San Ramon Services
District (DSRSD) as a partner to determine the best way to secure necessary improvements. Major
conclusions of this year's effort were as follows:
· A 1913/1915 Act Assessment District was determined to be the preferred financing tool.
Assessments on property in the district would finance the improvements over a specified time.
· The City would be the lead agency in the formation of the district and the administration of
debt issuance.
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. COPIES TO:
8.1
ITEM NO.
Analysis:
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The City would enter into an agri:~entiwith DSRSD to make certain that the bond proceeds
from the assessment district would meet DSRSD's improvement needs.
A specific list of major infrastructure public improvements for the area could be financed using
a two phase assessment district on a 561 acre portion of Dublin Ranch between I-580-Fallon
Road, and southward of the existing Dublin Ranch Phase I development.
The proposed major public improvements would only finance 20-25% of the total
infrastructure needed to completely develop the 561 acres; however developer financing would
insure that the remaining infrastructure would be built to insure proper development ofthis
property .
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The findings, conclusions and recommendations of the Public Financing Plan Report prepared by Mark
Northcross for the Proposed Dublin Ranch Assessment District have been thoroughly reviewed by
DSRSD staff, City staff, the City Attorney, the City's Financial Advisor, Bond Counsel, Sam Sperry and
the District proponents, the Lin Family representatives. All parties are in agreement that the report as
presented here, accurately portrays the need for public financing to facilitate development of this 561 acre
property, the method to accomplish this financing (1913/1915 Assessment District) and the specific list of
improvements that should be financed by this district (at a total cost of $67 million).
If authorized by the City Council, the next steps to form the district would be as follows:
.
The developer would submit a petition to the City to form an assessment district.
Prepare a formal resolution of intention for adoption by the City Council, which would start
the process for eventual creation of the assessment district.
Retain a Financial Advisor, Bond Counsel, and Bond Underwriter, to prepare specific
documents to create and implement the district.
Secure DSRSD Board approval of participation in the proposed assessment district procedure
with the City.
Proceed with preparation of the engineer's report on the improvements, costs and assessment
spread.
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The City's Financial Advisor, Mark Northcross, will present a summary of the report to the City Council
to further explain the findings.
Conclusion:
Staff recommends that the City Council accept the Public Financing Plan Report and authorize staff to
begin the preparation of documents to create an assessment district for the South Dublin portions of the
Dublin Ranch property, and to take those steps necessary to secure the services of a Financial Advisor and
Underwriter to assist the City in the Districts formation.
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G:planning/com:spo/eddieJassessdist sr. doc
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PUBLIC FINANCING PLAN
for the
PROPOSED DUBLIN RANCH ASSESSMENT DISTRICT
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Analysis and Recommendations
Prepared by
Project Finance Associates, Inc.
for
The City of Dublin
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April 9, 1999
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
EXECUTIVE SUMMARY
This report was prepared in response to a proposal from the Un family for public financing to
fund public improvements for a portion of their property in east Dublin. The proposed public
financing vehicle would be an assessment district, tentatively titled the Dublin Ranch
Assessment District. If approved by the City, the official name of the district would be
Assessment District No. 1999-1 (Dublin Ranch). The purpose of this Executive Summary is to
outline the important issues related to such a bond issuance, and how any risks or concerns of
the City can be mitigated.
We believe that the need for some kind of public financing to facilitate development of this
property is both real and justified. The front-end costs to develop the property are considerable.
TIF fees are inadequate in both quantity and in timing to fund the required minimum
infrastructure necessary to open the property to development. As described in the body of this
report, an assessment district, as proposed by the developer, is the best financing vehicle
available for this purpose. The problems raised by Proposition 218 with respect to assessment
districts have been addressed and resolved, as described in the report.
Just as land development itself is risky business, so is the financing of land development. While
these risks and other matters of concern to the City are identified in this report and largely
mitigated, the element of risk cannot be entirely eliminated. While a number of issues are
covered in this report, below is a brief discussion of the matters of greatest concern, and how
we propose to mitigate them.
Entitlements
At present additional development entitlements are required to develop the property. A wetlands
permit from the Army Corps of Engineers will be required to develop much of the property. In
addition, a PO must be approved for the western portion of the property before building can take
place. In reality, the assessment bonds will be paid off through development of the property.
Without these entitlements, the bonds are at risk. Consequently, we propose conditioning the
issuance of bonds in part upon obtaining certain entitlements, as described in Section 5 of this
report.
Deve/oDer's Financial Strenath
The real estate market experiences ups and downs. The developer must have the financial
strength to carry the assessment burden through a down real estate market. Oftentimes, a
developer can rely on land sales to pay the annual assessment. If a down real estate market
has reduced or eliminated land sales as a revenue source, the developer must have the
financial strength to pay the assessments from their own reserves. We have conditioned
issuance of the bonds upon a review of the developer's funding sources, and the City's
satisfaction that there are adequate funding sources to carry the project through a down real
estate market.
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
Access to the ProDertv
The developer will need to acquire off site right-of-way to provide the access necessary for
construction of the proposed improvements to be financed through the assessment district. We
have conditioned issuance of the bonds upon the developer first obtaining this right-of-way.
City Administration
The City will incur certain ongoing administrative costs as a result of formation of a district and
issuance of bonds. In addition, in the event of a delinquency, the City must pursue judicial
foreclosure through the civil court system. This can add considerable expense. Fortunately,
there are a variety of mechanisms for reimbursing these costs. We have conditioned formation
of the district upon the provision of an adequate means of cost reimbursement for the City.
Conclusion
In order to facilitate development of the property, the City will need to issue assessment bonds.
This issuance however must be conditioned upon developer performance in certain key areas,
as described above. While these conditions will not eliminate all City risks or concerns with
respect to the financing, they will mitigate them to levels that are considered reasonable and
acceptable by other municipalities and by the municipal bond industry. The risks associated with
this proposal are consequently typical to land-secured finance and are not in any way unusual
by the standards of public agency issuers in California or the municipal bond industry.
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
1.0 Introduction
The purpose of this report is to describe a plan of public finance for public improvements
necessary to develop the Un property. The goals of this plan are as follows:
1) Provide financing for major infrastructure components required to initiate development
of the property
2) Minimize or eliminate the impact of the debt burden on future homeowners as a result
of the public financing plan
3) Provide adequate funding for backbone infrastructure required to open the Un
property to development.
4) Provide adequate security for bondowners
5) Minimize or eliminate financial risks to the City
6) Keep the overall debt burden on the property to the minimum required to accomplish
the other goals for the financing plan
The original request for proposals sent by the City for this assignment identified the following
specific issues as requiring analysis in this report:
1) Adequacy of cash flow from City of Dublin's Impact Fee Program and DSRSD's
Connection Fee Program.
2) Appropriate size/boundaries for district.
3) Appropriateness of infrastructure.
4) Political and financial risks and opportunities.
5) Proposition 218
6) Credit for City Impact Fees and DSRSD Connection Fees.
7) Other viable financing mechanisms.
All of these issues are addressed in this report.
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
2.0 Overview of Potential Financina Mechanisms
Before analyzing the specific public financing proposal from the Lins it is best to review the
potential mechanisms available to the City of Dublin and/or the Dublin San Ramon Community
Services District for financing public infrastructure in eastern Dublin. There are three basic
financings mechanisms presently available:
1 ) Assessment district
2) Community facilities district (Mello-Roos)
3) Utility revenue bonds
In addition, the section reviews the use of acquisition districts with both assessment and districts
and Mello-Roos districts, as well as the impact of the Security Exchange Commission
regulations on continuing disclosw'e.
2.1 Assessment District
As a general rule of thumb, parcels may be assessed for the cost of on site infrastructure to the
extent that a parcel is specifically benefited by such infrastructure. Bonds may be sold that are
secured by the annual assessment on such property. The assessment lien is specific to a
parcel, and may be prepaid by a parcel owner. However, in the wake of Proposition 218 the
ability of an assessment district to finance infrastructure of general benefit, as opposed to
infrastructure specifically benefiting a particular parcel, has been called into question. This is an
important point with respect to the Lin property since the development will impact two freeway
interchanges, as well as regional facilities of the DSRSD. The City has currently retained the law
firm of Orrick, Herrington & Sutcliffe as an advisor with respect to the proposed assessment
district. The Orrick firm has advised the City that findings of special benefit, when based upon
the consent of the current property owner, are binding upon successor owners and cannot be
challenged once the 3D-day statute of limitations has expired. Consequently, improvements to
the freeway interchanges and other regional facilities can potentially be financed through the
assessment district only with the consent of the landowner.
The obligation to pay the annual assessments is solely an obligation of the parcel owner. The
City is not obligated in any way for the annual assessments required to pay debt service on
assessment bonds. In the event of a delinquency by a parcel owner, the City is obligated to
pursue judicial foreclosure in the civil court system. As discussed elsewhere, this can be an
expensive and time-consuming effort.
There are several ways to form an assessment district. The process most likely for the Lin
property would be for the property owner to submit a petition to the City requesting formation of
an assessment district for a specified set of public improvements. These improvements would
be described in a report of an assessment engineer. The potential assessment liens on each
parcel would be identified, and the method for spreading the cost of the improvements onto
such parcels would be described. The City Council would subsequently adopt a resolution of
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
intent and call for a public hearing to be held at least 45 days after adoption of the resolution of
intent. After the public hearing, the City Council could order formation of the district and confirm
the assessments on the various parcels within. the district based upon the assessment
engineer's report.
2.2 Community Facilities District
A community facilities district (CFD), otherwise known as a Mello-Roos district, is very similar to
an assessment district. A special tax may be levied upon parcels within the district pursuant to a
special tax formula for the purpose of funding public infrastructure. The Mello-Roos statute
requires that there be no particular nexus between the parcel and the improvement as far as
benefit is concerned. Consequently, a CFD can be used to finance public infrastructure of
general benefit. As with an assessment district, the obligation to pay special taxes is solely an
obligation of the parcel owner. The City would not be obligated in any way to pay debt service
for a CFD. The City is obligated to pursue judicial foreclosure in the civil court system for parcels
that are delinquent in the payment of their special taxes.
With a CFD, there is no obligation to allocate the cost for improvements to parcels on the basis
of benefit. A unique special tax formula is adopted for each CFD, and that formula may allocate
debt service to parcels on a wide variety of methods. The issuer, (the City of Dublin in this
hypothetical) must calculate the levy for each parcel in the district on an annual basis. based on
the provisions of the tax formula. This annual calculation can be an expensive and time-
consuming process
CFD's have become politically controversial in some communities in California. There are two
reasons for this. One, the special tax burden can be very high relative to the 1 % base property
tax rate. (This particular problem associated with CFD's is also applicable to assessment
districts). Two, the CFD may be paying for public infrastructure of no particular benefit to
residents of the CFD, and for which no other residents of the community are subject to a special
tax lien. This latter issue is unique to CFD's.
The process of forming a CFD is similar to an assessment district. Typically, a property owner
petition for formation of a CFD is followed by drafting a special tax formula for the proposed
district. The tax formula and district boundaries are adopted through a resolution of intent. At
least 30 days later a public hearing is held regarding district formation. An election of the
property owners (or registered voters if there are more than 11 registered voters within the
district) is held subsequent to the public hearing. If 2/3 of the qualified voters (whether
landowners or registered voters) approve formation of the district, the district is formed and the
tax is levied.
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
2.3 Utility Revenue Bonds
Some of the infrastructure required to develop the Lin property comprises water and sewer
facilities. DSRSD could conceivably finance these improvements through the issuance of bonds
secured by its water and sewer service charges. These bonds are called utility revenue bonds.
(Since no tolls will be charged for use of streets on the Lin property, utility revenue bonds are
not a possibility for the arterial and freeway interchange improvements required for
development. )
Until such time as service charges from development within the Lin property are sufficient to pay
debt service on such utility revenue bonds, the existing ratepayers of DSRSD would carry the
debt service burden. This would in effect constitute a subsidy from current DSRSD ratepayers to
the developer of the Lin property. Consequently, utility revenue bonds are rarely used to fund
infrastructure of specific benefit to a new development.
Utility revenue bonds may be issued by resolution of the issuer's governing board. Depending
on the legal mechanism used, no public hearing may be required.
2.4 ACQuisition Districts
Both assessment district and CFD's may be set up also as an acquisition district. This means
that the issuer (the City of Dublin in this case) would acquire the public infrastructure from the
developer when completed. Pursuant to an acquisition agreement, the City would use bond
proceeds to pay the developer for the cost of the improvements, as agreed upon in the
acquisition agreement, at such time as the City accepts the improvements as complete. This
means that the developer must secure construction financing since bond proceeds are available
only for reimbursement. However. under an acquisition agreement, the developer is in charge of
the construction of the improvements. If bond proceeds were used to pay the contractor directly,
the improvements are subject to all publiC bidding requirements. With an acquisition district, the
developer is subject only to a prevailing wage requirement. Note also that some projects within
an assessment district or CFD may be funded through an acquisition district while at the same
time other projects are funded through a traditional public works contract procedure.
2.5 Continuina Disclosure
Effective July 3, 1995, the Securities Exchange Commission (SEC) required issuers of
municipal bonds to provide for continuing disclosure. In effect, issuers must provide information
on their various bond issues since 1996 to a central data repository on an annual basis. With
respect to assessment and CFD bonds in California, the SEC effectively made landowners
subject to the same continuing disclosure requirements as publiC agency issuers. This means
that landowners and developers must provide annual reports on the progress of development
and the status of their funding sources for a development project. Should the City choose to
issue publiC debt to fund public infrastructure for the Lin property, the Lins (and their successors
if they sell the property) will be subject to the SEC's continuing disclosure requirements.
However, once all improvements required to be financed through the bond issue are completed,
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
and a landowner has no further obligations to fulfill, the landowner becomes exempt from
continuing disclosure. The City will still need to provide continuing disclosure on the district on
an annual basis through the full term of the bonds.
3.0 The Public Financina ProDosal from the Lin Familv
While in theory, the basic backbone infrastructure required to open the Lin property to
development could be funded by cash from the property owner, the Lins believe that the upfront
cash outlay required would be too great a burden. Consequently, they have proposed that the
City facilitate a public financing for the basic infrastructure required to open the property for
development. In this regard, their public financing request is not intended to fund all of the
infrastructure needs for the project, but rather to open all of the property to development.
Further infrastructure development would still be required, but would be funded as a
requirement of specific developments. The Lin public financing proposal also takes into
consideration infrastructure needs put forth by the City and DSRSD.
The Eastern Dublin Specific Plan, which was approved May 10, 1993, sets forth goals and
policies related to the financing of infrastructure required to serve the Specific Plan Area. The
first goal required that "new development in the Specific Plan Area should pay the full costs of
infrastructure needed to serve the area, and should fund the costs of mitigating adverse project
impacts on the City's existing infrastructure and services," Several financing options and various
measures of financial viability were summarized in the Specific Plan.
Pursuant to the goals and policies in the Specific Plan, representatives of the Lins have worked
with City Staff and consuttants to determine the most appropriate financing mechanism for
infrastructure required to serve a significant portion of the Eastern Dublin area and allow
development to proceed. A 1913/1915 Act assessment district was determined to be a more
feasible funding tool. The Specific Plan sets forth two policies related to the issuance of
assessment district bonds:
(1) The bonds must be sold with a minimum value to lien ratio of 3 to 1
(2) The combined assessments and property taxes on homeowners in the Assessment
District cannot exceed 2% of the home value.
The proposed Dublin Ranch Assessment District meets both of these Specific Plan policies, as
is discussed elsewhere in this report.
Many of the improvements to be financed under the Lin proposal are transportation
improvements covered by the City's TIF program. When the TIF program was implemented by
the adoption of an ordinance in December, 1994, the staff report made it clear that assessment
district financing was an option available to property owners in order to fund their TIF
requirements. Consequently, use of assessment financing as proposed by the Lins is
contemplated by both the Eastern Dublin Specific Plan and the City's TIF program.
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The public financing plan is designed to implement the overall development plan for the Lin
property. As such, the public financing request from the Lins must be sensitive to development
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
phasing and entitlement issues. For this reason, it is important to summarize these larger issues
as part of this analysis.
3.1 Overall Deve/oDment Plan
The immediate focus of the development plan is to begin developing that portion of the property
that is not subject to the jurisdiction of the Army Corps of Engineers. The long-term focus of the
plan is the development of the entire property. Because of anticipated Corps jurisdiction as a
result of the final jurisdictional determination by the Corps, the Lins must obtain a wetlands
permit from the Corps of Engineers to develop much of the eastern half of the property, and
some of the western half. This Corps jurisdictional determination has yet to be done, but is
anticipated soon. At such time as the Corps permit is obtained for the remaining property that is
determined to be under Corps jurisdiction, development of these areas can proceed. Obtaining
a wetlands permit from the Corps may take from 1 to 2 years. Consequently, any public
financing plan for the Lin property must take into consideration that major portions of the
property will not be initially open to development, and is dependent on an unrelated third party,
the Corps of Engineers, to complete development entitlements. A related concern is that the
final conditions of the Corp permit (not known at this time) could permanently eliminate a small
portion of the Lin property from development.
3.2 Public ImDrovements to be financed
Table 1 shows the public improvement costs to be financed, as proposed by the Lin family, and
broken down into broad categories. Table 1 also shows an allocation of these costs into either
Phase 1 or Phase 2. Phase 1 comprises those improvements necessary to develop the
western half of the property, which is that portion of the project area generally not subject to the
Corps permit process. The Phase 2 improvements are generally necessary for the development
of the eastern half of the property, and are also contingent on the Corps permit. While the Un
proposal assumes two phases, actual issuance may involve more than two phases. A final
decision on phasing would be made in the future as development of the property proceeds.
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
Table 1
Proposed Public Improvements for Assessment District Funding
Pro'ect
Circulation (including ROW) (1)
Timin
Phase 1
Phase 2
Phase 1
Phase 2
Phase 2
Phase 1
Phase 2
Phase 1
Phase 2
Phase 1
Phase 1
Phase 2
Cost
$13,625,550
11,103,200
1,000,000
3,534,500
1,000,000
195,000
3,893,000
1,000,000
4,000,000
5,000,000
3,675,540
6,918,560
24,496,090
30,449,260
Major storm drainage
Wetland miti ation
Water, sewer, recycled water
Fallon Road interchange (design)
Fallon Rd. inter. construction
Tassa'ara Road interchan e
Construction & Administration
Phase 1 Total
Phase 2 Total
Grand Total
$54,945,350
Includes following segments:
Central Parkway (2 lanes, Tassajara to Connector)
Connector Street (2 lanes, Central to DUblin)
Fallon Road (2 lanes)
1-580 to Gleason
Gleason Drive (2 lanes (Tassajara to Fallon)
Dublin Blvd. (4 lanes Tassajara to Fallon)
The costs for each project have generally been reviewed by the City, and are believed to be
accurate. However these are preliminary estimates and are subject to change, particularly as
actual design of the improvements progress. Two potential funding sources are shown:
1) Assessment district
2) Un cash with reimbursement from the assessment district
No City cash will be used to fund the development of the Un property. It is anticipated that the
Un family will initially fund all off-site right of way (ROW) acquisitions necessary to construct the
public improvements proposed to be funded through the assessment district. This cash
contribution will be later reimbursed from assessment bond proceeds. A total of $56 million in
improvement and land acquisition costs are proposed to be funded by the assessment district.
The Un family has proposed that the assessment district reimburse them for the cost of TIF
ROW through their own property. This is shown in the Phase 1 financing.
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
The arterial segments to be funded would generally be constructed as 2 lane roadways from the
proceeds of public financing, with the exception of Dublin Blvd., which will be constructed
initially to 4 lanes. As development takes place on specific parcels, developers will be required
to construct their arterial frontage out to 4 lanes or 6 lanes as required by the City's Circulation
Element. Water, sewer and storm drain facilities located in roadways will be constructed to
ultimate design levels from the proceeds of the public financing. The funding provided for
improvements to the Tassajara Road interchange and the Fallon Road interchange is not
sufficient to fund completion of either interchange to their ultimate design levels, but rather is
intended to improve both interchanges to a level sufficient to handle the traffic generated by full
development of the Lin property.
3.3 Form of Public Financina
The Lin family proposes formation of an assessment district, comprised of only their property. If
the assessment district format is selected, the question of general benefit versus special benefit
will need to be addressed. California law generally provides that assessment districts can be
used to finance only the special benefit portion of project costs for projects of special benefit to a
parcel. In the case of a freeway interchange, for example, it is not clear that there is only special
benefit to a particular set of parcels. As noted in Section 2.1, Orrick Herrington has advised the
City that the Lin family consent to findings of special benefit would be binding and that
successor property owners may not challenge such findings.
The assessment district would be done as an acquisition district for all Phase 1 public
infrastructure to be financed with the exception .of the freeway interchange work, and certain
improvements requested by DSRSD. The Lin family will fund initial construction of each
improvement. Upon completion and acceptance by the City of each discrete component thereof,
reimbursement will be made from proceeds of the public financing. The City would be in charge
of the freeway interchange work, which would be subject to public bidding. With respect to the
Phase 2 improvements, no decision has been made as to whether to use an acquisition district
or public bidding. There is no need to make this decision until just prior to the time that the
Phase 2 funding is required.
The Lin family proposes to go through the process of district formation only once. Consequently,
they propose to form only one district at the outset of the development process. The one district
would be capable of financing all required backbone infrastructure, regardless of phasing.
3.4 Bond Sizina
The assessment bonds would be issued in two or more phases. For purposes of this report we
are assuming two phases. With few exceptions, the first phase would fund backbone
infrastructure for the western half of the property, the second phase would fund infrastructure for
the eastern half of the property. Table 2 shows an allocation of bond proceeds for the Phase 1
financing, otherwise known as the Division 1 assessment bonds. The total par value of bonds
for Phase 1 is currently estimated at $29.73 million. Table 3 shows an allocation of bond
proceeds for the Phase 2 financing, otherwise known as the Division 2 assessment bonds.
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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I Public Financing Plan for the Proposed Dublin Ranch Assessment District
Table 4 shows a combined allocation for Division 1 and Division 2. The total amount of Phase 2
I bonds is currently estimated at $36.51 million. The combined total of debt on the property would
be $66.24 million. These figures include 18 months of capitalized interest for each issue, a debt
service reserve fund equal to 1 year of debt service, as well as costs of issuance.
I Table 2
Division 1 Assessment Bonds for Phase 1 Improvements
I All figures are esimates and subiect to change
Par Amount 29,730,000.00
Earnings during construction 553,085.92
I Total Sources 30,283,085.92
I Improvement Fund 24,496,000.00
Debt Service Reserve Fund 2,482,500.00
I Capitalized Interest 2,483,546.96
Cost of Issuance 300,000.00
Underwriter's Discount 520,275.00
I Miscellaneous 763.96
Total Uses 30,283,085.92
I Table 3
Division 2 Assessment Bonds for Phase 2 Improvements
I All figures are estimates and subject to change
Par Amount 36,510,000.00
I Earnings during construction 827,031.00
Total Sources 37,337,031.00
I Improvement Fund 30,449,000.00
I Debt Service Reserve Fund 2,995,825.00
Capitalized Interest 3,043,095.56
Cost of Issuance 300,000.00
I Underwriter's Discount 547,650.00
Miscellaneous 1,460.44
, I Total Uses 37,337,031.00
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Table 4
Combined Totals for Both Series of Bonds
All fj ures are estimates and sub'ect to chan e
Par Amount 66,240,000.00
Earnings during construction 1,380,116.92
Total Sources
67,620,116.92
Improvement Fund
Debt Service Reserve Fund
Capitalized Interest
Cost of Issuance
Underwriter's Discount
Miscellaneous
54,945,000.00
5,478,325.00
5,526,642.52
600,000.00
1,067,925.00
2,224.40
Total Uses
67,620,116.92
3.5 District boundaries
The district will include all of the Un property south of the southern boundary of the MSSH
Dublin Development, LLC subdivision (Dublin Ranch Phase 1) and southwest of Fallon road.
The golf course residential development northeast of Fallon Road would not be included within
the district. The area proposed for the district comprises about 600 acres. Of this total, about
561 acres can be developed under current land use designations and accordingly receive an
assessment lien. This acreage figure is net of arterial ROW but includes potential ROW for local
streets.
3.6 Bond Lien (Der sauare foot)
The most common indicator of the relative debt burden on property is the par value of the bonds
divided by the square footage of assessable area. Using the 561 assessable acre figure for this
purpose, the resulting bond lien per square foot is $2.71.
3.7 Value to Lien Ratio
The standard ratio of appraised value to par value of bonds at issuance for both assessment
districts and CFD's is 3 to 1. This is the minimum level of land value security necessary to gain
broad investor interest in a raw land land-secured financing. Since in the event of foreclosure
due to property owner delinquency the value of the land must carry the assessment, having a
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strong value to lien ratio is important to bondowner security. This 3 to 1 ratio implies that the
value of assessable property plus the value of improvements financed by the first series of
bonds within the Dublin Ranch Assessment District at time of bond issuance must average at
least $8.13 per square foot for all 561 assessable acres. While no appraisal for the proposed
assessment district has been done, we are confident that the value of the property exceeds
$8.13 per square foot.
3.8 TIF Fees and Credits
The Un family would receive credit under the City's TIF program for all TIF eligible projects that
are funded through the assessment district. Such credits would not accrue to the parcels
carrying the assessment liens for such parcels, but to the developer that constructs the
improvements.
3.9 PreDavment of Bond Liens
The Un family proposes that there be no requirement to prepay the assessment lien at time of
occupancy of a residential or commercial building. The liens would be prepayable at the option
of the owner of the property.
3.10 Entitlements
The western portion of the Lin property does not have development zoning at this time. The Un
family has submitted a PO for about 306 acres in the western half of the property. The City is
presently negotiating a development agreement with the Un family. The draft development
agreement contains a section regarding public financing, which would obligate the Un family to
propose another means to finance backbone infrastructure, if the assessment is not formed.
3.11 TiminQ
The Un family proposes that the district be formed as soon as possible. Bonds would not be
issued until a final jurisdictional determination has been made by the Corps, and the first PD on
the western half of the property has been approved. However, bonds would be sold for
improvements benefiting primarily the west half of the property prior to obtaining a Corps permit.
3.12 Other ProDertv Owners
The Dublin Ranch Assessment District would only include property owned by the Un family. The
City has contacted other neighboring property owners within the City limits that are either
adjacent to or near the proposed Un development. These include Shea Homes, Casterson,
Dublin Land Company and the County of Alameda. Shea, Casterson and the County of
Alameda do not want to be included in the district and are not requesting public financing.
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
Dublin Land Company will consider a proposal from the City for public financing, but has made
no request on its own.
4.0 Analvsis
This section analyzes the Un public financing request with respect to the City's major policy
concerns. The important issues to be addressed in this analysis (including those in the RFP) are
as follows:
1) Adequacy of public improvements
2) Appropriateness of public improvements
3) Appropriate boundaries for district
4) Development entitlements
5) Protection of future homeowners
6) Bondowner security
7) Credit for City Impact Fee and DSRSD Connection Fees
8) Acquiring off-site right of way
9) Proposition 218
10) Other viable financing mechanisms
11) Development Agreement
12) City Administration
4.1 Adeauacv of Public Imorovements
The City wants to make sure that adequate funding is provided for circulation improvements
throughout the property on a timely basis, as well as make sure that the public improvements
needs of the Dublin San Ramon Services District (DSRSD) are adequately addressed. The
needs of DSRSD are discussed separately in Section 4.2. The on site circulation funding for
both Phase 1 and Phase 2 appear to be adequate, as far as backbone infrastructure for the
initial stage of development. However, as noted earlier, the roadways for the most part will be
constructed as 2 lane sections. Improvement to full design standards of 4 or 6 lanes will be a
condition of further development. Realistically, neither assessment nor CFD financing would be
available for such further improvements. The expectation is that the future developers will be
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
required to use their own funding sources to pay for improvement of roadway sections from 2
lanes to 4 or 6 lanes, as directed by the City.
The two freeway interchanges present special problems. The proposed funding through the
assessment district is not sufficient to complete the interchanges to their ultimate design
configuration. The funding provided however, is sufficient to result in usable improvements to
both the Tassajara Road and Fallon Road interchanges that will be capable of handling the
traffic generated by build-out of the Un property. In order to fully fund construction of the
interchanges to their ultimate design configuration, funding from other public agency sources
may be required.
The future alignment of Fallon Road will also be determined in part by the outcome of the Corps
permit process. However, a through connection for Fallon Road can be provided on an interim
basis regardless of the final outcome of the Corps permit process.
4.2 DSRSD Public Imorovement Needs
A new reservoir as well as a connection to an existing reservoir is funded by the assessment
district for DSRSD. Based on preliminary discussions, this appears to satisfy the District's needs
as far as water is concerned. DSRSD has stated that it does not at present have adequate
financing for its share of the funding for the LA VWMA sewer expansion project. DSRSD has
sewer capacity presently available to support future development within their jurisdiction. Any
additional capacity beyond this current level is dependent upon completion of the LA VWMA
project. Build out of the Dublin Ranch Assessment District will require a significant share of
DSRSD's currently available capacity. DSRSD has indicated a willingness to provide this
capacity to the property within the assessment district on the condition that either the district or
the Lin family provide financial assistance to DSRSD with respect to its funding obligations for
the LA VWMA project. The Lin family has proposed that such financial assistance not be
provided through the assessment district, but through a separate agreement between DSRSD
and the Lin family. In a letter from DSRSD to the City dated March 18, 1999, it was indicated
that this approach is acceptable to the District.
4.3 Aoorooriateness of Public Imorovements
The Un family has requested that the assessment district reimburse them for the costs of ROW
through their property. As noted elsewhere in this report, such a reimbursement is a legal use of
assessment bond proceeds. However, if there were no assessment district, the Lin family would
be required to dedicate this ROW. Nevertheless, portions of the cost of ROW through the Lin
property will be eligible for reimbursement under the City's TIF program.
The inclusion of funding for this purpose increases the debt burden on the property without
increasing the value of the property. Only improvements, both public and private, increase the
value of the property. Hence, from the standpoint of the value to lien ratio, reimbursing for ROW
reduces the ratio, and thereby reduces bondowner security. However, so long as the value to
lien ratio remains at or above a level with which the City is comfortable, the additional debt
burden primarily has the effect of reducing the sales price of the property. From the Lin family
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
perspective, this mechanism will allow for reimbursement from the assessment district for pre-
development expenses.
All other public improvements proposed for pUblic financing are also appropriate for an
assessment bond issue. The one concern in this regard is improvements that might be
considered to be of general benefit, such as the two freeway interchanges. However, based on
the advice of Orrick Herrington, these improvements are also appropriate for an assessment
bond issue, provided that findings of special benefit are supported by written consent from the
Un family.
4.4 Aoorooriate Boundaries for District
The proposed boundaries for the district potentially comprise sufficient property to support
financing of the infrastructure proposed. There is no need to include other property owners in
the district. If any current or future owner of adjacent property wishes to participate in an
assessment district, a separate district for such property could be formed at that time.
4.5 Develooment Entitlements
As discussed above, the ability of the Un family to develop the majority of the property is
contingent upon a Corps wetland permit. Despite the fact that existing general plan and zoning
entitlements for the proposed assessment district area add substantial value to the property, the
City cannot issue building permits in area subject to Corps jurisdiction until a Corps permit has
been obtained. Since the Phase 1 bonds benefit primarily the western half of the district, and
since the western half of the property is mostly free of Corps permit issues, the Phase 1 bonds
can go ahead regardless of resolution of the Corps permit. As discussed above, this is not the
case with Phase 2. Issuance of the Phase 2 bonds must be contingent upon final clearance
from the Corps to develop a sufficient amount of land such that the Phase 2 bonds can be
primarily carried by immediately developable property.
While there will be an approved PO for much of the western half of the property prior to sale of
the first series of bonds, the Corps permit for the portions of the property subject to Corps
jurisdiction will still be unresolved. To the extent that the benefit spread for the Phase 1 funded
projects includes property subject to the Corps permit, there is risk for the bondowners. Such
property is not developable without the Corps permit. To the extent that the Corps permit is
delayed beyond the developer's ability to carry the assessment burden, a delinquency could
take place. Fortunately, it appears that the preponderance of the benefit from the Phase 1
improvements is for property in the western part of the proposed district, which is for the most
part not subject to Corps jurisdiction. However, the assessment engineer's report will need to be
carefully reviewed in this regard to make sure the property subject to the Corps permit is not
over-burdened from the Phase 1 bonds. At the time of sale of the Phase 1 bonds, as much of
the Phase 1 assessment lien as possible should be on property ready for immediate
development. While these risks can be effectively mitigated, the possibility of a delay in the
Corps permit places emphasis on the financial ability of the developer to carry the assessment
burden.
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
The possibility of the Corps prohibiting development of certain areas proposed to be assessed
is another entitlement issue. If an entire large lot parcel subject to the assessment lien were to
be so conditioned, a bond default could result. The specific concern is that a parcel carrying an
assessment lien required to pay a portion of debt service on the bonds may be determined by
an outside third party (the Corps of Engineers) to be undevelopable. If that were the case, the
owner would be likely to stop paying the assessment. Depending on the size of the lien on the
parcel, a bond default could occur. We have received assurances from the Lin family that no
major area of any existing large lot parcel will be so conditioned. However, it must be noted that
without the permit in hand, no absolute guarantee in this regard can be made. In the event that
a small portion of a large lot parcel is made undevelopable as a condition of the Corps permit,
the assessment lien would be re-apportioned to the remaining, developable portion of the large
lot parcel. This could result in a higher than anticipated debt burden on the remainder of the
land in such large lot parcel. This is an acceptable risk so long as the value to lien ratio for the
remaining property within such a large lot parcel is in the neighborhood of 3 to 1.
It is also important that both the proposed development agreement for the entire project and the
PO for the western half of the project be approved prior to the actual sale of bonds. With respect
to the PD, there is some concern regarding the timing of district formation and the approval of
the PD. It is best if the assessment engineer's report accurately reflects the ultimate
development entitlements on the property. To the extent that the ultimate build-out configuration
changes after approval of the assessment engineer's report, the assessment spread could be
inappropriate for some parcels. Consequently, it is best if the final assessment engineer's report
is not approved until the PD is finalized.
4.6 Protected Imoact on Future District Homeowners
The City has a concern that future homeowners will be unduly burdened with bonded
indebtedness. Such residents will be much less likely to support future tax increases, should
they be needed. In communities where a significant part of the community has a high
assessment or CFD debt burden, the communities are otten politically divided by the relative
debt burden.
The City's planning policies for the Eastern Dublin area provided that the annual debt service
burden for public financing should not exceed 1 % of the assessed value of a home. Given the
type of residential production proposed for the Lin property, the 1% figure should generate a
maximum annual debt service limit of at least $2,500 per year. This conservatively assumes an
average home value for the project of at least $250,000.
Without an assessment engineer's report it is not possible to precisely identify the debt burden
on homeowners for the Lin property. However, based on rough estimates, this burden should
fall in the range of $1,250 to $1,750 per year, depending on the type of residential unit. This is
clearly less than 1 %, and as such is clearly allowed by existing City policies. Assuming a
$250,000 home value, this would amount to a combined tax rate, including the base property
tax rate, of 1.7%. If the home values were higher than the $250,000 conservatively assumed,
the percentage would decrease. In this regard it is important to consider whether DSRSD or the
Dublin Unified School District have any intention of putting a CFD lien on the property. The City
and the Lin family are party to an agreement with the school district providing for full mitigation
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of school impacts without recourse to a CFD. As discussed in Section 4.2, DSRSD has
proposed that either the assessment district or the Un family directly provide financial
assistance to DSRSD towards its LA VWMA funding obligation. Both DSRSD and the Un family
have tentatively agreed to pursue a solution for the LAVWMA issue without resort to
assessment district or any other form of land secured financing. Consequently, we do not
anticipate any additional financial burden on the property as a result of DSRSD's financing
needs.
However, future homeowners may still find fault with the debt burden, regardless of the City's
planning policies. In this regard it is very important to make sure that current State laws
regarding disclosure of assessment and CFD liens to prospective homebuyers are strictly
enforced. Furthermore, it is also important to make sure that local title companies are aware of
the assessment lien, and that it is disclosed to homebuyers in the secondary market.
This still leaves the question of a possible divisive effect from the Un property debt burden on
the Dublin community. Other than requiring prepayment upon first sale, there is little that the
City can do about this. We currently estimate that there will be about 2,000 residents of
ownership residential units on the Un property. This amounts to about 7.5% of the City's current
population. From this perspective, any divisive impact of the assessment debt burden on the
community would be relatively small. Note also that other than the freeway interchanges, no off-
site improvements of general benefit are being financed through the proposed district. Clearly,
the freeway interchanges do offer some specific benefit to the project. The likelihood of future
homeowners' complaints regarding the improvements for which they are being assessed
appears low.
Another option available to the City to protect future homeowners would be to require full
prepayment of the assessment bond lien by the developer prior to sale of a home. Federal tax
law provides that if prepayment is required for one class of property within an assessment
district or CFD, it must be required for all classes of property. Consequently, for the City to
require prepayment of the assessment lien on residential property, the same requirement must
be made for all other land uses within the district. The Un family has responded that this takes
away the benefit to them of doing public financing. The assessment district would be in effect a
short-term bridge loan for the cost of the improvements.
4.7 Bondowner Security
Whether or not bondowners receive timely payments of principal and interest depends on the
success of the Un family or their successors in developing the property. Assessment bonds are
typically sold subject to a minimum value to lien ratio of 3 to 1. While such a strong ratio
provides comfort that in the event of foreclosure as a result of assessment delinquencies the
bondowners will be fully reimbursed, this is not always the case. Commercial property values
can be volatile. Also, landowners may file for bankruptcy, which results in an automatic stay
against any foreclosure proceedings. Consequently, the value of the property at time of bond
sale is not a guarantee that bondowners will receive timely payments of principal and interest. In
reality, the property must develop, or otherwise be seen as having good development
prospects, for the bondowners to be secure.
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In this regard the questions regarding entitlements discussed in Section 4.5 and access
discussed in Section 4.8 are also very important to potential investors in the assessment bonds.
While the real estate market is strong right now, there are no guarantees that it will remain
strong over the next few years. Given the multi-year timetable necessary to build out this
property, it is likely that at least one real estate recession will occur prior to build out. This risk,
as with the Corps permit question, raises the issue of whether the Un family has the staying
power to keep paying assessments through a real estate recession. Lack of financial staying
power would result in assessment delinquencies, which in turn can result in a bond default.
4.8 Acauirina Off.site Riaht af Way
The question of access to the Un property through the off-site parcels must be resolved prior to
issuing the Phase 1 bonds. Since this question effects the ability to develop the property, neither
the City nor bondowners should take any risk regarding resolution of this issue. Any significant
access from Tassajara Road must be through property owned by the Dublin Land Company.
Either the City or the Un family will need to negotiate ROW acquisition with the Dublin Land
Company. Alternatively, the City could acquire such ROW. However, the Un family would need
to provide the cash necessary to fund such an action.
4.9 ProQositian 218
The City has expressed concern that Proposition 218 makes it more difficult to form an
assessment district and issue bonds. The primary question in this regard is the ability of
subsequent voters or landowners to overturn the assessment district formation and invalidate
the assessment liens. As noted elsewhere, the City has consulted with the bond law firm of
Orrick, Herrington & Sutcliffe regarding this issue. The position of the Orrick firm is that original
consent from the landowner in conjunction with the issuance of bonds resolves any questions
regarding the type of improvements suitable for funding and eliminates the possibility of future
voters or landowners overturning the formation process and invalidating the assessment liens.
4.10 Other Viable Financina Mechanisms
While a CFD could be used to accomplish all of the public financing for the Un property, the
owners have requested formation of an assessment district. From the City's standpoint, an
assessment district will impose a smaller administrative burden than a CFD. Since the City will
not have to perform an annual special tax calculation, staff time for district administration will be
less. The City will also be able to augment the annual assessment for its administrative costs.
Consequently, there is no advantage to the City from using a CFD. The risks associated with
land-secured financing are the same for both assessment districts and CFD's. The potential
adverse impacts on future homeowners are also the same for both financing mechanisms.
Cash is the other financing mechanism available for the project. The Un family could pay cash
for the improvements proposed for public financing. Fees under the City's TIF program would be
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available for an amount equal to about 2/3 of the total cost of the non-DSRSD TIF Category 1-
type improvements identified in Table 1. Category 2 fees may be sufficient to fund the
improvements at the two freeway interchanges. However, these fees are only realized when
development actually takes place. This means that the Un family would be carrying the full cost
of the improvements (including the amount eligible for credit) until such time as property
develops. Depending on the time to build out the project, the carrying costs could be very
significant. From the developer's standpoint, public financing is a much better financing vehicle
than TIF fees. From the City's perspective, cash is a much better option. Cash does not impose
the administrative burden that public financing does. Cash carries no risk of significantly higher
tax burdens in east Dublin proving politically divisive in the future. Other developers adjacent to
the Lin property are all using cash, and are not doing any public financing. However, if the City
chooses to reject public financing, the very high up-front costs to develop the Un property could
make development of the area impractical for now. As noted before, both the City's Eastern
Dublin Specific Plan and TIF program provide for public financing as means of funding public
improvements.
4.11 City Administration
The City will have an increased administrative burden as a result of the assessment district.
Unlike a CFD, there is no requirement to do an annual calculation of the assessment per parcel.
However, every time there is subdivision, the benefit spread must be recalculated for each
successor parcel. Also, every time a property owner prepays the assessment lien, the City must
calculate the payoff amount and work with the trustee or fiscal agent for the bond issue to
process the flow of funds from the property owner. Obviously, the City will need to manage the
construction of the freeway interchange projects, and handle construction inspections and
related tasks for public improvements constructed under the acquisition agreement.
In the event of a delinquency, it is the responsibility of the City to diligently pursue judicial
foreclosure. This means that the City must hire an attorney experienced in foreclosure to pursue
the matter in the civil court system. The City will pay these legal expenses out of its own pocket
until such time as the property owner either redeems the delinquencies, or there is a successful
foreclosure sale. The foreclosure process typically takes at least 2 years. In the event that the
property owner files for protection under the Federal bankruptcy statutes, the City's legal
expenses can further increase. Arguably, the City should then hire bankruptcy counsel to
represent it. In bankruptcy there is an automatic stay of foreclosure until either the bankruptcy is
resolved, or the bankruptcy judge allows the foreclosure to proceed. The City would need to hire
counsel to petition the judge to allow the foreclosure to proceed. Under this scenario, the City's
legal expenses could amount to $50,000 per year or more.
There are a variety of mechanisms under which the City can levy an administrative fee to
recover ongoing administration costs. However, in the event of delinquencies, such
administrative cost reimbursements would be abated until such time as the delinquency was
cured.
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5.0 Recommended FinancinQ Plan
In general, the Un proposal for public financing is acceptable. While both the land development
process and the financing thereof can be risky, the plan minimizes risks to the City and
accomplishes the basic goal of opening the property to development. Since the goal of the City
is to see the property develop, some form of public financing is necessary under current
economic conditions for development to start. Specific conclusions and recommendations
follow:
5.1 Proiects
The projects identified in Table 1 are reasonable with the possible exception of the
reimbursement for ROW through the Un property. Note that DSRSD has expressed some
reservations about cost estimates for some of their water-related infrastructure. This technical
issue can be resolved by the time of district formation through collaboration between DSRSD
and the assessment engineer.
5.2 PhasinQ
The phasing shown in Table 1 is also reasonable. Federal tax law provides that at the time of
issuance, the City must have a reasonable expectation of spending all of the proceeds within 3
years of the date of issuance. This expectation appears reasonable at this time for all of the
Phase 1 projects. However, the Tassajara Road freeway interchange will require further
investigation in this regard. All of the proposed improvements for this interchange are funded in
Phase 1, meaning that all of those improvements will need to be designed, approved by
Caltrans and constructed in a 3 year period.
5.3 Assessment Bonds
Assessment bonds can be used to fund the project. Based on the position of the Orrick firm
regarding the Proposition 218 issues, an assessment district meets the policy requirements of
the City and the stated objectives of the property owner. One district would be formed for the
property the Lin family proposes to include in the district.
5.4 Preoavment Requirement
There will be no prepayment requirement for the district. The annual debt service burden on
residential property is within the limits set by City policy. Requiring prepayment on residential
would mandate prepayment on commercial and other uses. The number of residents of
ownership residential units in the City with a significantly higher combined tax and assessment
burden would be less than 10% of the current population.
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5.5 T/F Credits
All TIF credits will be allocated to the master developer identified in the acquisition agreement
for the assessment district without regard to any allocation by parcel.
5.6 Conditions for Formation of the District
The following conditions apply to formation of the district:
1) Execution of a development agreement between the City and the Un family
2) Submittal of a PO for a portion of the western half of the district
3) Verification on the basis of the assessment engineer's report that the likely annual
debt burden on ownership residential units will not exceed 1 % of assessed value, as provided
for in the City's planning policies.
4) Final jurisdictional determination from the Corps for the entire area comprised of the
proposed district.
5) Verification on the basis of the assessment engineer's report and the best available
data at the time that possible development restrictions as a result of the Corps wetlands permit
will not result in an excessive assessment burden on any large lot parcel.
6) Adequate provision is made through the district formation process for reimbursement
of City administration costs.
The resolution of intent can be adopted by the City prior to the satisfaction of items #2 and #3
above. However, the public hearing for district formation and approval of the assessment
engineer's report would not take place until the development agreement has been executed, the
final Corps jurisdiction has been determined and the PO has been submitted. While the public
hearing could take place prior to final approval of the PO, we recommend that the public hearing
not be held until the City has thoroughly reviewed the PO and determined whether or not any
significant changes need to be made in the PO that would impact the benefit spread in the
engineer's report.
5.7 Conditions for Phase 1 Bond Issuance
The following conditions must be met prior to issuance of the Phase 1 bonds:
1) Approval of the previously submitted PD.
2) Acquisition of all off-site ROW required for the proposed Phase 1 public improvements either
in fee title, or through an order of immediate possession pursuant to an eminent domain action.
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
3) Appraisal prepared by an appraiser of the City's choice showing a value for all
assessed property within the district that will result in a value to lien ratio for the Phase 1 bond
issue of at least 3 to 1. No large lot parcel shall have a value to lien ratio of less than 2.5 to 1.
4) Developer concurrence with all SEC continuing disclosure requirements
5) Demonstration by the developer of sufficient equity or other financial resources to
both carry out the development plan and to carry at least two years of assessments on the
property, after capitalized interest has been expended. As discussed in Section 4.4, the
developer's ability to pay assessments during a real estate recession is crucial to avoiding major
delinquencies on the assessment bonds. Demonstration of such financial strength could come
in the form of a letter-of-credit equal to two years debt service on the assessment bonds, proof
of adequate funding from other sources, or by review of the financial statements and balance
sheet of the developer. If the latter option were used, it would be the intent of the City to not
make such information subject to public review or continuing disclosure.
6) Determination to the satisfaction of the City that DSRSD can provide an adequate
number of sewer connections to support development of the assessment district.
5.8 Conditions for Phase 2 Bond Issuance.
1) Resolution of the alignment of Fallon Road through the assessment district to the
satisfaction of the City.
2) Sufficient resolution of Corps permit issues such that the majority of the assessment
lien activated by the Phase 2 bonds can be carried by immediately developable property.
3) Appraisal prepared by an appraiser of the City's choice showing a value for all
assessable property within the district that will result in a value to lien for the combined Phase 1
and Phase 2 bond issues of at least 3 to 1. No large lot parcel shall have a combined value to
lien ratio of less than 2.5 to 1.
4) Satisfaction of items #4 and #5 in Section 5.7.
6.0 Next SteDs
If the developer wishes to proceed with formation of an assessment district, the developer
should submit a petition to the City. The City can work with the developer and its financing team
to prepare the first draft of the assessment engineer's report. At the same time, the City should
prepare a list of conditions based on its review of Section 5.0 of this report for formation of the
assessment district and issuance of bonds that should become part of the assessment district
process. As stated in Section 5.6, adoption of a resolution of intention by the City can proceed
without a final development agreement, Corps jurisdictional determination or submittal of the
PO, but the public hearing should await completion of these two items. Prior to adoption of the
resolution of intention the City will need to hire a financing team. Initially, this should include
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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Public Financing Plan for the Proposed Dublin Ranch Assessment District
bond counsel and a financial advisor. By the time of the public hearing, the City will need to
retain an underwriter and a disclosure counsel as well.
The timing of the actual bond sale will depend on the need for money to reimburse the Un
family for ROW acquisition and completed improvements. At this time, the earliest such need
would be the fall of 1999. Note that the actual bond documents and the acquisition agreement
would be approved at a separate City Council meeting held prior to the actual bond sale, but
after the public hearing on district formation.
About 4 months prior to the anticipated sale of bonds, the City will need to retain an appraiser to
prepare an appraisal of all property within the district. Depending on the qualifications of the
appraiser hired, the City may also need to hire an absorption consultant to prepare absorption
estimates for use by the appraiser. In this case, the absorption consultant needs to be at work at
least one month prior to the appraiser. Based on an anticipated bond issuance in late summer
or early fall for this project, the absorption consultant and appraiser will probably need to be
hired either at the same meeting where the resolution of intent is adopted, or shortly thereafter.
PROJECT FINANCE ASSOCIATES, INC.
Mill Valley, CA
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