Subject: Community facilities DISTRICT NO. 6 (GREAT OAKS- ROUTE 85) SPECIAL TAX BONDS
COUNCIL DISTRICT: 2
Adoption of a resolution of the City Council:
(a) Authorizing the issuance of special tax bonds in the aggregate principal amount of not to exceed $15,210,000 to be sold at a competitive sale in connection with Community Facilities District No. 6 (Great Oaks-Route 85).
(b) Approving the forms and authorizing the execution of the Fiscal Agent Agreement and certain other related financing documents, and directing and authorizing certain other related actions.
(c) Approving the forms and approving the use of the Official Notice of Sale and the Official Statement in connection with the competitive sale of the bonds, and directing and authorizing certain other related actions.
(d) Authorizing the City Manager to negotiate and execute an agreement to reimburse Equinix for the costs of right of way acquisition for the extension of Great Oaks Boulevard north of the intersection of Great Oaks Boulevard and State Route 85 in an amount not to exceed $2,282,431.
CEQA: Resolution No. 69699.
BACKGROUND
On March 27, 2001,
a public hearing was held in which 100% of the qualified landowner electors
voted for the establishment of Community Facilities District No. 6 (Great
Oaks-Route 85) (the “District”). At
this time, the District was authorized to incur bonded indebtedness and the
levy of special taxes was approved for the purposes of financing the
construction and acquisition of certain public facilities. The District is located in the Edenvale
Redevelopment Project Area and is comprised of 20 parcels currently owned by
four property owners. The owner of one
parcel prepaid the special tax during the cash payment period and this parcel
is no longer security for the special taxes.
The improvements
proposed to be constructed by the District have been split into two zones. Zone A includes improvements both within and
outside the boundaries of the Old Edenvale redevelopment project area and include
signal and intersection improvements at 12 locations, which benefit all
District properties. Zone B includes
the extension of Great Oaks Boulevard, which provides access that is required
only for benefit of the iStar parcels.
The District is also financing the acquisition of the right of way for
the Great Oaks Extension. It is
anticipated that a single construction contract will be awarded to construct
the improvements in both zones.
The construction
of the proposed improvements described above will serve as offsite traffic
mitigations for the build-out of Old Edenvale, which is expected to generate
over 3 million square feet of R&D, office and manufacturing space and more
than 9,000 new employment opportunities in the project area.
Reimbursement Agreement for Right of Way Acquisition
Equinix is the ground lessee of iStar, one of the property owners in the District. At the request of Equinix, with the concurrence of iStar, the cost of right of way acquisition for the Great Oaks Extension was included as an item to be financed by the District. Equinix has entered into a purchase agreement to acquire the street right of way and the owner of the right of way has executed and recorded an irrevocable offer to convey the right of way to the City. As the City is not directly acquiring the right of way, an agreement to reimburse Equinix for the purchase price of the right of way is required in order to finance the right of way acquisition through the District.
Overview of Financing
The improvements will be funded through the proceeds of the sale of the City of San José Community Facilities District No. 6 (Great Oaks-Route 85) Special Tax Bonds. The bonds will be secured by special taxes imposed upon each property in the District, except for the property that prepaid its special tax obligation. The bonds will be issued as fixed rate bonds and a debt service reserve fund will also be required. The bonds will be sold through a competitive sale in early August with bond closing and award of a construction contract in late August. The City’s Director of Finance will accept the highest responsible bid for the purchase of the bonds, determined in accordance with the Official Notice of Sale.
Bond Financing Documents
There are a number of bond financing documents that require Council approval. All of the documents will be available in the City Clerk’s Office on or about Tuesday, June 12, 2001.
Fiscal Agent Agreement: This agreement is between the City, as the issuer, and US Bank Trust National Association, as the fiscal agent. This agreement sets forth, among other matters, the terms of the bonds and the responsibilities and duties of the Fiscal Agent and the rights of the bondholders.
Official Notice of Sale: This document describes the competitive bidding process, the bidding parameters governing the submission of bids by potential underwriters for the bonds, and the basis for awarding the bonds to an underwriter. The Official Notice of Sale is provided to potential bidders with the Official Statement. The City’s bond counsel will publish a notice of intention to sell the bonds, in the form on file with the City Clerk, in “The Bond Buyer,” a financial publication generally circulated throughout the State of California, at least 15 days prior to the date for submission of bids.
Continuing Disclosure Certificate: This document sets forth the City’s agreement to provide certain financial information regarding the City and information related to the District on an annual basis for the benefit of the bondholders.
Official Statement: The Official Statement has been prepared for the City by the financial advisor. The Official Statement generally discloses material information on the bond issue, including the purposes of the bond issue, how the bonds will be repaid, credit enhancement for the bonds (if applicable), ratings (if applicable), and a description of the project to be financed. Investors may use this information to evaluate the credit quality of the bonds.
A copy of the draft Official Statement, in substantially final form, will be distributed to the City Council under separate cover on or about June 12, 2001. Staff has carefully reviewed the information contained in the draft Official Statement and believes it to be accurate and complete in all material respects. If any Councilmember has any personal knowledge that any of the material information in the draft Official Statement is false or misleading, they must raise these issues prior to approval of the distribution of the document. City staff, bond counsel, and the financial advisor will be available at the Council meeting on June 19, 2001, to address any questions, issues and/or concerns.
In March 2000, the City Council authorized the City Manager to negotiate and execute agreements with E. Wagner & Associates, Inc. as the financial advisor, and Berryman & Henigar, Inc. as special tax consultant. The City Council also authorized the City Attorney to negotiate and execute an agreement with Quint & Thimmig LLP as bond counsel. The agreement for financial advisory services includes the appraiser as a subconsultant. The compensation to be paid to the appraiser is not contingent on the sale of bonds and will be paid even if the bonds are not sold.
The
Redevelopment Agency and Department of Public Works have been in continuous
discussions with all property owners and developers located within the District
boundaries. Staff has provided them
with information regarding design and construction of improvements, the ballot
process and the bond financing schedule.
This report was prepared by the Finance and Public Works Departments in coordination with the City Attorney’s Office, the Redevelopment Agency, and the financing team participants.
Costs
associated with the issuance of the City of San José Community Facilities
District No. 6 (Great Oaks-Route 85) Special Tax Bonds will be paid from bond
proceeds. The financial advisor (except
for the appraisal subconsulting services) and bond counsel work on a
contingency basis and will be paid only upon the successful sale and close of
the bonds. In the event that the bonds
are not sold, the appraisal services and the special tax consulting services
will be covered by a Project Services Memorandum executed with the
Redevelopment Agency in the spring of 2000 and paid out of the Redevelopment
Agency FY 2000-01 Adopted Budget through the line item titled Edenvale: Assessment District/Interchange
Improvements. Costs associated with the
administration of the bonds and the District will be paid from annual special
tax levies on properties in the District.
The
Redevelopment Agency has funded consultant costs associated with the design of
the proposed offsite mitigations in an amount equal to $708,750. These funds are expected to be reimbursed to
the Agency once the bonds are issued.
CEQA
Resolution No. 69699.
SCOTT P. JOHNSON
Director, Finance Department
RAJEEV BATRA
Acting Director, Public Works Department