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Home My WebLink About03/08/2006 B A K 1E R $ F I E L D Mike Maggard, Chair Irma Carson Harold Hanson Staff: John W. Stinson MEETING NOTICE BUDGET AND FINANCE COMMITTEE of the City Council - City of Bakersfield Wednesday, March 8, 2006- 10:00 a.m. City Manager's Conference Room, Suite 201 Second Floor - City Hall, 1501 Truxtun Avenue, Bakersfield, CA AGENDA 1. ROLL CALL 2. ADOPT FEBRUARY 8, 2006 AGENDA SUMMARY REPORT 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Report and Committee recommendation on Policy regarding Land Based Financing / Community Facility Districts (CFD's and Assessment Districts) - Smith 5. NEW BUSINESS A. Report and Committee recommendation on Fiscal Year 2006-07 Community Development Block Grant (CDBG), Home Investment Partnerships (HOME), and Emergency Shelter Grant (ESG) Annual Spending Plan - Kurtz B. Discussion and Committee recommendation regarding Southeast Redevelopment Project Area request for additional property acquisition funds -Kunz C. Wastewater Treatment Plant Expansion Overview- Tandy D. Discussion and Committee recommendation on request from Bakersfield Homeless Center for $25,000 6. COMMITTEE COMMENTS 7. ADJOURNMENT B A K E R S F I E L D ~'"-/ ~ Mike Maggard, Chair Alan(Gl~ris~t~nsen, As~stant-City Manager Irma Carson For: Alan Tandy, City Manager Harold Hanson AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE MEETING Wednesday, February 8, 2006 - 10:00 a.m. City Manager's Conference Room - Suite 201 City Hall, 1501 Truxtun Avenue, Bakersfield, CA 1. ROLL CALL Councilmember Harold Hanson Called the Meeting to Order at 10:10 a.m. Present: Councilmembers Irma Carson; and Harold Hanson Councilmember Mike Maggard, Chair, seated at 10:17 a.m. 2. ADOPT DECEMBER 13, 2005 AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. :Discussion and Committee recommendation on growth of the City and impacts on refuse collection Public Works Director Rojas spoke regarding the request from Kern Refuse Disposal, Inc. to extend the haulers current contract expiration date from 2014 to 2025. The haulers indicated they need the extension to obtain equipment financing, and also current financing for their subsidiary material processing company (MRC) runs through 2020 and a hauling revenue stream is desired through that date to help assure the bond holder. The change to 2025 would also match the time frame of their hauling franchises in unincorporated Kern County. City Manager Tandy explained there is actual value attached to the haulers contract and the City should receive value in exchange for any extension of the term of the contract. DRAFT AGENDA SUMMARY REPORT Page 2 BUDGET AND FINANCE COMMITTEE MEETING Wednesday, February 8, 2006 Public Works Director Rojas gave an overview of some of the items that with the approval of the Committee, staff would like to meet and negotiate with the haulers. Rate related items for discussion included, but not limited to: · Basing rate increases on the current CPI · Assurance that haulers will maintain or replace carts as needed · Basing rates for new programs/services on City cost studies or pilot programs · ~lf the City chooses to convert its services to provide "blue carts" for curbside recycling service in lieu of the "extra tan" carts currently in use, the haulers also convert their services · Establish uniform rates and terms for miscellaneous charges, such as extra ,pick up charges, return trip charges, temporary bin delivery and pick up, locking ~bin service fee or handling overloaded containers Contract related items included, but not limited to: · Compliance with State air emission rules without cost to the City · Open the C&D (concrete and demolition materials) facility to the public, or reduce the space or terminate the lease so the City can use the space to handle C&D recycling · Haul a proportionate share of reject material from the curbside greenwaste sorting operation The Committee unanimously approved for staff to meet and negotiate with the contract haulers. Staff will report back to the Committee. 5. NEW BUSINESS A..Land Based Financing / Community Facility Districts (CFD) 1. Review draft ordinance to allow establishment of special tax districts (CFD) 2. Review policy regarding Land Based Financing (CFD's and Assessment Districts) Finance Director Smith explained the City has recently entered into development agreements with local landowners associated with large development projects. Each of the agreements includes a commitment by the City to provide a mechanism for financing public facilities and/or services commonly known as Community Facilities Districts (CFD), also known as Mello-Roos. CFD's provide developers with an optional financing mechanism to fund public facilities and services. A special tax is placed on the properties to fund the public improvements, which is actually paid by the homebuyers. In order for the City to be able to provide this type of financing to developers, the City needs to adopt an ordinance allowing for the formation of CFD's. The City will also need to adopt a policy document regarding CFD's to establish some perimeters and guidelines for the districts. Staff has been working with the D AFT AGENDA SUMMARY REPORT Page 3 BUDGET AND FINANCE COMMITTEE MEETING Wednesday, February 8, 2006 Building Industry Association, local developers, and others to develop a draft policy. City Manager Tandy explained the new developments are so large a mechanism is needed to finance public facilities and services. The landowners of the large developments have requested CFD's, which are similar to assessment districts except the CFD's are much broader. City Attorney Gennaro explained the proposed ordinance is a standard ordinance used by cities that have CFD's. It is an implementation device that makes it very clear to the public that community facility districts can be used to pay for actual services, including public safety services such as police and fire. The Committee requested staff to contact the Building Industry Association and offer an addition presentation if needed. Committee Member Hanson made a motion the Committee approve forwarding the ordinance to the Council for first reading on February 22, 2006. The Committee unanimously approved the motion. The Committee requested staff to bring the CFD policy to the Committee at its March 8th meeting. B. Staff report and Committee recommendation regarding Audit Reports for fiscal year ending June 30, 2005 (This item heard first) Finance Director Smith gave a report on the findings of the audit reports, management letter, and compliance letters. The outside audit was performed by M. Green and Company. There were no findings to report in their management and compliance letters, except for a couple of minor findings in the Subregional Wastewater Management Plan. The Subregional Wastewater Management Plan is an agreement with the City, Kern Sanitation Authority and the East Niles Community Services District. The auditors recommended the City send ten copies of the annual financial reports to its User Agencies and include a copy of the independent auditors report; and also recommended the City send notification and preserve evidence of such notification of trhe public meeting and the approved budget to the User Agencies. It was also noted a tentative capital-related operations and maintenance budget must be submitted to the Technical Advisory Committee (TAC) for each User Agency for review and approval by March 1st; the City was in compliance in 2005, but two days late in 2004. Finance Director Smith stated he has responded to the recommendations and will ensure the proper copies of the annual financial reports are sent out, as well as timely notification of the public meeting. Justin Morales, Jr., M. Green and Company, spoke regarding this being their first year of auditing the City and was complimentary of the Finance Director and staff. AGENDA SUMMARY REPORT Page 4 BUDGET AND FINANCE COMMITTEE MEETING Wednesday, February 8, 2006 Committee Member Carson made a motion to recommend the Committee accept and forward the audit reports to the City Council. The Committee unanimously approved the motion. C. Discussion and Committee recommendation regarding amending and adopting the 2006 Committee meeting schedule Committee Member Hanson made a motion to amend the calendar to move the March 6th meeting on the calendar to Wednesday, March 8th at 10:00 a.m. The Committee unanimously approved the motion. 6. COMMITTEE COMMENTS 7. ADJOURNMENT The meeting adjourned at 11:25 a.m. Attendance: Staff: City Manager Alan Tandy; City Attorney Ginny Gennaro; Assistant City Manager John W. Stinson; Finance Director Nelson Smith; Public Works Director Raul Rojas; Public Works Civil Engineer Marian Shaw; Rabobank Arena, Theater and Convention Center General Manager Jim Foss; Rabobank Arena Finance Director Steve Womack; Solid Waste Director Kevin Barnes; Assistant Finance Director Sandra Jimenez; Solid Waste Superintendent Sal Moretti; and Wastewater Engineer Art Chianello Others: Donna Carpenter Sikand Engineering; Larry Moxley, Kern Refuse; Bruce Keown, Superior Sanitation; and Justin Morales, Jr., M. Green and Company, LLP cc: Honorable Mayor and City Council S:~JOHN\Council Committees\06Budget&Finance\bf06 feb 08summary.doc MEMORANDUM TO: Budget and Finance Committee .Members FROM: Nelson K. Smith, Finance Director ~ .DATE: March 2, 2006 SUBJECT: Draft Land Based Financing Policy Document The City has recently entered into development agreements with local land owners associated with the Old River Ranch and Rosedale Ranch projects. The City also entered into a pre-annexation agreement with Sun Cai regarding the McAIlister Ranch .project. Each of these agreements includes a commitment by the City to provide a mechanism for financing public facilities and/or services commonly known as Community Facilities Districts (CFD); also known as Mello-Roos Financing. The first steps the City needs to take in providing this type of financing are to: 1. Adopt an ordinance allowing for the formation of CFD's 2. Adopt a policy document that provides guidelines regarding the formation of CFD's. A draft ordinance was brought before the committee on February 8, 2006. The first reading of the ordinance amendment went to the City Council on Feb. 22, 2006 and the adoption of the ordinance is on the March 8, 2006 City Council meeting. Enclosed is a draft p°licy document for your review and consideration. The document was prepared by the Finance Department, with input and/or assistance from Old River Ranch representatives, Sun Cai representatives, Bond Underwriters, Special Bond Counsel, Financial advisors, Special Assessment Engineers, City Public Works staff and City Attorney staff. Upon your review and recommendation, we will place this item on the next available Council meeting for adoption by resolution. Policy Document Summary The City has an existing policy document regarding Assessment District financing (Policy Resolution 86-95), which was last reviewed and amended by City Council in 1995. The policies associated with CFD's are very similar in many respects to Assessment District financing. Staff is recommending that the City have one policy document that addresses both types of land based 'financing; thus incorporating many of the existing Assessment District policies with additional language to address items unique to CFD's. Maximum Term. of Bonds - The current City policy allows for a maximum 20 year term on District bond issues. The development groups requested we extend this term to not exceed 35 years. The draft policy document allows for bond issues to generally range from 20 to 30 years, with the maximum term not to exceed 35 years. Minimum Bonding Amounts - Staff is proposing the minimum bond issuance requirement to be raised from $1 million (current district policy) to a minimum of $2 million of construction proceeds. Factors such as cost of issuance and capitalized interest can make this type of financing rather expensive. Staff has researched the last twenty district formations and determined that bonds issued with construction proceeds in excess of $2 million have cost of issuance percentages that range from 17% to 27%, while bonds issued for less than $2 million have cost of issuance percentages that range from 23% to 41%. There are some definite economies of scale in processing larger bond projects, and given that the majority of these costs get passed .on to our residents, we believe it is prudent to raise this minimum threshold. Value to Lien Ratio - The current policy document reads as follows: "The value to lien ratio for each individual property within a district shall be at least 3:1. The City Council is also desirous of a value to lien ratio of at least 4:1 district wide". Staff is recommending that the City maintain the guideline of 4:1 district Wide in the future, but strengthen the language to make it "required", rather than "desirous". Developer input on this topic requets the policy document to be reduced to a 3:1 ratio district-wide. Staff believes we should error on the conservative side of this issue and we are not in favor of weakening the policy in this area. Past practice has been to require a minimum 4:1 ratio on all bonds issued since 1995. There could be a case where staff might support a distr, ict-wide ratio of less than 4:1, but this would be a rare occurrence and staff would request Council authority prior to completing such a transaction. Level Debt Service vs. Tax Escalation Clause - This topic deals exclusively with CFD's special tax. The development groups have requested that we allow for a 2% annual escalation of the special tax within the CFD's. Staff is recommending that the City not allow the special tax to escalate, thus maintaining a level debt service on any bonds issued. The argument on the development side is that this is very similar to the County-wide ad valorem tax (the standard 1%) on properties, which is allowed to dse up to 2% per year. Allowing for this escalation within the Distdct provides additional bonding capacity so that more'public improvements may be financed through the Distdct bonds. Staff has two counter points on the subject. First, the County ad valorem tax can be challenged and reduced if property values drop, while the special taxes would continue to escalate. Second, it doesn't seem appropriate to staff to tax property owners at an escalating rate for public assets that depreciate over time. Many cities allow for the tax escalation; others do not. Attachment- Draft Ordinance cc: Alan Tandy, City Manager File name: nks:/p:/cfd/memo-draff policy to bud and fin com feb 8, 2006.doc CITY OF BAKERSFIELD LAND SECURED FINANCING POLICIES DRAFT Prepared by: Finance Department February 27, 2006 CITY OF BAKERSFIELD LAND SECURED FINANCING POLICIES' TABLE OF CONTENTS Pa.qe Definitions ................................................................................. 2 Introductory Statement ........................................................................ 3 Eligible Public Facilities .................................................................... .,... 4 Eligible Public Services ........................................................................ 5 Financing Priorities ...................................................................... 6 Right of Way Acquisitions ...................................................................... 6 Value-To-Lien ...................................................................... 7 Credit Enhancements ...................................................................... 7 Security ............................................................................................. 8 Special Tax Formula ........................................................................ 9 Terms and Conditions of Bonds ............................................................. 10 District Cost Deposits and Reimbursements ........................................ 11 Agreements .............................................................................................. 13 Use of Consultants ................................................................................... 13 Acquisition Provisions .......................................................... . .............. 14 Disclosure to Purchasers ........................................................................ 14 Property Owner Support ........................................................................ 14 Land Use Approvals ........................................................................ 15 Exceptions to These Policies ............................................................. 15 Attachment: Form of Application for Land-Secured Financing .]_ City of Bakersfield Land Secured Financing Policies Definitions Unless the context otherwise requires, the terms employed in the following policies shall have the meanings specified below: "Assessment Acts" means the Improvement Bond Act of 1911 and/or the Municipal Improvement Act of 1913 and/or the Improvement Bond Act of 1915; the Landscaping and Lighting Act of 1972; the Benefit Assessment Act of 1982. "Bonds" means bonds authorized and issued under the Mello-Roos Act or Improvement Bond Act of 1915. "Bulk Sale Value" means the most probable price, in a sale of all parcels within a tract or development project, to a single purchaser or purchasers, over a reasonable absorption period, discounted to a present value, as of a specified date, in cash or in terms equivalent to cash, for which the property rights should sell after reasonable exposure, in a competitive maCket under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgably and for self-interest, and assuming that neither is under undue stress. "City" means the City of Bakersfield. "Discounted Cash Flow" means the measurement of the cash flows associa(ed with the development and sale of real estate parcels, based on an independent judgment of the prices and times at which individual parcels or properties would be sold, after applying a discount rate to such cash flows to reflect the risk-adjusted rate of return necessar~ to attract the debt and equity investment necessary to undertake and complete the acquisition, entitlement, development and sale of the parcels or properties. "District" means a Community Facilities District (CFD) formed under the Mello-Roos Commun,ity Facilities Act of 1982 or an assessment District formed under the Improvement Act of 1911 or the Municipal Improvement ACt of 1913. "Lien" means, in the case of public debt imposed on a parcel or parcels, the aggregate amount of debt attributable to such parcel, as measured by an assessment engineer; or, in the case of Mello-Roos Community Facilities District debt, the amount of debt attributable to a parcel or parcels, based on an apportionment of the debt to such parcel or parcels in relation to the probable debt service to be borne by such parcel or parcels. -2- "Public Facilities" means improvements authorized to be constructed or acquired under the Mello-Roos and Assessment Acts including, but not limited to, fees for capital facilities imposed by public agencies as a condition to approval of the development encompassed by the District or as a condition to service the District. "Public Services" means any one or combination of the following: police protection services; jail, detention facility, and juvenile hall services; fire protection and suppression services; ambulance and paramedic services; maintenance of parks, parkways and open space; flood and storm protection services, including, but not limited to, the operation and maintenance of stOrm drainage systems, and sandstorm protection services; or environmental cleanup and remediation services. "Value" or "Fair Market Value" means the amount of cash or its equivalent which property would bring if exposed for sale in the open market under conditions in which neither buyer nor seller could take advantage of the exigencies of the other and both have knowledge of all of the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions upon uses and purposes. "Value-to-lien ratio" means a calculation to measure the number of times the value of a property (gross retail value after improvements funded by the district) exceeds the sum of its assessment liens, including the proposed assessment and any existing assessments, special taxes or other encumbrances. Introduct, ory Statement The City of Bakersfield (the "City") will consider developer or property owner initiated applications requesting the formation of Assessment Districts and the issuance of bonds to finance eligible public facilities necessary to serve newly developing or existing residential, commercial and/or industrial projects under the conditions set forth herein. Developers.may apply for Community Facilities District (CFD) financing of eligible public facilities and/or services necessary to serve newly developing residential, commercial and/or industrial projects, but only in the following instances: 1. The tax-exempt financing of project public facilities will result in a clear public benefit, as such public benefit is determined by the City; AND 2. The City has negotiated and executed a development agreement (or similar agreement) addressing project implementation and providing for financing of all required public infrastructure and public safety services, including all facilities and services as listed in the Assessment Acts and Mello-Roos Community Facilities Act of 1982 or approved zoning or site plan approval. Project applicants without a negotiated and executed development agreement (or similar agreement) may apply for assessment District financing only. -3- The above criteria will be applied by the City staff with final determination and findings to be made by the City Council. Generally, facilities providing a significant public benefit', such as collector and arterial streets and highways, state highways and bridges, freeways and freeway interchanges, railroad crossings, traffic signals, parks and open space acquisitions, public works facilities (including water, wastewater,' storm drainage processing and distribution systems), community facilities (including youth facilities, sports complexes, libraries, bikeways and community/youth centers), public safety facilities (including police and fire facilities), public safety services (including police and fire operating costs), library facilities and services, and other appropriate public facilities will be eligible for' this program. Facilities and services will be financed in accordance with the provisions of the Assessment Acts, or the Mello-Roos Community Facilities Act of 1982. Each time a CFD or Assessment District is formed for the benefit of a development project, the City may require the creation of a maintenance district. The maintenance district may be established pursuant to the provisions of the Landscaping and Lighting Act of 1972, or such other provision of state law or appropriate local code or charter provisions, and will serve for the purpose of paying for any unfunded on-going City maintenance costs associated with the development project. All City and consultant costs incurred in the evaluation of new development, District applications and the establishment of Districts must be paid by the applicant(s) by advance deposit increments. The City will not incur any non-reimbursable expense for processing assessment District or a CFD. Expenses not prepaid and chargeable to the District shall be solely for the account of the applicant. Eli.qible Public Facilities Facilities: to be finanCed must be public facilities for which the City, or a public agency as determined appropriate by the City, will be the owner or will have normal operating and maintenance responsibility. The types of facilities eligible to be financed include, but are not limited to: A. Streets, roads and highways 1. Arterial roads and state highways 2. Collector streets, as determined by the City 3. Bridges and freeway interchanges 4. Traffic signals and railroad crossings, including grade separations 5. Canal and river crossings B. Parks, open space and community facilities 1. Youth facilities, youth centers, community facilities, child care facilities 2. Sports facilities and complexes 3. Bikeways -4- 4. Parks and recreational facilities 5. Multi use trails C. Public safety facilities 1. Police stations, sub-stations, and other facilities 2.. Fire stations and facilities. D. Public works facilities 1. City owned and operated Water and wastewater treatment, storage and conveyance facilities 2. Storm drainage facilities 3. Natural gas pipelines, telephone lines, facilities for transmission and distribution of water or electrical energy, and cable television lines (includes public, PUC-regulated and municipal facilities). The aforementioned list may not be exhaustive, For a complete list of eligible facilities, please refer to the current version of the Municipal Improvement Act of 1913, Improvement Bond Act of 1915, and the Mello-Roos Community Facilities Act of 1982. In the case where any public or private utility facilities are funded with District proceeds, anY future reimbursements related to said facilities shall be credited to the District and to the benefit of the property owners at the 'time said funds are received by the City. These funds will generally be used to reduce District debt in the form of bond calls. Should said reimbursements continue beyond the life 'of the District, said funds will become property of the City and used for ongoing maintenance of other public facilities funded bY District proceeds. The City will retain final determination as to any facility's eligibility for financing, as well as the prioritization of facilities to be included within a District financing. Use of bond proceeds for grading, and right-of-way acquisition will be reviewed by the City and bond counsel .on a case-by-case basis. Generally, "in-tract" improvements will not be considered eligible, unless specific circumstances and credit conditions warrant such inclusion. Applicant will be eligible for reimbursement, for all soft costs relative to construction of eligible facilities, including but not limited to design and engineering costs, as to be defined in the deposit and reimbursement agreement. Eli.qible Public Service~ Services to be financed through a CFD must be public services for which the City provides, and would include both staffing costs (salary and benefits) and normal operating costs of providing such services. The types of services eligible to be financed are: A. Police protection services B. Fire protection and suppression services C. Jail, detention facility, and juvenile hall services -5- D. Ambulance and paramedic services E'. Services and maintenance of parks, parkways and open space F. Flood and storm protection services, including, but not limited to, the operation and maintenance of storm drainage systems, and sandstorm protection services G. Environmental cleanup and remediation services (including hazardous substances). H. Library services. FinanCir~R Prioritie~ It is the City's view that a comprehensive policy toward mitigating the service impacts of growth is the best way to foster cooperation in allocating available debt capacity. Therefore, it is the City's intent to work closely with local school districts (and any other public agencies with District creating authority) to ensure that the maximum tax rate is not exceeded and homeowners are not overburdened. In order to ensure that public financing is used in a comprehensive, organized way consistent with the City's General Plan and these Policies, the aforementioned eligible public facilities are prioritized below: l S.~ City Facilities and services needed to serve a community plan area that is Priority currently deficient in off-site infrastructure needed to develop the area as planned; that is "backbone" public infrastructure to support already approved community plan areas. 2na Other public facilities and services for which there is a clearly demonstrated Priorit7 public benefit. 3ra Other public facilities and services permitted by the Acts. Priority Generally speaking, the City would give higher priority to any City owned public facilities and any financial terms or conditions specifically outlined in a Development Agreement. Non-City-Owned public facilities and related costs would! generally be of secondary priority. The City reserves the right to make exceptions to these priorities when circumstances warrant/the City is consciously establishing no priority for the use of the Acts in the case of populated areas and registered-voter elections). RiRht-of-'Way Acquisitions Right-of-way needed for streets purposes will be acquired through the District or dedicated asa street easement by the property Owner. If the right-of-way is acquired, the total cost of the acquisition shall be baSed upon an amount no greater than the value of the property acquired, including any severance damages. The cost of a right- of-way acquisition for a specific property will be assessed back to such prope.rty in accordance with the assessment spread 'methodology (for AsseSsment Districts) -6- described in the engineer's report prepared for the District. If a property owner dedicates in lieu of monetary payment, a property owner can do so only prior to the end of the cash collection, period. This section will not apply to any property owner within the District required to dedicate street right-.of-way as a condition of an approved development entitlement, since the property owner does not receive monetary payment for the dedication, unless the acquisition of right-of-way provides funding for a public purpose as approved by the City. Value-Te-Lien The City requires a District-wide value-to-lien ratio of at least 4:1 for the District. The District (or improvement area) property value-to-lien ratio for each individual parcel within the District shall be at least 3:1. Therefore, the value-to-lien ratio for any particular individual parcel within a District can be less than 4:1 (but must be at least 3:1 ) as long as the overall valuation of the District is at least 4:1. Valuations shall be determined based upon an appraisal of the proposed District properties. Assessed valuation data from the County of Kern may be used for valuation purposes in lieu of an appraisal report, at the discretion of the City. The appraisal shall be coordinated by and under the direction of the City. All costs associated with the preparation of the appraisal report'shall be paid by the applicant through the advance deposit mechanism. The appraisal shall be conducted by an MAI appraiser in accordance with criteria established by the City, based upon the recommendations received by the City from its bond counsel and/or finanCial advisor. In every case, the appraisal shall employ either a discounted cash flow or utilize bulk sale comparables and shall fully conform to published guidelines set forth in the Appraisal Standards for Land Secured Financings published by' the California Debt and Investment Advisory Commission ("CDIAC Guidelines"), originally dated .May 1994 and modified July 2004. However, notwithstanding the foregoing sentence, if a conflict exists between the CDIAC Guidelines' and the corresponding definitions, standards, or assumptions in the' Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USPAP"), USPAP shall govern. The City shall have discretion to retain a consultant to prepare a report to verify market absorption assumptions and projected sales prices of the properties which may be subject to the maximum special tax or assessments in the District. Such a report may be used by appraisers in determining the value of property to be assessed or taxed. Credit Enhancement Owners of the property who are deemed responsible for 33% or more 'of the debt service Obligation of the bond issue may be required to provide a letter of credit or cash deposit equal to two years' special taxes or assessments on their property. The letter of credit may be drawn on if and to the extent that the landowner is delinquent in paying its special taxes or assessments. Upon receipt of a request of a property owner who has provided a letter of credit or cash deposit pursuant to the first sentence of this -7- paragraph, which request shall be accompanied by documentation in support of such request, the City will review such request.to determine (a) the percentage of annual special tax or assessment payment obligation applicable to property owned by the property owner submitting the request and (b) the annual amount of special taxes or assessments applicable to such property; provided that such requests shall not be submitted more frequently than such property owner is providin'g reports pursuant to a continuing disclosure undertaking under SEC Rule 15c2-12. If the.City determines, based on its review of the information submitted, that the percentage has fallen below 33%, the City shall notify the property owner and release the letter of credit or return the cash deposit, as the case may be. If the City determines that such percentage remains at 33% or above but that the amount of two years' special tax or assessment payment obligation has decreased, the City shall either notify the property owner and cooperate with the property owner in obtaining a redu(~tion of the amount of the letter of credit or reducing the amount of the cash deposit, as the case may be. The City may, at its discretion, require additional credit enhancement to increase the credit quality of any CFD / Assessment bond issue. Credit enhancements may be required in additional 'situations where there is an insufficient value to lien ratio, a substantial amount of property in the district is-undeveloped, tax delinquencies are present on parcels within the District, and in any other situation as required by the City. As a practical matter, such additional requirements will generally be the result of recommendations made by the City's bond counsel, financial advisor, bond underwriter, or other members of the City's financing team. The form of credit enhancement is subject to the approval of the City and the City shall impose specific requirements (including but not limited to an absorption study) with respect to such credit enhancement on a case-by-case basis. The City retains the right to withhold public financing if it determines that such financing is detrimental to its credit rating or to the issuance of other City-planned, land-secured debt. Security For new development, the applicant or property owner must demonstrate its financial plan for the property within the District and ability to pay all assessments and/or special taxes during the build-out period. Additional security such as credit enhancement may be required by the City in certain instances. If the City requires letters of credit or other security, the credit enhancement shall be issued by an institution in a form and upon terms and conditions satisfactory to the City. All fees payable on the letter of credit or other security shall be the sole responsibility of the applicant or developer, not the City or District. Any security required to be provided by the applicant shall be discharged by the City upon the opinion of a qualified appraiser retained by the City, that specific release thresholds have been reached. -8- ,Special Tax Formul~ For Mello-Roos Community Facilities Districts ("CFDs"), the assigned' special tax submitted to the qualified electors of the CFD shall not exceed nine-tenths of one percent (0.9%) of the estimated base sales price of the subject properties at the time of CFD formation. Furthermore, the total of the following burdens, when taken.in the aggregate, may not exceed two percent (2%) of the estimated base sales price of the subject properties: A. Ad valorem property taxes levied by the County. B. Voter approved ad valorem taxes levied by the County in excess of one percent (1%) of the estimated base sales price for each unit. C.. Special taxes levied by any 'existing CFD for the payment of bonded indebtedness or on-going services. D. 'Assessments levied by the City for residential garbage service, residential sewer service, median landscape districts and parks maintenance districts. E. Assessments levied for any assessment district or maintenance district for the payment of bonded indebtedness or services and, F. The assigned special tax for the proposed CFD. The special tax formula shall adhere to the following'requirements: A. The maximum special tax shall include customary and reasonable annual administrative costs of the City to administer the District (A portion of these costs may be established as superior in lien position to the debt service). - B. The special tax formula shall not include escalator rates allowing annual tax increases above the maximum special tax established upon District formation. C. The maximum special tax shall establish for undeveloped land, tax rates corresponding to the adopted land use designations on each parcel. Undeveloped land shall be taxed at rates equal to developed properties of the same land use designation. D. The City shall have discretion to allow a special tax.in excess of the established limits for any lands within the CFD which are designated as commercial or industrial. -9- E. For residential districts, once property sales to homeowners actively commences, the City will not take any actions to modify the established special tax formula that would cause an increase, of the special tax on residential properties. Proposed actions that would reduce the special tax on residential properties will be considered on a case-by-case basis. The City shall retain a special tax consultant to prepare a report which: · A. Recommends a special tax method for the proposed CFD, and B. Evaluates the special tax proposed to determine its ability to adequately fund identified public facilities, City administrative costs, services (if applicable) and other related expenditures. Such analysis shall also address the resulting aggregate tax burden of all proposed special taxes plus existing special taxes, ad valorem taxes and assessments on the properties within the CFD. .Terms and Conditions of Bonds All terms and conditions of the bonds shall be established by the City. The City will control, manage and invest all District issued bond proceeds. Unless otherwise authorized by the City, the following shall serve as bond requirements: A. A reserve fund shall be set at the lesser of the three tests: i. 10% of par amount, ii. maximum annual debt service, or 125% of average annual debt service. B. The special taxes or assessment liens shall be levied for the first fiscal year following sale of the bonds for which they may be levied. Interest may be capitalized for up to 24 months. C. The repayment of principal shall begin on the earliest principal payment date for which sufficient special tax or assessment revenues can be made available. The term of any given bond issue will be set by the Finance Director, in consultation with the applicant(s) and the bond underwriter, and will be in relation to the relative size of the particular bond issue. The City prefers most District bond issues to be in the 20 year to 30 year range. In any case, the maximum term of bond issue shall not exceed 35 years. D. The City has established the minimum amount of public improvement bonds financed to be not less than two (2) million dollars construction cost -10- per bond issue. Multiple applicants may be merged together into one. District, at the City's discretion, to meet this minimum requirement. E. ' Beginning with the commencement of the rePayment of principal, annual debt service shall be level. F. For assessment Districts, the bonds shall be callable on any interest payment date. For CFD's, the bonds shall be callable on interest payment dates as structured at the time of sale. Any call premium structure shall be established based on market conditions at the time bonds are sold. G. The maximum special tax shall be established to assure that the annual revenue produced by levy of the maximum special tax shall be equal to at least 110% of the average annual debt service. H. All statements and documents related to the sale of bonds shall emphasize and state that (i) the Bonds are limited obligations of the City and neither the faith, credit nor the taxing power of the City is pledged to security or repayment of the bends, (ii) the sole source of revenues are assessments and/or special taxes, the debt service reserve fund or proceeds raised by foreclosure proceedings, and (iii) the City shall not be obligated to make payments of prinoipal, interest or redemption premiums (if any) from any other source of funds. In general, advance refundings of outstanding bonds for economic savings will be considered on a case-by-case basis, but only when net present value savings of at least five percent (5%) of the refunded debt can be achieved. Refundings with savings of less than five percent (5%), or with negative savings, will not be considered unless there is a compelling public policy objective, as determined by the City. The measurement of the 5% savings may, but is not required to, consider other benefits to the City, other than the proposed bond transaction, if deemed appropriate by the City. District Cost Deposits and Reimbursement~ All City and consultant costs incurred in the evaluation of District applications and the establishment of Districts will be paid by the applicant by advance deposit increments. Except for those applications for assessment Districts or CFD's where the City is the applicant, the City shall not incur any non-reimbursable expenses for processing and administering applicant initiated assessment Districts or CFD's. Expenses not chargeable to the District shall be directly borne by the applicant. Each application for formation of an assessment District or CFD shall be accompanied by an initial deposit in the amount determined by the City's Public Works Department to fund initial staff time and consultant costs associated with District review and implementation. No work will-be initiated by City staff until the initial deposit is received by the City. If additional funds are needed to off-set costs and expenses incurred by the -]]. District, the City shall make written demand upon the applicant for such funds and the applicant shall comply wit'h each demand within ten (10) business days of receipt of such notice. If the applicant fails to make any deposit of additional funds for' the proceedings the City may suspend all proceedings until receipt of such additional deposit. The deposits shall be used by the City t© pay for actual costs and expenses incurred by the City relative to the proceedings, including but not limited to, legal, engineering, appraisal, special tax consultant and financial advisory expenses; documented City staff time, administrative costs and expenses; required notifications; and printing and publication of legal matters. The applicant may request deposit terms and conditions to be defined by a deposit and reimbursement agreement to be executed by the applicant and the City. Upon such request, the City will place this agreement on the City Council agenda, as soon as practical after receipt of application. The dist, rict shall refund any unexpended portion of the deposits' upon the following conditions: A. The District is not formed; B. Bonds are not issued and sold by the District; C. The proceedings for formation of the District or issuance of bonds is disapproved by the City; or D. The proceedings for formation of the District or issuance of .bonds is abandoned in writing by the appliCant. E. The formation of the District and the issuance of bonds as set forth below a. Except as otherwise provided herein, the applicant shall be entitled to reimbursement for all reasonable costs and expenses incident to the proceedings and construction of the public facilities as provided under the Mello-Roos Community Facilities Act of 1982 or the Municipal Improvement Act of 1911 or 1913 and the Improvement Bond Act of 1915, provided that all such costs and expenses shall be verified by the City as a condition of reimbursement. The applicant or property owner shall not be entitled to' reimbursement from bond proceeds for 'any of the following: A. In-house administrative and overhead expenses incurred by the applicant, or expenses of applicant's counsel or consultants; and - 12- B. Interest expense incurred by the appliCant on moneys advanced or expended during the proceedings and construction of public facilities; The City shall not accrue or pay any interest on any portion of the deposit refunded to the applicant or the costs and expenses reimbursed to the applicant. Neither the City nor the District shall be required to reimburse the applicant or property owner from any funds other than the proceeds of bonds issued by the District. Excess funds on deposit after the formation of the proposed District will be refunded to the depositor. A.qreements The apPlicant shall provide drafts of all necessary agreements incident to District proceedings in a form satisfactory to the City and consistent with these policies. City bond counsel will determine and approve the final form of all District agreements. These agreements shall include, but are not limited to: A. Development Agreement B. Reimbursement Agreement C. Agreements with any other public agency entitled to receive any portion of the bond proceeds or entitled to own and/or operate any of the public facilities financed by the bond proceeds. As a cor~dition to the issuance and sale of the bonds, all of the agreements specified shall be duly approved and executed by the parties thereto. Prior to execution of any agreements, such agreements shall be reviewed by bond counsel and the City Attorney and approved by the City Council. Use of Consultant~ The City shall select all consultants necessary for the formation of the district and the issuance of bonds, including the underwriter(s), bond counsel, disclosure counsel, financial advisor, assessment engineer, appraiser, market study consultant, and the special tax consultant. Prior consent of the applicant shall not be required in the determination by the City of the consulting and financing team. However, the applicant may make recommendations to the City on an advisory basis in their application. No firm may serve as both design engineer and engineer of work and assessment engineer or special tax consultant on the same District. No law firm may serve as bond counsel if any project proponent has engaged such firm at any time during the three-year period immediately preceding the formation .of the proPosed District. No law firm may serve as both bond counsel and disclosure counsel. Acquisition Provision-~ The City is generally opposed to developer initiated construction Districts. The. City shall have final determination as to whether it will allow the financing of public facilities through construction as opposed to acquisition, and will grant rare exceptions where an overriding justification exists concerning public benefit, safety or health. Such waiver shall be subject to City council approval. The City and the applicant or property owner shall mutually agree upon facilities to be acquired and the method of determining reasonable acquisition costs. A funding and acquisition agreement shall be required and approved by the City Council on or prior to the adoption of the Resolution of Intention to form the District. The applicant will be expected to have all improvements completed within three years from the date bonds are sold. Reimbursement requests should be filed with the City prior to the eXpiration of this three year period. Di.sclosure to Purchasers -The applicant or property owner Will be required to demonstrate to the satisfaction of the City that there will be full disclosure of this and any other special tax, assessment or other liens on individual parcels of which the seller or lessor has knowledge to existing and future property owners. In addition to all requirements of law, the City shall require the applicant to provide disclosure.of such information as the City deems appropriate to the purchasers of property within the District, with respect to the existence of the District, amounts of' special taxes to be levied within the District and the terms and conditions of.bonds issued on behalf of the District. Such disclOsure shall take place prior to sale, and may include homebuyer notifications requiring signature prior to home sales, as well as methods to notify subsequent home purchasers. Property Owner Support In the instance of multiple property owners, the District applicant shall be required to produce letters evidencing other property owner support for the scope and establishment of the District as an attachment to the District application. The City will require that developer initiated Districts have concurrence of not less than two-thirds of the property owners to be included in the proposed District, unless there is an overriding need for the public facilities, or the applicant is willing to separately fund the facilities on the non-participating property(s). The City reserves the right to require demonstration of a greater or lesser degree of public support for the formation of proposed multiple property owner Districts. - ]4- Land Use Approvals Proposed District properties must possess a land use determination such that proposed development land uses and specific facility requirements can be adequately assessed. The City will accept applications for assessment and/or Mello-Roos financing only when properties to be included within a proposed District have City approved zoning or site plan approval.' The City will also accept applications for District financing from appliCants whose properties are included in an approved Development Agreement. Exceptions to These Policie~ The City reserves the right to amend or modify these policies at any time as well as to make exceptions or changes for specific financing projects, as facts or circumstances so warrant. The City' may find in limited and exceptional instances that a waiver to any of the above stated policies is reasonable given identified special City benefits to be derived from such waiver. Such waivers are granted only by action of the City Council and based upon specific public purpose and/or health and safety findings. p:nks/cfd/land' based policy as revised feb 27 2006.doc BAKERSFIELD Economic and Community Development Department MEMORANDUM March 2, 2006 FROM: Donna L. Kunz, Economic Development Director SUBJECT: CDBG, HOME, and ESG Action Plan FY 06/07 As an Entitlement City under the U. S. Department.of Housing and Urban Development (HUD), the City receives annual entitlements in order to improve Iow-income neighborhoods in our City. The HUD CDBG/HOME entitlement for FY 06/07 has been posted showing an overall reduction of 9.2% from $5,620,980 to $5,144,124. The City's CDBG allocation for FY 06/07 is $3,391,309 ($353,473 less than FY 05/06). The HOME Investment Partnership Program allocation for next year is $1,608,770 ($78,419 less than FY 05/06). This amount also includes funds ($22,537) for the American Dream Downpayment Initiative. Lastly, the Emergency Shelter Grant funds for FY 06/07 are $144,045. The deadline for submission of applications for funding was October 31 ,~2-005. This year a total of eight (8) applications were submitted from non-profit and public entities totaling over $1.2 million requesting assistance for their projects to improve the quality of lives for Iow- income neighborhoods. In addition City departments submitted 8 proposals totaling about $2.8 million for activities that would improve the infrastructure in those Iow-income neighborhoods. Attached is a list of all the proposals and projects submitted for this years CDBG, HOME, and ESG funds. After reviewing all the proposals and projects, staff has prepared a proposed budget and Action Plan for FY 06/07. Attached is a summary of the proposed budget for consideration and recommendation to the City Council. S:\DEBBIE'S\Budget & Finance~Action Plan 06-07.doc CDBG Entitlement for FY 2006-07 - PROPOSED $3,391,309 Program Income Projected for 06-07 $150,000 TOTAL RESOURCES $3,541,309 20% Admin. Cap (not to exceed) $708,262 Long term obligations: Debt Svc. Public Fac.- P & I on $4.1 m $332,871 Debt Svc. Public Fac.- P & I on $800,000 $63,506 TOTAL LONG TERM OBLIGATIONS $396,377 PUBLIC SERVICES Current ent.+pr yr Pi X 15% = $541,000 max. for FY 06-07 Graffiti Removal in HUD Eligible Areas 200,000 Bakersfield Senior Center - Admin. Contribution 50,000 Fair Housing 50,000 Sub-total $300,000 PUBLIC FACILITIES Bakersfield Senior Center - Roof Repair $48,000 PAL - Storage. Facility $41,000 Sub-total $89,000 CDBG Home Owner Rehabilitation McDonald/Stockdale Sewer Assessment Grant Proj. 500,000 25,000 Sub-total $500,000 Housing and Slum and Blight Activities Home Access 50 Sub-total $50,000 Subtotal Administration, Debt and Programs $2,068,639 25,000 Note: Requests for Capital Improvement Projects include project cost and direct delivery: Capital Improvement Projects (Proposed) Public Works Streetscape - 34th Street - Design 250,000 2,500 Street Imp. - Lotus Lane btwn. Casa Loma & Bradshaw 127,000 2,500 Curb, Gutter, Sidewalk - E. Truxtun to Calif.& Union 375,000 5,000 to Williams Street Curb,Gutter Sidewalk - Various Streets 442,000 500 Central Park Improvements - Millcreek $268,170 AMOUNT OVER/UNDER NET RESOURCES AVAILABLE S:CDBGBudgetProposedUseFY0607Draftl Note: Street Improvement Projects by City forces. No Public Works Design required. OME Investment Partnership & Emergency Shelter Grant:~ ~, ~ ~, RESOURCES: HOME Entitlement for FY 2006-07 $1,586,233 Program Income Proiected 06-07 $375,000 Sub-Total $1,961,233 American Dreams- Downpayment Assistance New Program $22,537 PROGRAM ADMINISTRATION - 1'0% $t96,t23 New Construction - Lot Acquisition 427,175 American Dreams - Downpayment Assistance 22,537 Housing Urban Bakersfield: SEPA,DT & OTK Downpayment Assistance 1,000,000 100,000 CHDO Set Aside 15%: (HUD mandated) 237,935 Amount over/under net resources available $0 ESG Grant Proposed Funding for FY 2006-07 $144,045 5% Administrative Cap $7,100 Agencies Funded: Bakersfield Resuce Mission $60,880 Bethany Homeless Shelter $60,880 Alliance Against Family Violence $15,185 Amount over/under net Resources Available $0 HOME ESG BudgetProposedUse Fy06-07.xls BAKERSFIELD Economic and Community Development Department MEMORANDUM February 2, 2006 TO: Alan Tandy, City Manager Donna Kunz, Economic Development Director FROM: George Gonzales, ~,~munity Development Coordinator SUBJECT: Non-prOfit Applications submitted for CDBG FY 2006~07 Funding. The deadline for the submission of CDBG, HOME, and ESG applications for FY 2006/07 funding was October 31,2005. This year eight (8) applications were submitted from non- profit and public entities totaling over $1.2 million. The HUD CDBG/HOME entitlement for FY 06/07 has been posted showing an overall reduction of 9.2% from $5,620,980 to $5,144,124. The City's CDBG allocation for FY 06/07 is $3,391,309 ($353,473 less than FY 05/06). The HOME Investment Partnership Program allocation for next year is $1,608,770 ($78,419 less than FY 05/06). This amount also includes funds ($22,537) for the American Dream Downpayment Initiative. Lastly, the Emergency Shelter Grant funds for FY 06/07 are $144,045. Below are summaries of the applications received from non-profits requesting assistance from the various HUD programs for FY 06/07: Community Development Block Grant Applications - FY 2006~07 Applicant Estimated Cost Description & Location City Funds Requested HUD Proposal Name Other Sources Eligible Ebony Counseling Replace 7000 sq-ft of roof $73,000 Total Cost Yes Center surface at Ebony Center. 1301 California Ave (04) Roof Replacement $48,000 City $25,000 Ebony Bakersfield Senior Replace walkway roofs; re- $126,150 Total Cost Yes Center support sagging walkway coverings; new flooring; install Facility Improvements accessible new doors to center. $126,150 City 530 Fourth Street Page 1 of 2 S:\GEORGE~006-07 funding request.doc Applicant Estimated Cost Description & Location City Funds Requested HUD Proposal Name Other Sources Eligible Kern County Technical Funds to purchase shop $ 510,582 Total Cost Yes Training Center equipment and rehabilitate building. 1621 Columbus Street $ 245,582 City Incomplete $ 265,000 State grant Application Bakersfield Police Build a free-standing 1600 $ 98,800 Total Cost Yes Activities League sq-ft metal building on the' BPAL site to store BPAL Storage Building equipment used in sports $ 41,300 City Project programs. $ 57,500 County 301 East Fourth Street HOME Program Applications - FY 2006/07 C.L. Investors, L.P. Construct 137 affordable 2, $16.8 million Total Cost Yes 3, & 4 bedroom apartments at the Southeast corner of Casa Loma Family Lotus and Casa Loma $14 million Tax Credit Apartments - Phase II $1.95 million loans Ward 1 $500,000 County CD $ 350,000 City Emergency Shelter Grant (ESG) Applications - FY 2006/07 Alliance Against Family Fund the operating cost of $1.38 million annual operating Yes Violence and Sexual the Battered Women's budget Assault Shelter including utilities, insurance, maintenance and Battered Women's wages for a counselor. $ 15,000 City Shelter City Wide Bethany Services, Inc. Continue to fund operational $1.16 million annual operating Yes cost of the Bakersfield budget Bakersfield Homeless Homeless Center including Center cost of security maintenance and utilities at 1600 E. $ 125,000 City Truxtun Avenue. City wide Bakersfield Rescue Continue to fund operational $1.53 million annual operating Yes Mission cost of the Bakersfield budget Rescue Mission including Homeless Intervention maintenance, utilities, and Services personnel. $ 72,000 City City Wide Page 2 of 2 S:~GEORGE~2006-07 funding request.doc BAKERSFIELD Economic and Community Development Department MEMORANDUM February 13, 2006 TO: Alan Tandy, City Manager Donna L. Kunz, Economic Development Director FROM: George Gonzale~'~'~unity Development Coordinator II SUBJECT: Intra City ProposalS; Received for FY 2006/07 CDBG Assistance The deadline for submission of proposals for FY 2006/07 was October 31, 2005. We received 8 proposals totaling about $2.8 million. Below are project descriptions, location, and cost estimates. Projects are listed in order of priority as determined by submitting department. Project Description IDepartment Ward IEligibility Ranking STREET IMPROVEMENTS 34th Street Streetscape Project- Phase I' EDCD Priority Design and construction of streetscape and median Ward 2 2 improvements. FY06/07 CDBG $250,000 McDonald/Stockdale H~qhway Sewer Assessment Grant EDCD Priority Project Ward 1 1 McDonald/Stockdale Special Assessment Assistance to eligible Iow-income owner/occupant homeowners withn the area bounded by McDonald Way, Joseph Drive, Stine Road and Stockdale Highway. The special assessment will cover the eligible homeowner share of the installation of sewer project, sewer connection fee, removal of septic tank and connect to home. Estimated total cost $1.6 million. FY 06/07 CDBG $565,740 Curb, Gutter and Sidewalk Area of AIta Vista to Baker and Public Works/Streets Priority .from Flower to FWY 178. Estimated total cost $370,000. Ward 2 2 Curb, Gutter 8, Sidewalk - Area of East Truxtun to Public Works/Streets Priority California and from Union to Williams Street Estimated Wards 2 and 3 1 total cost $375,000. S:\GEORGE\CIP funding request 0607.doc Project Description Department Eligibility Ward Ranking Street Improvements- Nina Street~ Madison Street to Public Works Priority Lotus Lane Right-of-way and property acquisition, Ward 1 1 relocation, demolition, and Infrastructure improvements: curb/gutter, sidewalk, driveways, pavement to bring street to City standards Estimated total cost $1,100,000. Curbr Gutter & Sidewalk - Lotus Lane between Casa Loma Public Works/Streets Priority and Bradshaw Ward 1 2 Estimated total cost $127,000 (waiting on amount from Streets). Street Reconstruction Project in HUD El~qible Areas - Public Works/Streets Priority 3 Wards 6 & 7 Street reconstruction and sidewalk installation Wards 6 & 7 on City streets in HUD eligible residential areas. Total Cost $541,995. RECREATION AND PARKS Patriots Park Play.qround and Picnic Area Rehabilitation Ward 6 No Install playground equip, for 2-5 year olds; install shade canopy for group picnic areas; an ADA accessible 2-5 year old playground area. Estimated total cost is $304,100. PUBLIC SERVICES East and Southeast Crime Prevention Services Police Priority 1 Operating Costs for 4 additional police officers to enhance Wards 1, 3 & 7 Yes patrol and crime prevention service in East and Southeast Bakersfield. Estimated total cost $350,000. FY 06/07 CDBG $277,O00. Southeast Bakersfield Fire Protection Services Fire Priority 1 Operational costs for 3 additional fire fighters for Fire StationWard 1 Yes #5 at 700 Planz Road (102 East White Lane) which will provide full strength crew of four persons per shift. Total Cost $247,500 - CDBG FY 05/06 $247,500. Graffiti Removal Pro,qram Removal of graffiti within various Public Works Priority 1 Iow-income areas within the City. Estimated total Cost City-wide Yes $720,000. FY 06/07 CDBG $200,450. Bakersfield Senior Center Services Funds for public Ward 1 Priority 2 services to senior citizens at 530-4th Street. Total Cost - Yes CDBG FY 06/07 $50,000 S:\GEORGE\CIP funding request 0607.doc MEMORANDUM TO: Budget and Finance Committee Members FROM: Alan Tandy, City Manager DATE: March 2, 2006 SUBJECT: WastewaterTreatment Plant Expansion Overview The City has been developing a financing plan for the expansion of Wastewater Plant #3. The enclosed report includes a comparative rate survey of sewer services and a draft financing plan for the impending plant expansion project. Staff and bond consultant will provide a presentation of the enclosed materials. Attachment - Plant 3 Expansion project financing document FiFe name: nks:/p:/bond issues/memo-sewer expan bud and fin com march 8, 2006.doc B A K E 'R S .F I E'."L D Plant 3 Expansion Project Financing Prepared by i~ George K. Baum & Company INVESTMENT BANKERS SINCE 1928 George K. Baum & Compa?~ ~':INVESTMENT BANKERS SINCE 19.8 February27,2006 Mr. Alan Tandy City Manager City of Bakersfield 1501 Truxtun Avenue Bakersfield, CA 93301 Re: Wastewater Plant 3 Expansion Project Dear Mr. Tandy: We are pleased to present to the City of Bakersfield this report regarding financing for the proposed Wastewater Plant 3 Expansion Project. Included is a .Rate Survey comparing Bakersfield to peer cities in both California and the Western states, and a Plan of Finance setting forth the proposed financing scenario and the connection fee and rate changes which will be necessary to accomplish the Plant 3 Project. The appendices provide various Credit Rating and Bond Insurance Criteria as well as the expected Timetable for executing the financing plan concurrent with project design and construction. Rate Survey In 2005, George K. Baum & Company conducted a survey of wastewater system rates and fees on behalf of the City. This Survey compares Bakersfield with a group of peer cities both in California and the West. For purposes of financial planning, it is assumed that Bakersfield wastewater charges and fees must be retained at levels which enable the City to compete effectively with other cities for population and economic development, and to deliver true value to its citizens. Several important conclusions, can be drawn from the Survey: · Among its peer cities in California, Bakersfield had the highest rate of population growth (33.5%) between 1998 and 2005, and the second highest actual population increase. · Despite extensive growth and the resulting need for additional wastewater facilities, Bakersfield maintains a significant competitive margin within which to increase its wastewater fees and rates as necessary. · Bakersfield's current single family connection fee is competitively placed below the average of its peer cities in California. · User fee comparisons present an even more favorable competitive picture, with Bakersfield having the lowest user fee amongst the 15 peer cities in California, and the 29th lowest out of 30 peer cities in the West. 717 Seventeenth Street Suite 2500 * Denver Colorado 80202 * 800.72211670 Plan of Finance A proposed plan of finance has been developed for the Plant 3 Project, which m~nimizes impacts on connection and user fees. During the 1997 improvements at Plants 2 & 3, George K. Baum & Company developed a financing model which resulted in the successful financing of those projects, and beginning in 2005, George K. Baum & Company revised its planning model to accommodate this proposed Plant 3 Project. Alternatives were modeled using various inputs as to growth, cost, timing, debt service coverage, etc. The resultant plan incorporates several key considerations: · Sewer revenue bonds, relying solely on fees and charges paid by users, will be adequate as the financing source--no general City tax resources will be required. · The City's long time policy of using connection fees as its primary source of bond repayment can be fulfilled With gradual step increases over a period of time. · Debt service coverage ratios, key to maintaining the Wastewater Utility's high credit rating, and therefore access to the lowest interest rates, can all be accomplished without excessive user rate increases. · Necessary user rate increases can be accomplished with small annual step increases over a multi-year period. · The plan is structured so the City may add future year wastewater system improvements and plants to accommodate continued growth. George K. Baum & Company is available at any time to assist the City in its review of these materials and in further planning for the Plant 3 Expansion Project. Many thanks to Nelson Smith and Art Chianello from your staff, Lynn Paquin from the Sacramento George K. Baum & Company office and Josh Magden from the Denver George K.' Baum & Company office, all of whom have collaborated in the preparation of the Rate Survey and Finance Model for the Plant 3 Project. Sincerely, GEORGE K. BAUM & COMPANY Douglas L. Houston ' Executive Vice President KK/had B TABL[ OF C©NT[NTS Sectionl: Rate Survey Overview of Data Collection Methodology .............................................................. location Map ........................ : .................................................................................. 2 Population Growth ...... ................................................................................ . ............ 3 Population Increase .................................................................................................. 4 Wastewater Connection Fees and Annual Fees ......................................................... 5 Wastewater Connection FeEs .................................................................................... 6 Wastewater User Fees .............................................................................................. 8 2004-05 Annual Wastewater User Fee Survey ................................................2 ..... 210 Comparative Ratings and Select Financial Medians .......................... Comparative Wastewater Rates and Fees ................................................................ 12 Section 2: Proposed Plan of Finance Overview and Parameters ....................................................................................... 13 Schedules I through 4 ............................................................................................ 15 Appendix A: Ratings and Bond Insurance Parameters Appendix B: Preliminary Finance Schedule Prepared by :George K. Bantu & Company 0 © > OVERVIEW OF-DATA COLLECTION METHODOLOGY · A survey of wastewater system rates and fees was conducted on behalf of the City of BakerSfield by George K. Baum & company. "Pee~ Group" cities within California chosen for the comparative survey were selected on the basis of: · Proximity in Southern and Central California · Population size of 50,000 to 400,000 · System-wide growth due to new residential construction · The last fee survey prepared by George K. Baum & Company was conducted in 1998 and included the following cities: Fresno, Lancaster, Modesto, Oxnard, Pleasanton, Redlands, Rialto, Riverside, San Bernadino, Stockton, Vacaville and Visalia. · The Cities of Palmdale and Santa Clarita were added to this study based on the criteria listed above. · This survey also includes data from wastewater systems in other states for comparative purposes. · User fee information for the survey was obtained from the agencies' web site, follow-up calls and from the "Wastewater User Charge Survey Report 2004-05" published by the California State Water Resources Control Board. Population data is from the California Department of Finance. · This study is intended to provide the City's management with comparative data to assist in future financing decisions for its wastewater system. Consequently, it is not meant to be an exhaustive examination of all the selected, or other potential comparative, city data. Prepared by ~ George K. gaum & Company '~:~N,,~,,~ ............. ~ ~;T~ · Page 1 LOCATION MAP City Locations 1 Bakersfield 2 Fresno 3 Lancaster 4 Modesto 5 Oxnard 6 Palmdale 7 Pleasanton 8 Redlands 9 Rialto 10 Riverside 11 San Bernardino 12 Santa Clarita 13 Stockton 14 Vacaville 15 Visalia Bau~m _& Com__pa_n~y Page 2 o o WASI[WAI[R CONN[CIION FIlS AND ANNUAl_ 2004-05 2004-05 Ranking Connection Ann,ual by Annual Fee Per User Fee User Fee SFDE* Per SFDE Per SFDE Pleasanton $ 10,400 $ 378 1 Vacaville 6,938 304 3 Stockton 4,046 232 5 Redlands 3,850, 167 9' Oxnard 3,539 284 4 · San Bernardino 3,500 215 6 Riverside 2,700 157 11 Bakersfield 2,500 120 15 Santa Clarita 2,330 150 12 Visalia 2,325 166 10 Lancaster 2,250 129 14 Palmdale 2,250 131 13 Fresno 2,119 199 7 Rialto 1,394 322 2 M odesto 629 171 8 · SFDE = Single Family Dwelling Equivalent unit · Bakersfield charges the(8th highest connection fee and the lowest annual user fee. · Pleasanton charges the highest connection fees and annual user fees. However, Modesto charges the lowest connection fee and the 8th highest annual user .fee. · Based on the data presented above, there does not seem to be a correlation between the size of connection fees and annual user fees. Prepared by George K. Baum & Company ~,,~s~,.,,~.~ ~...~.~ ~,N~ ~,~ Page 5 COMPARATIVE RATINGS AND SELECT FINANCIAL MEDIANS AMONG PEER GROUP CITIES (sorted alphabetically) Net Revenue Net Revenue Outstanding Coverage of Coverage of Operating Rating City Rating Debt Peak Debt Rate Covenant Ratio Issued Bakersfield A1 3.14 N/A 1.25 50.6% 2002 Fresno (1) A2 2.40 1.0 1.25 94.0% 1995 · L.A. County Sanitation (2 Aa2 3.70 1.7 1.20 83.2% 2003 Modesto A1 3.43 2.15 1.25 N/A 1993 Oxnard (3) Pleasanton A1 * 3.56 3.35 1.25 83.4% 2004 Redlands (3) 'Rialto (3) Riverside (3). San Bernardino No wastewater debt Stockton (4) A2 2.51 2.44 1.25 58.6% 2003 Vacaville No wastewater debt Visalia A3 · 1.91 1.24 1.25 66.0% 2002 Moody's Median A2 1.90 NIA 1.20 59.3% 1999 Cities Outside the peer Group Comparison with Recent Wastewater Debt Ratings Burbank (5) AA3 1.77 1.58 1.20 79.0% ' 2004 Clovis (6) A3 2.66 N/A 1.20 33.3% 2005 Lompoc (7) A3 1.53 0.37 N/A 94.4% 2005 Los Angeles A1 1.75 N/A 1.25 N/A 2005 Richmond Baa3 2.12 1.25 1.20 81.4% 2004 San Diego A1 1.89 N/A 1.20 64.0% 2003 Santa Barbara A2 2.28 1.42 1.20 88.7% 2004 (1) Rating and ratios for 1995 Water bonds. (2) Includes Lancaster, Palmdale and Santa Clarita. (3) Does not have a published underlying rating for wastewater bonds. (4) Stockton's debt service coverage and peak debt service coverage is 1.40 and 1.36 respectively when connection fee revenue is excluded. (5) Burbank's coverage is required to be 1.2 for both annual user fee and connection fee revenue; annual user fee only is set at 1.0. (6) Clovis does not have~ sufficient debt coverage with annual user fee revenue alone. (7) Stockton's coverage is 1.40 and 1.36 for debt coverage and peak debt coverage respectively, net of connection fee revenue. · In addition to the financial statistics presented above, Moody's bases its ratings on other criteria including the local economy, demographic data (including population, income and unemployment rate), and the overall financial status of the City. Prepared by :George K. Baum & Company ~' ...... .,~ ............ ~ T;~,.~ ~ Page 11 COMPARATIVE WASTEWATER RATES AND FEES AMONG SELECTED CALIFORNIA CITIES (sorted alphabetically) % change 1997-98 2004-05 % change 1997-98 2004-05 % change 1998 2005 1998-2005 Connection Conn~ection Connection Annual Annual Annual Estimated Estimated Population Fee Per Fee Per Fee Per User Fee User Fee User Fee Population Population Growth SFDE SFDE SFDE Per SFDE Per SFDE Per SFDF Bakersfield 221,689 295,900 33.5% 1,750 2,500 43% 110 120 9% Fresno 411,600 464,700 12.9% 2,600 2,119 -19% 199 199 0% Lancaster 127,136 133,700 5.2% 1,780 2,250 26% 67 129 92% Modesto 182,700 207,600 13.6% 500 629 26% 135 171 26% Oxnard 163,000 188,850 15.9% 3,539 3,539 0% 248 284 15% Palmdale 111,500 136,700 22.6% 1,780 2,250 26% 71 131 85% Pleasanton 62,600 67,650 8.1% 5,049 10,400 106% 258 378 47% Redlands 62,800 70,300 11.9% 3,600 3,850 7% 125 167 34% Rialto 88,000 99,250 12.8% 7,764 1,394 -82% 167 322 92% Riverside 250,800 285,500 13.8% 2,684 2,700 1% 157 157 0% San Bemardino 180,306 199,800 10.8% 3,310 3,500 6% 175 215 23% Santa Clarita 142,200 167,950 18.1% 2,300 2,330 1% 112 150 34% Stockton 237,300 279,500 17.8% 3,634 4,046 11% 220 232 5% Vacaville 85,102 96,750 13.7% 3,944 6,938 76% 233 304 31% Visalia 93,980 107,550 14.4% 953 2,325 144% 123 166 34% Prepared by George K. Baum & Company Page 12 PROPOSED PLAN OF FINANCE The Finance Plan for the Bakersfield Plant 3 Expansion Project has been developed over the course of a significant study of the City's needs. While the design process has yet to produce definitive project cost Key Parameters · estimates, enough is known about preliminary design to develop financing parameters--however they may. · Structured to achieve be subject to change as the design process reaches completion in several months, high credit rating (and lowest borrowing cost) Bond Financing Parameters · 25-year term for bond 1. Sewer revenue bonds, relying solely on fees and charges paid by users, are to be used to finance the · Debt service payments Project. No general City tax resources are to be pledged, are structured to create 2. The plan is structured to enable the City to afford future wastewater system improvements and plants equal (level) payments to accommodate continued growth. Slower growth would delay the need and cost of such a future when combined with plant, faster growth could potentially speed up the need for and cost of a future plant, existing debt 3. The achievement of a high credit rating is essential to a low cost of financing; therefore appropriate · Debt service paid national credit standards are utilized, in practice from 4. Based on current, estimates, the Project cost to be financed is $114,135,000. Including capitalized connection fees interest for the two year construction period and costs of issuance, total bond par amount is estimated · Bakersfield has some of at $128,830,000. the lowest rates & fees in its peer group 5. A 25 year term is used for bond repayment as is typical for infrastructure projects of this type and size. · Rate increases should 6. In keeping with historical City practice, wastewater enterprise connection fees are the primary source be gradual over time of bond repayment. Future connection fees and rates are projected to produce a debt service coverage ratio of approximately 1.0.' · Residential rate increases of 7. Credit rating agencies set a debt service coverage standard which assumes that revenues from user fees, excluding connection charges, will be sufficient to cover payments by a ratio of at least 1.0. approximately $5 per year Accordingly, future user fees have been estimated to produce at a minimum this level of coverage. 8. Prior to the issua.nce of additional parity securities, the City's existing sewer bond covenants require that total audited revenues for the prior fiscal year must be at a coverage ratio of at least 1.25. By achieving the ratios for connection fees and user charges above, the City easily exceeds this requirement. 9. The bond issue is. structured so as to "wrap" around the Utihty's existing debt obligationi this commonly used technique enables combined debt service to be moderated until the existing obligation is retired in the year 2020, and creates overall level annual debt service payments. Prepared by George K. Baum & Company .~. . ......... Page 13 PROPOSED PLAN OF FINANCE (continued) Connection Fee and User Charges Impact 1. Maintaining Bakersfield's existing competitive rate structure, both among California "Peer Cities" and other Cities in the Western states who may be viewed as in economic competition with Bakersfield, is a central objective of the Finance Plan. 2. The Finance Plan is designed so as to allow for gradual annual "step" increases whenever rates must be increased. 3. Growth rates utilized in the Finance Plan are central to projecting future revenues. For purposes of this Plan annual new connections are conservatively projected by the City staff to moderate from current highs (4,554 SFDE in FY 2005) to a slightly more modest rate, leveling off at 3,000 SFDE connections from 2011 onward. No basis for these projections, other than historical trends, has been observed. Actual results will inevitably be different and if materially so, may change the future fees and charges required. 4. Connection fees are proposed to rise from the current $2,500 SFDE by annual increments of $200 until 2011 when it reaches $3,500. At that time connection fee increases may pause for two or more years while growth and the need for additional facilities would be evaluated. 5. Annual user charges are proposed to increase in annual steps of $5.00 until $155/year is reached in 2012. This estimated annual increase is based on meeting projected debt service coverage rates; actual rates will continue to be set annually by the City Council and are subject to fluctuation from a variety of operational factors that may require user fee rates to vary from this model. Prepared by :GeorgeK. Baum & Company ~, ...... ,~ ~ ~.~' .................. Page 14 BAKERSFIELD, CALIFORNIA REVENUE BONDS ~ Schedule 1 Revenue Growth Projections Projected Fiscal Single Family Annual User Fee Other Community Rents Total New Connection Conne~on Year Dwelling Rate Per Revenue User Service & User & Other Connections Fee Fee 6/30 Equivalents SFDE (cou~ co,~n) Charges (2) Diat~cta Royathee Revenue (SFDE) Per SFDE Revenue (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (3) x (4) Sum (5- 8) (10) x (11) 2005 94,640 120.00 11,356,800 3,335,710 511,500 364,209 15,568,219 4,554 2,500 11,385,000 0 2006 99,194 125.00 12,399,250 3,392,500 533,500 315,000 16,640,250 3,565 2,500 8,912,500 1 2007 102,759 130.00 13,358,670 3,494,275 549,505 315,000 17,717,450 3,400 2,700 9,180,000 2 2008 106,159 135.00 14,331,465 3,599,103 565,990 315,000 18,811,558 3,300 2,900 9,570,000 3 2009 109,459 140.00 15,324,260 3,707,076 582,970 315,000 19,929,306 3,200 3,100 9,920,000 4 2010 112,659 145.00 16,335,555 3,818,289 600,459 315,000 21,069,303 3,100 3,300 10,230,000 5 2011 115,759 150.00 17,363,850 3,932,837 618,473 315,000 22,230,160 3,000 3,500 10,500,000 6 2012 118,759 155.00 18,407,645 4,050,822 637,027 315,000 23,410,494 3,000 3,500 10,500,000 7 20t3 121 759 18,872,645 4,172,347 656,138 315,000 24,016,130 3,000 ~ 10,500,000 8 2014 124 759 19,337,645 4,297,518 675,822 315,000 24,625,964 3,000 i~P~ 10,500,000 9 2015 127,759 P~'~'~ ~! 19,802.645 4,426,443 696,096 315,000 25,240,185 3,000 10,500,000 10 2016 130,759 [;~,~ ~5!00~. ~.,.~.~ 20,267,645 4,559,236 716,979 315,000 25,858,861 3,000 10,500,000 55~0~ 20,732,645 4,696,013 738,489 315,000 26,482,147 3,000 ~! 10,500,000 11 2017 133759 12 2018 136759 i~i55:00 21,197,645 4,836,894 760,643 315,000 27,110,182 3,000~{ 10,500.000 ~'~%5:00~ 21,662,645 4,982,001 783,463 315,000 27,743,108 3,000 ~00~ 10,500,000 13 2019 139 759 14 2020 142,759 55~00 22,127,645 5,131,461 806,967 315,000 28,381,072 3,000 10,500,000 1615 2021 145,759~:i~I ~iS:0b~'~ 22,592,645 5,285,404 831,176 315,000 29,024,225 3,000 ,~;3,500 10,500,000 2022 148,759~'I[~ 23,057,645 5,443,967 856,111 315,000 29,672,722 3,000 10,500,000 17 2023 151,759,:~'~,*~ ~i ~!~i 23,522,645 5,607,286 881,794 315,000 30,326,725 3,000 _ ,~ 10,500,000 18 2O24 154,759 ~ 23,987,645 5,775,504 908.248 315.000 30,986,397 3,000 10,500,000 19 2025 t57,759 ~r~% ~ 55;00', 24,452,645 5,948,769 935,495 315,000 31,651,910 3,000 0 10,500,000 20 2026 160,759~'~1~0~; 24,917,645 6,127,232 963,560 315,000 32,323,438 3,000 ~ ~ ~ ,, ~;A~0d' 10,500,000 21 2027 163,759 ~?~0~L~;~:<~ ~ 25,382,645 6,311,049 992,467 315,000 33,001,161 3,000~ . , ,.,.;~500 10,500,000 22 2028 166,759 ~. 55~,00~ 25,847,645 6,500,381 1,022,241 315,000 33,685,267 3,000 ~i500; 10,500,000 23 2029 169,759 L~ ~:~ 26.312.645 6,695,392 1,052,908 315,000 34,375,946 3.000 10,500,000 24 2030 172'759 ~1~0~'~ 26,777,645 6,896,254 1,084,496 315,000 35,073,395 3,000 10,500,000 25 2031 175,759 27.242.645 7,103,142 1,117,031 315,000 35,777,817 3.000 ~:~ 10,500,000 26 2032 178,759 27,707,645 7,316,236 1,150,541 315,000 36,489,422 3,000 ~ ;10,500,000 Column (4) - Adjusted as necessary to provide 1 times coverage of debt seMce alter 2008 Column (6) - Increases 3% annually beginning 2007 Column (7) - Increases 3% annually beginning 2007 Column (8) - Remains Constant ~ $315,000 annually Column (10) - Assumes 3,565 new connections in 2006 and then 3,400 and declining to 3,000 in 2011 and thereafter Column (11) - Held Constant at $2,500 for the next 15,000 SFDE and then increasing as necessary to provide 1 times coverge of debt se~ce. * Rates & fees after 2012 will continue to be carefuliv rewewed to dete~nine levels reauired to SUDOOrt future arowth and the need for further new facilities. .....................K. Baum _& Company Page CIIY OF BAKERSFIELD, CALIFORNIA SEWER REVENUE BONDS SERIES 2007 Schedule 2 Summary of Revenue Sources Total Interest Fiscal User & Other Connection Income on Gross Year Revenue Fee Revenue Fund Balance Revenue 6130 (fromSched. t) (fmmSched. 1) ~3% Available (1) (2) (3) (4) (5) (6) 2008 15,568,219 11,385,000 1,134,500 28,087,719 0 2006 16,640,250 8,912,500 696,463 26,249,213 2007 17,717,450 9,180,000 412,780 27,310,230 2 2008 18,811,558 9,570,000 433,267 28,814,825 3 2009 19,929,306 9,920,000 356,887 30,206,194 4 2010 21,069,303 10,230,000 537,823 31,837,125 5 2011 22,230,160 10,500,000 492,210 33,222,370 6 2012 23,410,494 10,500,000 469,763 34,380,257 7 2013 24,016,130 10,500,000 464,828 34,980,958 8 2014 24,625,984 10,500,000 463,118 35,589,102 9 2015 25,240,185 10,500,000 464,671 36,204,856 10 2016 25,858,861 10,500,000 469,081 36,827,942 11 2017 26,482,147 10,500,000 475,203 37,457,350 12 2018 27,110,182 10,500,000 482,479 38,092,662 13 2019 27,743,108 10,500,000 491,821 38,734,930 14 2020 ' 28,381,072 10,500,000 503,093 39,384,166 15 2021 29,024,225 10,500,000 515,279 40,039,504 16 2022 29,672,722 10,500,000 527,241 40,699,964 17 2023 30,326,725 10,500,000 539,655 41,366,380 18 2024 30,986,397 10,500,000 552,039 42,038,437 19 2025 31,651,910 10,500,000 564,058 42,715,968 20 2026 32,323,438 10,500,000 575,532 43,398,970 21 2027 33,001,161 10,500,000 585,991 44,087,153 22 2028 33,685,267 10,500,000 594,102 44,779,369 23 2029 34,375,946 10,500,000 ' 599,879 45,475,824 24 2030 35,073,395 10,500,000 602,899 46,176,294 25 2031 35,777,817 10,500,000 602,306 46,880,123 26 2032 36,489,422 10,500,000 597,835 47,587,258 Prepared by Column (5) - ~sumes 3% Eamings Rate on Schedule 3 - Column (15) :GeorgeK. Baum & Company Page 1 9 CITY OF BAKERSFIELD, CALIFORNIA SEWER REVENUE BONDS SERIES 2007 schedule 3 Proposed Revenue Available for Debt Service and Bond Debt Service Coverage Projections Available Net Fiscal Gross O & M Revenue Existing Proposed Total Balance New Cumulative Year Revenue net of Other Total Available Bond Series 2007 Proposed After 16 MGD Annual Fund Fund 6/30 (from Sched. 2) Depreciation Expenses Expenses for Debt Service Debt Sewice Net Debt Service Debt Service Debt Service Plant CIP OepreclatJon Balance (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (4) + (5) (3)* (5) 2005 28,087,719 8,885,987 0 8,985,987 191201,732 902,555 902,555 18,298,177 0 4,310,000 23,215,419 0 2006 26,249,213 9,400,750 0 9,400,750 16,848,463 902,555 902,555 15,945,908 ~'~" ' 20,902,000 4,500,000 13,759,327 1 2007 27,310,230 9,682,773 0 9,682,773 17,627,457 902,555 0 902,555 16,724,902 ~.~" ~E%'; 11,542,000 4,500,000 14,442,229 2 2008 28,814,825 9,973,256 0 9,973,256 18,841,570 902,555 0 902,555 17,939,015 ~'~ ,~-~.. ;~g~ 15,985,000 4,500,000 11,896,243 3 2008 30,206,194 10,272,453 0 t0,272,456 19,933,740 902,555 0 ~02,555 19,031,185 ~ ~ 5,680,000 8,000,000 17,927,429 4 2010 31,837,125 10,560,627 0 10,560,627 21,256,499 902,555 8,874,383 9,776,938 11,479,561 5,000,000 8,000,000 16,406,989 5 2011 33,222,370 10,898,046 0 10,898,046 22,324,324 902,555 9,169,997 10,072,552 12,251,772 5,000,000 8,000,000 15,658,762 6 2012 34,380,257 11,224,987 0 11,224,987 23,155,270 902,555 9,167,208 10,069,763 13,085,508 5,250,000 8,000,000 15,494,269 7 2013 34,980,958 11,561,737 0 11,551,737 23,419,221 902,555 9,166,173 10,008,728 13,350,493 5,407,500 8,000,000 15,437,202 8 2014 35,569,102 11,908,589 0 11,908,589 23,680,513 902,555 9,156,456 10,059,011 13,621,503 5,569,725 8,000,000 15,489,040 9 2015 35,204,856 12,265,847 0 12,265,847 23,839,009 902,555 9,152,645 10,055,200 13,683,809 5,736,817 8,000,000 15,636,033 10 2016 36,827,942 12,633,822 0 12,633,822 24,194,120 902,555 9,178,593 10,081,148 14,112,972 5,908,921 8,000,000 15,840,084 11 2017 37,457,350 13,012,837 0 13,012,837 24,444,513 902,555 9,213,268 10,115,763 14,328,750 6,086,189 8,000,000 16,082,645 12 2018 38,092,682 13,403,222 0 13,403,222 24,689,440 902,555 9,206,707 10,109,262 14,580,178 6,208,775 8,000,080 16,394,048 13 2019 38,734,930 13,805,318 0 13,805,318 24,929,612 902,555 9,194,490 10,097,045 14,832,557 6,456,838 8,000,680 16,769,778 14 2020 39,384,166 14,219,478 0 14,219,478 25,164,688 902,555 9,205,400 10,107,955 15,055,732 6,650,543 8,000,000 17,175,987 15 ~2021 40,039,504 14,646,082 0 14,946,062 25,393,442 0 10,144,646 10,144,646 15,248,796 6,650,059 8,0~0,000 17,574,704 16 2022 40,698,964 15,065,444 0 15,085,444 25,614,520 0 10,145,149 10,145,149 15,469,371 7,055,561 8,000,080 17,968,514 17 2023 41,366,380 15,538,007 0 15,838,687 25,828,373 0 10,148,348 10,148,348 15,680,025 7,267,228 8,008,0001 18,401,311 18 2024 42,038,437 16,004,148 0 16,004,148 26,034,289 0 10,148,408 10,148,408 15,865,881 7,485,245 8,000,000 18,801,948 19 2025 42,715,968 16,494,272 0 16,484,272 26,231,696 0 10,139,448 10,139,446 16,092,251 7,709,802 8,000,000 19,184,396 20 2020 43,398,970 16,978,800 0 16,978,800 26,420,169 0 10,130,433 10,130,433 16,289,736 7,941,096 8,068,000 19,533,037 21 2027 44,087,.153 17,468,164 0 17,488,164 26;598,968 0 10,149,293 10,149,293 16,449,695 . 8,179,329 8,000,000 19,803,403 22 2028 44,779,369 18,012,809 0 18,012,809 26,766,560 0 10,149,303 10,149,303 16,617,257 8,424,709 8,000,000 19,995,951 23 2029 45,475,824 18,583,193 0 18,553,193 26,922,631 0 10,144,465 10,144,485 16,778,146 8,677,450 8,068,000 20,096,647 24 2030 46,176,294 19,109,789 0 19,109,780 27,066,505 0 10,148,502 10,148,502 16,918,003 8,837,774 8,008,0001 20,076,877 25 2031 46,880,123 ~9,683,083 0 19,683,083 27,197,041 0 10,140,165 10,140,165 17,056,876 9,205,907 8,050,000 19,927,646 20 2032 47,567,258 20,273,575 0 20,273,575 27,313,682 0 10,123,262 10,123,262 17,190,420 9,482,084 8,000,000 19,636,182 Column i4) - Increases 3% annually Beginning 2007 Column (9)- Net of Capitalized Interest for Saies 2006 by Column (15) - Cumulative Fund Balance is the Prior Year's Balance + Balance After Debt Sewice - CIP - Funded Depreciation :Georg_eK. Baum & Compan~ ........ . ............. ~ T;~.~ ~ Page 20 BAKERSFI[LD, CALIFORNIA REV[NU[ BONDS 2007 Schedule 4 Combined Debt Service and Bond Debt Service Coverages ABT Coverage Annual Annual Fiscal 1997 Total Proposed Proposed Net Revenue Annual (based on Coverage Coverage Year State Existing Series 2007 Total Available for DIS Prior yosr's (net of Connection 6/30 Loan Debt Service Net Debt Service Debt Service Debt Service 'Coverage revenue) Connection Fees Fees Only) (1) (2) (3) (4) (S) (8) (7) (8) (9) (10) (11) 2005 902,555 902,555 0 902,555 19,201,732 21.27 8.66 12.61 0 2006 902,555 902,555 0 902,555 16,848,463 18.67 1.89 8.79 9.87 1 2007 902,555 902,555 0 902,555 17,627,457 19.53 1.66 9.36 10.17 2 2008 902,555 902,555 0 902,555. 18,641,570 20.88 10.27 10.60 3 2009 902,555 902,555 0 902,555 19,933,740 22.09 11.09 10.99 4 2010 902,555 902,555 8,874,383 9,776,938 21,256A99 2.17 1.13 1.05 5 2011 902,555 902,555 9,169,997 10,072,552 22,324,324 2.22 1.17 1.04 6 2012 902,555 902,555 9,167,208 10,069,763 23,155,270 2.30 1.26 1.04 7 2013 902,555 902,555 9,166,173 10,068,728 23,419,221 2.33 1.28 1.04 8 2014 902,555 902,555 9,156,456 10,059,011 23,680,513 2.35 1.31 1.04 9 2015 902,555 902,565 9,152,045 10,055,200 23,939,009 2.38 1.34 1.04 10 2016 902,555 902,555 9,178,593 10,081,148 24,194,120 2.40 1.36 1.04 11 2~17 902,555 902,555 9,213,208 10,115,763 24,444,513 2.42 1.38 1.04 12 2018 902,555 902,555 9,206,707 10,109,262 24,689,440 2.44 1.40 1.04 13 2019 902,555 902,555 9,194,490 10,D97,045 24,929,612 2.47 1.43 1.04 14 2020 902,555 902,565 9,205,400 10,107,955 25,164,688 2.49 1.45 1.04 15 2021 0 10,144,646 10,144,646 25,393,442 2.50 1.47 1.04 16 2022 0 10,145,149 10,145,149 25,614,520 2.52 1.49 1.03 17 2023 0 10,148,348 10,148,348 25,828,373 2.56 1.51 1.03 18 2024 0 10,148,408 10,148,408 26,034,289 2.57 1.53 1.03 19 2025 0 10,139,446 10,139,446 20,231,696 2.59 1.55 1.04 20 2026 0 10,130,433 10,130,433 20,426,169 2.61 1.57. 1.04 21 ~27 0 10,149,293 10,149,293 26,598,988 2.62 1.59 1.03 22 2028 0 10,149,303 10,149,303 26,756,560 2.64 ~ 1.60 1.03 23 2029 0 10,144,485 10,144,485 26,922,631 2.65 1.62 1.04 24 2030 0 10,148,562 10,148,502 27,056,505 2.67 1.63 1.03 25 2031 0 10,140,165 10,140,165 27,197,041 2.08 1.65 1.04 26 2032 0 10,123,262 10,123,262 27,313,682 2.70 1.66 1.04 Column (5)- Net of Capitalized Interest for Series 2006 Column (8) - Rata Covenant Requirement is 1.25 Times Annual Debt Service Column (9) - Additional Bond Test = Prbr Year's Revenue divided by Maxium Annual Debt Service ComPany ...................... Page 21 APPENDIX A Rating and Bond Insurance Parameters · Local Economy · Population growth · Household/customer base growth · Socioeconomic data (unemployment rate, median income, home sales, etc.) · Recent development and future development plans · Management · Management team stability · Track record of last financing (were projects built on time and within budget?) · Capital plan · Finances · Current and projected finances · Revenue stream to repay debt · Customer base diversity · Debt Structure · Term of repayment · Debt service coverage - total coverage and coverage from annual revenue (excluding one-time connecti~)n fees) · Debt Coverage · Series 1997 bonds were rated A1 based on the local growth, diversity of customers and solid debt coverage. In 2001, coverage from all sources was 3.27x. · Minimum Debt Service Coverage Levels Rating analysts prefer the following minimum debt service coverage levels: · Annual user fee revenue: lx · One-time connection fee revenue, lx ' · · All revenue sources: 2x Prepared by :George K. Baum & Company BAKERSFIELD Economic and Community Development Department MEMORANDUM March 2, 2006 TO: FROM: Donna Kunz, Economic Development Director SUBJECT: Request for Additional Funding for Bethany Services, Inc. for operating the Bakersfield Homeless Center At the Joint Bakersfield City Council, Kern County Board of Supervisor's February 27, 2006 meeting, Jeff Green Chairman of the Board of Directors of the Bethany Services Inc, (Bethany) requested that the City and County provide additional assistance to the operation of the Bakersfield Homeless Center located at 1600 East Truxtun Avenue. This requested was referred to the Budget and Finance Committee of the Bakersfield City Council for their consideration. Bethany is one of many non-profits organizations in Bakersfield that provides needed emergency services and shelters to Homeless families, women, children, and men. Since 1991, Bethany has been providing, hot meals, job training and placements, child care, counseling, mail service, health and dental care, intensive case management, and long term housing placement to the Homeless population. As you will recall, the City was originally responsible for the construction of the Homeless Center and Bethany was contacted to operate the center. In May 2001, the City Council approved that transfer of title of the Homeless Center to Bethany and approximately $1.2 million of equity. Since then, Bethany has expanded the original site for additional storage and larger administrative offices to the adjacent site. Since 1998 the City Council has approved at least half of the City's Emergency Shelter Grant (ESG) entitlement (averaging $50,000 per year) with FY05/06 totaling $60,875 to Bethany. ESG can be used by homeless services agencies for operating funds for their programs. S:XDEBBIE'S~Budget & Finance~Bakersfield Homeless Center.doc It has been the City Council long standing policy that it would not fund requests from well deserved non-profits for operating funds for their agencies. Because of the increase number of non profit request for financial assistance, in June 2001, the City Council approved a policy and criteria for evaluating request from non-profits. That criteria is as follows: · It is for one-time expenditures rather than ongoing costs; · It is for capital expenditures rather than operating costs; · It is for one-time activities which are tied to specific high priority City Council goals; · It is for use of City facilities by the non-profit group. The deadline for Request for Proposals for the City of Bakersfield for funding non-profit Capital projects with HUD funds is October 31 of every year. Bethany did apply for ESG funding but not CDBG. The draft Action Plan for FY06/07 is set for the Budget and Finance Committee on March 8, 2006. City staff is an active member, along with Bethany and other members of the Homeless Collaborative that annually works to prepare an associated Shelter plus Care application for Bakersfield/Kern County's share of the US Department of Housing and Urban Development Super Notice of Funding Availability, under the Steward B. McKeney Act. The annual entitlement for the Bakersfield/Kern County area is $3 million, which allocated though a competitive process for the area wide homeless agencies. S:~DEBBIE'S~Budget & Finance~Bakersfield Homeless Center.doc -'. RESOLUTION NO. 1 5 2 "' 0 I A RESOLUTION ESTABLISHING COUNCIL POLICY FOR EVALUATING REQUESTS FOR FINANCIAL ASSISTANCE FROM NON-PROFIT GROUPS. WHEREAS, the City Council from time to time receives requests for financial assistance from non-profit groups; and WHEREAS, the City Council must evaluate these requests for financial assistance to determine the ability of the City to consider such requests in accordance with Council goals and given limited City resources; and WHEREAS, the City Council requested that the Budget and Finance Committee of the Council review a policy for evaluating requests for financial assistance from non-profit groups; and WHEREAS, the Budget and Finance Committee has reviewed the proposed policy and is recommending its adoption; and WHEREAS, a resolution of the City Council is necessary to adopt Council policy for - financial assistance from non-profit groups; NOW, THEREFORE, BE IT RESOLVED as follows: 1. All the foregoing recitals are true and correct. 2. The Council may consider requests for financial assistance from non-profit groups if the request for financial assistance meets at least one of the following criteria: a. It is for one-time expenditures rather than ongoing costs; b. It is for capital expenditures rather than operating costs; c. It is for one-time activities which are tied to specific high priodty City Council goals; d. It is for use of City facilities by the non-profit group. Requests for financial assistance from non-profit groups not meeting the criteria set forth in this paragraph will not be considered for funding. 3. Non-profit groups requesting financial assistance shall provide current financial information including Balance Sheets, Profit and Loss Statements and other pertinent financial information to support their funding request. The nOn.profit group shall provide evidence of matching funds so the City does not bear the entire cost of the proposed project or activity. .... 4. The Council will not consider assistance to non-profit groups for ongoing ~ operation and maintenance purposes with the exception of the following groups with which the City has had an ongoing relationship, The Bakersfield Senior Center, The Bakersfield Museum of Art and The Bakersfield Symphony. The sources and amounts of funds to be contributed annually to these three organizations is to be recommended by the City Manager as part of the City's annual budget, subject to City Council review and approval. 6. The Council authorizes the City Manager to notify groups who make requests for financial assistance which do not conform to this policy, that their request is outside Council policy. I HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the Council of the City of Bakersfield at a regular meeting thereof held on ~t by the following vote: Ayes: Council Member Benham, Carson, Couch, Hanson, Maggard, Salvaggio, Sullivan Noes: Council Member t,,i<~, ~- Abstain: Coundl Member ~J o t5 ~ Absent: Council Member 1,3~ ~: CITY CLERK AND EX OFFICt[(D of the Council of the City of Bakersfield Mayor APPROVED AS TO FORM: BART J. THILTGEN City Attorney