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12-14-2010 CC Rpt A13 COUNCIL AGENDA STAFF REPORT CITY CLERK USE ONLY RECEIVED Meeting Date: December 14, 2010 / .r-M, ''�\ Z0I011OV 15 P11 3: 37 Public Hearing: 0 Discussion Item: 0 OFFICE 0 CITY CLERK Consent Item: d CHINO HILLS DECEMBER 7, 2010 TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: CITY MANAGER SUBJECT: RESOLUTION SETTING DISCOUNT RATE FOR PREPAYMENT OF SPECIAL TAX FOR COMMUNITY FACILITIES DISTRICT NO. 5 RECOMMENDATION: Adopt a resolution entitled: "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS, REVISING THE DISCOUNT RATE UTILIZED TO DETERMINE THE PRESENT VALUE OF THE COMMUNITY FACILITIES DISTRICT NO. 5 SPECIAL TAX OBLIGATION." BACKGROUND/ANALYSIS: Annually, the City Council adopts a resolution establishing the Community Facilities District's No. 5 (CFD)tax rate for the next calendar year and fiscal year. The CFD was formed to finance certain infrastructure to benefit parcels within the District. Upon incorporation of the City, responsibility of the CFD was transferred to the City, with the City Council replacing the County Board of Supervisors as the legislative body for the CFD. On January 25, 1988, the County Board of Supervisors approved Resolution 88-25 which specified conditions under which the obligation to pay Special Tax "B" may be prepaid and permanently satisfied at any time upon the payment to the district of the present value of said special tax obligation as of the date of prepayment.Additionally, this Resolution set an initial discount rate of six(6%)percent and that the Board may annually review the discount rate utilized to determine the present value of the special tax obligation. On February 12, 2008, the City Council repealed Resolution No. 88-25 and adopted Resolution No. 08R-06 reducing the discount rate from the initial rate of 6% to 3%. On November 17, 2009, the City Council repealed Resolution No. 08R-06 and adopted Resolution No. 09R-64 reducing the discount rate from the rate of 3% to 1.66%. Due to the continued decline in interest rates, it is recommended that the current 1.66%discount rate be modified to 1.00%to correspond with the City's average composite investment rate for the quarter ending September 2010. Present value of taxes means (1) the Special Tax applicable to the subject parcel in the fiscal year not yet received by the CFD No. 5, if any, (2) plus the sum of the present value of the Maximum Special Tax applicable to the subject parcel in each remaining fiscal year subsequent to the fiscal year in which the calculation is made until the final year the subject parcel is subject to the Special Tax. 7913 AGENDA DATE: DECEMBER 14, 2010 SUBJECT: ADOPT RESOLUTION SETTING DISCOUNT RATE FOR PREPAYMENT OF SPECIAL TAX FOR COMMUNITY FACILITIES DISTRICT NO. 5 PAGE TWO REVIEWED BY OTHERS: This agenda item has been reviewed by the City Attorney and the City's financial advisor. FISCAL IMPACT: There is no fiscal impact as a result of this agenda item as the discount rate has taken into account the interest rate for the bond obligations that CFD No. 5 is responsible for. Respectfully submitted, Recommended by: Michael S. F1e r , Cit p ((//ager .Ju�1,)'/�. LOcaster, Finance Director MF:JRL:BJS:ddk// Attachment: Resolution RESOLUTION NO. 10R- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS, REVISING THE DISCOUNT RATE UTILIZED TO DETERMINE THE PRESENT VALUE OF THE COMMUNITY FACILITIES DISTRICT NO. 5 SPECIAL TAX OBLIGATION. WHEREAS, the Board of Supervisors of the County of San Bernardino, State of California, has initiated proceedings, held a public hearing, conducted an election and received a favorable vote from the qualified electors relating to the levy of Special Tax "A" and Special Tax "B" in Community Facilities District No. 5, as authorized pursuant to the terms and provisions of the "Mello-Roos Community Facilities Act of 1982", being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code for the State of California. This Community Facilities District shall hereinafter be referred to as COMMUNITY FACILITIES DISTRICT NO. 5 (hereinafter referred to as the "District"); and WHEREAS, the Board of Supervisors of the County of San Bernardino, acting in its capacity as the Governing Body of the aforementioned District, by Ordinance as authorized by Section 53340 of the Government Code of the State of California, authorized the levy of Special Tax "A", a special one time development tax to pay for the cost of making certain regional and local public facilities available, and to benefit parcels within the District, said tax due and payable prior to the granting of any building permit and Special Tax "B", a special annual use tax to pay for the cost of making certain regional and local public facilities available, and to benefit parcels within the District, said tax due and payable for a period of years not to exceed twenty-five (25), commencing subsequent to occupancy of any dwelling unit or residential dwelling unit, and WHEREAS, the Board of Supervisors of the County of San Bernardino, acting in its capacity as the Governing body of the District, by Resolution No. 88-25 specified conditions under which the obligation to pay said Special Tax "B" maybe prepaid and permanently satisfied at any time upon the payment to the District of the present value of said special tax obligation as the date of the prepayment. WHEREAS, the Board of Supervisors of the County of San Bernardino, under the specified condition, set an initial discount rate of six (6%) percent and may annually review the discount rate utilized to determine the present value of the special tax obligation set forth in Resolution No. 88-25. On February 12, 2008, the City Council repealed Resolution No. 88-25 and adopted Resolution No. 08R-06 reducing the discount rate from the initial rate of 6% to 3%. On November 17, 2009, the City Council repealed Resolution No. 08R-06 and adopted Resolution No. 09R-64 reducing the discount rate from 3% to 1.66%. The discount rate may be modified if the governing board determines that said modified discount rate would result in the calculation of a then more accurate present value for said special tax obligation. Page 1 of 4 NOW, THEREFORE, the City Council of the City of Chino Hills, acting in its capacity as the governing body of the aforementioned District, does resolve, determine, and order as follows: SECTION 1. That the above recitals are all true and correct. SECTION 2. That the City Council hereby repeals Resolution No. 09R-64. SECTION 3. The district's Special Tax "B" applicable to any Parcel within the District may be prepaid in whole, but not in part, by payment of a one-time prepayment of Special tax, which shall be an amount equal to the sum of the following: (a) all delinquent Special Taxes, penalties and interest applicable to the subject parcel; (b) the Present Value of Taxes; (c) the applicable Administrative Expenses, as reasonably determined by the district. SECTION 4. Present value of taxes means the Special Tax applicable to the subject parcel in the Fiscal Year not yet received by the district, if any, plus the sum of the present value of the Maximum Special Tax applicable to the subject parcel in each remaining Fiscal Year subsequent to the Fiscal Year in with the calculation is made until the final year the subject parcel is subject to the Special Tax. SECTION 5. That the City Council hereby establishes the discount rate of 1.00% to be utilized to determine the present value of the special tax obligation as of the date of the prepayment. SECTION 6. That the City Council may annually review the discount rate utilized to determine the present value of the special tax obligation, and may modify said discount rate if the Council determines that said modified discount rate would result in the calculation of a then more accurate present value for said special tax obligation. Page 2 of 4 SECTION 7. The City Clerk shall certify as to the adoption of this Resolution. PASSED, APPROVED, and ADOPTED this 14th day of December 2010. ED GRAHAM, MAYOR ATTEST: MARY M. McDUFFEE, CITY CLERK APPROVED AS TO FORM: MARK D. HENSLEY, CITY ATTORNEY Page 3 of 4