A RESOLUTION OF THE CITY COUNCIL, ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 10 OF THE CITY OF ONTARIO (ONTARIO AIRPORT TOWERS), TO CONSIDER ALTERING THE AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX

SUBJECT:

A RESOLUTION OF THE CITY COUNCIL, ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 10 OF THE CITY OF ONTARIO (ONTARIO AIRPORT TOWERS), TO CONSIDER ALTERING THE AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX

RECOMMENDATION: That the City Council, acting in its capacity as the legislative body of Community Facilities District No. 10 (CFD No. 10), adopt the attached Resolution of consideration to alter the Amended and Restated Rate and Method of Apportionment of Special Tax for CFD No. 10 (Ontario Airport Towers).

COUNCIL GOALS: Invest in the Growth and Evolution of the City’s Economy

• Promote the creation of mixed-use urban centers at Guasti Plaza, in the Civic Center and at Ontario Center. 
• Continue business retention and expansion programs while implementing office and industrial attraction strategies emphasizing provision of high paying jobs.

Invest in the City’s Infrastructure (Water, Streets, Sewers, Parks, Storm Drains and Public Facilities)

• Develop funding alternatives to implement infrastructure master plans.

FISCAL IMPACT: As proposed, altering the Amended and Restated Rate and Method of Apportionment of Special Tax will have no fiscal impact on the Mello-Roos financing to be used in the development of the Ontario Airport Towers project. Pursuant to the authorization of a negotiated purchase of the CFD No. 10 special tax bonds by the City as an investment, approved in Resolution No. 2008-119, the financing is expected to generate approximately $8.4 million for funding the extension of Guasti Road between Archibald Avenue and Turner Avenue, and approximately $9,300 annually for funding City services within the district. Since Mello-Roos bonds are not a direct responsibility of the City and are paid from special taxes levied on each taxable parcel in the district, there is no General Fund obligation from the issuance of Mello-Roos bonds. However, there are projected annual interest earnings from the purchase of the bonds; projected to be $715,275 for the first year, with this amount to decline gradually as the outstanding principle is paid down over time.

BACKGROUND: The Mello-Roos Community Facilities Act of 1982 provided local government, with the consent from a majority of the property owners, the authority to establish community facilities districts for the purpose of levying special taxes to finance various kinds of public infrastructure facilities and governmental services.

Ontario Airport Center, LLC (J.R. Wetzel, RREEF America REIT), provided a written petition to the City requesting the formation of a community facilities district to fund the extension of Guasti Road, which is required to facilitate the development of the Ontario Airport Towers project. The Ontario Airport Towers project addresses the development of approximately 25 acres and is generally located on the south side of Interstate 10, north of Guasti Road, east of Archibald Avenue and west of Turner Avenue. Ontario Airport Center, LLC proposes to develop in 5 phases: 850,000 square feet of Class A office space (five buildings), 10,000 square feet of retail space, and a 175 room hotel.

Over the past year and a half, the City Council, in accordance with the Mello-Roos Act, adopted several resolutions and ordinances to form Community Facilities District No. 10 (Ontario Airport Towers), and to establish special tax rates, authorize the levy of special taxes, and authorize the issuance of bonds for the District.

On November 18, 2008, by Resolution No. 2008-118, the City Council authorized the issuance of the CFD No. 10 special tax bonds and approved the forms of the documents associated therewith and related matters. On the same date, the Council approved, in Resolution No. 2008-119, the purchase of the bonds by the City for investment purposes. The City has negotiated with the Developer the purchase of the bonds; to be structured as 30 year term bonds with a coupon rate fixed at 8.50%, and an estimated principal amount of $8,415,000.

To address any potential risks to the City resulting from the current downturn in the commercial real estate market, the City subsequently requested another appraisal update. This updated appraisal, completed by Harris Realty Appraisal on January 15, 2009, concluded that property values in the District had declined since the previous appraisal. Accordingly, as proposed, the Second Amended and Restated Rate and Method of Apportionment makes the adjustments necessary to achieve the required 4:1 value to lien ratio per parcel based on the updated appraisal. The results of these adjustments shift some of the tax burden from the District’s undeveloped parcels to its developed parcels - primarily the developed office parcel - thereby lowering the City’s risk. The terms of the Second Amended and Restated Rate and Method of Apportionment are consistent with the City Council’s adopted Mello-Roos Local Goals and Policies, which were last amended on April 18, 2006.

 City staff has presented and discussed the proposed Second Amended Rate and Method of Apportionment with representatives of Ontario Airport Center, LLC.

STAFF MEMBER PRESENTING: Grant D. Yee, Administrative Services/Finance Director