RESOLUTIONS AUTHORIZING THE ISSUANCE OF SPECIAL TAX BONDS FOR COMMUNITY FACILITIES DISTRICT NO. 10 (ONTARIO AIRPORT TOWERS), AND APPROVING AMENDMENT NO. 1 TO THE ACQUISITION AGREEMENT RELATING TO THE DISTRICT

SUBJECT:

CONSIDERATION OF RESOLUTIONS AUTHORIZING THE ISSUANCE OF SPECIAL TAX BONDS FOR COMMUNITY FACILITIES DISTRICT NO. 10 (ONTARIO AIRPORT TOWERS), AND APPROVING AMENDMENT NO. 1 TO THE ACQUISITION AGREEMENT RELATING TO THE DISTRICT

RECOMMENDATION: That the City Council adopt the attached resolutions authorizing the issuance of special tax bonds for Community Facilities District No. 10 (Ontario Airport Towers) and approving Amendment No. 1 to the Acquisition Agreement for the District. The resolution authorizing the issuance of special tax bonds rescinds previously adopted Resolution No. 2008-118, and:

	A	Authorizes the issuance of special tax bonds for public improvements required to facilitate the development of the Ontario Airport Towers project;
	B	Approves the forms of the Indenture of Trust, the Bond Purchase Agreement, the Continuing Disclosure Certificate, and the Official Statement;
	C	Authorizes a negotiated sale of the special tax bonds to the City of Ontario in accordance with the terms of the Bond Purchase Agreement, and as authorized in Resolution No. 2008-119;
	D	Authorizes the execution of the Indenture of Trust, the Bond Purchase Agreement, the Continuing Disclosure Certificate, and the Official Statement by the City Manager, or his designee;
	E	Authorizes the execution of the special tax bonds by the Mayor; and
	F	Authorizes the appointment of a trustee for the District.

Amendment No. 1 to the Acquisition Agreement revises the termination date of the agreement and provides that the acquisition of the facilities may be financed by one or more series of bonds.

COUNCIL GOALS: Develop Strategies And Take Actions To Minimize The Negative Impacts Of The Global Financial Downturn On Ontario’s Economy And The City’s Fiscal Health Invest In The Growth And Evolution Of The City’s Economy

Invest In The City’s Infrastructure (Water, Streets, Sewers, Parks, Storm Drains And Public Facilities)

FISCAL IMPACT: The use of Mello-Roos financing in the development of the Ontario Airport Towers project is projected to generate approximately $8.4 million for funding the extension of Guasti Road between Archibald Avenue and Turner Avenue, and approximately $9,300 a year for funding City services in the District. Since Mello-Roos bonds are not a direct obligation of the City and are paid from special taxes levied on each taxable parcel in the district, there is no general fund impact 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. It is expected that the bonds will be issued in April 2009. The approval of Amendment No. 1 to the Acquisition Agreement will have no fiscal impact.

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 was 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. At this time, the extension of Guasti Road has been completed, and accepted by the City, and a 150,000 square foot Class A office building, and a 10,000 square foot retail facility have been substantially completed, with approximately one-third of the office building, as well as approximately 15% of the retail facility, having already been leased to tenants.

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), establish special tax rates, authorize the levy of special taxes, authorize the issuance of bonds for the District, and to alter the rate and method of apportionment of special taxes. On November 18, 2008, 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.

A recently updated appraisal of the property in the District, completed by Harris Realty Appraisal on January 15, 2009, concluded that property values in the District had declined since the previous appraisal. To address the decline, the previously approved special tax rates required adjustment. The City Council, on January 20, 2009, adopted a resolution initiating proceedings to alter the existing rate and method of apportionment of special tax and set a public hearing date for the regularly scheduled City Council meeting of March 3, 2009 to consider adoption of the Second Amended and Restated Rate and Method of Apportionment. The amending of the tax rates, and the revisions to the associated bond documents, necessitate the reauthorization of bond issuance.

The attached resolution authorizing the issuance of special tax bonds references several bond documents and other matters related to the proposed issuance of bonds for Community Facilities District No. 10. These documents are listed below and are on file with the Records Management Department.

• Official Statement for the Bonds
• Indenture of Trust
• Bond Purchase Agreement
• Continuing Disclosure Certificate for the Bonds

The Acquisition Agreement by and between the City and Ontario Airport Center, LLC, dated June 1, 2007, authorizes the acquisition of public facilities by the City through the issuance of Community Facilities District No. 10 bonds. The agreement provided that if no bonds were issued by December 31, 2008, the agreement would terminate. It is anticipated that the bonds will be issued in April 2009. The proposed amendment to the agreement revises the termination date, provides that the acquisition of the facilities may be financed by one or more series of bonds, and makes other minor changes to conform with current bond documents.

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