Susana Alcala Wood, City Attorney Jorge Oseguera, City Auditor Mindy Cuppy, City Clerk Howard Chan, City Manager John Colville, City Treasurer City Council Report
915 I Street, 1st Floor
Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-00401 March 1, 2022 Consent Item 08
Title: Assignment Agreement and Second Amendments to the Greenbriar Community Facilities District No. 2018-03 (Improvements) Acquisition and Shortfall Agreement and Agreement to Reimburse Fees
Location: District 1
Recommendation: Pass a Motion 1) authorizing the City Manager or the City Manager’s designee to execute the Assignment and Assumption Agreement with the Greenbriar Project Owner, LLC, and Greenbriar Phase 2, LLC, 2) authorizing the City Manager or the City Manager’s designee to execute the Second Amendment to Acquisition and Shortfall Agreement with The Greenbriar Project Owner, LLC, and Greenbriar Phase 2, LLC, for improvements to be constructed as part of the City of Sacramento Greenbriar Community Facilities District No. 2018-03 (Improvements), and 3) authorizing the City Manager or the City Manager’s designee to execute the Second Amendment to Agreement to Reimburse Fees from Bond and Tax Proceeds, Greenbriar Community Facilities District No. 2018-03 (Improvements).
Contact: Eric Frederick, Senior Development Project Manager [email protected],(916) 808-5129; Sheri Smith, Special Districts Manager [email protected], (916) 808-7204, Department of Finance Presenter: None.
Attachments:
1-Description/Analysis
2-Background
3-Assignment Agreement
4-Second Amendment to Acquisition and Shortfall Agreement 5-Second Amendment to Agreement to Reimburse Fees
File ID: 2022-00401 Consent Item 08
March 1, 2022
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City of Sacramento
Description/Analysis
Issue Detail: On November 27, 2018, City Council adopted a resolution to establish the City of Sacramento Greenbriar Community Facilities District No. 2018-03 (Improvements) (CFD) (Resolution No. 2018-0052). The special tax levied within the CFD can be used as security for special tax bonds that can be issued by the City to partially reimburse the developer for the cost of public infrastructure. In connection with the acquisition of such infrastructure, on September 10, 2019, the City and The Greenbriar Project Owner, LLC (TGPO) entered into an Acquisition and Shortfall Agreement (A&S Agreement) that prescribes how TGPO is to construct the facilities and specify how the City will reimburse the Developer from special-tax revenues and/or bond proceeds (City Agreement No. 2019-1393).
The purposes of the A&S Agreement are: (1) to provide for the formation of the CFD; (2) to provide for the design, construction, and acquisition of facilities from the proceeds of special- tax bonds (Bonds) issued through the CFD or directly from special tax revenues of the CFD; and (3) to specify the terms and conditions, including prices and timing, for any reimbursement or other payment to TGPO for the acquisition of facilities, and for payment of incidental expenses (e.g., the cost of issuing the Bonds and the expenses of administering the CFD), whether from the proceeds of the Bonds or special-tax revenues.
One of the terms related to the acquisition of facilities set forth in the A&S Agreement is an “expenditure limit,” or maximum amount that may be reimbursed from proceeds of the Bonds and special-tax revenues generated by the CFD. On February 18, 2021, the City and TGPO entered into a First Amendment to Acquisition-and-Shortfall Agreement, designated City Agreement No. 2019-1393-01 (“First A&S Amendment” and together with the A&S Agreement, the “Amended A&S Agreement”). The purpose of the First A&S Amendment was to increase the Expenditure Limit (as defined in Section 5(g) of the A&S Agreement) for Improvement Area No. 1 of the District from $38 million to $44 million.
The City and the TGPO also executed an Agreement to Reimburse Fees from Bond and Tax Proceeds, designated City Agreement No. 2019-1394 (Fee Agreement). The purpose of the Fee Agreement was for the City and TGPO to memorialize their intent that special taxes levied by means of the CFD, and the proceeds of Bonds issued through the CFD will be available to finance Eligible Fees (as defined in the Fee Agreement). The Fee Agreement also listed the expenditure limit of $38 million for IA1, therefore on February 18, 2021, the City and TGPO entered into a First Amendment to the Fee Agreement, designated City Agreement No. 2019- 1394-01 (“First Fee Amendment” and together with the Fee Agreement, the “Amended Fee Agreement”) to stay consistent with the Amended A&S Agreement.
File ID: 2022-00401 Consent Item 08
March 1, 2022
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City of Sacramento
On August 31, 2021, TGPO transferred to Greenbriar Phase 2, LLC (Phase 2 Developer) all of the taxable land in Improvement Area No. 2 (IA-2) of the CFD. Phase 2 Developer intends to develop the property in IA-2, a map of which is provided in the Background section of this report. Phase 2 Developer desires to assume all of the obligations and receive all of the benefits of the Amended A&S Agreement and the Amended Fee Agreement (collectively, “Amended Agreements”), but only with respect to the development and financing of IA-2.
Pursuant to the Amended Agreements, TGPO and Phase 2 Developer seek the City’s consent to the assignments and assumptions set forth in the Assignment Agreement included as Attachment 3 to this report.
On December 7, 2021, the City Council adopted a Resolution of Change to the Rate and Method of Apportionment and Debt Limit for IA-2 (City Resolution No. 2021-0356) (Resolution of Change). The Resolution of Change: 1) amended the rate and method of apportionment of special taxes to, among other things, increase the maximum special rates in IA-2, and 2) increased the indebtedness limit for IA-2 from $50 million to $67 million. As a result of these changes, the Expenditure Limit for IA-2 is no longer adequate to meet the increase in special- tax proceeds that are anticipated to be generated in IA-2.
The City is currently in the process of issuing Bonds secured by special taxes to be levied in IA-2. The City, TGPO, and Phase 2 Developer wish to amend the Amended Agreements to more clearly define the Expenditure Limit for both Improvement Areas of the CFD. The revised Expenditure Limit for either Improvement Area of the CFD shall be the amounts deposited in the improvement fund for such Improvement Area from time to time rather than a specific dollar amount because that amount can change between the time it is set and when bonds are issued.
Policy Considerations: Approving the Assignment Agreement will signify the City’s consent to the assignments and assumptions between TGPO and Phase 2 Developer, as outlined in that agreement. The proposed amendments to the Amended Agreements will allow the amount of tax-exempt municipal bond proceeds issued through the CFD (or directly from special tax revenues generated in the CFD) to be used to reimburse either TGPO or Phase 2 Developer for construction costs of facilities and fees up to the amounts deposited in the improvement fund for either Improvement Area of the CFD. The proposed amendments to the Amended Agreements do not bind the City to make any expenditure, to incur any indebtedness, or to proceed with the Greenbriar development project.
Economic Impacts: None.
File ID: 2022-00401 Consent Item 08
March 1, 2022
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City of Sacramento
Environmental Considerations:
California Environmental Quality Act (CEQA): The City prepared an environmental impact report (EIR) that evaluated the environmental effects of the Greenbriar Development Project (M05-046/P05-069). The EIR was certified by the City Council on January 29, 2008 (Resolution No. 2008-053). The City Council later certified the EIR and an addendum for modification to the previously approved project and next stage entitlements for the Greenbriar Development Project (P11-093) on May 30, 2017 (Resolution 2017-0207).
Council’s action in approving the three attached agreements is solely for the purpose of providing funding and reimbursement mechanisms and does not affect the environmental review the was previously prepared for the Greenbriar Development Project. No additional CEQA review is required.
Sustainability: Not applicable.
Commission/Committee Action: None.
Rationale for Recommendation: Approval of the Assignment Agreement and the proposed amendments to the Amended Agreements will support new development within the City. The Greenbriar development project will add approximately 2,753 residential units to the City’s housing supply.
Financial Considerations: TGPO and Phase 2 Developer will initially use their own funds to finance construction of the public improvements and to pay development fees required by the City and other local agencies to fund the construction of public improvements. Later, if and when Bond proceeds and special taxes become available, the City will use such available moneys to purchase improvements constructed by TGPO or Phase 2 Developer and provide a funding source for development fees owed by TGPO or Phase 2 Developer, consistent with the City’s Mello-Roos Policy and with all applicable agreements, including the A&S Agreement and Fee Agreement, as amended. The payment of principal and interest on the Bonds are secured by a special tax lien placed on each property within the CFD, without obligations placed on other funds of the City. The first bond sale for IA-2 is anticipated to occur in second quarter of 2022. There are no impacts on other funds of the City.
Local Business Enterprise (LBE): Not applicable.
Background
On November 27, 2018, the City Council formed the CFD, which consists of Improvement Area No. 1 and Improvement Area No. 2 (previously defined as IA-2). On November 28, 2018, the qualified electors within IA-2 authorized the issuance of special-tax bonds in an amount not to exceed $50 million.
Beginning in October 2021, TGPO petitioned for the City to make certain changes to the Rate and Method of Apportionment of IA-2 (RMA) and to the maximum debt authorized for IA-2. Changes to the RMA included increasing the maximum special tax rates, modifying the provisions for partial prepayment of special taxes, and related and clarifying changes. In addition, the maximum debt limit for IA-2 was increased from $50 million to $67 million. The City Council approved all of these requested changes via a series of actions as follows:
Resolution of Consideration, inclusive of the amendment to the RMA (Amended RMA) – adopted on October 26, 2021 (Resolution No. 2021-0321) Resolution Calling Special Mailed-Ballot Election – adopted on November 30, 2021 (Resolution No. 2021-0349)
Resolution Determining Results of Special Mailed-Ballot Election – adopted on December 7, 2021 (Resolution No. 2021-0355)
Resolution of Change, inclusive of the Amended RMA – adopted on December 7, 2021 (Resolution No. 2021-0356)
Ordinance Supplementing and Amending Ordinance No. 2018-0052 and Levying a Special Tax for Fiscal Year 2021-2022 – adopted on December 14, 2021 (Ordinance No. 2021-0033)
A map of the project area that includes the location of both Improvement Areas is provided on the following page.
Project Area Map