Title
a. Receive a report regarding the Fort Ord Reuse Authority’s proposal to issue debt against its statutory share of property tax revenue to for building removal in the former Fort Ord area; and
b. Provide direction to staff.
Report
RECOMMENDATION:
It is recommended that the Fort Ord Committee
a. Receive a report regarding the Fort Ord Reuse Authority’s proposal to issue debt against its statutory share of property tax revenue to for building removal in the former Fort Ord area;
b. Provide direction to staff.
SUMMARY
On July 12, 2019 the FORA Board received a status update report, including their consultant’s preliminary findings (Attachment A). Based on feedback and discussion at the FORA Board meeting, the consultant updated its model and provided the update to the FORA Administrative Committee at its July 16, 2019 meeting.
FORA’s Administrative Committee took action to recommend that the FORA Board move forward with debt issuance in the amount of an estimated $36M, specifying that the bond proceeds should only go toward building removal as a first priority and other uses only if there are proceeds remaining after the blight is addressed. County representative abstained from the Administrative Committee vote as staff wanted time to review the updated analysis and seek policy input from the Board. This item is expected to return to Administrative Committee for review again on July 31, 2019, and FORA staff plan to bring the debt issuance proposal to the FORA Board at its August 2019 meeting. FORA’s ability to issue new debt expires on June 30, 2020, so there is a general sense of time sensitivity to move forward with the bond, if that is the desire of the FORA Board.
Monterey County has approximately $3M worth of building removal needs, assuming the bunkers remain at the Ammunition Supply parcel. Debt issuance has an effect on revenues such as property taxes that is being evaluated. Staff is seeking input and direction from the County’s Fort Ord Committee regarding the proposed debt issuance for building removal in the former Fort Ord area, and for the Committee to consider if it would like to make a recommendation the entire Board of Supervisors.
DISCUSSION:
In October 2018 the Fort Ord Reuse Authority (FORA) Board directed its staff to investigate the legality and feasibility of issuing debt against FORA’s statutory share of property tax revenue to fund building removal and blight remediation in the former Fort Ord area. FORA staff in turn entered into agreement with a third-party consultant firm to: 1) confirm financing would be legal under current state law; 2) prepare a financial plan for proposed debt issuance; and 3) if FORA Board authorizes, implement the debt issuance by or before June 30, 2020.
FORA’s consultant advised that FORA had the legal authority to issue debt for building removal. Subsequently, the consultant developed its preliminary quantitative analysis, which indicates a municipal bond issuance would be very strong and they would anticipate approximately $36M in bond proceeds. The preliminary analysis was presented to the FORA Administrative Committee, and County staff subsequently met twice with the consultant to provide feedback with respect to analysis assumptions and results.
On July 12, 2019 the FORA Board received a status update report, including the consultant’s preliminary findings (Attachment A). Based on feedback and discussion at the FORA Board meeting, the consultant updated its model and provided the update to the Administrative Committee at its July 16, 2019 meeting. The summary sheet is provided as Attachment B.
The key changes and results of the July 16, 2019 consultant analysis is summarized below:
• The development forecasts used in the model changed to use the “high development” forecast provided by Marina and Seaside in the scenarios where the bond is issued and blight is removed; in turn the model uses the “low development” forecasts Marina and Seaside in scenarios with no bond issuance, and thus no accelerated building removal. The result is property tax revenues over the bond repayment term are substantially lower in the “no bond” scenarios than previously reported.
• The net proceeds distribution utilized is based on Fiscal Year 2018-19 Recognized Obligation Payment Schedules (ROPS) percentage allocation by jurisdiction, in which the County is proposed to receive approximately $9.8M in bond proceeds. The County, however, only has approximately $3M worth of building removal needs (assuming the bunkers remain at the Ammunition Supply parcel).
• Using the FY19 ROPS allocation and a June 30, 2020 dissolution date of FORA, the County is projected to receive the following property tax revenue through 2048: a) with bond issuance (high development) $22,722,849; and b) with no bond issuance (low development) $24,066,246. For the bond issuance scenario, if the County receives the assumed ROPS distribution of $9,778,215, the consultant shows a total County benefit with bond issuance as $32,501,064. However, if the policy decision is to use bond proceeds for building removal only, the County would receive an estimate bond proceed of $3,000,000, indicating a total County benefit of $25,722,849. With building removal only, the County over the 30-year repayment term would come out approximately $1.7M ahead in total revenue realized.
• The Successor Agency to the Redevelopment Agency of Monterey County will receive 54% of FORA’s statutory share of property tax after FORA’s dissolution, so debt issuance against FORA’s property tax share will also impact Successor Agency revenues. The Successor Agency calculations are complicated and staff has not had the opportunity to project when the East Garrison Successor Agency obligations are anticipated to be fully met, however, if we look at a 10-year forecast after FORA’s dissolution, then the Agency’s 54% of FORA’s share is: a) approximately $6M with bond issuance; and b) approximately $9M without bond issuance.
• The Monterey County Regional Fire District received by agreement 65.5% of the County’s property tax revenue in the former Fort Ord area. Assuming a June 30, 2020 dissolution, the Fire District is estimated to realize approximately $1.78M less in revenues over 30 years if the bond is issued, which averages to about $60K less per year over the 30 years.
OTHER AGENCY INVOLVEMENT:
The Office of County Counsel-Risk, Auditor-Controller, County Administrative Office, and Resource Management Agency has reviewed the proposed debt issuance and financial model and met with FORA’s consultants to provide input into the model parameters and assumptions.
BOARD OF SUPERVISORS STRATEGIC INITIATIVES:
Issuance of bonds for the building removal by FORA would support the Board’s strategic initiative for Economic Development by removing a significant barrier to redevelopment of the former Fort Ord area.
Check the related Board of Supervisors Strategic Initiatives:
X Economic Development
__ Administration
__ Health & Human Services
__ Infrastructure
__ Public Safety
Prepared by: Melanie Beretti, Property Administration/Special Programs Manager (755-5285)
Approved by: Carl P. Holm, AICP, RMA Director
Attachments:
Attachment A - FORA July 12, 2019 Board Agenda Item No. 8c - Building Removal Financing Update
Attachment B - FORA Building Removal Financing Scenario Summaries (July 16, 2019 model version)