07-13-2016 Council Packet - Laserfiche WebLink

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STAFF REPORT TO: Mayor Keis and Members of City Council FROM: Joel Hanson, City Administrator DATE: July 8, 2016 RE: Canabury Square HIA Assessment Payoff Policy As you know, we have not allowed the assessments financed with the taxable bond issue to be paid off early given we cannot earn enough interest on the payoff amount to equal the rate we are paying on the bonds. This point was made very clear to the residents back in 2009 when the HIA project moved forward. Recently, we acted on a request to allow an early payoff whereby the owner would be required to pay us all principal and interest due over the remaining term of the assessment; less a .5% discount factor. Given we offered this to one party, we should be willing to do this for other property owners to be consistent. In fact, another party has already made a payoff on that basis. Therefore, staff recommends we formalize a policy for this situation and forward it to all those properties in Canabury Square that have active assessments financed by the 2009 bond issue. The suggested policy statement is as follows: Canabury Square Active Assessment Payoff Policy: In 2009, the City assisted Canabury Square Condominium Association by adopting a Housing Improvement Area that financed needed improvements at the property. To help with the financing, the City issued 15 year taxable General Obligation Bonds with the condition that no early payoffs of these assessments could be made because the City would not be able to earn enough interest on the principal payoff amount to meet debt service requirements. In some cases, that has made it more challenging for owners with those assessments to sell their units. Based on subsequent requests by some of these property owners, the City is willing to accept early payment of the outstanding assessment on the following basis: • Payoff amounts will be calculated for the outstanding assessment years beyond the current year, assuming payment is made by no later than November 15th. • The payoff amount will be determined by adding the outstanding principal and interest due over the remaining assessment term. • A discount factor will be applied to those payments to reflect an approximation of interest the City can earn on those amounts. The discount factor will be determined at the sole discretion of the City and based on conservative estimates of investment returns in a liquid, interest bearing account. As of the date of this policy, that rate is .5% (.005).