Parking Assessment District Reserve
PREPARED BY : STEPHEN CONWAY
Director of Finance
Reviewed by: Assistant Town Manager Town Attorney Finance
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MEETING DATE: 0 4 /0 5 /1 6
ITEM NO : 7
COUNCIL AGENDA REPORT
DATE: MARCH 24, 2016
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI , TOWN MANAGER
SUBJECT: ADOPT A RESOLUTION TO :
A. DECLAR E SURPLUS RESERVE FUNDS IN THE AMOUNT OF $179,20 4.18
REMAINING IN T HE DOW N TOWN PARKING ASSESSMENT DISTRICT 88 -1
RESERVE ACCOUNT .
B. AUTHORIZE PRO -RATA DISBURSEMENT OF SAID SURPLUS BA L A NCES
REMAINING IN THE DOWNTOWN PARKING ASSESSMENT DISTRICT 88 -1
RESERVE ACCOUNT TO PAST ASSESSEES UNDER PROVISIONS OF 1915
BOND ACT SECTION 8885 .
C. APPROVE A TRANSFER EXPENDITURE BUDGET ADJUSTMENT IN THE
AMOUNT OF $179,20 4.18 IN THE DOWNTO WN PARKING ASSESSMENT
DISTRICT FUND 88 -1 TO DEPOSITS PAYABLE “PASS T HROUGH”
ACCOUNT IN THE TOWN’S GENERAL FUND.
RECOMMENDATION :
Adopt a resolution (Attachment 1) to:
1. D eclar e surplus reserve funds in the amount of $179,204.18 remaining in the Downtown
Parking Assessment District 88 -1 Reserve Account.
2. A uthorize pro -rata disbursement of said surplus balances remaining in the Downtown Parking
Assessment District 88 -1 reserve account to past assess e es under the provisions of the 1915 Bond Act
Section 8885.
3. A pprove a transfer expenditure budget adjustment in the amount of $179,20 4.18 in the Downtown
Parking Assessment District Fund 88 -1 to deposits payable “pass through” a ccount in the General
Fund.
BACKGROUND :
On behalf of the Parking Assessment District, on November 21, 198 8 the Town of Los Gatos issued
$1,587,956.29 of “limited obligation” bonds under the Municipal Improvement Bond Act of 1915 (“the
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: ADOPT A RESOLUTION DOWNTOWN PARKING ASSESSMENT DISTRICT 88 -1
DECLARING SURPLUS RESERVE ACCOUNT
APRIL 5, 2016
Bond Act”). The bonds were issued to provide financing for various parking improvement projects in
accordance with the procee dings conducted by the Town Council in 1988 under the Municipal
Improvement Act of 1913 (the “Improvement Act”) in the Town’s Downtown Parking Assessment
District. Project improvements made in the parking assessment district provided a special benefit upo n
the parcel s in the district and, thus, were levied and paid for by benefitting property owners. The bonds
were 25 year obligations, and t he last debt payment on these bonds was made in FY 20 14/15. With
completion of the FY 20 14/15 comprehensive audit l ast fall, staff has confirmed that all bonded debt has
been paid in full and that only one assessment made through the property tax rolls remains unpaid. The
amount unpaid (dating to FY 2010/11) was for an original approximate $2,000 assessment, and due t o
non -payment, associated penalties and late fees will also be collected. The County of Santa Clara Tax
Collector’s Office has responsibility to seek payment of the delinquency (one property owner is
delinquent). Because the date of the eventual payment by the property owner is unknown , staff’s
estimate of the current amount due is $2,500 including late fees and penalties. Once payment is
received the County will forward the payment to the Town. It does not appear that the Bond Act allows
for a deductio n against the reserve payout to the owner of the delinquent parcel, but staff will pursue this
remedy if it is available. Under the Bond Act, the eventual rec eipt of these funds from the County will
be deposited to the Town’s General Fund.
When the bonds were issued in 1988 a 5% reserve account (initial balance of $79,397.81) was
established wherein interest was credited each year until the bonds were fully paid off. The balance of
this reserve is $179,204.18 which is available to be distri buted to the assesse e s as prescribed under the
reserve provisions of the Bond Act.
DISCUSSION :
T hese bonds were issued in accordance with the Municipal Improvement Bond Act of 1915 which
outlines th e legal provisions for the administration of all fun ds received as part of the financing,
including construction funds (all amounts received were spent on parking improvements), redemption
funds (annual assessments collected with all amounts used for annual principal and interest due), and
lastly, reserve f unds (presently consist ing of the $1 79,204.18 which includes the initial balance placed
into the reserve account and accumulated interest through the life of the bond issue ).
The 1915 Bond Act provides mechanisms as to the disposition of any remaining ba lances once all debt
has been paid and construction activity has been completed. Re sidual excess balances (if any) in the
C onstruction F und or the R edemption F und (the redemption fund holds annual assessments use to pay
annual debt service) can be legally transferred to the local government ’s General Fund . However,
excess reserve account balances are legally restricted by the Bond Act to be used as a credit against the
annual assessments or early retirement of outstanding special assessment debt. There w ere no credits
made against the annual assessments and there was no early retirement of debt, therefore the reserve
accounts balances can only be used for refunds back to the property owners.
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: ADOPT A RESOLUTION DOWNTOWN PARKING ASSESSMENT DISTRICT 88 -1
DECLARING SURPLUS RESERVE ACCOUNT
APRIL 5, 2016
Sect ion 8885 of the Act requires the T own to use surplus reserve funds according to the following:
“In the event that the balance in the fund at the time of liquidation exceeds the amount required
to retire all outstanding bonds in the issue, the excess shall be apportioned to each parcel upon
which the individual assessment remained unpaid at the time the balance the reserve fund was
sufficient to retire all outstanding bonds in the issue. The payment shall be made in cash to the
respective owners of the parcels except that, if the excess is not grea ter than ($1,000), the excess
may be transferred to the general fund of the entity conducting the proceedings.”
Upon approval by Council , staff anticipates refunding owners of 128 parcels on a pro -rata basis. The
refunds are based on the proportionate sh are of each parcels assessment as compared to the total
assessments for the last year (FY 2012/13) in which assessments were levied by the County. The
average refund is approximately $1 ,400. The maximum refund for any of the parcels is approximately
$40,000 and the minimum amount distributed to a parcel is expected to be approximately $150.
CONCLUSION :
Upon approval by Town Council , staff intends to transfer the remaining reserve balances to a General
Fund liability “pass through” deposit account which will be used to make the disbursements to the
property owners of record who paid the final year of benefit assessment payments when the bonds were
paid off . Once this distribution to the General Fund deposit account has been made, there are no
remaining b alances in the Parking District Assessment Fund and it will be officially closed for FY
20 15/16.
COORDINATION:
Staff of the Finance Department worked closely with the Town Attorney’s Office and the Santa Clara
County Auditor -Controller’s office to con firm legal requirements , delinquent assessments, and balances
available for distribution to final assessment property owners of record .
FISCAL IMPACT :
Upon Council approval the reserve funds will be closed and refunded to the property owners of record
wh o paid the final year of the benefit assessments in accordance with section 8885 of the Bond Act .
ENVIRONMENTAL ASSESSMENT :
This i s not a project defined under CEQA, and no further action is required.
Attachments:
1. Resolution of the Town Council of the Town of Los Gatos Determining Assessment Fund Surplus
and Ordering Disposition Thereof.
RESOLUTION 201 6 -
RESOLUTION OF THE TOWN COUNCIL
OF THE TOWN OF LOS GATOS DETERMINING ASSESSMENT FUND SURP LUS AND
ORDERING DISPOSITION THEREOF
WHEREAS , in proceedings conducted by this Council Under the Municipal
Improvement Act of 1913 (the Improvement Act), Division 12, California Streets and Highways
Code, for the Downtown Parking Assessment District 88 -1, the Town previously provided the levy
of assessments and issuance, delivery and sale of improvement bonds and making certain
impro vements, all as therein described ; and
WHEREAS , on November 21, 1988 the Town issued limited obligation improvement
bonds secured by the assessments made upon designated parcels in the Downtown Parking
Assessment District 88 -1 under the Municipal Improvem ent Bond Act of 1915 (the Bond Act) in
order to finance the costs of the improvements, and all of the bonds have been paid in full and
retired (whether at maturity or by early prepayment and redemption) in accordance with the 1915
A ct; and
WHEREAS , all imp rovements provided for in the proceedings have been made; all
costs thereof, together with expenses incidental thereto, have been paid; and all proceeds of the
bonds deposited in the improvement funds have been spent; and
WHER EAS , the amount of $179,204.1 8 remains in the assessment district reserve
fund account and is available for distribution to property owners ; and
NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS
GATOS DOES HEREBY RESOLVE :
1. The amount of $179,204.18 held in the Downtown Parking Asses sment District (88 -
1 ) Fund rese rve account be declared surplus.
2. The amount of $179,204.18 shall be transferred from the Downtown Parking
Assessment District to the Town of Los Gatos General Fund “pass through” deposit
account f ro m which pro -r ata distributi ons of the entire $179,204.18 balance to
property owners shall be made.
3. Approval of a FY 2015/16 expenditure budget adjustment in the amount of
$179,20 4 in the Downtown Parking Assessm ent District 88 -1 Fund, source of
funding is from said surplus reserve account balances .
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of
Los Gatos held on the 5 t h day of April 201 6 by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA