HomeMy WebLinkAboutResolution 3215 Revised SID policy
COMMISSION RESOLUTION NO. 3215
A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF BOZEMAN.
MONT ANA. ADOPTING A REVISED SPECIAL IMPROVEMENT DISTRICT POLICY
PROVIDING FOR AN INCREASE IN THE ADMINISTRATIVE FEE. AN OPTIONAL
RESERVE ACCOUNT AND MANDA TORY AND OPTIONAL INTEREST RATES ON
ASSESSMENTS.
WHEREAS. the Commission adopted its current special improvement district policy on
the 6th day of September 1988. under Commission Resolution No. 2712; and
WHEREAS. during the 1995 session of the Montana State Legislature, legislation
pertaining to special improvement districts was revised; and
WHEREAS. the City Commission has determined it is necessary to revise Section 6 to
reflect those legislative changes; and
WHEREAS. in anticipation of the creation of new special improvement districts under the
new legislative provisions. a new resolution reflecting changes to Section 6 is necessary to
provide for an increase in the administrative fee charged. to provide for an optional reserve
account. and to provide for the mandatory and optional additions to the net effective interest
rate for bonds for purposes of establishing the semi-annual assessments.
NOW. THEREFORE. BE IT RESOLVED by the City Commission (the Commission) of the
City of Bozeman (the City):
Section 1. Recitals.
1.01. Proposed Objectives of Policv.
It is the intent of the City of Bozeman. Montana. to establish a policy regarding the
creation of special improvement districts within the City and the issuance of special improvement
district bonds therefor so as to provide for the orderly and economical construction and financing
of necessary public improvements within the City and to minimize the risks to the taxpayers in
the City as a result of unpaid or delinquent assessments.
1.02. Findinas.
The Commission hereby finds that:
(a) The use of special improvement districts is an important and necessary method of
constructing improvements in the City of Bozeman in existing fully developed neighborhoods and
business districts. as well as in new residential and commercial subdivisions; and
(b) Over the past 15 years, special improvement districts have been extensively used
by real estate developers to finance the entire costs of water, sewer, curbs and gutters, streets,
road and park improvements associated with the development of residential and commercial
subdivisions within the City; and
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(c) Such use of special improvement districts and the issuance of special improvement
district bonds secured by the City's Revolving Fund have provided a significant economic benefit
to the developers of such subdivisions; and
(d) That the rate of delinquent special improvement assessments for undeveloped
special improvement districts is significantly greater than that developed for special improvement
districts; and
(e) The high incidence of the failure or inability of such developers to pay assessments
levied against the property within such subdivisions while in their ownership has exposed the
City's Revolving Fund and ultimately the City's General Fund and taxpayers to risks that are not
warranted under the circumstances. and
(f) In order to establish a policy that allows the use of special improvement districts
and special improvement district bonds, and at the same time provide protection for the City's
Revolving Fund, it is necessary to establish a policy that distinguishes between, and establishes
different standards for, special improvement districts created within existing developed
neighborhoods and special improvement districts created for undeveloped residential and
commercial subdivisions. Furthermore, it may, in some instances be in the City's interest to
permit creation of special improvement districts on undeveloped properties not secured by the
City's Revolving Fund.
(g) Section 7-12-4190 MCA allows the city to assess the cost of SID improvements
over a period of 20 years or less. This section states in part: "The payment of assessments to
defray the cost of acquiring or constructing any improvements in special improvement districts
may be spread over a term not to exceed 20 years... "
Assessing the costs over a period less than the 20 year maximum could facilitate the sale
of the bonds under more advantageous terms or with lower interest rates in certain instances,
such as a relatively small bond issue or a period of volatile interest rates. It is recognized,
however, that shorter term bonds will result in higher required semi-annual payments by property
owners.
(h) Section 7-12-4193 MCA authorizes the city to pool bonds of more than one SID
district. This section states in part: "If the city council determines by resolution that the pooling
of bonds of more than one special improvement district of the city is in the best interest of the
city and the respective districts and will facilitate the sale of the bonds under more advantageous
terms or with lower interest rates, the city may issue bonds of the districts combined in a single
offering... "
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Section 2. Definitions.
All capitalized terms used herein shall have the meanings given to them in this section,
unless otherwise indicated; or, if not defined herein, the meanings given to them in Title 7,
Chapter 12, Parts 41 and 42.
Code shall mean the Internal Revenue Code of 1986, and any regulations and rulings
promulgated thereby.
Costs of Imcrovements shall mean those incidental expenses described in Section 7-12-
4104, M.C.A., and those costs described in Section 7-12-4169, M.C.A.
Costs of Issuance shall mean all items of expense directly or indirectly payable by or
reimbursable to the City and related to the authorization, sale, and issuance of bonds including
the City's fees and charges of Trustee, (if any) legal fees and charges, fees and charges for
preparation, execution and safe-keeping of the bonds.
Develoced District shall mean a special improvement district in which more than 50% of
the lots have occupiable structures built thereon.
Develocer shall mean an individual or a group of individuals, corporation or partnership
requesting the creation of a special improvement district.
Community Facilitv Imcrovements shall mean those improvements that are designed to
be part of the community wide system of city service or improvement facilities and which are
not designed to provide city services or access to individual lots or properties.
Imcrovements shall mean public improvements authorized by Section 7-12-4102, M.C.A.
to be constructed and financed through the creation of special improvement districts.
On-side Imorovements shall mean those improvements located within the boundaries of
a Special Improvement District.
Off-Site Imcrovements shall mean those improvements located outside the boundaries of
a special improvement district but of special benefit to the properties within the district.
Revolvina Fund shall mean the fund established by the City pursuant to Section 7-12-
4321 et seq.
Undeveloced District shall mean a special improvement district in which less than 50%
of the lots have occupiable structures built thereon.
Soecial Imcrovement Districts shall mean those districts established pursuant to Title 7,
Chapter 12, Parts 41 and 42,
M.C.A. for the purpose of constructing and installing
improvements for the special benefit of properties located within such districts.
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Special Improvement District Bonds shall mean bonds issued by the City pursuant to Title
7, Chapter 12, Parts 41 and 42, M.C.A. for the purpose of financing improvements within
special improvement districts and paying incidental costs as defined in Section 7 ~ 12-4101,
M.C.A. related to the creation of the districts and the issuance of the Bonds.
Section 3. Special Improvement Districts Secured Bv The Revolvina Fund.
3.01. Creation of Speciallmcrovement Districts and Issuance of Bonds Secured bv the
Revolvina Fund.
In accordance with the provisions of Title 7, Chapter 12, Parts 41 and 42, the City may
create special improvement districts for financing improvements only upon a determination that
the creation of the district and the installation of the improvements is in the public interest.
The City may issue special improvement district bonds for financing the costs of
constructing and installing the improvements and paying incidental costs relating thereto. The
City will not pledge the Revolving Fund to such bonds unless one of the additional following
circumstances exist:
a) The district is a developed district.
b) The district is being created and the bonds are being issued for the purpose of
financing Community Facility Improvements in either developed or undeveloped districts.
c) The district is undeveloped and the developer complies with 3.02 hereof.
3.02. Standards Applicable To Undeveloped Districts.
a. Costs of Improvements. Costs of the improvements, including design engineering
and inspection, survey and legal work incurred relating to the issuance of the special
improvement district bonds, may be eligible for financing by the district and included in the bond
issue, beginning at the point when the City commission creates the special improvement district.
b. On~Site Improvements to be Finances. Special Improvement
Districts may be
created to finance the costs for street improvements of on-site improvements proposed for an
undeveloped district. Approval of a special improvement district is contingent upon:
1 ) developers financing the cost of improvements for water and sewer services; and
2) developers remitting to the City a five percent (5%) Revolving Fund fee and a three
percent (3 %) administrative fee, in cash prior to the sale of the bonds, for the street
improvement SID in accordance with Section 5 and 6 of this policy.
Developers are fully responsible for financing, contracting, and installing water and sewer
improvements. Plans for water and sewer improvements must be approved in advance by the
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City. Actual construction must be certified by a professional engineer that the improvements
were installed in accordance with City standards.
Prior to Commission approval of the creation of a district for street improvements, the
developer must secure a performance bond naming the City as beneficiary for the installation of
the water and sewer improvements. The performance bond will remain in place until water and
sewer utilities are accepted and turned over to ownership of the City, unencumbered. No building
permits will be issued until all improvements are installed and acceptable and in the ownership
of the City, unencumbered.
c. Amount of Off-Site Imorovements to be Financed.
The cost of off-site improvements, which are assessable against any district, may be
financed through a special improvement district upon a determination that the proposed off-site
improvements are consistent with the City's public improvement goals.
d. Postina Additional Securitv.
Application of this section is contingent upon bond counsel's approval and concurrences.
Notwithstanding other provisions of this section, the City may in its discretion create
special improvement districts for undeveloped districts to finance water, sewer, and street
improvements and issue bonds for financing such improvements secured by the Revolving Fund
it:
1 ) The developer posts with the City, prior to the sale of bonds: cash, and/or some
other acceptable form of credit or security obligating the developer to pay principal and
interest on the bonds for all assessments for the first five (5) years. The credit will be
estimated prior to the sale of the bonds and finalized upon awarding of bids. The credit
posted will separately identify each individual property in the district and act as its
security. The credit will be used as security for special improvement district assessments
for a minimum of 80% of the properties within the district. A separate written agreement
will be made between the developer and the City regarding the credit and how it will be
applied in instances of default and/or transfers of property.
2) The credit will not be released prior to five (5) years, unless (j) over 50% of the lots
in the district become developed, and (ij) the district has a delinquency rate of less than
10% for the most recent two consecutive years.
3) That portion of credit relating to parcels not participating in credit escrow will be
provided in cash for five (5) years of principal and interest
coverage by those
participating.
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e. Pre-existina Undevelooed Citv Subdivisions. This section
will apply to areas
previously subdivided by the City prior to 1978 which are presently undeveloped. Special
Improvement Districts may be approved and created on undeveloped properties for all
improvements with guarantee by the City's Revolving Fund. In order to approved, all of the
following conditions must be met:
1 ) The developer posts with the City, prior to the sale of the bonds, a Certificate of
Deposit or a cash escrow amounting to 10% of the total principal and interest
payments on the bonds, for the entire special improvement district(s) assessments.
The cash will be used as security for the special improvement district assessments
for a minimum of 80% of the properties within the district. A separate written
agreement will be made between the developer and the City regarding the credit
and how it will be applied in instances of default and/or transfers of property .
2) Any remaining credit will not be released prior to five (5) years, unless (i) 60% or
more of the lots in the district become developed, and (ii) the district has a
delinquency rate below 10% in each year for the most recent two consecutive
years.
3) The five percent (5%) Revolving Fund fee and a three percent (3%) Administrative
fee will be charged against the entire bond issue and paid from the bond proceeds,
in accordance with Sections 5 and 6 of this policy.
4) More than 60% of the district must be owned by individual property owners. An
"individual property owner" is defined as a person who has an ownership interest
in a lot, whether as an individual, partner, joint tenant, tenant in common, or
stockholder in a corporation owning a lot in the district, who has a recorded
interest in less than 10% of the lots in the proposed district pre-dating the
application hereunder by at least ninety (90) days and who is neither related by
blood or marriage to other individual property owners within the proposed district
nor who has any ownership interest, whether as an individual, partner, joint tenant,
tenant in common, or as a stockholder of a corporation owning a lot in the district
with other individual property owners within the proposed improvement district.
Section 4. SDeciallmorovement Districts Not Secured bv the Revolvina Fund.
4.01. Districts Not Secured bv the Revolvina Fund.
Special Improvement Districts may be approved and created on undeveloped properties
for all improvements without guarantees by the Revolving Fund. In such instances, all costs of
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issuance including engineering fees, bond counsel fees, etc. will be paid by the developer, prior
to sale of bonds.
Section 5. Revolvina Fund.
5.01. Deoosit to the Revolvina Fund.
For districts which the City issues bonds secured by the Revolving Fund, the costs of the
improvement shall include a deposit to the Revolving Fund of five percent (5%) of the principal
amount of the bonds to be issued.
Section 6. Administrative Feei
6.01. Three pereent (a%) m'p:::~~:::~:::~:!~I::::~~~~II:~:::~:!:I:~ administrative fee shall be assessed
against all special improvement districts.
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Section 7. Reauirements for ADDroval.
7.01. It is hereby declared to be in the best interests of the City of Bozeman that any
person, firm, partnership, organization or corporation requesting the creation of a special
improvement district shall, as a condition of approval of said special improvement district, have
paid and brought current all existing special improvement district assessments for which said
person, firm, corporation or partnership is responsible on all properties owned by said person,
firm, corporation or partnership or in which said person, firm corporation or partnership has an
interest therein.
EXCEPTION: This section shall not apply to existing residential neighborhoods or
commercial districts applying for special improvement districts, such as lighting and sprinkling,
and various maintenance districts.
Section 8. Private Activitv Bonds.
8.01. Under the Code, it is possible that bonds issued to finance improvements in an
undeveloped district, pursuant to the resolution, may be considered private activity bonds, and
if such bonds can be considered exempt facility bonds, such bonds may be issued as taxable
bonds, subject to the provisions of the Code.
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8.01. Costs of Issuance. If special improvement district bonds are determined to be
private activity bonds, the developer of the district for which the bonds are to be issued shall be
responsible for costs of issuance in excess of the amount allowed by the Code to be financed
from bond proceeds.
Section 9. Term of the SDecial ImDrovement District.
The term of SID assessments and the corresponding bond issue shall be established at
a period (years) which will be in the best interests of the property owners, taking into
consideration the expected interest rate and the property owners' ability to pay.
Section 10. Poolina of SID Bonds.
If the city commission determines that the pooling of bonds of more than one special
improvement district of the city is in the best interest of the city and the respective districts and
will facilitate the sale of the bonds under more advantageous terms or with lower interest rates,
the city will issue bonds of the districts combined in a single offering.
Section 11. Severabilitv Clause.
11.01. Severabilitv.
If any part of this policy is held to be unconstitutional or void such part shall be deemed
severable from the other parts, and the invalidity thereof shall not affect the remaining parts of
this policy.
Section 12. Repealer.
Commission Resolution No. 2712 is hereby repealed and declared null and void and of no
effect.
PASSED AND ADOPTED by the City Commission of the City of Bozeman, Montana, at
a regular session thereof held on the 17th day of November 1997.
L rJ~ Z ~-r-,-4
DON E. STUECK,
Mayor
ATTEST:
~~;/ J,~
ROBIN L. SULLIVAN
Clerk of the Commission
APPROVED AS TO FORM:
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