HomeMy WebLinkAboutResolution 2712 Revising SID policy: 9-06-88
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COMMISSION RESOLUTION
NO. 2712
A RESOLUTION
OF THE CITY
COMMISSION OF
BOZEMAN, MONTANA
AMENDING RESOLUTION NO. 2654
WHICH ESTABLISHED
THE CITY OF BOZEMAN'S
SPE-
CIAL IMPROVEMENT
DISTRICT POLICY BY
ADDING
PARAGRAPH 1. 02
(g) AND (h)
TO SECTION 1 , BY
ADDING A
NEW SECTION 9 AND
10, AND BY
RENUMBERING FORMER SECTION 9 AS SECTION 11.
Be It Resolved By
The City Commission
(the Commission) of
the City of Bozeman (the City) :
Section 1. Recitals.
1.01. Proposed Objectives of Policy.
It is the intent of
the City of Bozeman, Montana, to
estab-
lish a policy regarding the creation of
special improvement
dis-
tricts within the City
and the issuance
of special improvement
district bonds therefor so as to provide for the orderly and eco-
nomical construction and financing
of necessary public
improve-
ments within the City and to minimize the
risks to the
taxpayers
in the City as a result of unpaid or delinquent assessments.
1.02. Findings.
The Commission hereby finds that:
(a) The use of
special improvement districts
is an impor-
tant 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 wa
ter, sewer, curbs
and gutters, streets,
road and park improvements
associated with the
development of
residential and commercial subdivisions within the City;
and
(c) Such use of special improvement districts and the
issu-
ance 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 assess-
ments for undeveloped special
improvement districts is
signifi-
cantly greater than that
for developed special
improvement dis-
tricts; and
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(e) The high
incidence of the failure
or inability of such
developers to pay assessments
levied against the pro
perty within
such subdivisions while in their ownership has exposed the City's
Revolving Fund and ultimately the City's General Fund and taxpay-
ers 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 dis-
tinguishes between, and establishes different standards
for, spe-
cial improvement districts
created within
existing developed
neighborhoods and special improvement districts created
for unde-
veloped 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 prop-
erties 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 max-
imum could facilitate
the sale of the
bonds under more advanta-
geous 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 dist.rict
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
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terms or with lower interest
rates, the city
may issue bonds of
the districts combined in a single offering..."
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 ,
Chap-
ter 12, Parts 41 and 42.
Code shall mean
the Internal Revenue
Code of 1986,
and any
regulations and rulings promulgated thereby.
Costs of Improvements
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, costs of preparation
and reproduction
of documents,
initial fees and charges
of Trustee, (if any
) legal fees and
charges, fees and
charges for preparation,
execution and sa fe-
keeping of the bonds.
Developed District shall mean a special
improvement district
in which more than
50% of the lots
have occupiable structures
built thereon.
Developer shall mean
an individual or
a group of individu-
als, corporation or partnership requesting the creation of a spe-
cial improvement district.
Community Facility
Improvements shall mean
those improve-
ments that are designed
to be part of
the community wide
system
of city service or
improvement facilities
and which are not
de-
signed to provide city
services or access
to individual lots
or
properties.
Improvements 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-Site Improvements
shall mean those
improvements located
within the boundaries of a Special Improvement District.
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Off-Site Improvements
shall mean those
improvements located
outside the boundaries
of a special
improvement district but
of
special benefit to the properties within the district.
Revolving Fund
shall mean the
fund established by
the City
pursuant to Section 7-12-4321 et. seq.
Undeveloped District
shall mean a
special improvement dis-
trict in which less
tha,n 50% of the
lots have occupiable
struc-
tures built thereon.
Special Improvement
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 improve-
ments for the
special benefit of properties
located within such
districts.
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 dis-
tricts and the issuance of the Bonds.
Section 3.
Special Improvement Districts
Secured By The
Revolving Fund.
3.0l. Creation
of Special Improvement
Districts and
Issu-
ance of Bonds Secured by the Revolving Fund.
In accordance
with the provisions
of Title 7, Chapter
12,
Parts 41 and
42, the City may
create special improvement
dis-
tricts for financing
improvements only upon a
determination that
the creation of the district and the installation of the improve-
ments is in the public
interest.
The City
may issue special improvement
district bonds
for
financing the costs
of constructing and
installing the improve-
ments and paying
incidental costs relating
thereto. The
City
will not pledge
the Revolving Fund to
such bonds unless
one of
t.he additional following circumstances exist:
a)
The district is a developed district.
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b) The district
is being created and
the bonds are
being
issued for the purpose
of financing Community
Facility Improve-
ments 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, in-
cluding design engineering and inspection,
survey and legal work
incurred relating to the issuance of the
special improvement dis-
trict 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 Financed.
Special Improve-
ment 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 contin-
gent upon:
1 ) developers financing
the cost of
improvements for water
and sewer services; and
2) developers remitting to the City
a five percent
(5 %) Re-
volving 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
City. Ac-
tual 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
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will be issued until
all improvements are
installed and accept-
able and in the ownership of the City, unencumbered.
c. Amount of Off-Site Improvements to be Financed.
The cost of
off-site improvements, which
are assessable
against any district, may be
financed through a special
improve-
ment district upon
a determination that
the proposed off-site
improvements are consistent
with the City's
public improvement
goals.
d. Posting Additional Security.
Application of
this section is
contingent upon bond
coun-
sel's approval and concurrence.
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 im-
provements and issue
bonds for financing
such improvements
secured by the Revolving Fund if:
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 in-
terest 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 cred-
it 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 assess-
ments for a minimum of 80% of the properties within the dis-
trict. 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
(i) over 50% of
the lots in
the district
become developed,
and (ii) 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 partic-
ipating in credit
escrow will be
provided in cash for
five
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(5) years of
principal and interest coverage
by those par-
ticipating.
e. Pre-existing
Undeveloped City Subdivisions.
This sec-
tion will apply to areas
previously subdivided by the City prior
to 1978 which are
presently undeveloped. Special Impr
ovement
Districts may be approved
and created on
undeveloped properties
for all improvements with guarantee by the City's Revolving Fund.
In order to be 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 improve-
ment district(s)
assessments. The cash will be used as
security
for the special
improvement district assess-
ments 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 d
eveloped, 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
indi-
vidual 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
own-
ing a lot
in the district, who has
a recorded interest
in less
than 10% of the lots
in the proposed
district
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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. Special
Improvement Districts Not Secured by the
Revolving Fund.
4.0l. Districts Not Secured by the Revolving
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 issuance
including engineering fees,
bond counsel fees,
etc. will be paid
by the developer, prior to sale of bonds.
Section 5. Revolving Fund.
5.0l. Deposit to the Revolving Fund.
For districts which
the City issues
bonds secured by the
Revolving Fund, the costs of the
improvement shall
include a de-
posit to the Revolving Fund of five percent (5%)
of the principal
amount of the bonds to be issued.
Section 6. Administrative Fee.
6.0l. Three
percent (3%) administrative
fee shall be as-
sessed against all special improvement districts.
Section 7. Requirements
for Approval.
7.0l. It is
hereby declared to be in the best interests
of
the City of Bozeman
that any person, firm,
partnership, orga-
nization or corporation
requesting the creation
of a special im-
provement district shall, as a condition of approval of said spe-
cial improvement district,
have paid and brought current all
ex-
isting special improvement
district assessments for
which said
person, firm, corporation
or partnership is
responsibl~e on all
properties owned by said person, firm,
corporation or partnership
or in which said person,
firm corporation or partnership has
an
interest therein.
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EXCEPTION:
This section shall not
apply to existing
res-
idential neighborhoods
or commercial districts
applying for spe-
cial improvement districts,
such as lighting and
sprinkling, and
various maintenance districts.
Section 8.
Private Activity Bonds.
8.0l. 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.
8.02. 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 Special Improvement 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
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Section 10.
Pooling 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 9;...!.!.
Severability Clause.
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11.0l. Severability.
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.
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PASSED AND ADOPTED by
the City Commission of the
City of
Bozeman this ~ day of SeT?tember ,
1988.
ATTEST:
'f~ ~t ~IL~
ROBIN L. SULLIVAN
Clerk of the Commission
APPROVED AS TO FORM:
L Q~ -
BRUCE E. BECKER
City Attorney
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