HomeMy WebLinkAboutCOM 0579.000 2006-2008 M<r os N1
I tarry Kim ~ Dixie Kaetsu
ylul•
dlapm~ ~ ~ Mnnngmg Uireuor
6arbara Koslow
?,~`r~ Depury Managwy U~rerlnr
County of Hawaii
25 Aupuni Strut, Room 215 Hilq I lawnii 96720
(ROR) 961-R21 I • pax (RUS) 96 Lfi553
.luly 20, 2007
Pete Hoffmann, Chairman and
Members of the Hawaii County Council
Hawaii County Council
25 Aupuni Street
Hilo, [II 96720
Dear Chairman Ioffmann and Council Members:
Chapter 32 of the Hawaii County Code ("Chapter 32"), entitled the "Community Facilities
Districts Codc," authorizes the County of Hawaii (the "County") to establish community
7acilities districts ("CFDs") within the County for the purpose of financing the purchase,
construction, installation, expansion, improvement or rehabilitation of special improvements (as
defined in Chapter 32). The establishment of a CFD is subject to satisfaction of various
substantive and procedural requirements specified in Chapter 32.
The County recognizes that the requirements of Chapter 32 must be applied in a fair and
consistent manner based on fair and consistent standards. The purpose of these administrative
guidelines is to establish the procedures and standards to be applied by the Administration in
evaluating proposed CPDs and CFD bond issues. Amendments to the guidelines will be made
from time to time, as necessary and appropriate.
fhe procedures and standards set forth in these guidelines will apply generally to CPDs proposed
by the County itself and those proposed by private owners. However, the application process
will differ for CFDs proposed by private owners. In addition, to the extent applicable in the case
of CFDs proposed by the County, the availability of County funding to defray costs and the
degree of County oversight over construction of the special improvements will be taken into
account in addressing various standards set forth in these guidelines.
In cash and every circumstance, the decision as to whether or not the County will establish a
CFD under Chapter 32 will be made solely by the County Council. Nothing contained within the
guidelines shall be construed as obligating the County to establish a CFD in any circumstance or
as granting to any person any right to have the County establish a CFD in any circumstance.
Comm. No. 5~
~f. To:~_
Rd. Date JUL 31 ~DT-
1-fn2uaii Counh~ is nn equnl oyportuniL~ provider ~nA employer.
Honorable Pete Hoffinann, Chairman
Page "fwo
July 20, 2007
The administrative guidelines are organized into two basic parts:
Part I relates to the CFD Review Committee that has been created to administer the review
process for proposed CPDs, and the review process to be administered by the Committee,
including provisions for the initiation of the review process, the initial and subsequent reviews (if
necessary) to be conducted by the Committee and the County's retention of special consultants
for advice and assistance in connection with the consideration and formation of proposed CFDs.
Part 11 relates to the criteria to be applied by the Committee in its review of proposed CPDs,
including a description of special improvements eligible for CFD funding, the types of public
benefits that these special improvements should be expected to provide, the funding priorities of
different types of special improvements, the special taxes to be imposed, the appraisals and
market absorption analyses required to support the feasibility of the CFDs, relevant structural
considerations for CPD bond issues, and disclosure obligations to CPD bond investors and
purchasers of CFD properties.
Staff from the Department of Finance will be happy to discuss these Guidelines in greater detail
when it is reviewed by the County Council Should you have any questions before that, please
contact Finance Director, William 1'akaba, at your convenience.
Aloha,
G~-
~Harry Kim, Mayor
cc: William Takaba
COUNTY OF HAWAII
ADMINISTRATIVE GUIDELINES FOR EVALUATION
OF PROPOSED COMMUNITY FACILITIES DISTRICTS
Chapter 32 of the Hawaii County Code ("Chapter 32"), entitled the "Community Facilities
Districts Code," authorizes the County of Hawaii (the "County") to establish community facilities
districts ("CFOs") within the County for the purpose of financing the purchase, construction,
installation, expansion, improvement or rehabilitation of special improvements (as defined in
Chapter 32). The establishment of a CFD is subject to satisfaction of various substantive and
procedural requirements specified in Chapter 32.
'fhe County recognizes that the requirements of Chapter 32 must be applied in a fair and
consistent manner based on fair and consistent standards. The purpose of these administrative
guidelines is to establish the procedures and standards to be applied by the Administration in
evaluating proposed CFOs and CFD bond issues.
"fhe procedures and standards set forth in these guidelines will apply generally to CFOs
proposed by the County itself and those proposed by private owners. However, the application
process will differ for CFOs proposed by private owners (as discussed herein). In addition, to the
extent applicable in the case of CPDs proposed by the County, the availability of County funding to
defray costs and the degree of County oversight over construction of the special improvements will
be taken into account in addressing various standards set forth in these guidelines.
In each and every circumstance, the decision as to whether or not the County will establish a
CFD under Chapter 32 will be made solely by the County. Nothing contained herein shall be
construed as obligating the County to establish a CFD in any circumstance or as granting to any
person any right to have the County establish a CFD in any circumstance.
These administrative guidelines are organized into two basic pans:
Yart I: relates to the CFD Review Committee that has been created to administer the review
process for proposed CFOs, and the review process to be administered by the Committee, including
provisions for the initiation of the review process, the initial and subsequent reviews (if necessary)
to be conducted by the Committee and the County's retention of special consultants for advice and
assistance in connection with the consideration and formation of proposed CFDs. Attached as
Exhibits A and B hereto are the current forms of the CFD Application and the Deposit and
Reimbursement Agreement described herein with respect to the County's CFD process.
Part II: relates to the criteria to be applied by the Committee in its review of proposed
CFDs, including a description of special improvements eligible for CFD funding, the types of
public benefits that these special improvements should be expected to provide, the funding
priorities of different types of special improvements, the special taxes to be imposed, the appraisals
and market absorption analyses required to support the feasibility of the CFDs, relevant structural
considerations for CFD bond issues, and disclosure obligations to CFD bond investors and
purchasers of CFD properties.
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PART I: THE CFD REVIEW COMMITTEE
AND THE CFD REVIEW PROCESS
A. THE CFD REVIEW COMMITTEE
Each proposed CFD shall be evaluated by the Administration's Community Facilities
District Review Committee (the "Committee"), which shall include the following officials or their
respective designees: the Managing Director; the Finance Director; the Planning Director; the
Director of Public Works; and the Corporation Counsel. The Committee shall be chaired by the
Finance Director orhis/her designee.
The Committee shall review each proposed CFD for compliance with the requirements of
Chapter 32 and these administrative guidelines. Each proposed CFD will be reviewed initially prior
to consideration by the County Council of the Resolution of Intention (the "ROI") authorizing the
institution of proceedings for the formation of the CFD, and again if necessary prior to
consideration by the County Council of the Ordinance of Formation providing for the establishment
of the CFD (the "Ordinance of Formation") and the Bond Ordinance providing for the issuance of
bonds to finance special improvements relating to the CFD (the "Bond Ordinance").
A. INITIATION OF CFD REVIEW PROCESS
1. CFD Application.
Each developer/landowner proposing the formation of a CFD (the "Applicant") will be
required to submit a completed Application for CFD Financing (the "CFD Application") to the
Department of Finance. '['he current form of CPD Application is attached as Exhibit A hereto.
Submission of the completed CFD Application will be required before the Applicant petitions the
Council to commence proceedings for formation of the proposed CFD, with sufficient time allowed
for the Committee to conduct its initial review of the proposed CFD.
2. Deposit of Funds.
In addition, in connection with the processing of a CFD Application and as a condition to
the taking of any action on the Applicant's petition, the Applicant will be required to deposit funds
with the County to cover the costs and expenses incurred by the County in connection with its
consideration and implementation of the proposed CFD, including a reasonable charge for
administrative staff time, fees of the County's special consultants and out-of-pocket expenses of
~ The application procedure outlined in this Section applies specifically to CFD proceedings
commenced upon petition by a developer/landowner. In the case of proceedings
commenced by the Council on its own initiative, the Committee will work cooperatively
with the Council to develop and obtain the necessary information for the Committee's
review of the proposed CFD.
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the County relating to the proposed CFD. The deposit will be made pursuant to a Deposit and
Reimbursement Agreement between the County and the Applicant. The current form of Deposit
and Reimbursement Agreement is attached as Exhibit B hereto.
The County will generally suggest the initial deposit to be at least $75,000, and may require
a higher amount depending on the circumstances. Pursuant to the Deposit and Reimbursement
Agreement, the deposit will be used by the County to pay its costs and expenses relating to the
proposed CFD and is subject to replenishment by the Applicant on demand of the County if the
balance falls below a specified minimum level. The use of the deposit shall in no way be construed
as obligating the County to form the proposed CFD or to issue CFD bonds. Upon termination of
the CFD proceedings or issuance of bonds for the CFD (as applicable), and after payment of all of
the County's costs and expenses relating to the CFD, any remaining portion of the deposit will be
returned to the Applicant.
C. THE CFll REVIEW PROCESS
1. Initial Review Process.
The Committee will conduct an initial review process for each proposed CFD prior to
consideration of the ROI for the CFD by the County Council In the case of CFD proceedings to be
commenced by petition of a developer/landowner, this initial review process will be conducted
upon the Committee's receipt of the completed CPD Application for the proposed CFD, and the
Applicant's petition to Council should not be submitted until completion of this review process.
This initial review process will focus primarily on the following areas:
a. To confirm that the information provided in the CFD Application is sufficiently complete
and responsive to the requirements of Chapter 32 and the review criteria set forth herein;
b. "I'o identify and evaluate the public benelits and funding priorities associated with the
special improvements included in the proposed CFD;
c. 'Ib review the proposed forms of the Applicant's petition to Council and ROI, including the
legislative findings and determinations to be made pursuant to the ROI;
d. 'fo review the proposed rate and method of apportionment (the "RMA") for the special
taxes to be imposed within the proposed CPD, as specified in the RMA report prepared by
the County's special tax consultant;
e. 7'o review relevant components of the proposed CFD for conformity with the guidelines set
forth herein and to identify and address any potential difficulties that may be encountered at
later stages in the CFD process (e.g., at the time of the County's consideration of the
Ordinance oC Formation or Bond Ordinance, or at the time of any subsequent offering of
CFD bonds for the proposed CFD);
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2. Additional Discretionary_ Review.
To the extent deemed necessary or appropriate by the Committee in its discretion, each
proposed CFD will be subject to further review by the Committee, prior to submission of the
Ordinance of Formation and the Bond Ordinance to the County Council, for the following
purposes:
a. To review the principal components of the CFD and CFD bonds to be authorized in relation
to the requirements of Chapter 32 and the review criteria set forth herein, to the extent that
such matters were not fully addressed in the initial review process; and
b. If applicable, to consider any significant changes in relevant lads or circumstances
subsequent to the completion of the initial review process.
D. CONSULTANTS
The Committee may seek and rely upon the advice of special consultants retained by the
County in connection with the Committee's review of proposed CFDs. All such special consultants
shall be independent of the Applicant. The selection of such special consultants will be made
pursuant to the County's consultant selection procedures for bond issues (which are applicable to
CFD bonds). Accordingly, the selection of special consultants will be made solely by the County in
its discretion.
Typically, County will retain the following special consultants in connection with the
formation of CPDs and issuance of CFD bond issues:
1. Special Tax Consultant.
A special tax consultant will be retained by the County to collect and analyze relevant
information on the tax base in the CFD, advise the County regarding appropriate tax calculation and
allocation methods to support the costs of the proposed special improvements and related costs of
the CFD and the CFD bonds, and prepare the RMA reflecting the tax calculation and allocation
methods to be implemented. (See fart ILB for a discussion of RMAs.)
2. Appraiser.
An appraiser will be retained by the County to determine the value of the properties within
the CFD, and to prepare the MAI appraisal report(s) on such value for purposes of Chapter 32,
Section 32-18, and for bond marketing purposes. At its discretion, the County may permit the
appraisal to be prepared by an appraiser not appointed by the County, bul the County reserves the
right in such instances to retain its own appraiser to perform an independent review of the appraisal.
(See Pari ILC for a discussion of relevant appraisal criteria.)
3. Market Absorption Consultant.
In most cases, the County will retain a market absorption consultant to analyze and report
on the rate at which the properties in the CFD which are subject to a special tax are expected to be
sold or leased to end users. As necessary, the market absorption consultant will also provide
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relevant information to the appraiser for purposes of the CFD appraisals. (See Part ILD for a
discussion of the market absorption study.)
4. Bond Underwriter.
In most cases, the County will sell CFD bonds in a negotiated sale process. In connection
with such sales, the County will retain a bond underwriter to assist in the structuring of the bond
issue, to market the bonds to potential investors and to purchase the bonds from the County for
reoffering to investors. (See Part ILF for a discussion of considerations regarding the structure of
CFD bond issues.) Depending on the size and complexity of the offering, the County may retain a
team of two or more underwriting firms, in which case one firm will be designated as the ]cad
underwriter.
"Che bond underwriter will be represented by legal counsel for the purpose, among others, of
preparing the offering and underwriting documents for the CFD bond issue. The underwriter will
select its own legal counsel, but the underwriter will be expected to consult with the County in
making this selection so as to help avoid potential conflicts and promote the formation of an
effective financing team.
5. Special Counsel.
The County will retain bond counsel for purposes of: preparing the ROI, Ordinance of
Formation, Bond Ordinance and bond financing documents; assisting the County in the review of
the RMA, appraisals, market absorption study, bond purchase contract, official statement and other
documents relating to the formation of the CFD and the offering and sale of bonds for the CFD; and
providing legal advice regarding the foregoing. In appropriate cases, special tax counsel will also be
retained to provide tax advice regarding the CFD bonds in conjunction with the services of bond
counsel.
In connection with the issuance of CFD bonds, the County may also retain disclosure
counsel for the purpose of preparing the official statement or other offering document to be
circulated in connection with the marketing of the bonds.
6. Financial Advisor.
In most cases, the County will also retain a financial advisor to provide financial analysis
and advice regarding the formation of the CFD and the structure, offer and issuance of the CFD
bonds, and to assist in coordinating the respective responsibilities of the County and its special
consultants in connection with the foregoing.
7. Other AnPOintments.
In addition to the foregoing special consultants, the County will also select other outside
service providers in connection with CFD bond issues, including the bond trustee, credit
enhancement provider and official statement printer.
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PART II: CRITERIA FOR REVIEW OF CFD PROPOSALS
A. ELIGIBLE IMPROVEMENTS
1. Eligible Special Improvements Generally.
Special improvements eligible for funding under Chapter 32 include infrastructure facilities
that serve and provide benefits to the public in connection with the formation of a CFD. Such
facilities are required to have an estimated useful life of five years or more. Privately-owned
facilities may be eligible for financing under Chapter 32 if the County Council determines that they
serve a public purpose.
Eligible special improvements may include, but are not limited to, the following types of
facilities and improvements:
a. Streets, roads, highways, pedestrian malls, sidewalks or alleyways, including but not limited
to, grading, paving or otherwise improving the foregoing;
b. Public parking facilities;
c. Lighting systems, including but not limited to traffic signals, for any public right-of-way;
d. I,oca] park, recreation, child care, parkway and open-space facilities;
e. Elementary, secondary, vocational and higher education school sites and facilities;
E Libraries, museums or other cultural facilities;
g. The undergrounding of natural gas pipeline facilities, telephone lines, facilities for the
transmission or distribution of electrical energy, cable television lines and other utility
facilities, subject to the further provisions of Chapter 32, Section 32-7(g);
h. Water systems;
i. Police, criminal justice (including but not limited to jails and courthouses), fire suppression
(including but not limited to fire stations) and paramedic facilities;
j. Wastewater, storm damage, sewage removal or treatment, or solid waste disposal, recycling
or resource recovery systems or facilities;
k. 'Transit or transportation systems;
z It should be noted that federal tax laws impose limits on tax-exempt bonds that can
be issued to finance privately-owned infrastructure facilities as part of a CFD.
'T'herefore, it may be necessary to issue taxable bonds to finance such facilities.
Chapter 32 permits the issuance of both tax-exempt and taxable bonds for CFDs.
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I. "telecommunications systems; and
m. Any other facilities which the County is authorized by law to contribute revenue to, or
construct, own, maintain or operate.
2. Required Public Benefits.
Chapter 32, Section 32-18, provides in relevant part that: 'No district shall be established
unless the council finds that such approval is in the public interest." In connection with each
CFD proposal, this public interest requirement will be evaluated in terms of the benefits to the
public that will be provided by the special improvements to be funded through the formation of the
CFD and issuance of CFD Bonds. In view of the financial benefits to be realized by developers and
owners of properties within the boundaries of the CFD, the County will require demonstration of
meaningful types and levels of public benefits.
There is no single standard by which public benefits produced by CPDs can be measured.
Therefore, each Applicant should be expected to demonstrate how and to what extent specific
improvements included in its proposed CFD, and the CFD as a whole, will produce meaningful
benefits to the public. Consideration will be given to the following types of factors:
a. Regional Benefits.
Special improvements that provide regional benefits include those which serve and provide
benefits to communities beyond the boundaries of the CFD, including but not limited to: the
construction or improvement of regional roadways and transportation systems; the expansion or
improvement of water and sewer facilities that enhance the capacity of such facilities to serve
communities within the region; and the construction or improvement of other public facilities (such
as police stations, fire stations, and public parks and recreational facilities) that serve communities
outside the proposed CFD. Generally speaking, improvements providing regional benefits will be
expected to do more than simply offset or mitigate burdens on regional public facilities resulting
from the development of properties within the CFD; they will be expected to produce a net
improvement to such regional facilities and the public benefits produced by such facilities.
In most cases, a special improvement will not be considered as providing regional benefits
if the direct benefits provided by the improvement are limited to residents and businesses within the
CI'D. However, certain special improvements, although primarily local in nature, may nevertheless
be considered as providing regional benefits if they provide significant indirect benefits beyond the
CFD boundaries. 'these may include, for example, innovative infrastructure facility projects within
the CFll which are implemented as pilot projects and identified by the County as potentially having
broader application.
h. Furtherance ofldentired County Programs/Objectives.
Special improvements may provide public benefits by supporting identified County
programs and objectives, such as intrastructurc facilities necessary for the development of
affordable housing projects (including projects to provide senior housing, low-to-moderate income
housing or workforce housing) or for the revitalization of targeted areas of economic distress.
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c. Environmental Benefits.
Special improvements may also be considered as providing public benefits to the extent that
they help to address environmental concerns. >;xamples may include: acquisition and preservation
of wetlands (or other significant ecological habitats) and open space; provision of public access to
coastal areas and recreational trails; and construction of storm water facilities.
d. ('acililies Enhanced Beyond Legal Reguiremen(s.
Under applicable land use and development laws, approvals for new property developments
are typically conditioned upon compliance with various requirements regarding infrastructure
facilities to be provided. While these required facilities will generally be recognized as providing
public benefits, developments that meet, but do not exceed, the minimum requirements may not be
regarded as providing a sufficient level of public benefits to merit funding through a CFD.
Consideration will generally be given to higher levels of public benefits provided by infrastructure
facilities that exceed the minimum requirements.
e. Acceleration oflmprovemenis.
In some cases, the availability of CFD funding for infrastructure may have the effect of
accelerating the completion of infrastructure facilities in comparison to other funding sources.
Accelerated completion of infrastructure, in and of itself, does not necessarily provide public
benefits. However, to the extent that the infrastructure itself provides public benefits, consideration
may be given to the extent to which CFD funding can enhance these benefits by making them
available to the public sooner.
f Other Public Bene/its.
fhe foregoing is not intended as an exhaustive listing of factors to be considered in
detcnnining whether improvements within a proposed CFD will provide meaningful benefits to the
public. It is recognized in this regard that CFDs may provide other forms of public benefits
depending on the particular facts and circumstances involved. Therefore, consideration will be
given to other potential benefits in light of the applicable facts and circumstances.
3. Priority of Funding.
in order to optimize Lhe public benefits realized through a CFD bond issue, special
improvements provided by the CFD will generally be prioritized for funding purposes in the
following order:
First ~ Facilities that constitute regional or backbone infrastructure providing public
benefits required to serve proposed development;
Second: Other facilities addressing a clearly demonstrated public need; and
Third: Other facilities authorized to be financed pursuant to Chapter 32.
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Notwithstanding the foregoing, it is recognized that circumstances may differ significantly
from one CFD to another. In appropriate cases, exceptions to the above priority may be appropriate
in order to enhance the potential benefits provided to the public. The Committee will consider
whether exceptions are appropriate on a case-by-case basis.
B. SPEC[AL TAX FORMULAS AND MAXIMUM SPECIAL TAXF,S
1. Reasonable Basis of Annortionment.
Special taxes must be allocated and apportioned on a reasonable basis to all categories and
classes of property (other than exempt property) within the CFD. Exemptions from the special tax
may be given to parcels which are publicly-owned, are held by property owners associations, are
used for a public purpose such as open space or wetlands or are affected by public utility easements
making impractical their utilization for other than the purposes set forth in the easements. Other
exemptions in whole or in part may also be provided to the extent deemed reasonable and equitable
by the County.
2. Total Tax Burden.
The County will need to be reasonably satisfied that the total tax burden on properties
within a proposed CFD will not be excessive, including the anticipated annual CFD special tax,
together with cad valorem property taxes, special improvement assessments, special taxes for any
overlapping community facilities districts, and any other taxes, fees and charges payable from and
secured by the property. Limits on the CFD special taxes will be established at levels necessary to
avoid undue burdens on properties, as determined by the County in consuhation with the CFD
appraiser, market absorption consultant and other special consultants to the County.
3. Rate and Method of Annortionment.
The rate and method of apportionment for CFD special taxes must be structured so as to
produce annual special tax revenues sufficient to pay reasonable and necessary amoral
administrative expenses of the CPD and 110% of the annual debt service on all CFD bonds.
Additionally, the rate and method of apportionment may be structured so as to produce amounts
sufficient to fund (a) any amounts required to establish or replenish any reserve fund established Cor
a CFD bond issue, (b) amounts to pay directly the costs of public facilities authorized to be financed
by the CFD, (c) amounts to pay the costs of services authorized to be financed by the CI'D, (d) the
accumulation of funds reasonably required for future debt service on CTD bonds, (e) amounts equal
to projected delinquencies in special tax payments, (Q remarketing, credit enhancement or liquidity
fees, and (g) any other costs or payments permitted by law.
Generally, the rate and method of apportionment for CFD special taxes will be required to
include aback-up tax so that changes in development within the CFD would not result in the
inability to levy special taxes that would produce special tax revenues in such amounts.
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4. Increases in Special Tax.
Generally, the maximum special tax levied to finance public facilities for any parcel within
a CFD for which a building permit for the construction of a for-sale residential unit has been issued
shall not escalate. However, the County may, in its discretion, on a case-by-case basis, allow such
maximum special tax to escalate annually in an amount not exceeding the maximum specitied in
the applicable RMA. The increase in the special tax levied on any parcel within a CFD as a
consequence of delinquency or default by the owner on any other parcel may not exceed the
maximum specified in the applicable RMA.
5. Prepayment of Special Tax.
'typically, the RMA for a CFD will be structured so as to allow the prepayment of special
taxes by a property owner. The applicable prepayment provisions must provide for payment of the
property owner's allocable share of the CFD bonds and other CFD costs for which the owner is
responsible.
C. APPRAISALS
Chapter 32, Section 32-18, provides in relevant part that: "No district shall be established
unless the council finds that the appraised value of the land in the district (in accordance with
prevailing standards of appraisal then used by financial institutions for loans thereon) is at least two
times the estimated cost of the proposed improvement...." The appraised value of the land in a
proposed CFD must be included in the report on the CFD to be filed by the Director of Public
Works under Chapter 32, Section 32-21, within 60 or 90 days after adoption of the ROI [or a
proposed CFD (depending on whether or not a public hearing is held for the CFD).
When the CFD is established, an appraisal will also be required in connection with the
offering of CPD bands for the CFD. Ideally, this requirement and the appraisal requirement under
Section 32-18 could be satisfied by a single appraisal report. This may not be possible, however,
due to timing consideration and/or the extent to which the two appraisal requirements call for
inconsistent assumptions.
ftach appraisal will be prepared in compliance with applicable standards under the fJniform
Standards of Professional Appraisal Practice oC the Appraisal Foundation, and the Code of
Professional I?thics and Standards of Professional Appraisal Practice of the Appraisal Institute.
Subject to such standards, the specific assumptions for purposes of Section 32-18 and for bond
marketing purposes will be determined by the Committee upon consultation with the appraiser and
other special consultants retained by the County.
The appraisals will be performed by the independent appraiser retained by the County.
However, in appropriate cases where an appraiser has been retained by the construction lender for
the proposed infrastructure improvements, the County may accept that appraiser's report for
purposes of the appraisal requirement under Section 32-18. In any other cases, if an appraisal is
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provided by an appraiser not retained by the County, the County may retain its own appraiser to
perform an independent review of the appraisal.
D. ABSORPTION STUDY
Generally, for all new residential development, and in such other cases as may be
appropriate, the County will require a market absorption study of the proposed development within
the CPD. The market absorption study will provide the market absorption consultant's estimates.
based on specified economic and demographic data, of the rates at which the finished products (lots
or completed buildings or units) will be sold to final users and, generally, shall include an analysis
of competitive prices for the product types proposed to be developed within the CFD.
E. CONSTRUCTION FINANCING
Except in unusual cases, CFD bond proceeds will not be used to fund the initial
construction of the special improvements for a CFD. Instead, the Applicant will be required to
construct the special improvements for a CFD with funds other than the CFD bonds, and the CFD
bond proceeds will be used to acquire the special improvements upon completion. Therefore, the
Applicant will need to obtain construction financing for the special improvements sufficient to fund
initial construction.
F. STKUCTURAL CONSIDERATIONS FOR CFD BONll ISSUES
1. Reserve Fund.3
In order to enhance the credit quality of CFD bond issues, the County generally will require
that each fixed rate bond issue be secured by a debt service reserve fund. Generally, each debt
service reserve fund will be required to be funded (with cash or an acceptable reserve surety or
other credit facility) in an amount equal to the lowest of the following: (a) 10% of the initial
principal amount of the bonds of such issue; (b) maximum annual debt service on the bonds of such
issue; or (c) 125°/0 of the average annual debt service on the bonds of such issue. Any reserve surety
or other credit facility funding such a reserve fund will generally he required to be issued or
guaranteed by an entity, the long term unsecured obligations of which arc rated at least "A" by
Moody's Investors Service or Standard & Poor's Ratings Service. The County may, on a case-by-
case basis, also require a debt service reserve fund for variable rate issues, although the reserve
requirement, if any, may differ for such issues.
2. Credit F.nhanccment.
Where a substantial amount of the property within a CPD is undeveloped or is owned by a
single owner, the County will generally require credit enhancement to increase the credit quality of
a CFD bond issue, particularly where the value-to-lien ratio of a significant portion of the property
s Chapter 32 permits the issuance of either general obligation bonds or bonds secured
solely by the special taxes on properties within a CFD. A debt service reserve fund
will be considered only in cases involving bonds secured solely by special taxes.
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in such CFD is less than three-to-one. The County may, in its discretion, require such credit
enhancement in other situations where the County deems such an increase in credit quality to be
necessary, appropriate or prudent. Such credit enhancement will usually be in the form of an
irrevocable letter of credit issued or guaranteed by an entity, the long term unsecured obligations of
which are rated at least "A" by Moody's Tnvestors Service or Standard & Poor's Ratings Service.
Any such credit facility will generally be required to be in an amount not Icss than two times the
amount of annual special taxes levied on undeveloped property and will be required to remain in
effect until such property is developed or the value thereof has otherwise been sufficiently
increased. The actual requirements for any particular credit facility will be determined on a case-
by-case basis to address deficiencies in land values and other relevant circumstances.
3. Capitalized Interest.
Where appropriate, capitalized interest (i.e., interest during construction) will be funded
from CFD bond proceeds. Capitalized interest can improve the credit quality of CFD bonds and
result in lower borrowing costs. However, the funding of capitalized interest also uses debt
capacity that could otherwise be used to fund additional infrastructure improvements. The amount
of capitalized interest to be funded will be determined on a case by case basis.
4. Bond Structure.
Under Chapter 32, the term to final maturity of CFD bonds may not exceed 40 years. "I'he
actual term to maturity of each issue will be determined on a case-by-case basis. CFD bonds will
generally be structured such that, once principal amortization thereof has commenced, debt service
thereon will be substantially level. However, the County may, in its discretion, on a case-by-case
basis, allow such bonds to be structured such that debt service thereon escalates annually within
specified limits.
G. llISCLOSURE REQUIREMENTS FOR BOND ISSUES
1. Initial Disclosure.
Each owner of property within a CFD that has not reached its planned development stage
and that will be responsible for a substantial portion (as determined by the County) of annual debt
service on an issue of CFD bonds will be required to provide for inclusion in the official statement
or other offering materials distributed in connection with the offering and sale of such bonds such
information as may be required for the County to comply with, satisfy any requirements of, or avoid
any liability under, any applicable federal or state securities laws. Each such property owner will
be required to verify in writing the accuracy and completeness the information so provided for
inclusion in the official statement or other offering materials.
2. Continuing Disclosure.
Each owner of property within a CFD that has not reached its planned development stage
and that will be responsible for a substantial portion (as determined by the County) of annual debt
service on an issue of CI~ll bonds will be required to provide such information, on an ongoing
basis, as may be required for the underwriter of such bonds to satisfy the requirements imposed on
13
it pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934. Each such
property owner will be required to provide a written commitment to provide such information for
so long as the property owner remains responsible for a substantial portion of the annual debt
service on the CFD bonds.
H. DISCLOSURES TO PROSPECTIVE PROPERTY PURCHASERS
In order to ensure that prospective property purchasers are fully informed about their special
tax obligations imposed under Chapter 32, the County will require that proper disclosure statements
regarding such special tax obligations be made to prospective property purchasers. Such disclosure
statements will be subject to approval by the Committee, and will include the following
information:
a statement that the property being purchased is subject to a special CPD tax which is in
addition to regular County property taxes;
the maximum annual amount of the special tax, the number of years over which it will he
levied and the permitted amount of annual increases;
the prepayment provisions for the special tax;
if the properly owner fails to pay the special tax, the County may foreclose on the property
to collect the delinquent special tax; and
such other information regarding the CFD and special tax as may be required by the
Committee.
I. CRITERIA INTENDED AS GUIDELINES; WAIVERS AND AMENDMF,N'I'
1'he review procedures and criteria set forth herein reflect the administrative guidelines for
the consideration of proposed CFDs by the County. The County may, in its discretion, require
additional or different procedures and review criteria, enhanced security and higher standards in
particular casts.
The administrative guidelines set forth herein may be amended at any time and by the
Committee and will be forwarded to the Council.
14
EXHHIIT A
COUNTY OF HAWAII
COMMUNTTY FACILITIES DISTRICT FINANCING PROGKAM
Application for Formation of
Community Facilities District
Instructions:
The following Application will be required for consideration of a proposed Community Facilities
District (a "CFD') under Chapter 32 of [he Kawaii County Code ("Chapter 32"). Reference
should be made [o Chapter 32 and the County's Administrative Guidelines for Evaluation of
Proposed Community Facilities Districts ([he "Administrative Guidelines') for further
information regarding matters to he addressed in this Application.
Three completed and signed copies of this Application, including attachments, should be
suhmitted to [he Direcinr• of Finance gJ'the County of Hawaii. The Application will be reviewed
by the County's C/-'D Review Committee, which consists of the following gJficiais or their
respective designees: Managing Director; Finance Director; Planning Director: Director of
Public Works; and Corporation Counsel.
Attach additional sheers as necessary. Attachments should identify the speci/ic sections n/this
Application to which they relate.
I. BASIC INFORMATION REGARDING APPLICANT AND OTHER
INTERESTED PARTIES
A. The Applicant)
Name:
Mailing Address: _
Contact Person:
Title:
Telephone:
Facsimile:
E-Mail:
Pursuant to Chapter 32, the Applicant must own at least 25% of the land within the proposed CFD in order
to petition the County Council to institute proceedings for formation of the CFD. If the Applicant does
own the requisite percentage of land within the proposed CFD, this requirement can be met on a combined
basis by two or more co-Applicants. In such event, the Application must be submitted jointly by the co-
Applicants.
I3. Contractor/Developer (if other than Applicant)
Name:
Mailing Address:
Contact Person:
"Title:
Tclephone:
Facsimile:
Is-Mail:
C. Legal Counsel
Attorney/Firm: _ _
Mailing Address:
Contact Person:
'Title:
Tclephone: _
Facsimile:
E-Mail:
D. Other Consultants
Name:
Role:
Mailing Address:
Contact Person:
'Title:
I"elephone:
Facsimile:
E-Mail:
II. PROPOSED CFD
A. Location/Boundaries of Proposed CFD
Provide a map and narrative description identifying the location and boundaries of the
proposed CFD. If separate improvement areas within the CFD are proposed, this information
should indicate the boundaries of each improvement area.
2
B. Overall Project Development Plans
Describe the development plans for the property within the proposed CFD, including
reasonable detail regarding: the proposed uses (residential, commercial etc.); types, nwnbers of
units and acreage applicable to each use; development schedule; and other information
reasonably necessary to understand the nature and scope of the development plans.
C. Proposed Special Improvements
Describe the proposed special improvements to be funded through the establishment of
the proposed CPD. (See Administrative Guidelines: Part II, Section A.l for a listing of eligible
improvements.) Description should include a cost breakdown and construction timetable.
D. Public Benefits to be Provided
Describe the public benefits expected to be provided as a result of the funding of the
proposed special improvements by the proposed CFD. (See Administrative Guidelines: Parl II,
Section A.2 for a discussion of required public benefits.)
E. Other Infrastructure Needs
Identify all required infrastructure facilities that will serve the proposed CI'D, but will not
be funded by the CFD. Provide cost estimates and identify funding sources.
F. Permits and Approvals
Identify all pending and issued governmental permits and approvals required for the
development of the property within the proposed CFD (including the overall project components,
special improvements and other required infrastructure identified in B, C and 1; above). In the
case of pending permits and approvals, provide information regarding the status of the
application and anticipated issuance date.
G. Appraisals and Other Studies
Provide copies of all appraisal(s) of the property within the proposed CFD. If an
additional appraisal will he required to obtain financing for construction within the proposed
CFD, identify the appraiser and the anticipated issuance date for the appraisal.
Provide copies of all other studies, including marketing studies and financial feasibility
studies, prepared with respect to the proposed CFD and/or the development plan components
identified in B above.
3
H. Other Information
1. Are there any other community facilities districts or special improvement districts
that will overlap the boundaries of the proposed CFD? Yes L~ No L~ If yes, please
identify such other district(s) by name and number assigned by the County, and identify the
overlapping boundaries on the map of the proposed CPD.
2. Is 100% of the property within the proposed CPD owned by the Applicant (or co-
Applicants)? Yes No If no, identify all other property owners, show their
properties on the map of the proposed CFD, and provide information about their level of support
for the proposed CFD.
3. Is the property within the proposed CFD current on property taxes? Yes
No [ ] If no, provide further information.
[II. PROPOSED FINANCING ARRANGEMENTS
A. Construction Financing for Special Improvements
As indicated in the Administrative Guidelines (see Part II, Section E therein), applicants
will generally be required to obtain construction financing for the CFD special improvements
subject to repayment Crom CFD bond proceeds upon completion of the improvements. Provide
information regarding the anticipated source and amount of construction financing. If available,
provide a copy of the signed loan commitment letter. If application for financing is pending,
identify the financing source and provide information regarding the status of the loan application
and anticipated commitment daft.
B. Other Financing Commitments
Provide information regarding the anticipated sources and amounts of financing to be
obtained for project components and infrastructure requirements (other than special
improvements to be funded by the proposed CFD) identified in ILB and ILE about. If available,
provide copies of signed financing commitments. If application for financing is pending,
identify the financing source and provide information regarding the status of the application and
anticipated commitment date.
C. Project Financing Pro Formas
Provide project financing pro formas, including projected timelines, reflecting the
amounts and sources of financing identified in A and 13 above.
4
IV. ADDITIONAL INFORMATION
A. Identify up to three banking references, including the name and address of the
banking institution, and the name and contact information for the bank representative to be
contacted.
B. Provide recent financial statements of the Applicant and/or other information
demonstrating past financial performance.
L. Has the Applicant been in bankruptcy? Yes No If yes, provide
further information.
D. Is the Applicant current on all tax obligations? Yes ~ ] No ~ ~ If no,
provide further information.
6. List previous experience with developments of similar type and/or size, including
location, size, project mix, year of completion and Applicants involvement.
P'. Were any of the listed prior developments funded by CFD bonds? Yes ~ ~
No If yes, (a) identify the bond-financed developments on the list, (b) confirm whether the
bonds have been in default (whether or not cured), and (c) confirm whether the Applicant has
been in default (whether or not cured) of any continuing disclosure obligations relating to the
bonds.
Submitted by:
Applicant:
By:
Name:
Title:
Date:
5
EXHIBIT 13
COUNTY OF HAWAII
PROPOSED COMMUNITY FACILITIES DISTRICT
DEPOSIT AND REIMBURSEMENT AGREEMENT
THIS AGREEMENT is made and entered into this
20_, by and between the County of Hawaii
(the "County"), and a (the "Proponent"),
which owns the property within the boundaries of a proposed community facilities
district.
RECITALS
A. The Proponent owns the real property that is included within the proposed
boundaries of a proposed community facilities district (the "Proposed
District") for the development known as (the
"Development Project"). The Proposed District is proposed to be
established pursuant to the provisions of Chapter 32 of the Hawaii County
Code, as amended ("Chapter 32") for financing the acquisition,
construction and installation of "special improvements" (as defined in
Chapter 32) (the "Special Improvements") which the Proponent is required
to provide in connection with the Development Project.
B. The Proponent has agreed to advance funds to allow the County to pay all
costs and expenses of the County related to proceedings heretofore and
hereafter conducted for the establishment of the Proposed District and the
issuance of special tax bonds for the Proposed District pursuant to
Chapter 32 (the "Proposed Bonds").
C. The parties hereto wish to enter into an agreement to define the terms and
conditions under which the funds will be advanced and subsequently
reimbursed.
AGREEMENT
In consideration of the mutual promises herein contained, the parties
hereto do hereby agree as follows:
Section 1. Proponent's Deposit• Use of Deposited Funds.
(a) The Proponent agrees to deposit initially the sum of [$75,000]
(together with additional deposits hereunder, the "Deposit") with the County to
pay one hundred percent (100%) of the costs and expenses of the County
relating to the proceedings for the formation of the Proposed District and the
issuance of the Proposed Bonds (collectively, the "County Costs"), including
without limitation: (i) the fees and expenses of the County's special tax
consultant, financial advisor, appraiser, absorption consultant, legal counsel
(including bond counsel and special tax counsel), consulting engineers and other
professional consultants and advisors (individually a "Consultant" and collectively
the "Consultants"); (ii) publication costs and other out-of-pocket expenses; (iii) a
reasonable charge (if applicable) for County staff time; and (iv) other County staff
and administrative costs.
(b) The County may draw upon the Deposit to pay the County Costs
from time to time. The County shall not be obligated to advance any of its funds
for purposes of forming the Proposed District or the issuance and sale of the
Proposed Bonds.
(c) In the event that the balance of the Deposit falls below [$20,000], or
is otherwise insufficient to pay any County Costs due or coming due, the
Proponent shall deposit additional monies with the County in the amount
necessary to restore the balance of the Deposit to [$75,000] and/or pay the
County Costs due or coming due. The Proponent shall deposit such additional
monies within ten (10) calendar days of the receipt of written notification from the
County of the need for such additional funds. Without limiting any other right of
the County to discontinue proceedings relating to the Proposed District or the
Proposed Bonds, it is expressly understood and agreed that the County shall
have the right to suspend or terminate all proceedings for the establishment of
the Proposed District and/or the issuance of the Proposed Bonds in the event
that the Proponent fails to deposit such additional monies with the County within
said ten (10) calendar days.
(d) The County shall provide monthly statements to the Proponent
showing the amount disbursed from the Deposit and the remaining balance
thereof. The County agrees to keep such records as are reasonably necessary
to show the amount of monies disbursed for payment of County Costs. The
County shall make such records available to the Proponent upon request.
Section 2. Consultants Compensation, and Method of Payment.
The County shall retain the Consultants upon such terms as it deems appropriate
in its sole discretion. The County shall have the sole discretion to select the
persons or firms to be retained as Consultants, and to evaluate their performance
and the reasonableness of their compensation. Compensation shall be paid to
each Consultant for work performed as specified in their respective contracts with
the County. Upon request, the County shall provide the Proponent with a
summary of fees paid to the Consultants on a bi-monthly basis.
Deposit and Reimbursement Agreement Page 2 of 6
Section 3. Reimbursement to Proponent. If the Proposed District is
established and the Proposed Bonds are issued, the Proponent shall be entitled
to be reimbursed for Deposit, without interest, from the proceeds of the Proposed
Bonds. In the event that the net proceeds of the Proposed Bonds, after
deducting the costs of issuance from the proceeds received by the County, are
insufficient to fully fund both (i) reimbursement of the Deposit and (ii) financing of
the Special Improvements, the Proponent shall advise the County in writing
whether it wishes to receive reimbursement of the Deposit or to waive its
entitlement to such reimbursement. In the event that the Proposed Bonds are
issued in multiple series, waiver of reimbursement with respect to a given series
shall not constitute a waiver of reimbursement from the proceeds of any
subsequent series. If the proceedings are abandoned for any reason prior to the
sale and issuance of the Proposed Bonds, the obligation of the County to
reimburse the Proponent for the Deposit or any portion thereof shall be strictly
limited to that portion of the Deposit not yet expended, and the provisions of
subsection (c) of Section 5 hereof shall govern the application of such
unexpended portion of the Deposit.
Section 4. Ownership of Documents. All plans, specifications,
reports, appraisals and other documentation prepared as part of the proceedings
to establish the Proposed District and to sell and issue the Proposed Bonds shall
become the property of the County, regardless of whether the Proposed District
is formed and/or the Proposed Bonds are sold and issued; provided, however,
that the Proponent shall be entitled to use the information contained in such
documents.
Section 5. No Obligation to form a Community Facilities District;
Abandonment of Proceedings.
(a) The County expressly reserves the right to abandon the
proceedings for the establishment of the Proposed District and/or issuance of the
Proposed Bonds for any reason at any time prior to the completion thereof.
Without limiting the generality of the foregoing, the Proponent expressly
acknowledges that the decision of the County to form a community facilities
district and/or to issue special tax bonds under Chapter 32 is an exercise of the
legislative authority of the Council of the County, and that the County may not
enter into a contract or obligate the Council to exercise its legislative discretion in
a particular manner. This Agreement does not, therefore, in any way create a
contractual, legal or equitable obligation of or commitment by the County to
approve the formation of the Proposed District or to sell the Proposed Bonds to
finance the Project.
(b) Should the Proponent elect to abandon the proceedings, the
Proponent shall provide written notification of such election to the County and
request the County to terminate all consulting agreements and use reasonable
efforts to minimize any and all additional County Costs.
Deposit and Reimbursement Agreement Page 3 of 6
(c) If proceedings to form the Proposed District and/or issue the
Proposed Bonds are not completed and are abandoned for any reason at any
time, there will be no obligation on the part of the County to reimburse the
Proponent for any monies previously advanced pursuant to this Agreement. In
such event, the County, however, agrees to return to the Proponent such portion
of the remaining balance of the Deposit, without interest, as the County
determines to be in excess of the amount necessary to pay any outstanding
County Costs which the County is obligated to pay, which determination shall be
made as soon as reasonably practicable. If, for any reason, the remaining
balance of the Deposit is not sufficient to pay all outstanding County Costs, the
Proponent shall deposit such additional amounts as are required to pay all such
County Costs.
(d) It is hereby expressly acknowledged and agreed that this
Agreement is not a debt or liability of the County, and that the County shall not be
obligated to advance any of its funds for purposes of forming the Proposed
District or issuing the Proposed Bonds.
Section 6. Authority to Execute Agreement. The County and the
Proponent each represents that it has the authority to execute, deliver and
perform its obligations under the terms of this Agreement and that the
individual(s) signing this Agreement on its behalf have full right and authority to
bind said party to this Agreement.
Section 7. Designated Representatives; Notices. The following
individuals are hereby designated as representatives for the County and the
Proponent, respectively, to act as liaison between the parties:
County:
Director of Finance (or his/her designee)
County of Hawaii
25 Aupuni Street, Rm. 118
Hilo, Hawaii 96720
Proponent:
[Contact Person/Address]
Any written notice, statement, demand, consent, approval, authorization, offer,
designation, request or other communication to be given hereunder shall be
given to the party entitled thereto at its address set forth above, or at such other
address as such party may provide to the other party in writing from time to time.
Each such notice, statement, demand, consent, approval, authorization, offer,
designation, request or other communication hereunder shall be delivered to the
Deposit and Reimbursement Agreement Page 4 of 6
party to whom it is addressed (a) if personally served or delivered, upon delivery,
(b) if given by electronic communication, whether telex, telegram, electronic mail
or telecopy upon sender's receipt of an appropriate answerback or other written
acknowledgment, (c) if given by registered or certified mail, return receipt
requested, deposited with the United States mail postage prepaid, 72 hours after
such notice is deposited with the United States Mail, (d) if given by overnight
courier, with courier charges prepaid, 24 hours after delivery to said overnight
courier, or (e) if given by any other means, upon delivery at the address specified
in this Section.
Section 8. Jurisdiction and Venue. Each of the County and the
Proponent (a) agrees that any suit action or other legal proceeding arising out of
or relating to this Agreement shall be brought in state court in the County of
Hawaii, (b) consents to the jurisdiction of each such court in any suit, action or
proceeding, and (c) waives any objection that it may have to the laying of venue
or any suit action or proceeding in any of such courts and any claim that any
such suit, action or proceeding has been brought in an inconvenient forum.
Section 9. Amendments. This Agreement may be amended by an
instrument in writing executed and delivered by the parties hereto.
Section 10. Waivers. No waiver of, or consent with respect to, any
provision of this Agreement by a party hereto shall in any event be effective
unless the same shall be in writing and signed by such party, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
Section 11. Indemnification. The Proponent hereby indemnifies, and
agrees that it shall defend and hold harmless, the County and its officials,
employees, contractors and agents, from and against any and all actions, claims,
damages, losses or expenses of any kind whatsoever arising out of or relating to
any acts or omissions on the part of the Proponent or any of its officers,
employees, contractors or agents with respect to the Proposed District or the
Proposed Bonds.
Section 12. Governing Law. This Agreement has been executed in and
shall be governed by the laws of the State of Hawaii.
Section 13. Construction. The parties to this Agreement and their
counsel have reviewed and revised this Agreement, and the normal rule of
construction to the effect that any ambiguities in an agreement are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.
Section 14. Severability. If a provision of this Agreement is found to be
void, illegal or unenforceable, then any such provision shall be deemed stricken
Deposit and Reimbursement Agreement Page 5 of 6
and the remaining provisions hereof shall, nevertheless, remain in full force and
effect.
Section 15. Entire Agreement. This Agreement shall constitute the
entire Agreement between the parties. Any amounts to or clarification necessary
to this Agreement shall be in writing and acknowledged by all parties to the
Agreement.
Section 16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original, and all of which
together shall be considered one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date and year first above written.
COUNTY OF HAWAII
By:
Name:
Title:
[PROPONENT]
By:
Name:
Title:
Deposit and Reimbursement Agreement Page 6 of 6