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HomeMy WebLinkAboutCOM 1193.001 2006-2008 Q!,M Harry Kim cP, William Takaba Mayor ' Director • r• Nancy E. Crawford Deputy Director Count of Hawaii y Finance Department 25 Aupuni Street, Room 118 • Hilo, Hawaii 96720 (808) 961-8234 • Fax (808) 961-8248 cx~ 'W ~ April 29, 2008 c,~ ~,~.w. t ,..r ' i`~ The Honorable Pete Hoffmann, Chairman, and ~tl Members of the Hawai `i Count Council ° ~.'-:y ~ 4~ Y 333 Kilauea Avenue, Second Floor Hilo, HI 96720 RE: Communication 1193 and the associated Resolution 629-08 related to establishing a Community Facilities District, designated as Hawaii County Community Facilities District No. 2-2008 (Kamanu Street. Extension). Attached is a report from the Community Facilities District (CFD) Review Committee on the referenced Proposed CFD. I am forwarding this report, which recommends favorable consideration of formation of the District. The Department of Finance concurs with this recommendation. Should you have any questions please feel free to contact, Nancy Crawford at 961-8092. Sincerely, William Tak a Director of Finance Attachments def. Ti. Ref. ~~te Hawaii County is an equal opportunity provider and employer. ~t~ 0!~N Harry Kim ~ ~ • Dixie Kaetsu Mayor "tf • Managing Director r~• r~ of Coun of Hawaii 25 Aupuni Street Hilo, Hawai `i 96720 DATE: April 29, 2008 T0: William Takaba Dir for of Finance FROM: Roil akemoto, Executive Assistant 0 'ce of Management RE: Kamanu Street Extention Community Facilities District On April 28, 2008 the Community Facilities District Review Committee met to review information on the referenced Proposed Community Facilities District. The committee consisted of the following representatives: Roy Takemoto, Designee for the Managing Director Nancy Crawford, Designee forthe Director of Finance Bruce McClure, Director of Public Works Chris Yuen, Director of Planning Craig Masuda, Designee for the Corporation Counsel Information considered previously and at this meeting included the impact of the project and its public benefits, details of the construction project itself and the landowners, the total costs of the project as well as the cost of financing and creation of the District, and other relevant data. The attached report of the Review Committee is transmitted to you with a positive recommendation. ..M Hawaii County is an equal opportunity provider and employer. Communit Facilities District Review Committee Re ort Y p Date: April 28, 2008 Proposed District: Hawaii County Community Facilities District No. 2-2008 Kamanu Street Extension Petitioner: West Hawaii Business Park LLC -owner of 100% of land within the proposed District Project Summary: The Kamanu Street Community Facilities District CFD or Districts has been proposed as a means of financing the early completion of Kamanu Street extension from its currentterminus within Kaloko Light Industrial Park to the Honokohau Industrial Subdivision to the south. This will provide the County with an essential minor arterial road between Hina Lani Street and Kealakehe Parkway, relieving congestion on Queen Kaahumanu Highway and facilitating access to the business park areas. The County of Hawaii will administer the construction of the roadway based on plans and specifications prepared by the landowner in coordination with Department of Public Works staff. Construction will also include a portion of road outside of the CFD on property owned by TSA Corporation and some additional County improvements. The project will be funded with a combination of County funds, some of which will be reimbursed by TSA Corporation, and with proceeds from a CFD bond. The current estimated cost of the construction (including design, engineering and construction contingencies) subject to the CFD is $8,447,478,000. The road length is 3,862 linearfeet and includes water and sewer lines. Total bond issuance is currently estimated to be $12,370,000, which includes issuance costs, capitalized interest and a reserve fund. The bonds will have athirty-year term and the District will have aforty-year term to allow all applicable costs to be recovered. District Information: The property within the CFD is currently owned by a single landowner, West Hawaii Business Park, LLC. The area consists of approximately 300 acres, of which 215 acres would be subject to special taxation to retire the CFD debt issued to fund the construction project. It is anticipated that the property will be developed to approximately 100 fully improved lots that will be sold to individual buyers. The property to be developed in the District is zoned for either general industrial orindustrial-commercial mixed uses. Page 1 of 4 Due to the County's interest in expediting this project and the decision to have the County manage construction, this will be a construction CFD (the County would bid and award the construction project and progress payments would be made from bond proceeds) rather than the usual developer sponsored acquisition CFD (the developer bids and awards construction and provides progress payments with the CFD reimbursing the developerforcompleted CFD project improvements). Improvements to be Funded: The improvements to be funded for the proposed District will include a 60-foot roadway with curbs, gutters and sidewalks, and related facilities and improvements. Related improvements include retaining walls, a "ground bridge" over a portion of burial cave, sewer lines, water mains, drainage facilities, street lights, and overhead utilities. All of the improvements will be owned by the County, except for certain private utility lines. (See attached Petition) Initial CFD Committee Review: On December 3, 2007, the CFD Review Committee met to perform an initial review of CFD applications from West Hawaii Business Park, LLC and TSA Corporation, the two owners within the proposed District. They found the applications to be sufficiently complete and responsive to the requirements of Chapter 32. Based upon the information provided in those applications and by County staff, the Committee determined that there was sufficient public benefit and that the owners had sufficient financial capacity and ability to perform and to warrant going forward with the CFD process. The Finance Department was directed to form a financing team in cooperation with the petitioners and proceed to develop the Petition, Resolution of Intention, Rate and Method of Apportionment and related information and documentation for further review. Subsequent CFD Pre-Formation Activities: The financing team, consisting of County staff from a number of relevant departments, the property owners, their attorneys, the County's financial consultant, bond counsel, underwriters, special tax consultants, and other specialists was formed and commenced activities required as conditions precedent to commencing legal CFD formation proceedings. In the process of determining the financing costs, special tax structure and generally educating the landowners regarding CFD financing, TSA Corporation decided to withdraw from participation in the CFD and privately finance their segment of the roadway improvements. This left West Hawaii Business Park LLC as the sole owner of the CFD land and sole participant in the CFD. Chapter 32 requires that land and improvements within a CFD have a value of at least three times that of the debt to be incurred by the district in funding the improvements. This determination is to be made immediately prior to the sale of any CFD bonds. However, since this is a County sponsored improvement project Page 2 of 4 and because the West Hawaii Business Park is currently undeveloped there was concern whether that ratio could be achieved, therefore a preliminary appraisal was obtained. While the ratio may be achievable by the time bonds are issued, it is not currently sufficient, so there is the possibility that the CFD bonds maybe issued in two segments, with the second bond issue coming after additional on- site improvements increase the value of the land. The level of the annual special tax includes the financial capacity to permit this possibility. In addition, if the land value is not sufficient to support the amount of CFD bonds to fund the CFD improvement project and related CFD bond costs, the County will advance the shortfall from general obligation bond funds and be repaid by the CFD either in annual special tax revenues orfuture CFD bonds or both. This will allow the full construction of the project in a single contract, without any phasing. The current estimated shortfall, based on the appraiser's most recent estimate is $1,700,000. The owners and other members of the financing team continue to work to minimize or eliminate the shortfall prior to bond issuance. Due to the current volatility in marketing CFD bonds, a conservative interest rate of 8% was used in determining the maximum special tax required for meeting the CFD debt service. The annual tax burden for property tax and proposed special taxis projected to be 1.18% of assessed value. CFD Legislative Process: The steps required to form a CFD consist of Finance Committee review and Council consideration of a Resolution of Intention (ROI) to form a CFD. Subsequent to the approval of the ROI the Council will consider an Ordinance of Formation to form the CFD. Public hearing is waived in this case since the petitioner is the single owner of 100% of the land within the proposed District and County staff support the waiver. If the Council forms the CFD and bonds are anticipated to be sold, a Bond Ordinance will be introduced to authorize the issuance of CFD bonds. CFD Review Committee and Process The Administrative Guidelines for Evaluation of Proposed Communit Facilities Districts identifies the membership of the CFD Review Committee to include the following officials or their designees -the Managing Director, the Finance Director, the Planning Director, the Director of Public Works, and the Corporation Counsel. It also outlines the focus areas forthe Committee to consider in reviewing applicant and project information relevant to the proposed CFD. A Review Committee meeting was held for this purpose on April 28, 2008. Documents for Review: Petition for establishment of the District Resolution of Intention to form a CFD which includes the CFD boundary map, a brief description of the CFD improvements and the Rate and Method of Apportionment of Special Tax} Special Tax Analysis , Page 3 of 4 Administrative Guidelines -Review Findings: a. Confirm that the CFD Application is sufficientl~pl= -Previously confirmed that the application was complete at initial review meeting. b. Idd=y and evaluate the public benefits and funding priorities - Kamanu Street Extension project has public benefit as it is an essential minor arteriallconnectorrnad and is the sole primary CFD improvement project to be funded. c. Review of proposed forms of Petition and Resolution of I ntent -The Petition identifies the proposed District boundaries and the improvements to be funded through the CFD. Petitioner is the owner of 100% of the property within the proposed District and requests that public hearing be waived. Petition is signed by authorized representatives of the owner. The Resolution proposes a maximum special tax bond limit of$13,500,000 to finance the improvements identified therein, sets the term of the proposed District at 40 years, and allows for Special Taxes to be levied annually. d. Review of proposed rate and method of apportionment (RMA) -The RMA sets the Maximum Special Tax at $3,150 per acre for MG property and $1,830 per acre for MCX and Other property. The RMA defines and describes all terms and processes forthe annual determination of the Special Tax, the method of levy, collection and disbursement. It also identifies exempt properties and process for pre-payment. e. Review of relevant components of the proposed CFD for conformity to the Administrative Guidelines and identification of any potential difficulties that may be encountered at later stages of the CFD -All components of the reviewed documentation are in conformity with the Guidelines. The land within the proposed District is undeveloped and any barriers to development, such as lack of water or sewer availability would cause difficulties. The owners and other members of the financing team are currently addressing water and sewer issues to provide assurance that requirements will be met. Conclusion: Based on all accumulated information, the Review Committee has concluded that the project has significant public benefit and that the CFD would be a viable method for providing funding for the project. The Review Committee therefore, recommends supporting this district as it proceeds to County Council review. Page 4 of 4