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REDEVELOPMENT AGENCY AGENDA ITEM NO. 33

Meeting Date: September 12, 2006

Subject/Title: Adopt a Resolution authorizing the Agency Treasurer to appropriate funds from the Redevelopment Agency of the City of Brentwood Tax Allocation Bonds, Series 2001, to fund a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for the northern phase of Lone Oak Road Utility Improvements in the amount of $1,643,000.

Prepared by: Gina Rozenski, Redevelopment Manager

Submitted by: Howard Sword, Deputy Director

RECOMMENDATION
Adopt a Resolution authorizing the Agency Treasurer to appropriate funds from the Redevelopment Agency of the City of Brentwood Tax Allocation Bonds, Series 2001, to fund a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for the northern phase of Lone Oak Road Utility Improvements in the amount of $1,643,000.

PREVIOUS ACTION
On February 28, 2006, by Resolution RDA-107, the Agency authorized the Agency Treasurer to appropriate funds from the Redevelopment Agency of the City of Brentwood Tax Allocation Bonds, Series 2001, to fund a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for the southern phase of Lone Oak Road Utility Improvements in the amount of $642,000.

On April 11, 2006, the Redevelopment Agency approved its annual project priorities to be funded by its 2001 Tax Allocation Bond Proceeds with deliberate coordination with the City’s Capital Improvement Program. The Agency’s approved project priorities included the Lone Oak Utility Improvements in the amount of $2,285,000.

On May 23, 2006, by Resolution No. 2006-126, the City Council adopted the City’s 2006/07– 2010/11 Capital Improvement Program that included the Lone Oak Utility Improvements in the amount of $2,285,000. This project is entirely funded by the Brentwood Redevelopment Agency.

On June 27, 2006, by Resolution RDA-112, the Redevelopment Agency amended its two-year operating budget, which included a budget amount of $2,285,000 for the Lone Oak Utility Improvements, southern and northern phases.

As a companion item on tonight’s City Council agenda, the City Council shall consider the approval of a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision 8788 (Lennar Homes), for costs associated with northern phase only of the Lone Oak Utility Improvements in the amount of $1,643,000.

BACKGROUND
The homes along Lone Oak Road, Lone Oak Court, Gracie Lane and Saddle Creek Court are currently using well and septic systems. This area has high water tables and winter weather causes problems for already overtaxed well and septic systems. Subdivision 8788 (Lennar Homes) was conditioned to construct certain off-site water and sewer improvements on Lone Oak Road, Lone Oak Court, Saddle Creek Court and Gracie Lane. The condition provides for improvements to be constructed in two phases, and for the City to reimburse the developer within 30 days after completion of each phase of work.

The installation of the southern phase of the improvements is complete, and the reimbursement of $642,000 to Lennar Homes was approved by both the Council and Agency in February 2006.

The water and sewer laterals for the northern phase was postponed due to complexities and costs involved with installing these facilities during the winter months. The construction of the northern phase of the improvements will commence by the end of July 2006. It is critical to proceed with this work and complete the northern improvements before winter, or the project will most likely incur construction delays and increase the total project costs.

It is staff’s recommendation that a portion of the Redevelopment Agency’s costs to construct the north and south Lone Oak improvements be recovered. The best mechanism for reimbursement is the formation of a benefit district. By establishing a benefit district, any future subdivision of the adjacent 48 parcels that would benefit from the installed water and sewer improvements will be required to pay their fair share of the costs. The level of recovered costs is uncertain at this time, and should not be considered a guarantee of 100% recovery. At its meeting in February 2006, the Council approved a resolution directing staff to proceed with the formation of a benefit district for both the north and south improvements. Once the Reimbursement Agreement between the Council and Lennar Homes is approved for the northern phase, the total cost for both north and south improvements will be determined and staff can begin the formation of a benefit district in an attempt to recover as much cost paid by the Redevelopment Agency as possible. The City Council is not being asked to form a benefit district this evening. Formation of a district can only occur after a noticed public hearing.

When the Capital Improvement Program and the Agency’s operational budget that included Lone Oak Road Utility Improvements were approved in 2005, the Council and Agency members believed that a benefit district would be established among both the existing and future homeowners to recover the Agency’s costs to fund this project. However, during the ongoing discussions with the homeowners in the Lone Oak Road area regarding the adjacent S&S Farms development, there were no discussions about existing homeowners sharing a portion of the cost of water and sewer improvements except for connection fees. Consequently, the existing property owners will pay into the proposed benefit district only if and when they subdivide their properties in the future.

Currently, a written policy does not exist for the Council and Agency to use in its evaluation to fund public improvements in existing developments and subdivisions. In situations where Agency funds are the identified funding source, a measurement of benefit is analyzed prior to making a funding commitment, findings are made that the project meets the Agency’s investment strategies, or a recovery of the costs is identified. In this case, the formation of a benefit district paid by the existing homeowners as a method to recover the Agency costs was not pursued as intended by the Council and Agency. The funding of the Lone Oak Utility Improvements should not be construed as setting precedent for funding by the Agency or the City of future public improvements in existing developments or subdivisions. Analysis of the appropriateness of the City and Agency’s financial participation in projects and programs has been, and will continue to be, an examination of benefit districts, fair share payments, economies of benefit, return of tax increment, funding priorities, investment strategies and necessary findings and criteria for consideration by the City and Agency prior to making funding commitments to projects. A formal, written policy establishing the guidelines for analyzing the appropriateness of the City and Agency’s financial participation in projects and programs is being drafted and will be brought to the Council and Agency Board for consideration and approval at a later date.

Staff requests the Redevelopment Agency adopt a resolution authorizing the Agency Treasurer to appropriate funds from the Redevelopment Agency of the City of Brentwood Tax Allocation Bonds, Series 2001, to fund the Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for the northern phase of Lone Oak Road Utility Improvements in the amount of $1,643,000.

FISCAL IMPACT
The reimbursement for the northern phase of the Lone Oak Road Utility Improvements of $1,643,000 to Brentwood Sand Creek Partners, LLC, Subdivision 8788, shall be funded entirely by the Redevelopment Agency’s Tax Allocation Bonds, Series 2001. There is no impact on the City’s General Fund.

Funds may be recouped by the future formation of a benefit district. The level of estimated cost recovery is uncertain at this time and should not be considered a guarantee of 100% recovery.

Attachment:
Resolution

RESOLUTION NO. RDA-

A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF BRENTWOOD AUTHORIZING THE AGENCY TREASURER TO APPROPRIATE FUNDS FROM THE REDEVELOPMENT AGENCY OF THE CITY OF BRENTWOOD TAX ALLOCATION BONDS, SERIES 2001, TO FUND A REIMBURSEMENT AGREEMENT WITH BRENTWOOD SAND CREEK PARTNERS, LLC, SUBDIVISION 8788, FOR THE NORTHERN PHASE OF LONE OAK ROAD UTILITY IMPROVEMENTS IN THE AMOUNT OF $1,643,000

WHEREAS, on March 2, 2004, the Planning Commission of the City of Brentwood adopted Planning Commission Resolution No. 04-10, approving Vesting Tentative Subdivision Map (VSTM) No. 8788, with conditions to construct certain off-site water and sewer improvements on Lone Oak Road, Lone Oak Court, Saddle Creek Court and Gracie Lane (“Lone Oak Road Utility Improvements”), located in the North Brentwood Redevelopment Project Area (“Project Area”). The condition provides for improvements to be constructed in two phases, and for the City to reimburse the developer within 30 days after completion of each phase of work; and

WHEREAS, on May 23, 2006, by Resolution No. 2006-126, City Council adopted the City’s 2006/07 – 2010/11 Capital Improvement Program (CIP), which included the Lone Oak Road Utility Improvements; and

WHEREAS, on April 11, 2006, the Redevelopment Agency of the City of Brentwood (“Agency”) approved its annual project priorities to be funded by its 2001 Tax Allocation Bond Proceeds (“Bonds”) with deliberate coordination with the City’s Capital Improvement Program. The Agency’s approved project priorities included the Lone Oak Road Utility Improvements; and

WHEREAS, on June 27, 2006, by Resolution RDA-112, the Agency amended its 2005/06 – 2006/07 two-year operating budget, which included a budgeted amount of $2,285,000 for the Lone Oak Road Utility Improvements; and

WHEREAS, the existing homes along Lone Oak Road, Lone Oak Court, Saddle Creek Court and Gracie Lane are currently using well and septic systems. This area has high water tables and winter weather causes problems for already overtaxed well and septic systems; and

WHREAS, the 48 homes along Lone Oak Road, Lone Oak Court, Saddle Creek Court and Gracie Lane to be serviced by the southern and northern phases of Lone Oak Road Utility Improvements are within the Project Area; and

WHEREAS, on September 12, 2006, Council adopted Resolution No. ________ approving a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for the northern phase of Lone Oak Road Utility Improvements in an amount of $1,643,000.

NOW, THEREFORE BE IT RESOLVED by the Redevelopment Agency of the City of Brentwood as follows:

1. The Agency hereby finds and determines as follows:

a. The payment of funds for the Lone Oak Road Utility Improvements will assist in the elimination of blighting conditions inside the Project Area by providing necessary public improvements.

b. The Lone Oak Road Utility Improvements are consistent with the identified goals and objectives in the 2005-2009 Implementation Plan as follows:

Revitalize the Merged Project Areas through the improvement and installation of public improvements and improve public safety.

c. The north and south phases of the Lone Oak Road Utility Improvements will be a minor benefit to the Project Area. This finding is based on the fact that while the Lone Oak Road Utility Improvements are located within the Project Area, the Improvements serve a limited number of households and the economies of benefit are minimal.

d. The City of Brentwood desires to establish a benefit district on the future development of 48 parcels that will benefit from the Lone Oak Road Utility Improvements and which can reasonably be expected to be subdivided due to their sizes. Further, the City of Brentwood will collect fair share payments from residential developers that require the northern phase of the Lone Oak Road Utility Improvements to serve their “downstream” developments. There are no other reasonable means of financing the up-front costs for the Lone Oak Road Utility Improvements. This finding is based on the lack of sufficient funds in the capital improvement budget of the City to fund the Lone Oak Road Utility Improvements together with other urgently needed public improvements and facilities. Future payments made into the benefit district and made from fair share payments will provide a partial recovery of the Redevelopment Agency’s financial contribution, although the amount of recovered costs are uncertain at this time and should not be considered a guarantee.

2. The Agency does hereby authorize the Agency Treasurer to appropriate funds from the Redevelopment Agency of the City of Brentwood Tax Allocation Bonds, Series 2001, to fund the northern phase of Lone Oak Utility Improvements in North Brentwood Redevelopment Project Area in the amount of $1,643,000.

PASSED, APPROVED AND ADOPTED by the Redevelopment Agency of the City of Brentwood at a regular meeting held on the 12th day of September 2006 by the following vote:

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