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HomeMy WebLinkAboutMINUTES - 06242014 - C.103RECOMMENDATION(S): APPROVE and AUTHORIZE the County Administrator, or designee to execute the Amended and Restated Subordination Agreement, dated as of June 24, 2014, with the Successor Agency to the Hercules Redevelopment Agency, in connection with the Amended Settlement Agreement between the Successor Agency to the Hercules Redevelopment Agency and its bond insurer, Ambac Assurance Corporation. FISCAL IMPACT: No immediate fiscal impact. Through the Amended and Restated Subordination Agreement ("Agreement"), the County agrees to subordinate its rights to receive tax increment revenue payments under the existing Pass-Through Agreement (“PTP Payments”) and will not be eligible to receive PTP Payments until a $94 million tax increment cap identified in the Agreement has been met, which is expected to occur in fiscal year 2016/17. This will allow the Agency to apply those payments to its Bonds (and any refunding obligations hereafter issued to refund all or any portion of the Bonds) to the extent that other pledged revenues are insufficient to pay amounts payable. The following with respect to the Bonds, pursuant to the following schedule: a) APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 06/24/2014 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYES 5 NOES ____ ABSENT ____ ABSTAIN ____ RECUSE ____ Contact: Lisa Driscoll, County Finance Director (925) 335-1023 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: June 24, 2014 David J. Twa, County Administrator and Clerk of the Board of Supervisors By: Chris Heck, Deputy cc: Eric Gelston, Deputy County Counsel, Timothy Ewell, Senior Deputy County Administrator, John Knox, Orrick Herrington & Sutcliffe, David L. Dubrow, Arent Fox LLP, Patrick Tang, Jarvis Fay Doporto & Gibson LLP, Lynn Hutchins, Goldfarb Lipman LLP C.103 To:Board of Supervisors From:David Twa, County Administrator Date:June 24, 2014 Contra Costa County Subject:Successor Agency to the Hercules Redevelopemnt Agency - Amended and Restated Subordination Agreement FISCAL IMPACT: (CONT'D) For fiscal years 2015-16 through 2020-21, 66.6% of the PTP Payments shall be subordinate to the Bonds, and 33.4% of the PTP Payments shall not be subordinate to the Bonds and will be paid to the County by the County Auditor-Controller before amounts from the Redevelopment Property Tax Trust Fund established for the Agency pursuant to the Dissolution Act (the “RPTTF”) are transferred to the Successor Agency; b) For fiscal years 2021-22 through 2029-30, 50% of the PTP Payments shall be subordinate to the Bonds, and 50% of the PTP Payments shall not be subordinate to the Bonds and will be paid to the County by the County Auditor-Controller before amounts from the RPTTF are transferred to the Successor Agency; and c) For fiscal years 2030-31 and thereafter, 0% of the PTP Payments shall be subordinate to the Bonds, and 100% of the PTP Payments shall not be subordinate to the Bonds and will be paid to the the County by the County Auditor-Controller before amounts from the RPTTF are transferred to the Successor Agency. BACKGROUND: The Hercules Redevelopment Agency (the “Former Agency”) was dissolved pursuant to Part 1.85 of Division 24 of the California Health and Safety Code (the “Dissolution Act”) and was superceded by the Agency, and the Agency assumed all liabilities and obligations of the Former Agency, other than the housing functions, assets, liabilities and obligations of the Former Agency. The Former Agency and the County entered into an agreement, dated as of November 23, 1983, as amended on June 5, 2001 (the “Pass-Through Agreement”), providing, among other matters, for the allocation and payment of certain tax increment revenues from the Former Agency’s Dynamite Redevelopment Project Area to the County. On June 1, 2005, the Former Agency and the County entered into a Subordination Agreement (the “Original Subordination Agreement”) pursuant to which the County agreed to subordinate its rights to receive tax increment revenue payments under the Pass-Through Agreement, in order for the Former Agency to be able to pledge such tax increment revenue to such long-term bonded indebtedness. The Former Agency issued its Hercules Merged Area Tax Allocation Bonds, Series 2005 in the amount of $56,260,000 (the “2005 Bonds”) and pursuant to the Original Subordination Agreement, the County’s payments under the Pass-Through Agreement were subordinated to payments due under the 2005 Bonds. The Former Agency subsequently issued is Hercules Merged Area Tax Allocation Bonds, Series 2007 (the “2007 Bonds” and, together with the 2005 Bonds, the “Bonds”) on parity with the 2005 Bonds; however no amendment of the Original Subordination Agreement was entered into in connection with the 2007 Bonds The 2007 Bonds and the 2005 Bonds were each insured by a municipal bond insurance policy ( the “Policies”) issued by Ambac Assurance Corporation (“Ambac”). Due to significant and persistent declines in assessed value within the Hercules Merged Project Area, the Bonds are now in default, and Ambac has made payments pursuant to the Policies to bondholders as a result of the default. Pursuant to the Indenture, dated as of August 1, 2005, by and between the Former Agency and The Bank of New York Trust Company N.A., as supplemented and amended (the “Indenture”), Ambac has the right to declare all of the principal and interest due on the Bonds to be accelerated.The Agency and Ambac are parties to litigation in the Contra Costa County Superior Court in connection with the default on the Bonds (Case No.: CIVMSN 12-0182) and have agreed to settle such litigation pursuant to that certain Amended Settlement Agreement, which requires as one of the conditions precedent to its effectiveness, among other conditions, that the Agency enter into this Amended and Restated Subordination Agreement. The Settlement Agreement has been duly approved by the court and the court has directed the Agency to enter into this Amended and Restated Settlement Agreement. CONSEQUENCE OF NEGATIVE ACTION: The Amended and Restated Subordination Agreement will not be executed and the Successor Agency to the Hercules Redevelopment Agency will not be able to execute the Amended Settlement Agreement with Ambac Assurance Corporation. CHILDREN'S IMPACT STATEMENT: No impact. ATTACHMENTS Draft Amended and Restated Subordination Agreement