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HomeMy WebLinkAboutRAS01-Economic Development Agency ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO SUBJECT: INDEMNITY AGREEMENT ON BEHALF OF THE SAN BERNARDINO MOBILEHOME PARK CORPORATION IN CONNECTION WITH THE REFINANCING OF THE SEQUOIA AND RANCHO MERIDIAN MOBILEHOME PARKS .------------------------------------------------------------------------------------------.--------------------- FROM: Gary Van Osdel Executive Director Onl~ I., ilL Hi\", " . r\ DATE: March 2, 2001 Svnoosis of Previous Commission/CounciVCommittee Action(s): Recommended Motion(s): (Community Develooment Commission) MOTION: RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO AUTHORIZING THE EXECUTION OF AN INDEMNITY AGREEMENT ON BEHALF OF THE SAN BERNARDINO MOBILEHOME PARK CORPORATION IN CONNECTION WITH THE REFINANCING OF THE SEQUOIA AND RANCHO MERIDIAN MOBILEHOME PARKS Contact Person(s): Gary Van Osdel Phone: 663-1044 Project Area(s) Ward(s): Supporting Data Attached: 0 Staff Report 0 Resolution(s) 0 Agreement(s)/Contract(s) 0 Map(s) 0 Letter/Memo FUNDING REQUIREMENTS Amount: $ Source: SIGNA TORE: Budget Authority: Commission/Council Notes: GVO:lag:03-05-01 Indemnity Agmt COMMISSION MEETING AGENDA Meeting Date: 03/05/2001 Agenda Item Number: R 1/ S , ECONOMIC DEVELOPMENT AGENCY STAFF REPORT Indemnitv Al!reement on Behalf of the San Bernardino Mobilehome Park Corporation in Connection with the Refinancinl! of the Seouoia and Rancho Meridian Mobilehome Parks Background In 1993, the EDA advanced funds to the mobilehome park conversion program in the amount of $4.5 million. The EDA then transferred ownership of the parks to the San Bernardino Mobilehome Park Corporation, a non-profit corporation (the "Non-Profit"), which was created by the EDA, and entered into a loan agreement (the "EDA Loan Agreement") for the balance owed to the EDA and unpaid at closing. On January 8, 2001, the EDA approved the restructuring of the EDA Loan Agreement in order for the Non-Profit to refinance the short-term financing on the Rancho Meridian and Sequoia Parks (the "Projects") on a long-term basis with FHA mortgage-backed securities. The restructuring is designed such that the EDA should be repaid approximately $3.0 Million of the $4.5 Million owed to the EDA as the remaining parks are refinanced. This is based upon current projections of the cash flows and debt service coverage on the parks. The Projects were assessed property taxes for the years 1998-99 and 1999-00, and despite the representations by certain County of San Bernardino staff that the property taxes were probably incorrectly assessed against the Parks, there is currently a lien on the Parks in the amount of approximately $213,131, representing taxes, interest and penalties. In the event that Orange Coast Title Company (the "Title Company") does not agree to enter into an indemnity agreement with the Non-Profit, in order to close the transaction as scheduled on March 14,2001, and payoff a portion of the short-term notes, it may be necessary for the EDA to assist the Non-Profit by entering into an indemnity agreement with the Title Company. The indemnity agreement (a form of which is attached hereto) would provide that the EDA agrees to indemnify the Title Company in the event that the property taxes are not extinguished in full and the Non-Profit fails to pay the property taxes. The Indemnity Agreement would be secured by the 2001 Loan Agreement, 2001 Note and 2001 Regulatory Agreement which were approved on January 8, 2001. Thus, in the event that the property taxes are not extinguished, the amount of the obligation under the 2001 Note and 2001 Loan Agreement would increase by the amount of the indemnity. GVOJag:03-05-0Ilndemnity Agmt COMMISSION MEETING AGENDA Meeting Date: 03/05/2001 Agenda Item Number: Economic Development Agency Staff Report Indemnity Agreement March 2, 2001 Page Number -2- Entering into the Indemnity Agreement would assist the Non-Profit in moving closer to meeting its obligation under the existing EDA Loan Agreement. In the event that the property taxes are not extinguished and remain as liens against the Projects, the EDA should, at least, be repaid approximately $2.8 Million instead of the $3.0 million currently projected. If the short-term notes are not refinanced at this time, the EDA runs a greater risk of not being repaid the $4.5 Million. It is believed that either the total amount of the property taxes or at least 50% thereof should be subject to an exemption from property taxes. Applications for exemptions for the Projects have been filed and are pending. RECOMMENDATION That the Community Development Commission adopt the attached Resolution. GVO:lag:03-05-01Indemnity Agmt COMMISSION MEETING AGENDA Meeting Date: 03/05/2001 Agenda Item Number: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO AUTHORIZING THE EXECUTION OF AN INDEMNITY AGREEMENT ON BEHALF OF THE SAN BERNARDINO MOBILEHOME PARK CORPORATION IN CONNECTION WITH THE REFINANCING OF THE SEQUOIA AND RANCHO MERIDIAN MOBILEHOME PARKS WHEREAS, the Community Development Commission of the City of San Bernardino (the "EDA"}is a public body corporate and politic duly organized and validly existing under the laws of the State of California and is authorized under the Community Redevelopment Law (Health and Safety Code Sections 33000, et. ~) to make loans and enter into agreements for redevelopment purposes; and WHEREAS, the EDA advanced funds in the amount of $4.5 million for due diligence review and preparation for the acquisition of certain mobilehome parks located with the City of San Bernardino; and WHEREAS, the EDA transferred ownership of the parks it purchased pursuant to the mobilehome park conversion program to the San Bernardino Mobilehome Park Corporation, a non-profit corporation (the "Non-Profit") which was created by the EDA and entered into a Loan Agreement (the "EDA Loan Agreement") for the amount owed and unpaid to the EDA at closing; and WHEREAS, on January 8, 2001, the EDA approved the restructuring of the EDA Loan Agreement in order for the Non-Profit to refinance the short-term financing on the Rancho Meridian and Sequoia Parks (the "Projects") on a long-term basis with FHA mortgage-backed securities; and 26 27 28 WHEREAS, the Projects were assessed property taxes for the years 1998-99 and 1999-00 and there is currently a lien on the Projects in the amount of approximately $213,131, representing taxes, interest and penalties; and 1 I WHEREAS, in the event that Orange Coast Title Company 2 (the "Title Company") does not agree to enter into an indemnity 3 agreement ("Indemnity Agreement") with the Non-Profit, in order to 4 close the transaction as scheduled on March 16, 2001, and payoff a 5 portion of the short-term notes, it may be necessary for the EDA to 6 assist the Non-Profit by entering into an indemnity agreement with 7 the Title Company (a form of which is attached hereto) which would S provide that the EDA agrees to indemnify Orange Coast Title Company 9 in the event that the property taxes are not extinguished in full 10 and the Non-Profit fails to pay the taxes; and 11 WHEREAS, the Indemnity Agreement would be secured by the 12 2001 Loan Agreement, 2001 Note and 2001 Regulatory Agreement which 13 were approved on January 8, 2001, thus, in the event that the 14 property taxes are not extinguished, the amount of the obligation 15 under the 2001 Note and 2001 Loan Agreement would increase by the 16 amount of the indemnity; and 17 WHEREAS, by entering into the Indemnity Agreement the IS EDA would assist the Non-Profit in moving closer to meeting its 19 obligation under the existing EDA Loan Agreement; and 20 WHEREAS, if the short term notes are not refinanced at this 21 time, the EDA runs a greater risk of not being repaid under the 22 $4.5 Million EDA Loan Agreement. 23 NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION OF 24 THE CITY OF SAN BERNARDINO, CALIFORNIA, ON BEHALF OF THE 25 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO DO HEREBY FIND, 26 RESOLVE, DETERMINE AND ORDER AS FOLLOWS: 27 Section 1. Recitals. The Recitals contained herein 28 are true and correct and are incorporated herein by this reference. 2 1 Section 2. Determinations: Aooroval. In the event 2 that either Orange Coast Title Company refuses to enter into an 3 indemnity agreement with the Non-Profit or HUD refuses to accept 4 an indemnity from the Non-Profit in order to close the long-term 5 bond transaction, the EDA shall execute the Indemnity Agreement 6 with Orange Coast Title Company in the form as attached hereto. The 7 EDA hereby approves the Indemnity Agreement, in an amount not to 8 exceed $215,000 with any amendments as may be approved by the 9 Executive Director which shall be required to meet the HUD and FHA 10 requirements under the financing transaction. The EDA finds and II determines that said Indemnity Agreement will result in significant 12 public benefits to the EDA and its residents by assisting in 13 maintaining low and moderate income housing within the City of San 14 Bernardino and structuring a financing plan which will allow 15 repayment of the EDA Loan. 16 Section 3. Securitv. The Indemnity Agreement shall be 17 secured by the 2001 Loan Agreement, 2001 Note and 2001 Regulatory 18 Agreement which were approved on January 8, 2001, which documents 19 shall include the amount of the indemnity in the event that the 20 property taxes are not extinguished. 21 Section 4. Official Action. The officers of the 22 EDA are hereby authorized and directed, jointly and severally, to 23 do any and all things and to execute and deliver any and all 24 documents which they deem necessary or advisable in order to carry 25 out, give effect to and comply with the terms and intent of this 26 Resolution and the financing transaction approved hereby. 27 Section 5 . Effective Date. This Resolution shall 28 take effect from and after the date of its passage and adoption. 3 1 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO AUTHORIZING THE 2 EXECUTION OF AN INDEMNITY AGREEMENT ON BEHALF OF THE SAN BERNARDINO MOBILEHOME PARK CORPORATION IN 3 CONNECTION WITH THE REFINANCING OF THE SEQUOIA AND RANCHO MERIDIAN MOBILEHOME PARKS 4 5 I HEREBY CERTIFY that the foregoing Resolution was duly 6 adopted by the Community Development Commission of the City of 7 San Bernardino at a meeting thereof, held on , 2001, by the following vote, to wit: 8 the 9 10 Commission ESTRADA 11 LIEN MCGINNIS 12 SCHNETZ SUAREZ 13 ANDERSON McCAMMACK 14 15 16 17 day of 18 19 20 day of AYES NAYS ABSTAIN ABSENT Secretary The foregoing Resolution is hereby approved this , 2001. Judith Valles, Chairperson Community Development Commission of the City of San Bernardino 21 22 By: 23 Agency 24 25 26 27 28 4 1 STATE OF CALIFORNIA COUNTY OF SAN BERNARDINO ss 2 CITY OF SAN BERNARDINO 3 I, Secretary of the Community Development Commission of the City of San Bernardino, DO HEREBY 4 CERTIFY that the foregoing and attached copy of Community Development Commission of the City of San Bernardino Resolution 5 No. is a full, true and correct copy of that now on file in this office. 6 IN WITNESS WHEREOF, I have hereunto set my hand and 7 affixed the official seal of the Community Development Commission of the City of San Bernardino this day of , 2000. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Secretary of the Community Development Commission of the City of San Bernardino ADD--- Boiler plate for EDA here 5 .MAIHJh~UUl lHU Ub:b4 YM Ul,;l lJUILllt.K:i :it.KVll.;t.:i ~flX NU. ~U~jlU~lj~ ____ TITU~ INSURANCECOMPANY ..~.... Indemnity No. Order No. Date SPECIAL INDEMNITY AGIWEMBNT TlUS INDEMNITY AORUEMfNT (hereinafter rcferrcU to as this "Agr.: e~ec\'ted this __' day of _, by _.. (heroinafter rcferred to as "INDEMNITOR") for the benefit of THE Al>O\' INSUI~ANC1i COMPANY. a corporation {hereinafter referred to as "COMPANY' 1. TIlls Agrcement covers any pan, parcel, or subdivi~ion of the rc: (bereilll\fter rcferred to a.~ the "Real Property") in the County of Stato of . described as follows: ---' 2. INDEMNITOR has requested the COMPANY to issue it.~ policy{~) of t:,: .._.' insuring all interest ill the Real Prope1'tY withollt taking exception to the following .. 3. INDEMNITOR (whether a.~ owner of, part owper of, or having ;In iL. Heal Property or in a corporation, p;mncrship, joint vClOtlIre or other entity whi<:h : of, part owner or, or bas an interc.\t ill the Real I)roperty, or othcrwhe) has an ;. issuance of, am! desires COMPANY from time to time to issue, policies of tllt.: Cnd()f~Cmel\l.~ thereof, covering the Real Property or lots or portions thereoi, ins..: < I,' whkh may he sUSl.ained by reason of tbe matters referred to in Paragraph 2> or v.l'" as to tl1c mailers referTed 10 in Paragraph 2. ......... 1 4-'21-95 . , . .' -~ ' .,." . .... .nAI{-U h:~UU I THU UO: 04 ~n Ul,;T llU 1 LVt:.I<~ ~t:.l{V ll,;t:.~ fAX NU. 9U!;jJIU~ 1 ~i:' 4. Nothing herein ~hall be conSlnJed as an obligation on lhe part of COMP MI' ....., any of the (lolicies or insurance mentioned in this Agreement. However, if COM!',' issue any such policics or insurance or l~sue hold harmless or indemnity letlers to in,' tide insurance companies to JUlie title insurance policics, \hen INDEMNITOR shai, !'.' 10 have concurrently &iven the assurances and nuu1c the agreement.s herein set rOt' benem of COMPANY. S_ In urder to induce COMPANY 10 is.~ue and in consideration of the j;:, COMI'ANY 01' :wch policies of title illSUl'anco and endorsements a.~ it may be willi!'>( INDHMNI'fOR promises and agrees to hold harmle.'I.~, ptotoct and indemnify COM:'. and againsl Rny and allliabUities, losses, damages, expenses, charges, and fees, i:;<' not limited tu attonlCYs' fees and C7\pcllSe$ of litigation, which it may sustain, umkr every policy or policies of title in.'lUTance ur endol'$Cment:l thereof which it may at any' re!iUlting directly or indirectly from the mattet'$ referred to in Paragrnph 2, lIJld to p:, eX(ll~nscs and aUomeys' ree.~ incurred in enforccment of this Agreement. .~..... . 6. It is understood and agreed that COMPANY may rely upon this Ag.reem'..... any (loliey, policies or cndorsc:rncnt~ covering all or any portion of the Real PrOl1e t. or not INDEMNITOR i~ the person ordering the same, regardless of any change ~:i of dlc titlc to the Real Property or any portion theteof or any change in \~, INDI!MNITOR's interest in the same; that Ulc issuance of any such policy Of endorsements in the manner desired by lNDBMNlTOR may cause COMPANY necessary or expedient for practical business reasons to issue other policies or <", covering the Real Property, without showing therein, as matters not insured agairo ..'.. referreu to in Paragraph 2; and therefore the obligations of INDEMNITOR herc\J~' be limiled \0 policies initially issued covering the Real Property or portions thw apply aJ~o 10 allY policy or policies of title insurance sub5Cquently issued COW.i l'ro(ICrty or poctions thereof; provided, however, that INDBMNITOR may, a\ al!Y .' wri\lC;ll notice to COMPANY uflNDBMNITOR's elcttion to e7\clude from the f\l\II".~ IIf this Agreement any of the Real Property upon which COM PAN Y has not i~~'.ICC endorsement in rcliallCe upon this Agreement. INDEMNITOR's election shaH b;: . lhe nfth (Sib) t>usine~s day following receipt by COMPANY of the above-ferm'" . 7. INDEMNITOR agrees that it is directly and primarily liable 10 COMP.: the obliRations of INDUMNrfOR hereunder are independent of the obligation;; lndemni\or or tbird party owing to COMPANY. If more than one person signs 'c.;" as INDEMNITOR, the obligation hereundcr shall be joint and seVllral. INDE~~ '. Ihal any release whieh may be given lly COMPANY to any olber indemnitor 01 ".. not I'cl<:ase INDliMNlTOR from the paym~t and performance of it~ obliga';. Agreement. As Ii condition to the Ilayment and performance by INDEMNITOR r i . under Ihi~ Agreement, COMPANY shall not be required to, and INDEMNlTO.t . any lmd all riglltS \0 require (;OMP AN Y 10 prosccute or seele tll enforce any Ie ~ny mhcr Indemnitor or tbird party, or wilb re.spec\ to any security in"" 2 4-21-9:; .;. '0" ~ .. ~_..;.,-_. flHK-Ul-lUUI IHU UO;OO rn UVI ~U1LVtK~ ~tKV1~t~ rHh NV. ~U~j/Ulljl tllcumhrances gfltl1lcd 10 COMPANY by any other indemnitor or third party. lNl)F~ _. also ilb'Tecs tbat ilS obligaUons under this Agreement shall not be impaired or affect.. modification, suppletnent, or amendment to any policy. policie:; or enllorsemCTIts issued ( the Real Property, nor by release or (lther altcration of any security pledged hy, indemnitor or third party, nor by any agreements or arrangements whatsoever wilh' indenlnitor or lhird plnty. 8. without afretting any of iN DliMNl'fOR's obligations owing to COMPt, this Atrcement. INDEMNITOR hereby agrees Ihat COMPANY may elect, in !'.; abSolute discretion, to retain legal counsel of its choice on behalf of COMPANY's j' conncction with any claims, disputes, demands, nr actions made or arising in com1~ . tho subject MaUer of this Indemnity or any policy or policies of title insurance or e",~ thereof issued covering tbe Real Property, and COMPANY may, in itll sole ar., discretion, seltle or compromise OIly sucb claim, dispute. demand or action on Stief! , In such a milnner as COMPANY cJeem.' appropriate. COMPANY is under no :it, accept INDEMNITOR's selection of counsel. At COMPANY's option it may,., Insureds that counsel recommended by INDEMNITOR be retained for the dc!!" InsllrellS, INDEMNITOR agrees to underwrite the fees, costs and expen5c~ associJ:.' dcrel\.~e afthe Insureds. Any coun.~el selected by tho INDeMNITOR to represent CU Insureds must be acceptable to the Insurccls and be independent counsel fTec of <!l'Y . interest. ,'_' '. 9. iNDEMNITOR is l,resently informed oUhe comlition and status of the ji;. and of all olber circumstances which a diligent inquiry would reveal and whidl h~ risk: of liability of INIJEMN1TOR undor this Agrecmenl. iNDEMNITOR hereby c\' it will continue to keep itself informed of tile condition aild status of \he Real propen: of olher imJenlnitol'li, if any, and of all other circumstances which bear upon the ris. of INIlEMNITOR under this Agreement. Absent a written reque~t for such ill!" INI>EMNITOR to COMPMIlY, INDEMNITOR hereby waives its right. il i1]I' COMPANY to disclose to it any information which COMPANY may now or he!':': conceming such condition or circumstances including, but not limited to, ;h~ r lev\lc<\lioll by any other indemnitor. 10. INJ)EMNITOR hereby waive:; any defen.~c arising by reason of any el:; hased upon an elcclion of remedies hy COMPANY, which, in any manner if!' reduces, releases. ~'~'troys and/or extinguishes INDEMNITOR's sub(\>~/ reimbursement lighlS, and/or any other rights of INDHMNlTOR to proceed agr<' inucmnitur or against lIny other third party or security. iNDEMNITOR waives all :" dcmall~l~ for performance, notices of non.perfonnance, protesl~, notices of [In)":.' dishonllr, notices of default, notice of acceptante of this Agreement, and notices Clf creation. or issu:mce \If any new or additional policy or policies of title ill'" elldorSl'ments thereof, regarding the Real Property. and all olher nOlices or forr:', INDEMNITOR may he entitled. ,...... J 4-Z 1.95 . ~ _.....L.. .nAI(-Ul-(UUlIHU Uo:ob YM Ul,;1 tlUILU\:t<::; ::;\:t<Vll;\:::i I'AX NU. \jU\jJ IU(13" '---. II. This Agreement shall be binding upon the successor~ and assigns of IN DE;,: snd ~hall inure to the benefit ofCOMPANY's liUCcossors and assigns. The death, the 111C the lack of authority, the disability. and/or lhe di~solution of INDEMNITOR or ~'" indemnilor shall not terminate or othenvise impair COMPANY's righ~ under thi~ I,,:" 12. IN1>EMNITOK agrees that this agreement is not. intended to give any'. rigbtll, privileges. uct.lons, or remedics to any person. parlllership, firm, or corporation co. COMP^NY and INDEMNITOR Ullder any theory of law. 13. INDJ.!MNll'OR ^CKNOWLEDGl:!S THA'r HE/IT IS EXhCUTtl" AGRf!nMI1NT BI!CAUSB Of THE B6NBFITS f)11WGT1.Y OR INDIRliCIL Y AC- TO HE/IT BY REASON Of 'CHI! lSSU^NC1~ O~ THE SAID POLlCIES. In witness wbereof the undersigned INDEMNITOR has executed this Agref'. .___ day of____ "INDE.MNITOR. .' , >. By: ;....... 4 4-21-95 ..;.. ...... . .....,...:..:-- --.~.."'-' INTER OFFICE MEMORANDUM OFFICE OF THE CITY ATTORNEY CITY OF SAN BERNARDINO TO: Judith Valles, Chairperson Community Development Commission Members FROM: James F. Penman City Attorney DATE: March 2, 200 I RE: Indemnity Agreement on Behalf of the San Bernardino Mobilehome Park Corporation in Connection with the Refinancing of the Sequoia and Rancho Meridian Mobilehome Parks (3/5/01 Agenda Item #RASl) COPIES: Gary Van Osdel, Executive Director Attached is a copy of Mr. Carlyle's memorandum to me concerning the above-indicated agenda item which is scheduled to be considered at the March 5, 2001 Commission meeting. In view of the fact that the issue of unpaid property taxes on some of the mobilehome parks has now apparently arisen not once, but twice, in the last couple of years, I strongly recommend that should we consider any future transactions or arrangements on our mobilehome parks that require "clear title," we obtain a preliminary title report as soon as possible (and much earlier in the process) so as to preserve as many options as possible in addressing this issue. J MES F. PENMAN ity Attorney attachment 3/S/01 -# ;fI4S I CITY OF SAN BERNARDINO INTEROFFICE MEMORANDUM TO: FROM: DATE: March 2, 200 I RE: Indemnity Agreement on Behalf of the San Bernardino Mobilehome Park Corporation in Connection with the Refinancing of the Sequoia and Rancho Meridian Mobilehome Parks (3/5/01 Agenda Item #RAS1) The above-referenced agenda item was received in our office this morning at 10:50 a.m. According to David Gondek of the law firm of Lewis, D' Amato, Brisbois and Bisgaard, the common areas of the Sequoia and Rancho Meridian Mobilehome Parks have been assessed property taxes for the years 1998-99 and 1999-00 and are now delinquent. The staff report attached as backup indicates an amount now due and owing of "approximately $213,131, representing taxes, interest and penalties." The staff report further indicates that the first option is to have the San Bernardino Mobilehome Park Corporation ("Corporation") enter into an indemnity agreement (for the payment of the back taxes owed) with the Orange Coast title Company ("Title Company"). However, if the Title Company will not do this because of the amount which is owed, this agenda item is proposed which would have the Economic Development Agency (EDA) become a guarantor to the Title Company of that amount owed in case the Corporation could not get the back taxes forgiven, reduced and paid off or paid off in full (both of the latter options being paid by the Corporation). In the event that there is an amount due and owing despite the Corporation's efforts, the EDA would have to pay to the Company the amount outslancling, up to the approximate $213,131 (assuming this is the correct amount and another tax year is not making its way onto the rolls). Mr. Gondek further advised me that a couple of years ago, this issue arose in the context of a mobilehome park and that the Title Company agreed to the indemnity by the Corporation only; however the amount of money involved was considerably less than $200,000. This current problem was just discovered last week; however, if it similarly occurred a couple of years ago, a preliminary title report on these two mobilehome parks should have been obtained much sooner so that the Community Development Commission would not find itself being squeezed by this Catch-22 choice.