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HomeMy WebLinkAboutORDINANCE 1180-1986Suggested byt Administration CITY OF KENAI ORDINANCE NO. 1110-86 AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAIt ALASKAt AMENDING TITLE 16 OF THE KENAI MUNICIPAL CODE BY ADDING A NEW SECTION PROVIDING FOR SUPPLEMENTAL ASSESSMENTS FOR SPECIAL ASSESSMENT DISTRICTS. WHEREAS, KMC 16.10.080 states that the City Manager shell prepare an assessment roll after the costs of improvements are computed; and, WHEREAS9 it is possible that the City Manager may believe that all costs are known and may prepare an assessment roll, but be unaware that additional coots msy be incurred due to claims arising from construction or other reasons; end, WHEREAS, the Kenai Municipal Code should provide for a method of supplemental assessments egoinet benefited properties so that all taxpayers will not be burdened with the additional cost. NOW9 THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, that KMC 16.10 be amended by adding a new Section 16.10.1800 as follows: 16.10.180 Supglemental Aegessmentes (a) If additional costs are incurred a are chaVgeSDIO to an assessment district after the initial assessment roll has been approved by the City Council# the City Manager may prepare and file with the City Clerk a supplemental assessment roll. (b) Procedure for notice and public hearing for a supplemental assessment must conform to that utilized for the Initial assessment. (c) Billings and payments on a supplemental assessment shall be kept so state from the initial assessmentSupplemental assessments may have payment terms and due dates different from the initial assessment. 1 C - -- ; - -- - Qa k;r win ,yi 1/ M- M M Nand City Council 7=8 Ch rles A. BrOMne Finance Director e44 - - VAIRS Decslber ZZ. 1906 o BUBO $ Ordinance 91180-NO Buppiesrntel Assesnisnts -. - -�. The purpose of this ordinance is to provide a method of making supple- mental assessments when additional costs are incurred after the initial assessment roll is approved. The City administration may or may not be aware of the potential additional costs. For instance, the contractor could make a claim of some sort after we have closed out the job and finalized the assessment roll. If this happens, who should pay those costs? Assuming we can't charge the costa to a third party, you only have two choices: the s people who own property in the assessment district or the general :. taxpayers. However, what prompted this ordinance is the situation where the City has some knowledge of a potential claim. Let's assume that all costa _,....G.' that we know about are paid, but the contractor is talking about a claim against the City. Let me propose a set of premises to clearly show the m. dilemma. Total costs known $2,000,000 $ to be assessed 100$I, Interest rate 20t Number of lots served 200 Amount of suspected claim $100,000 Estimated period to resolve claim 2 years Without an ordinance similar to #1180, a decision has to be made about when to close the assessment district. It's an important decision, because we can only approve one assessment roll. Let's assume two possibilities: ;. close Now: In this case the $2,000,000 is divided between the 200 lots, and each lot is assessed $10,000. If we lose the litigation over the claim (if in fact there ever really is a claim), then the taxpayers pay the $100, 000 . - : _fir . ...... Closa Later: In this case, we leave the assessment district open for - - two years while we litigate the claim. Two years of additional interest is $400,000. So, each lot will be assessed two yeare later at $22,000 (2,400,000/200). This is true if we win the case and no - additional amounts are paid. If we lose and pay another $100,000. each lot will be assessed $12,500. If this ordinance passes, the City can make an informed decision -- --=---==-= concerning when to close the district. Using the above example, we could close the district now and charge each property owner $10,000. If e T we lose the case, we charge each property owner (not taxpayer) an additional $500 (100,000/200). IF we win the case, we charge now=6 additional costs. j Isn't this better than our options above without this ordinance? I believe that without an ordinance similar to this one, the City would be very reluctant to close out an assessment Q administration district if claims are suspected. This would clearly be a dieadvantage :t to the property owners in the district. Their assessments could be substantially higher, even if we incur no additional costs. one further comllent is needed. one Councilmember said that the City shouldn't be making supplemental assessments just because the administration made a math error on the initial roll. The first sentence of the new code section to be added by the ordinance says "IF I„■,,,�, additional costs are incurred . . . ." It's pretty clear that this sets out one, and only one, situation permitting a supplemental assessment (a :•,: math error on the first roll is not it). = _ v 1 Tot Kenai City OMMOLL 7=9 Marls! A. 9Yawn, Fiance Dir"tor Cq4 DA'Rt FdM=y 6, 1W7 8083=1 Ordinance lie. 1160-86, Assessments Today, I received a response from AHFC regarding my inquiry of January 9, 1987. Copies of the response and my letter are enclosed for your review. AHFC says that, if Ordinance No. 1180.86 is adopted, they will continue to loan money in Kenai. They go on to say that they will require an escrow of 150% of the pending assessments to cover any potential cost overruns. AHFC does not understand the ordinance or my question (I've talked to them three times on the phone). The ordinance deals with supplemental assessments, not cost overruns. The examples given from Anchorage, Fairbanks, and Juneau all deal with cost overruns between pending assessment and the final assessment. This may be valuable information, but it has nothing to do with the question. we're talking about supplemental assessments after the initial roll has been approved. If I follow AHFC'a philosophy, they should have been requiring an escrow of 150% all along since we have no cap on the initial assees- ment roll (as a percentage of the preliminary or pending roll). By now, I'd imagine Council is thoroughly confused. I suggest, in order to make AHFC happy (although it's clear they don't understand why they're unhappy), Council amend section 16.10.180 of the ordinance by adding paragraph (e) to reads "The sum of all supplemental assessments in any one aesessment district may not exceed 20% of the initial approved assessment roll." This 20% cap should allow the flexibility the Administration desires. „u 1 . •. . (7 HOU81N0 FINANCE CORPORATION February 4p 1987 Mr. Charles A. Brown Finance Director City of Kenai 210 Fidelgo Kensi, AK 9%11 Res Supplemental Assessments Deer Mr. Browns In answer to your letter of 3enuary 99 19879 Alaska Housing Finance Corpo- ration would like to go into some detail surrounding this type of assessment. AWC guidelines require any pending or levied assessment to be paid in full at time of closing, or the lender must evidence that sufficient funds have been held in escrow to pay the assessment when it is levied. (Seller/Servicer Guide - enclosed). Areas throughout the state have different ways in handling cost overruns on aseeasments. Anchorages In Anchorage the maximum amount that a lend owner would be required to pay is 10% over the amount disclosed as a pending assessment. The lender involved in the trans- action would than escrow 110% to cover the additional expenee, if required. Fairbankes Fairbanks also uses the same 10% allowance for overruns. 3unesus In 3uneau the allowable overrun is 201. Mith this process, AHFC is able to approve loans knowing that a prior lien will not appear at some future dates. The open-end supplemental assessment that has been proposed by the City of Kenai would not offer this protection for lenderse investores or the home- owner. I he oposed ordineWs is a0prove, AHFC would continue to avant _ F-- waver at a minimum, a homeowner Would 0a requs�o escrow of the proposed assessment to provide a sufficient cushion on cost over- runs. In some cases this could be very expensive and real estate transactions may be affected as borrowers or sellers would not have these additional funds to escrow. 238 Ent Bth Avenue P.O.60c 101M Tdophons (W) 0"50 Th{rd Flo AnahonpM, A 109610 r-- Nr. Charles A. Brown February 4, 1987 Page Z I hope this letter answers your question concerning the proposed ordinance. Please contact me if I can be of further assistance. S cerely Nona beady Senior Loan 0 r su Enclosure - 7.6 - Section 7001 Incomplete lease in Rsossa of 1 000. An •$crow sufficient to complete the wor t tines e astigats for completion) suet be established with the Seller/Servicer assuming responsibility for oowpletGon *Wain a reasonable period of time. The Escrow Agreement gust specify that the funds will not be disbursed until the work is completed in a satisfactory workmanlike urnner as determined by the inspecting appraiser and/or an agployae of the Seller/Servicer. It the cost to finish the incom- V s. inaos�let�_2tess Less than 1 000. pieta items is Less than VASUM the Seller/Servicer way choose to . provide AarC with a Seiler/Servicer indemnification (Aare Form 4" •Fab-Sl) in lieu of an escrow agreement. The Seiler/Servicer must be able to monitor the progress of the work and agree to provide AHPC with a notice of completion of the work within a reasonable period of time. Both the Escrow Agreement and the Indemnification gust specifically address the incomplete items, the estimated cost to complete, and the period of time in shicb the work most be completed (no longer than one year from date of closing). The Seller/Servicse say be required to repurchase the loan '; v should the work remain incomplete at the end of the one year period. ;,`•' .04 Title Requirements Each mortgage purchased must meet the following criteria: !c } A. Constitute a first lien (or second lien for loans submitted under the r :1 second program), subject only to permitted encumbrances, on real estate in fee simple or on an acceptable leasehold estate. 4� B. Be insured by an ALTA mortgagee's policy of title imsureace issued by a tit42 Insurance company qualified to do business in Alaska and the Corporation, insuring the Corporation that the acceptable to mortgree on the premisee is a valid and enforceable first mortgage (or " -- second wortgage for lose submitted under the Second Program), subject 7, only to permitted encumbrances. C. Special assessments must be paid -in -full. in instances whsre assets• msmte are pending but not yet levied, the amount to be "•$seed shall be deposited in aarow with the seller/Servicer or title company. Brost .the purchaser is establishing $aid escrow, the Sailer/Servicer provide a letter of awsreness to the purchaser which clarifies the the Agreement to purchase plus the total sale price [amount shown on Qa amount of the assessment). n. Legal access to a public road/Street must be recorded for each loan ur_%.weaby ANFC. it it is necessary to arose other property to reach a public road/street, copies of recorded access agreements muae ,;r : -';. _ _ be obtained by the Seller/Servicer and reviewed to molars that all future ownere, their heirs and aseigas, have unlimited and unre- ; A. stricted use of the road or driveway. �� � , '��h!•. '�� . ` �' � 1. � - �• �... •� - _ .. _ -. .. . . 0 CITY OF KENAI „od Oapdod ej A"., 'RL@NON/�q•� January 9, 1987 Betty Cook Alaska Housing Finance Corp. 235 Z. 8th Avenue Anchorage, Alaska 99501 Dear Ms. Cook: As we discussed on the phone January 8, I am enclosing a copy of City of Renai's proposed Ordinance No. 1180-86, along with a copy of my memo to the City Council of December 22, 1986. Someone has suggested that if this ordinance is adopted, MWC will not loan money for real estate in an area that is or has been an assessment district. Perhaps an example will help. Let's assume that an assessment district is formed to develop raw land. The purpose is to install water, sewer and streets. After Q the work is done, the City prepares and adopts an assessment roll. Will AHFC refuse to loan money to build a house on one of the assessed lots solely because the City could, if additional costs were incurred some time in the future, make a supplemental assessment? tf possible, I would like to have an answer to this question in writing so that I can provide the information to our City Council. i ,3r 4-21 Also, for my own information, I would like to ask another question. At times, a - -� lending institution or title company will inquire about assessments and we will `� n notify them of pending assessments. This occurs when an individual wants to WIN a house (and acquire a loan) on a lot in an assessment district that has not been totally closed out. The physical work of installing the water, sewer, - -• ',..;, :D.'.- -a' and streets are done, but the City has not adopted an assessment roll. The City ..,, Cannot tell the lending institution the amount of the assessment, nor can we accept payment in any amount and label it payment in full. Yet, these people do got loans and do build houses. It appears, then, that it is not absolutely necessary for the lending institutions to know the amount of pending or possible liens in order for them to approve a loan. Ie this correct? I thank you for the time you will spend on these matters. Please call me if I can help in any way. Also, for my own information, I would like to ask another question. At times, a - -� lending institution or title company will inquire about assessments and we will `� n notify them of pending assessments. This occurs when an individual wants to WIN a house (and acquire a loan) on a lot in an assessment district that has not been totally closed out. The physical work of installing the water, sewer, - -• ',..;, :D.'.- -a' and streets are done, but the City has not adopted an assessment roll. The City ..,, Cannot tell the lending institution the amount of the assessment, nor can we accept payment in any amount and label it payment in full. Yet, these people do got loans and do build houses. It appears, then, that it is not absolutely necessary for the lending institutions to know the amount of pending or possible liens in order for them to approve a loan. Ie this correct? I thank you for the time you will spend on these matters. Please call me if I can help in any way.