1998 AGN NOV 10 I01 - Laserfiche WebLink

Browse Search

TO: APPROVAL: FROM: SUBJECT: DATE: CITY OF COLTON AGENDA REPORT Ff172 f'(1TTN(`TT. MF.F.TTNf',' (1F Nnvpmhpr 1(1 199f2 _--__��__. �------�.� _- -•---------- --� HONORABLE MAYOR & CITY COUNCIL BACKGROUND: ��^ �hr"'1 HENRY GARCIA CITY MANAGE �.. MICHAEL J. WILLIAMS, CITY TREASURER /�J� � ' c �''� Consideration and Approval of Refunding of Community Facilities District 90-1 (Mt. Vernon Corridor) of the City of Colton November 3, 1998 In 1990 the City of Colton accommodated two property owners, Lebanoff-McKnight III group and the Plaza Las Glorias group who wished to form a Community Facilities District (CFD) now commonly referred to as the Plaza Las Glorias project. The Plaza Las Glorias part of the project was improved but the site to the South, referred to as the Lebanoff-McKnight property was never developed and has been the subject of litigation. The Lebanoff-McKnight group claimed that they were mislead about the benefits of the CFD and have not paid either ad valorum or Special Taxes. The non-payment of Special Taxes required the City to retain attorneys to initiate foreclosure proceedings to fulfill the City's covenants to Franklin Fund the sole bondholder The foreclosure action resulted in a counter-suit by the Lebanoff-McKnight owners which required the City to defend itself and delayed the foreclosure process. . In addition, because the Lebanoff-McKnight group did not pay their Special Taxes, the tax levy was increased on the Plaza Las Glorias property. In the mean time the Plaza Las Glorias developer, failed to pay his property taxes and again the City initiated foreclosure action, which resulted in the developers lender foreclosing and putting the property up for sale. A group of sophisticated investors, WHC III Investors, purchased the property in 1993, apparently with the intention of filling up the vacant stores and then selling the project. Because of the protracted litigation with Lebanoff-McKnight, the sale of its property for unpaid taxes was delayed. In addition, Lebanoff-McKnight continued to refuse to pay property taxes. This caused the entire debt service burden to be placed on the Plaza Las Glorias property. The WHC III Investors group hired a real estate attorney who found what they claimed was a drafting error in the formula for calculating the Special Tax that is placed on the tax roles to pay debt service annually. WHC III sued the City and County claiming that they had overpaid their taxes and were entitled to a refund. The City's position is that we only levied enough to comply with the covenants of the bond documents and that WHC III's position is without merit. WHC III failed to pay their December 1996 tax installment in a timely manner and the City demanded that they pay their tax or we would proceed with foreclosure proceedings as required by the bond documents. The Lebanoff-McKnight property was offered at a Sheriff's sale for unpaid ..�-'i�� ..�