LOS ANGELES - A bank has stepped in and paid virtually all assessment delinquencies that had posed a default risk for the Bell Avenue Assessment District in Sacramento Calif., the city reported Friday.
National Westminster Bank paid the city slightly more than $494,000 to cover assessment installments, interest, and penalties on almost all current delinquencies in the district, Sacramento Treasurer Thomas P. Friery said in a press release.
The bank has a deed of trust on the delinquent land that secures a loan between the property owner and the bank.
Sacramento issued $3.57 million of limited obligation bonds on behalf of the district in June 1990. The assessment installments secure those bonds.
Friery cautioned in late October that the district might miss its full payment due March 2, 1994, to holders of the bonds. He predicted at the time that the district might come up short by about $53,000, or roughly half the scheduled March payment.
Given the latest developments, however, it appears "there is no longer an imminent danger of ultimate loss to bondholders," Friday's release says.
The payment from National Westminster, a British public limited company acting through its Chicago branch, "is sufficient to reimburse $311,568.75 to the district's reserve fund," the city said.
By contrast, the next scheduled payment to bondholders in March totals about $106,000.
The reserve fund was previously depleted to cover bondholder payments when property owners - primarily 1-80 Industrial Associates, a California general partnership - failed to make scheduled assessment payments beginning in April 1992, Including missed payments in December 1992 and April 1993, the delinquencies had climbed to almost $402,000 excluding interest and penalties.
Friery said he did not know whether the bank initiated a nonjudicial foreclosure action against the original owners.
In general, lenders often take control of land if they step forward to cover tax payments. The treasurer said, however, that I-80 Industrial Associates remains on the property rolls as owner of the land tied to the previously delinquent assessments.
The I-80 partnership owns land representing about 93% of the aggregate assessments in the Bell Avenue district, which consists of about 100 parcels on 121.73 acres of land within the city's boundaries.
A Sacramento County Superior Court judge last month cleared the way for the city to move forward on judicial foreclosure proceedings that had been initiated because of the April 1992 delinquency.
But receipt of the bank's payment, a long with other required actions, has terminated the city's foreclosure process, Friery said.
Bond proceeds helped finance sewer and storm drain improvements, along with upgrades to Interstate 80 near the project area, which is geared to industrial zoning. National Westminster's deed of trust, totaling $5.75 million, was recorded on March 22, 1988. Friery said he has no knowledge about how much might have been paid on the original note between the bank and the I-80 partnership, or whether the note may have been transferred or discharged.
The original property owner also had sold or developed some of the land, and those parcels were not delinquent, according to the treasurer. The bank's payment eliminated all but $520 of the previously reported delinquencies, he said. Although the release says Friery "considers the bank's payment to be a constructive development," he cautioned bondholders that "no assurances can be made that future assessment installment payments will be made as scheduled by district property owners."
Bondholders "should prudently consider all covenants, conditions and risks to bondholders investing in assessment district bonds," the treasurer said.
Stone & Youngberg and PaineWebber Inc. underwrote the bond issue.
The bonds were structured as serials maturing from 1991 to 2005, with interest rates ranging from 6.3% to 7.5%.
A Sacramento City Council public hearing set for Dec. 14 specifically to discuss the district's situation will take place as scheduled, Friery said. But now that virtually all the delinquencies are cured, Friery said he believes the City Council will concur that the imminent danger to bondholders has passed and thereby direct him to make principal and interest payments as scheduled from authorized district funds.
The city originally made a cash contribution to the Bell Avenue district of almost $73,000 for the cost of certain pavement construction. Other credits that totaled about $903,000, primarily from sewer fee and drainage fee districts, also helped offset the overall cost of construction.