The Bell Avenue Assessment District in Sacramento, Calif., may be unable to make full payment due March 2, 1994, to holders of limited obligation improvement bonds, the city's treasurer said today.
Thomas P. Friery, the treasurer, said in a press release that a public hearing is scheduled Nov. 23 to advise the Sacramento City Council about the district's potential shortfall in making the $106,313 March payment.
Sacramento issued $3.57 million of limited obligation bonds on behalf of the Bell Avenue district in June 1990.
Assessments on land in the district provide the sole security for the bonds; the city has no legal obligation to make debt service.
The city did covenant, however, to initiate judicial foreclosure in the event of assessment delinquencies. A trial date is set for this Friday, Nov. 5, on a foreclosure action tied to delinquencies that occurred in April 1992.
"If judgment is awarded to the city, the process prior to the actual sale of the property will require six to eight months," Friery's release said. "Therefore, unless the delinquency is cured by other means, it is unlikely that moneys from the sale of the property would be available" for the March payment to bondholders.
Friery said he cannot promise that delinquent assessment payments will be brought up to date or that future installments will be paid.
In addition, "the market value of the property is unknown, and it is not known whether buyers would be interested in the property under foreclosure action," the release says.
Bond proceeds helped finance sewer and storm drain improvements, along with improvements to Interstate 80 near the project area. The district, geared to industrial zoning, is about one-half mile north of Interstate 80 via the Raley Boulevard exit.
The Bell Avenue district consists of about 100 parcels on 121.73 acres of land within the city's boundaries.
Delinquent assessments in the district total almost $402,000, covering installments due in April 1992, December 1992, and April 1993.
Almost all of the delinquencies are attributable to I-80 Industrial Associates, a California general partnership that owns parcels representing about 93% of the aggregate assessments in the district. The parcels include about 90 acres of undeveloped industrial property.
A reserve account that began with $312,000 has been almost fully drained to pay previous debt service, and Friery predicted that the March 2 payment to bondholders could be short by $53,000 "based on recent collection experience."
Friery said the City Council will direct him on how to allocate the payment to bondholders for the amount due in March.
The release also notes that a banking institution has a recorded deed of trust on the delinquent parcels. But Friery said in an interview that he does not know if the bank will bring the assessments current if it takes control of the land from I-80 Industrial Associates.
According to Friery's release, the I-80 partnership consists of two general partners: JDSI, a Wisconsin limited partnership of which Johnson Wax Development Corp, is general partner; and NRHZ, a California limited partnership with three general partners -- James K. Hobson of HZ Development, and K. Mark Nelson and David G. Rodgers of the Nelson Rodgers Co.
Stone & Youngberg and PaineWebber Inc. underwrote the bond issue, with Sturgis, Ness, Brunsell & Sperry as bond counsel.
The bonds were structured as serials maturing from 1991 to 2005, with interest rates ranging from 6.3% to 7.5%.
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 totaling about $903,000 -- primarily from sewer fee and drainage fee districts -- also helped offset the overall construction cost, according to Friery's release.