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ADOPT RESOLUTIONS IN CONNECTION WITH PROPOSED FORMATION OF COMMUNITY FACILITIES DISTRICT NO. 2024-1 (SOUTH STOCKTON FACILITIES AND SERVICES)
recommended action
RECOMMENDATION
It is recommended that the City Council approve the following resolutions:
1. A Resolution of Intention to form a Community Facilities District (“CFD”), establish a future annexation area and to levy a special tax in such district to finance public services and the acquisition and construction of certain public facilities in and for such district; and
2. A Resolution of Intention to incur bonded indebtedness to finance the acquisition and construction of certain public facilities in and for proposed Community Facilities District No. 2024-1 (South Stockton Facilities and Services) (the “District”)
The City Manager is authorized to take such other actions as are necessary and appropriate to carry out the purpose and intent of these resolutions.
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Summary
The City recently annexed into the city limits property commonly known as the Mariposa Industrial Park. As part of the Development Agreement, the developer is required to form a CFD to help offset the General Fund impacts of providing fire service to the District. In addition, this new CFD will provide funding for necessary fire related improvements and will ensure that all benefiting landowners participate in facility financing. CFD bonds will be used to provide the primary funding for authorized facilities, which includes the costs of acquiring land and constructing one or more fire stations to serve this portion of the City.
The resolutions necessary to begin the process of forming the CFD are attached to this staff report. The resolutions have been approved as to form by the City Attorney.
DISCUSSION
Background
The Mello-Roos Community Facilities Act of 1982, as amended (Government Code Sections 53311 et seq.), was enacted by the California Legislature to provide an alternate method of financing certain essential public capital facilities and services, especially in the developing areas of the State of California. Once duly established by a city, county, or other local agency, a CFD is a legally formed governmental entity with defined boundaries, with the governing board or legislative body of the local agency acting on its behalf. Subject to approval by a two-thirds vote of qualified electors within the boundaries in compliance with the provisions of the Act, a legislative body of a local agency may issue bonds for a CFD to finance public facilities and may levy and collect a special tax within a CFD to repay such indebtedness, in addition to levying and collecting a component of the tax to pay for public services.
Present Situation
The initial boundary of the District will include just the Mariposa Industrial Park which currently houses a Walmart Distribution Center of approximately 900,000 square feet and is expected to develop other industrial buildings up to another 1,224,880 square feet. In addition to the initial boundary, other undeveloped commercial and industrial areas within the annexation territory will be asked to annex into the District thereby expanding the boundaries as future development occurs.
If formed, the new District will help fund the construction of fire related public capital infrastructure facilities in the project area, including one or more fire stations to reduce service times to this portion of the City. Fire and paramedic related services will also be funded by the special tax.
Steps in Initiating the Formation of a Community Facilities District
The formation of a CFD is subjected to a formal public process beginning with the adoption of several Resolutions by the City Council that establish the parameters of the CFD.
The first resolution before the City Council for consideration is the Resolution of Intention (the 'ROI') to Form a CFD and Levy a Special Tax within the territory of the proposed District. The resolution includes:
• The Rate and Method of Apportionment (the “RMA”) defines the amount of special taxes applied to each acre of land withing the boundaries of the District for both facilities and services special taxes and the escalation factors applied to each component.
• A list of the types of public facilities and services proposed to be funded by special taxes.
• Reference to a boundary map showing the territory that is proposed to be included in the District, including the initial boundary subject to the special tax levy and the future annexation territory.
In addition to the items mentioned above, adoption of the ROI sets the date, time and place for a public hearing on the establishment of the District and future issuance of bonds. At the hearing, testimony concerning the District, and the furnishing of the types of public facilities and services will be heard. Protests by landowners or registered voters residing within the District boundaries and persons owning real property within the CFD will be considered. The date of the public hearing for the proposed District is November 12, 2024, at 5:30 p.m. in the Council Chambers.
The second resolution before the City Council for consideration is the Resolution of Intention to Incur Bonded Indebtedness. The resolution sets forth the maximum proposed amount of bonded indebtedness for the District. The District may issue one or more series of bonds totaling no more than $50.0 million to fund facilities within the District. Actual approval of each series of bonds will require future Council consideration and action.
Rate and Method of Apportionment of the Special Tax
Parcels within the proposed District will pay a maximum annual special tax based on the RMA, commonly referred to as the Special Tax Formula. Each year, the City will approve the annual costs within the District. The annual costs will include:
• Administrative Expenses
• Annual Services Tax
o Limited to fire, protection and suppression services, and ambulance and paramedic services
• Annual Facilities Tax
o Limited to fire station facilities, including, but not limited to, land acquisition, acquisition of furnishings, equipment, apparatus, communications equipment, and other items required for a fully staffed fire station facility
o Debt Service (i.e., principal and interest on bonds)
o Replenishment of the reserve fund (when necessary)
• An amount equal to estimated special tax delinquencies
The annual costs funded by the levy of the special tax will be determined by subtracting other available revenues, such as reimbursement payments, fees, funds available from prepaid special taxes, interest earnings on the bond reserve fund, or receipts of delinquent special taxes from previous fiscal years, from the annual costs. The City will then apply the Special Tax Formula to determine the special tax levy for each parcel.
The maximum annual facilities special tax for each parcel within the District will initially be $650 per acre and will grow at a rate of 2% per year while bonds are outstanding. The maximum annual services special tax for each parcel within the District will initially be $1,637 per acre and will grow at a rate of up to 4% per year. The services special tax and escalator will remain in perpetuity.
FINANCIAL SUMMARY
The estimated cost to the City to form the District is between $40,000 and $60,000 and will include the fees and expenses of the Special Tax Consultant (Economic Planning Systems), Bond Counsel (Jones Hall) and the City’s Municipal Advisor (Del Rio Advisors, LLC). The developer is responsible for paying the full cost for the District formation as a condition of the Development Agreement in an amount not to exceed $100,000.
The City will benefit from the services tax at such times as a property moves to developed status and parcels become subject to the services tax. Developed status means any parcel, prior to May 1 of each year, for which a building permit has been pulled.
Ultimately, when bonds are issued, the City will receive an administrative fee based on a sliding scale of the issuance based on three-quarters of one-percent (0.75%) up to the first $5 million of the par amount of the bond issue; one-half of one-percent (0.50%) of the par amount of the bond issue over $5 million up to $10 million; one-quarter of one-percent (0.25%) of the par amount of the bond issue over $10 million. The City’s Administration Fee is a component of the cost of issuance and is paid from bond proceeds.