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APPROVE A RESOLUTION AUTHORIZING AN INITIAL ISSUANCE OF SPECIAL TAX BONDS ON BEHALF OF THE CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2025-1 (CANNERY PARK EAST) IN THE ESTIMATED AMOUNT OF $7,650,000 AND A NOT-TO-EXCEED AMOUNT OF $9,000,000
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Authorizing the issuance and sale of Special Tax Bonds, payable from Special Taxes, for and on behalf of the City of Stockton Community Facilities District 2025-1 (Cannery Park East) in the estimated amount of $7,650,000 (not-to-exceed $9,000,000);
2. Directing the execution of a Fiscal Agent agreement approving as to form a preliminary official statement; and
3. Approving all other documents and actions in connection with the issuance.
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Summary
The City was approached by the landowner JEN California 31, LLC (“Developer”) who acquired a portion of the property from Arnaiz Homes within the existing boundary of CFD 2019-1 (Cannery Park II), to form the “City of Stockton Community Facilities District No. 2025-1 (Cannery Park East) (the “CFD”), to authorize the levy of special taxes upon the land within the District, and to issue bonds secured by said special taxes for the purpose of providing moneys for the construction and acquisition of authorized improvements for the District. The District is comprised of 331 single-family residential lots which have been sold to two merchant builders.
The City Council (the “Council”) of the City of Stockton (the “City”) conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, commencing at section 53311, of the California Government Code (the “Act”). The Council, as legislative body of the District, authorized the issuance of special tax bonds of the City for the District in the maximum principal amount of not to exceed $15,000,000, and the City now desires to issue the first series of the bonds (the “2026 Bonds”). Adopting the resolution is necessary to complete the issuance process for the 2026 Bonds. The City Attorney’s office has approved the resolution as to form.
DISCUSSION
Background and Current Status of Development
In 2005, the City formed the City of Stockton, Community Facilities District No. 2005-1 (Cannery Park) (the “2005 CFD”). The 2005 CFD encompassed the entire the 450-acre Cannery Park Master Plan area that was annexed to the City and originally approved in 2004 and designated for a variety of land uses ranging from more than 1,000 single or multi-family residential units to parks, an elementary school, fire station, business park as well as commercial and office uses, and developable in accordance with a Development Agreement entered into in October 2004 (with a 20-year term). The original Cannery Park plans submitted in 2003 by the developer were for 1,400 residential units, 1,100 of them single-family homes and the remainder apartments or condominiums. The 2005 CFD did not immediately undergo development largely due to the slowdown in the real estate market, neighbor concerns about water usage, and regulatory delays associated with the construction of a bridge and utility infrastructure over Bear Creek.
In 2019, due to changes in development plans, the developer requested that a large portion of the 2005 CFD be removed from the 2005 CFD and encompassed within a newly formed district. In April 2019, the City complied with the request and accepted participation in a new community facilities district as a form of prepayment of obligations related to the existing 2005 CFD. The portion of the property removed from the 2005 CFD is now subject to special taxes of the adjoining district, the “City of Stockton Community Facilities District No. 2019-1 (“Cannery Park II”).
In 2025, JEN California 31, LLC acquired a portion of the property from Arnaiz Homes within the existing boundary of CFD 2019-1 (Cannery Park II) and requested that the City form an “overlay” district over this territory to finance additional required infrastructure. The current special taxes within CFD 2019-1 are fixed at an annual amount of $1,600 per year and are collected for the repayment of bonds already issued for that CFD. The City agreed with the request and established the CFD with the name “City of Stockton Community Facilities District No. 2025-1 (Cannery Park East).” As noted above, the CFD comprises 331 single-family residential lots which have been sold by the Developer to two merchant builders:
• Developer sold 64 lots to Richmond American on October 25, 2024.
• Developer sold 267 lots to Century Communities on May 19, 2025
Below is a table of the status of development in the CFD as of July 15, 2026, the date of value of the bring-forward letter of the appraisal (development remains ongoing):
|
Remaining Lots: Richmond American |
64 |
|
Remaining Lots: Century Communities |
265 |
|
Individual Homeowners |
2 |
|
Total Homes |
331 |
As of June 15, 2026, 67 building permits were pulled, representing 24.3% of the CFD classified as developed. The remaining 264 lots have all received final map approvals.
The appraised value of all properties within the CFD is valued at $68.059 million. Assuming the 2026 Bonds are sold in the amount of $7,650,000 plus other overlapping tax and assessment debt in the amount of $5,627,298, the estimated value-to-lien of the CFD (total appraised value / total direct and overlapping tax and assessment debt) is approximately 6.14:1, excluding Escrow Bonds.
The 2026 Bonds
(1) Assumes Interest Rates and Yields as of July 9, 2026
(2) Assumes Escrow Release by September 1, 2028, in the amount of $905,000
(3) Excludes Escrow Bonds
The sale of the bonds will be as two distinct series: a non-escrow piece and an escrow piece:
• The non-escrow piece is paid from the maximum special taxes from current developed property (i.e., property for which a building permit was issued by May 1) and special taxes on undeveloped property.
• The escrow piece will allow for the release of dollars to the improvement fund when the property that did not have a building permit as of May 1, 2026, moves to developed status. For a full release of the net proceeds of the escrow bonds to the improvement fund, 266 building permits will need to have been pulled. If the escrow release does not occur within 2 years, the net proceeds of the escrow bonds will instead be used to redeem the escrow bonds on September 1, 2028. The benefit of this structure is that it allows all of the proposed special tax bonds for the CFD to be sold now, rather than waiting 1-2 years for the undeveloped property to develop and then selling a very small additional series of special tax bonds when that occurs. That is just duplicating costs and not very efficient. However, there can be no assurance that the trigger for the release of the net proceeds of the escrow bonds into the improvement fund will be achieved.
Below is a table of the estimated sources and uses of funds for the 2026 Bonds:
|
Sources of Funds |
Non-Escrow |
Escrow |
Total |
|
Par Amount |
$6,465,000.00 |
$1,185,000.00 |
$7,650,000.00 |
|
Net Premium / Discount |
$117,841.70 |
$0.00 |
$117,841.70 |
|
Total Sources of Funds |
$6,582,841.70 |
$1,185,000.00 |
$7,767,841.70 |
|
|
|
|
|
|
Uses of Funds |
Non-Escrow |
Escrow |
Total |
|
Project (Improvement) Fund |
$5,715,648.30 |
$955,792.59 |
$6,671,440.89 |
|
Reserve Fund |
$572,140.90 |
$107,028.97 |
$679,169.87 |
|
Capitalized Interest |
$0.00 |
$122,178.44 |
$122,178.44 |
|
Costs of Issuance |
$235,000.00 |
$0.00 |
$235,000.00 |
|
Underwriter’s Discount |
$60,052.50 |
$0.00 |
$60,052.50 |
|
Total Uses of Funds |
$6,582,841.70 |
$1,185,000.00 |
$7,767,841.70 |
Below is a table of the estimated costs of issuance for the 2026 Bonds:
|
Role |
|
Company |
Amount |
|
|
|
Bond Counsel Fee and Expenses |
|
Jones Hall |
$66,500.00 |
|
|
|
Disclosure Counsel |
|
Jones Hall |
$45,000.00 |
|
|
|
Municipal Advisor and Expenses |
|
Del Rio Advisors LLC |
$43,250.00 |
|
|
|
City Administration Fee |
|
City of Stockton |
$50,750.00 |
|
|
|
Special Tax Consultant |
|
Willdan Financial Services |
$11,140.00 |
|
|
|
Printing of Official Statement |
|
TBD |
$5,000.00 |
|
|
|
Fiscal Agent and Counsel |
|
U.S. Bank |
$8,000.00 |
|
|
|
Contingency / Rounding |
|
Miscellaneous |
$5,360.00 |
|
|
|
Total Estimated Costs |
|
|
$235,000.00 |
|
|
In addition, Hilltop Securities, as underwriter, has agreed to work for a fee of $7.85 per bond or 0.785% of the estimated principal amount of $7,650,000. The fee is currently estimated at $60,052.50 but will vary, up or down, depending upon the final amount of bonds sold.
Documents to be Approved
There are several documents to be approved as part of the resolution to authorize the issuance and sale of the 2026 Bonds.
• Fiscal Agent Agreement (Exhibit 1 to Resolution): This agreement governs the terms and conditions of the 2026 Bonds and identifies the net proceeds of the 2026 Bonds will be used for the following purposes:
o Make a deposit to the Project (Improvement) Fund
o Fund a Debt Service Reserve Fund
o Fund Capitalized Interest on the Escrow Portion
o Pay the costs of issuing the 2026 Bonds
• Preliminary Official Statement (Exhibit 2 to Resolution): Disclosure Counsel prepared this document, which, upon Council authorization, will be distributed by the Underwriter and is used as the primary marketing document to prospective bond purchasers. The agenda packet includes a preliminary version of the official statement (“POS”) deemed to be essentially final. A final version of this document is to be made available shortly after the 2026 Bonds are sold and will reflect the final bond sale information. A table of contents identifies critical topics such as the plan of finance, security for the 2026 Bonds, information on the CFD, continuing disclosure, the foreclosure covenant, and the form of opinion of Bond Counsel.
• The Continuing Disclosure Agreement (included as an exhibit to the official statement): This agreement governs the terms and conditions whereby the City will provide the holders of the 2026 Bonds with an annual report updating the status of development in much the same form as some of the tables in the official statement. In addition, should a material event occur, as listed in the agreement, the City will provide immediate disclosure to the holders of the 2026 Bonds.
• Bond Purchase Agreement (Exhibit 3 to Resolution): Hilltop Securities as Underwriter will execute this document agreeing to purchase the 2026 Bonds contingent upon the City satisfying the obligations imposed within the agreement. The Underwriter agrees to make a public offering of the 2026 Bonds when authorized by the Council.
Financing Schedule
Assuming approval, the financing calendar outlines the remaining steps and the timeline to complete the sale and closing of the 2026 Bonds. It is anticipated that the financing team will participate in a due diligence call the week of September 7th, post the POS during the week of September 13th, conduct the sale the week of September 21st, finalize the documents and post the POS during the week of September 28th, and close the week of October 5th.
Financing Team
The financing team (the “Financing Team”) consists of representatives from the appropriate City vendor pools:
• Municipal Advisor: Del Rio Advisors, LLC
• Bond Counsel: Jones Hall
• Underwriter: Hilltop Securities
• Special Tax Consultant: Willdan Financial Services
• Fiscal Agent: U.S. Bank National Association
FINANCIAL SUMMARY
There is no financial impact on the City for the issuance of the 2026 Bonds. The 2026 Bonds are not a debt of the City and are secured solely from special taxes on property owners within the CFD and certain funds held under the Fiscal Agent Agreement.
The City will receive an administrative fee, currently estimated at $50,750, based on a sliding scale of the issuance size. The City’s Administration Fee is a component of the cost of issuance and is paid from bond proceeds.
The Appraiser's fee is not contingent upon the successful sale of the 2026 Bonds. The fee will be paid from the Developer deposit and therefore not a cost to the City.
GOV CODE 5852.1 COMPLIANCE:
In compliance with Government Code 5852.1, the good faith estimates set forth herein are provided with respect to the 2026 Bonds. Such good faith estimates have been provided to the City by Hilltop Securities as the Underwriter. Each estimate is based on the City’s financing plan and current market conditions, including market interest rates prevailing at the time of preparation of the estimate and the assumption that the net proceeds of the escrow bonds are released to the improvement fund and not used to redeem those bonds early. There can be no assurance that the trigger event for the release of the escrow bond proceeds will be achieved.
Principal Amount: The estimated aggregate principal amount of the 2026 Bonds to be sold is $7,650,000.
True Interest Cost: The estimated true interest cost of the 2026 Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the 2026 Bonds, is 5.074640%.
Finance Charge: The estimated finance charge for the 2026 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the 2026 Bonds), is $295,052.50 consisting of $235,000.00 in fixed costs of issuance and $60,052.50 for the underwriter’s discount.
Amount of Proceeds to be Received: The estimate of the amount of proceeds to be received by the City from the sale of the 2026 Bonds, less the finance charge of the 2026 Bonds, as estimated above, and less estimated reserves and capitalized interest, is $6,671,440.89.
Total Payment Amount. The estimated total payment amount, which means the sum total of all payments to pay debt service on the 2026 Bonds, plus the finance charge for the 2026 Bonds, as described above, not paid with the proceeds of the 2026 Bonds, calculated to the final maturity of the 2026 Bonds, is $16,280,456.63.
The foregoing estimates are good faith estimates only. The actual figures may differ from the estimates owing to (a) differences between assumptions regarding the date of the sale of the 2026 Bonds, the principal amount of 2026 Bonds sold, the amortization of the 2026 Bonds, and market interest rates at the time of sale of the 2026 Bonds and, (b) other market conditions, (c) changes in the City’s financing plan, and/or (d) a combination of such factors.