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APPROVE TWO RESOLUTIONS RELATED TO PROPOSED FORMATION OF COMMUNITY FACILITIES DISTRICT 2026-1 (TRA VIGNE WEST) AND A FUTURE ANNEXATION AREA
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RECOMMENDATION
It is recommended that the City Council approve the following resolutions:
1) A Resolution of Intention to form a Community Facilities District (“CFD”) to levy a special tax in such district to finance 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. 2026-1 (Tra Vigne West) (the “District”)
The resolutions authorize the City Manager or designee to take appropriate and necessary actions to carry out the purpose and intent of the resolutions.
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Summary
The City was approached by the landowner representative, the Zimmerman Group, who represents both landowners, MCD South Parcel, LLC (81.48 acres) and MCD North Stockton, LLC (121.2 acres). The desire of the landowners is to form a new community facilities district. 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 office of the City Attorney.
DISCUSSION
Background
The Mello-Roos Community Facilities Act of 1982, as amended (Government Code §§ 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 (in this case the landowner) 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 be located west of the Union Pacific Railroad line, south of Eight Mile Road, and east of West Lane. The property is adjacent to the current Cannery Park project. If formed, the District will help fund the acquisition of authorized public facilities, including the payment of fees. The entire project is to include 756 residential units, with 335 residential units within the initial boundary and the remaining 421 residential units, along with a high-density residential site and commercial site, both planned for the final phase, all of which are contained within the future annexation area.
Steps in Initiating the Formation of a Community Facilities District
The formation of a CFD is subject to a formal public process beginning with the adoption of these two 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 maximum amount of special taxes applied to each parcel of land within the boundaries of the District and the escalation factor to be applied to each year.
• A list of the types of public facilities and fees proposed to be funded by special taxes.
• Reference to a boundary map (Attachment A) showing the territory that is proposed to be included in the District, including the boundary subject to the special tax levy.
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 limit on the future issuance of bonds. At the hearing, testimony concerning the District and the furnishing of the types of public facilities and fees 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 Tuesday, December 8, 2026, at 1:00 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 an intention to set the maximum proposed amount of bonded indebtedness for the District. The District may issue one or more series of bonds totaling no more than $100 million to fund facilities and fees within the District, initially allocated as $40 million to Improvement Area No. 1 and $60 million to the future annexation area. Actual approval of each series of bonds will require future Council consideration and action.
These resolutions are simply an expression of intent, however the Council is not bound to form the CFD. The formal formation proceedings will be decided on December 8, after the public hearing.
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. The annual costs will include:
• Administrative Expenses
• Debt Service (i.e., principal and interest on bonds)
• 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.
In addition, all parcels within the District will join CFD No. 2018-3 (Citywide Services and Maintenance). CFD No 2018-3 helps to offset the cost of providing services to new residential development
FINANCIAL SUMMARY
There is no financial impact to the City for the formation of the proposed CFD. The cost to the City to form the District is estimated at $39,500 and includes the fees and expenses of the Special Tax Consultant (Willdan Financial Services), Bond Counsel (Jones Hall), and the City’s Municipal Advisor (Del Rio Advisors, LLC). The Developer has deposited with the City an amount to cover the estimated costs of formation.
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 (.75%) up to the first $5 million of the par amount of the bond issue; one-half of one-percent (.50%) of the par amount of the bond issue over $5 million up to $10 million; one-quarter of one-percent (.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.
Attachment A - Proposed Boundary Map