title
PUBLIC HEARING: APPROVE FOUR RESOLUTIONS AND ADOPT AN ORDINANCE 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:
1. Approve the following four resolutions:
a) A resolution of formation establishing Community Facilities District No. 2014-1 (South Stockton Facilities and Services) (the “CFD”), authorizing the levy of a special tax within the CFD and establishing an appropriations limit for the CFD.
b) A resolution determining the necessity to incur bonded indebtedness in an amount not to exceed $50,000,000.
c) A resolution calling for an election for the purpose of submitting the levy of the special tax and the establishment of the appropriations limit to the qualified electors of the CFD.
d) A resolution declaring the results of the election and directing the recording of a notice of special tax lien.
2. Adopt an ordinance authorizing the levy of a special tax within the CFD.
The City Manager is hereby authorized to take such further actions as are necessary and appropriate to carry out the purpose and intent of these Resolutions.
body
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 areas of new development. In addition, the 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 South Stockton.
Approval of the recommended resolutions will complete the implementation of Title 5, Chapter 5.05 of the Council Policy Manual. The Council adopted this policy in July 2018 to require new development, as defined, to provide adequate resources for the provision of services and maintenance of facilities impacted by new development.
Previously, staff analyzed the fiscal impact of potential development and determined that it would add net General Fund costs not otherwise included in the Long-Range Financial Plan (the “LRFP”). The adopted Council policy allows for the formation of new services community facilities districts to help offset the cost of new development. Approval of the recommended resolutions completes the creation of the new facilities and services CFD and provides the mechanism to collect the necessary taxes to provide funding for fire facilities and the provision of fire and paramedic services required to meet the demands of new development in the City.
The Council approved the resolution necessary to begin the process of forming the CFD on September 17, 2024, and set a public hearing date of November 12, 2024. The recommended resolutions, attached to this agenda item, finalize formation by calling for the landowner election (which can be held immediately because the City has procured waivers of the time otherwise required), certify the election results, and authorize the placement of special taxes on the tax roll. The City Attorney’s office has approved these resolutions as to form.
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 Community Facilities District 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 2/3rds 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 CFD 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 in the future to annex into the CFD thereby expanding the boundaries as future development occurs.
After the adoption of the Resolution of Intention, the landowners conducted a swap of two parcels (approximately four acres) south of Bear Creek in exchange for property north of Bear Creek. The property north of Bear Creek has been built as a detention basin. The developers recommended that the two parcels South of Bear Creek be excluded from the initial boundary of the CFD and moved to the Future Annexation Area. In connection with the request, the landowners submitted an amended boundary map depicting the requested amended boundaries of the CFD and Future Annexation Area (herein the “Amended Map”). The Amended Map is on file with the City Clerk. As part of the Resolution of Formation, the City Council will approve and adopt the Amended Map and request it be recorded as final.
If formed, the CFD 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.
The City has completed all legal matters needing to take place before the public hearing concerning the formation of the proposed CFD, including recording a Boundary Map showing the initial area and future annexation boundaries with the San Joaquin County Recorder, and published in the Stockton Record a Notice of the Public Hearing to be conducted this evening. Certificates certifying both actions regarding notification are on file with the City Clerk.
The law requires that a CFD can only be formed, and the tax approved, by a 2/3rds vote of the eligible registered voters who reside within the proposed CFD. The law provides that if there are fewer than 12 registered voters residing within the boundaries of the proposed CFD (as is the case here), then the eligible registered voters are the landowners with one vote for each acre of land owned. The landowners in the proposed CFD have filed the necessary waiver and consent documents with the City Clerk shortening the time periods and waiving various requirements for conducting a mailed ballot election.
Formation of the District
The adoption of the recommended resolutions and ordinance will establish the City of Stockton Community Facilities District No. 2024-1 (South Stockton Facilities and Services). If the CFD is formed, it will establish a maximum debt authorization of $50 million, which will involve multiple bond issues. The size and timing of bond issues has yet to be determined and is not expected to occur for several years.
Facilities and Services To Be Funded
The types of public facilities proposed to be funded by bond proceeds include funding 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.
In addition, certain incidental expenses authorized by the Mello-Roos Community Facilities Act of 1982 can be financed, including but not limited to, the cost of planning, engineering, and designing the facilities; costs associated with the creation of the CFD, issuance of bonds, and determination of the amount of taxes and the collection and payment thereof.
The Rate and Method of Apportionment
Parcels within the proposed CFD will pay a maximum special tax based on the rate and method of apportionment of special tax, commonly referred to as the Special Tax formula.
Each year, the administrator will calculate and the City will approve the annual costs for the CFD. The annual costs will include:
• Administrative Expenses
• Annual Service Costs
• Annual Debt Service (i.e., principal and interest on bonds)
• Replenishment of the Bond Reserve Fund (if necessary)
• 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. The administrator 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 CFD 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 CFD 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.
Incurrence of Bonded Indebtedness
During the formation process of the CFD, the not to exceed bonded indebtedness is established at $50 million. While the initial boundaries of the CFD are small and will generate little special tax revenue, the CFD is expected to continue to develop over time as properties annex. It is anticipated that the CFD will issue bonds for capital facilities, but this is not expected to occur for several years.
FINANCIAL SUMMARY
The estimated cost to the City to form the CFD 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.