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APPROVE THREE RESOLUTIONS COMPRISING INITIAL STEPS TO FORM THE COMMUNITY FACILITIES DISTRICT TO BE KNOWN AS CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2018-1 (ARCH ROAD/NEWCASTLE ROAD) (THE “DISTRICT”)
recommended action
RECOMMENDATION
It is recommended that the City Council approve the following resolutions:
1) Resolution 1 - A Resolution Accepting a Petition to Form a Community Facilities District;
2) Resolution 2 - A Resolution Declaring Intention to Establish a Community Facilities District and Authorize the Levy of a Special Tax therein to finance the acquisition of certain public facilities in the Community Facilities District No. 2018-1 (Arch Road/Newcastle Road).
3) Resolution 3 - A Resolution Declaring the Necessity to Incur Bonded Indebtedness in Community Facilities District No. 2018-1 (Arch Road/Newcastle Road) in an amount not-to-exceed $4.0 million.
It is also recommended that Council authorize the City Manager to take appropriate and necessary actions to carry out the purpose and intent of the motion.
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Summary
Approval of the recommended resolutions will facilitate development of more than 61 acres of the Arch Road/Newcastle Road project. The project is planned to include three warehouses ranging in size from 100,000 square feet to over 500,000 square feet. The Arch Road/Newcastle Road development requires the construction of certain public improvements that cannot be readily funded solely by property tax proceeds, impact fees or other traditional government funding mechanisms. PW Fund B Development, LLC (the “Developer”) requested the City form a Community Facilities District (CFD) to fund these improvements and to ensure all benefiting landowners participate in facility financing. CFD bonds will be used to provide the primary funding for authorized facilities.
The resolutions necessary to begin the process of forming the Arch Road/Newcastle Road Community Facilities District No. 2018-1 are attached to this report. The City Attorney has approved the 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 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 compliance with the provisions of the Act, a legislative body of a local agency may issue bonds for a CFD and may levy and collect a special tax within such districts to repay such indebtedness.
Present Situation
The Developer requested that the City consider the formation of a Mello Roos CFD to finance the public infrastructure associated with the development of more than 61 acres of the Arch Road/Newcastle Road project. This project is planned to house three warehouses ranging in size from 100,000 square feet to over 500,000 square feet and will include a fourth site dedicated to the City which will house a storm runoff detention basin. The project area consists entirely of assessor parcel number 181-100-10 which is bounded on the west by Newcastle Road and the north by Arch Road at the southeast corner of City limits east of Highway 99.
The CFD will fund the construction of transportation improvements, water and wastewater system improvements, drainage system improvements and other incidental expenses such as planning, design and environmental evaluation and remediation.
Steps in Initiating the Formation of a Community Facilities District
CFD formation is subject to a formal public process beginning with the adoption of several resolutions by the City Council that establishes the parameters of the CFD.
The first step in initiating the formation of a CFD, following receipt of a petition of certain landowners or voters in a proposed CFD, is for the City Council to consider adoption of a resolution that defines the territory that will be subject to the special tax levy. The Boundary Map, attached as Attachment A to this report, shows the territory within the boundary of the proposed Arch Road/Newcastle Road CFD. The boundaries of the proposed CFD may be reduced during subsequent public hearings held in conjunction with the formation of the CFD; however, the boundaries cannot be expanded in that process.
The next step is for City Council to consider adoption of a Resolution of Intention (the 'ROI') to form a CFD and levy a special tax within the territory of the proposed Community Facilities District. The resolution includes:
• A formula defining the rate and method of apportionment of the special tax (Exhibit A to ROI).
• A list of the types of public facilities and services proposed to be provided in the CFD (Exhibit B to ROI);
In addition to the items mentioned above, adoption of the resolution sets the date, time and place for a public hearing on the establishment of the CFD. At the hearing, testimony concerning the district, the extent of the district or the furnishing of the particular types of public facilities and services will be heard. Protests will be considered from registered voters residing within the CFD and persons owning real property within the CFD. The date of the public hearing for the proposed Arch Road/Newcastle Road CFD is proposed for June 19, 2018, at 5:30 p.m. in the Council Chambers.
The final action taken by the City Council in initiating the formation of a CFD is for the City Council to consider adoption of a Resolution of Necessity to Incur Bonded Indebtedness. The proposed Arch Road/Newcastle Road CFD will require one bond issue totaling no more than $4.0 million to fund transportation improvements, water and wastewater system improvements, drainage system improvements and other incidental expenses such as planning, design and environmental evaluation and remediation. The proposed CFD will reimburse the Developer for advance funding of the public infrastructure improvements, all of which will be dedicated to the City upon completion.
Rate and Method of Apportionment of the Special Tax
Parcels within the proposed Arch Road/Newcastle Road CFD will pay a maximum annual special tax based on the rate and method of apportionment, and manner of collection of special tax commonly referred to as the Special Tax Formula.
Each year, the City will approve the annual costs for the CFD. The annual costs will include:
• Debt Service (i.e., principal and interest on bonds)
• Administrative expenses
• 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 special tax in the proposed CFD is dependent on lot size and ranges from $27,146 to $114,258 with a maximum annual special tax of $4,235 per acre. The CFD Act allows for the annual administrative costs of the district to be included in the annual tax levy. The tax levy also includes an allowance to cover all special tax delinquencies that may occur in the CFD in a fiscal year. Should the bond reserve requirement be funded, rather than utilizing a reserve insurance instrument, interest earnings on the bond reserve fund balance will generate revenue to offset potential special tax delinquencies.
It is recommended that City Council approve all three resolutions as presented.
FINANCIAL SUMMARY
The Developer provided funding to cover legal and administrative costs of formation, including internal staff time. There is no financial impact to the City for the formation of the proposed CFD. At such time that bonds are issued, the City will receive an administrative fee of three-quarters of one percent of the par amount of the bonds. Based on the not-to-exceed issuance amount of $4.0 million, this fee will not exceed $30,000 and will be used to offset the costs of the bond issuance. All ongoing annual administrative fees are charged directly to the CFD as part of the annual special tax levy.
Attachment A - Boundary Map Arch Road Newcastle CFD 2018-1