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PUBLIC HEARING: APPROVE FOUR RESOLUTIONS AND ADOPT AN ORDINANCE IN CONNECTION WITH FORMATION OF COMMUNITY FACILITIES DISTRICT 2018-1 (ARCH ROAD/NEWCASTLE ROAD)
recommended action
RECOMMENDATION
At the conclusion of the public hearing, if a protest does not exist, it is recommended that the City Council take the following actions:
1. Approve four resolutions, including:
a) A resolution of formation establishing Community Facilities District No. 2018-1 (Arch Road/Newcastle Road), authorizing the levy of a special tax within said District, preliminarily establishing an appropriations limit for the District, and 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 District.
b) A resolution determining the necessity to incur bonded indebtedness within the proposed Community Facilities District No. 2018-1 (Arch Road/Newcastle Road) and calling an election for the purpose of submitting the proposition to the qualified electors of the proposed District.
c) A resolution canvassing (review and examine) the results of the June 19, 2018 election held within Community Facilities District No. 2018-1 (Arch Road/Newcastle Road) authorizing the levy of a Special Tax within said district, establishing an appropriations limit for said district, and determining the necessity to incur a bonded indebtedness within said district and calling an election for the purpose of submitting the proposition to the qualified electors of the district.
d) A resolution authorizing the issuance of special tax bonds, the execution of an indenture and a bond purchase agreement related to the issuance and sale of bonds, approving a preliminary official statement and authorizing the execution of a final official statement, authorizing the execution of an acquisition agreement relating to the facilities to be financed by the City of Stockton Community Facilities District No. 2018-1 (Arch Road/Newcastle Road), and approving other matters related thereto.
2. Adopt an Ordinance of the City of Stockton, California authorizing the levy of a special tax within Community Facilities District No. 2018-1 (Arch Road/Newcastle Road).
It is also recommended that the resolutions authorize the City Manager to take appropriate and necessary actions to carry out the purpose and intent of the resolutions.
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Summary
Approval of the recommended resolutions will facilitate the 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 issued to provide the primary funding for authorized facilities. The CFD authorizes the placement of an annual property tax assessment on each parcel in the district to provide ongoing revenue to pay both debt service and annual District administration costs.
The resolutions necessary to form the District, levy the special tax, and authorize the issuance of debt are attached to this report. The City Attorney has approved the resolutions as to form.
DISCUSSION
Background
The Developer and the sole landowner requested that the City consider the formation of a CFD to finance public infrastructure associated with the development of their 61± acre 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 to house a detention basin for storm runoff. 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.
On May 15, 2018, the City Council adopted Resolution 2018-05-15-1106-1 (Accepting a Petition to Form a CFD); 2018-05-15-1106-02 (Declaring Intention to Establish a CFD and Authorize the Levy of a Special Tax); and 2018-05-1106-03 (Declaring the Intent to Incur Bonded Indebtedness in the District in an amount not-to-exceed $4 million.
Adoption of the Resolutions on May 15, 2018, set a public hearing date of June 19, 2018. At the public hearing, the City can hear testimony concerning the proposed District, the extent of the proposed District or the furnishing of the particular types of public facilities and services and consider protests from registered voters residing within the proposed District and persons owning real property within the proposed District. At the end of the public hearing, the City Clerk will conduct the landowner election and announce the results.
Present Situation
All legal matters needing to take place prior to the Public Hearing concerning the formation of the proposed District have been taken. The City recorded a Boundary Map with the San Joaquin County Recorder on May 18, 2018, and published a Notice of Public Hearing in The Stockton Record on May 24, 2018. 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 2/3 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 sole landowner in the proposed District has 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. 2018-1) Arch Road/Newcastle Road). If the District is formed, it will establish a maximum debt authorization of $4 million. The actual bond issues and issuance costs will reflect market conditions at the time bonds are sold.
Facilities and services to be funded
The types of public facilities proposed to be funded by bond proceeds include the construction of public capital infrastructure facilities including transportation improvements, water and wastewater improvements, drainage system improvements and other incidental expenses such as planning, design and environmental evaluation and remediation. The proposed District will reimburse the Developer for advance funding these public infrastructure improvements, all of which will be dedicated to the City upon completion.
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 proposed 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 District will pay a maximum special tax based on the rate and method of apportionment of special tax, commonly referred to as the “special tax” for the proposed District.
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. The City will then apply the special tax formula to determine the special tax levy for each parcel.
The special tax formula is set up to allocate the maximum annual special tax first to developed parcels, and if the special tax levy from developed parcels is not adequate to cover annual costs, the special tax is allocated proportionately to undeveloped property in an amount equal to the amount of annual costs. The maximum annual special tax in the district is $4,235 per acre, and depending on parcel size, will range from $27,146 to $114,258. The annual special tax levy includes an allowance for annual administrative expenses and an allowance to cover all special tax delinquencies that may occur in the District in a fiscal year. In most years, interest earnings on the bond reserve fund balance will generate revenue to offset potential special tax delinquencies.
Incurrence of bonded indebtedness
Bonds are anticipated to be issued in August 2018, and a copy of the Preliminary Official Statement and other related documents are included as attachments to the fourth resolution listed as part of this item. That item includes the approval of an Indenture, a Bond Purchase Agreement, a Continuing Disclosure Agreement, and an Acquisition Agreement. The bond issuance will be in a not-to-exceed amount of $4 million.
FINANCIAL SUMMARY
The Developer provided funding to cover the 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.
The maximum annual special tax in the district is $4,235 per acre, and depending on parcel size, will range from $27,146 to $114,258 per parcel. The annual special tax levy includes an allowance for annual administrative expenses and an allowance to cover all special tax delinquencies that may occur in the District in a fiscal year. In most years, interest earnings on the bond reserve fund balance will generate revenue to offset potential special tax delinquencies.
Because this district will support industrial development, the assessment does not include a services component. The economic benefits associated with industrial development should generally offset the City’s service delivery and maintenance costs. The City has required the developer to make road and intersection improvements and to annex into the appropriate storm basin district. Water and wastewater costs will be recovered through connection fees and user charges.