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ADOPT RESOLUTION AUTHORIZING A SECOND ISSUANCE OF SPECIAL TAX BONDS TO BE ISSUED FOR AND ON BEHALF OF THE IMPROVEMENT AREA 1 OF THE CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2018-2 (WESTLAKE VILLAGES II), APPROVE AND DIRECT THE EXECUTION OF A FISCAL AGENT AGREEMENT, APPROVE THE FORM OF PRELIMINARY OFFICIAL STATEMENT, APPROVE SALE OF SUCH BONDS, AND APPROVE OTHER RELATED DOCUMENTS AND ACTIONS
recommended action
RECOMMENDATION
It is recommended that City Council adopt a resolution to authorize the issuance and sale of Special Tax Bonds, payable from Special Taxes, for and on behalf of the Improvement Area 1 of the City of Stockton Community Facilities District No. 2018-2 (Westlake Villages II) in the estimated amount of $4,800,000 (not-to-exceed $5,500,000), and direct the execution of a Fiscal Agent agreement, approve the bond sale, and approve all necessary actions and documents in connection with the issuance.
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Summary
The City Council established the City of Stockton Community Facilities District No. 2018-2 (Westlake Villages II) (the “District”) on June 19, 2018, to provide the funding necessary for the acquisition of public infrastructure improvements for the District.
Approval of the Resolution authorizes the issuance of bonds, in one or more series, for Improvement Area 1 of the City of Stockton Community Facilities District No. 2018-2 (Westlake Villages II), Special Tax Bonds, Series 2021 in the estimated amount of $4,800,000, and a not-to-exceed amount of $5,500,000. This second bond issuance is to be the final issuance for Improvement Area 1. Together, this issuance, in conjunction with the previous issuance, will support improvements in Improvement Area 1 of the District consisting primarily of flood control infrastructure, arterial and lateral streets, sidewalks, street lighting, landscaping, water and sewer infrastructure including hookups, and parks and bike paths.
DISCUSSION
Background
The City Council established the District in June 2018 to provide the funding necessary for the acquisition of public infrastructure improvements authorized for the District. The District was split off from CFD 2006-2 that had been dormant after the first 322 homes out of 2,622 planned had been built. CFD 2018-2 (Westlake Villages II) is comprised of the remaining 580 acres of the original roughly 855 gross acres of contiguous parcels that made up the CFD 2006-2 district in North Stockton, South of Eight Mile Road and West of Highway 5, just east of White Slough and the Delta. The District is planned to house 2,198 homes ranging in size from 1,400 to 3,500 square feet, and when fully developed will include a master-planned portion dedicated to 55+ living, multiple neighborhood parks, a school site, and a series of artificial lakes to aid in flood control. It is bounded on the west by Bishop Cut, on the north by Eight Mile Road, on the east by Regatta Lane (which separates the remaining development from the existing Spanos West CFD, and the initial homes built in the original Westlake Villages CFD) and on the south by Disappointment Slough.
On June 19, 2018, the City formed CFD No. 2018-2 (Westlake Villages II) via Resolution 2018-06-19-1501, authorized special taxes to pay for associated services and public facilities, and moved undeveloped parcels from CFD 2006-2 into the new district. On February 4, 2020, a revision to Improvement Area 1 within the District was approved that decreased the size of Improvement Area 1 and increased the area of Improvement Area 2 (via Resolution 2020-02-04-1501).
It is anticipated that later in 2021, Improvement Area 2 will undergo modifications as ongoing development plans are finalized and additional housing development plans become more certain.
Present Situation
To date, the developer has completed improvements consisting primarily of in-ground streets and flood control ponds. A permanent pump station and road improvements in the vicinity of Regatta Lane and Eight Mile Road were recently completed, which were required as a condition of expanded development in the District. Approval of the attached Resolution will allow the financing team to proceed with the second issuance of debt in the District that will finance the acquisition by the City of additional improvements consisting primarily of flood control infrastructure, arterial and lateral streets, sidewalks, street lighting, landscaping, water and sewer infrastructure including hookups, and parks and bike paths.
The special taxes for facilities commenced in FY 2020-21 for the 37 developed homes that had pulled their permits as of May 1, 2020. In FY 2021-22, all remaining parcels (regardless of development status) will be subject to the facilities tax. Special Taxes will continue until 30 years after the final issuance is made which is anticipated to be FY 2049-50, after which the tax for facilities will transition to 20% of the prior year plus a 2% annual inflator. The facilities tax will continue to be levied in perpetuity to provide for maintenance and replacement of the facilities financed by the special tax for facilities.
The special tax is expected to provide approximately $664,000 annually beginning in FY 2021-22. First-year debt service on this second issuance will not be supplemented by capitalized interest, given that all parcels (including those under development) will be taxed starting in FY 2021-22.
Financing Team
The financing team consists of representatives from the appropriate City vendor pools:
• Municipal Advisor - Fieldman, Rolapp & Associates, Inc (Resolution No. 2017-05-25-1102)
• Bond Counsel - Jones Hall (Resolution No. 2018-05-15-1102)
• Underwriter - Brandis Tallman LLC now doing business as a Division of Oppenheimer & Co. Inc. (Resolution No. 2017-07-25-1101)
• Fiscal Agent - Wells Fargo Bank, N.A.
Legal Authority and Procedures
The Special Taxes levied in the District are paid on the property tax bill and are treated the same as other taxes such as the ad valorem, general obligation bonds for schools, and other overlapping assessments and special taxes from other jurisdictions. Should a property owner become delinquent on any portion of their tax bill, the property is subject to accelerated judicial foreclosure, and the amount of lien on the property associated with the special taxes can be paid from proceeds of any foreclosure action. This process provides security to the bondholders.
Schedule
If approved by the City Council, the transaction schedule is as follows:
|
Timeline |
Item |
|
Week of May 13th |
Post Preliminary Official Statement |
|
Week of May 25th |
Pre-market bonds |
|
Week of May 26th |
Price bonds |
|
Week of June 7th |
Pre-closing, closing and transfer of funds |
Documents for Consideration
Fiscal Agent Agreement: This Agreement governs the terms and conditions of the bonds and the role and responsibilities of the Fiscal Agent. It also includes the covenants of the City concerning the levy of the special tax, foreclosure of delinquent parcels, and related matters.
Preliminary Official Statement: This is the offering memo to investors that provides all pertinent information related to the proposed bonds and the District. This document includes a Continuing Disclosure Certificate that details what ongoing information will be provided to investors.
Bond Purchase Agreement: This document details the agreement related to the terms of the negotiated sale of the bonds to the underwriter.
Construction and Acquisition Agreement: This document is an agreement between the City and the developer. It lays out a list of improvements that may be financed from bond proceeds once accepted and acquired by the City after completion.
FINANCIAL SUMMARY
There is no impact to the City’s General Fund or any other unrestricted fund as a result of taking the recommended action. Sufficient special taxes will be placed on the tax roll for FY 2021-22 to pay the first-year debt service on the bonds. Final sizing of debt service will account for City administrative fees and coverage beyond actual debt service requirements.
This CFD issuance is reported in a custodial fund that does not report revenues and expenditures. For this reason, adoption of this resolution approves the costs related to the transaction, which include those costs shown in the good faith estimate (Attachment B). The estimated costs of issuance are $315,250, which include fixed costs for the fees and expenses of bond counsel, underwriter costs, municipal advisor, fiscal agent, appraisal, and other reimbursable costs paid through deposit from the developer. The City will also receive an administrative fee of approximately $60,650 based on the estimated maximum issue size of $5,500,000.
SB 450 Compliance (“Good Faith Estimates”)
In compliance with state law (Government Code 5852.1), a good faith estimate (Attachment B) related to the proposed bonds is attached. The good faith estimates have been provided to the City by the Municipal Advisor. 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.
• Principal Amount-the estimated aggregate principal amount of the bonds to be sold is $4,420,000.
• True Interest Cost-the estimated true interest cost of the 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 bonds, is 3.631%.
• Finance Charge-the estimated finance charge for the bonds, which means the sum of all fees paid to third parties (or costs associated with the bonds), is estimated at $315,250.
• Amount of Proceeds to be Received-the estimate of the amount of proceeds to be received by the City from the sale of the bonds, less the finance charge of the bonds, as estimated above, and less estimated reserves, is $4,016,178.
• Total Payment Amount-the estimated total payment amount, which means the total of all payments to pay debt service on the bonds, plus the finance charge for the bonds, as described above, not paid with the proceeds of the bonds, calculated to the final maturity of the bonds, is $8,465,408.
These estimates are good faith estimates only. The actual figures may differ due to:
• Differences between assumptions regarding the date of the sale of the bonds, the principal amount of bonds sold, the amortization of the bonds, and market interest rates at the time of sale of the bonds
• Other market conditions
• Changes in the City’s financing plan
Attachment A - Description of Documents Being Approved and Terms Used
Attachment B - Good Faith Estimate