Summary:
[NOTE: This is not the creation of the Saddleback Community Facility Districts. This is a precursor action to set the financial participation rules before the creation of the actual district which can happen no sooner than 30 days after these resolutions are adopted. If the district does not get created, these actions expire]
After a couple of years of discussion with principals of, and consultants to, Saddleback Peoria Partners, LLC (“Developer”), City Staff have received from the Developer draft applications for the creation of Saddleback Community Facilities District No. 1, Saddleback Community Facilities District No. 2, Saddleback Community Facilities District No. 3, Saddleback Community Facilities District No. 4 and Saddleback Community Facilities District No. 5 (collectively, the “Districts”). As described in greater detail below, formal submission of such applications by the Developer will take place prior to a future Council meeting at which formation of the Districts is to be considered.
A Community Facilities District (CFD) is a separate legal entity with the ability to levy secondary property tax to pay for infrastructure within the boundaries specified by the CFD. The CFD is created by the Mayor and Council and the CFD governing board consists of the Mayor and Council acting in ex-officio capacity. Peoria structures its CFD's to reimburse the associated developer for certain infrastructure that is required by the City and eventually turned over to the City for operation and maintenance.
The first formal Council action regarding potential formation of the Districts is adoption of the above-referenced resolutions. The resolutions authorize the execution of a separate District Development, Financing Participation and Intergovernmental Agreement (the “CFD Agreement”) for each of the Districts concerning matters related to, among other things, conditions, terms, restrictions and requirements for public infrastructure and the financing of public infrastructure and subsequent reimbursements or repayments over time from funds derived from the District’s bond sales.
After adoption of the resolutions, City staff anticipates the Developer’s submission of the final applications for formation of the Districts, as well as other documents required by law for formation of the Districts. The Council would, at its discretion at a future council meeting, adopt resolutions declaring formation of the Districts and authorizing the taking of certain actions with respect to such formation. These resolutions today do not create the district, but are a necessary prerequisite to its formation.
As is the case with the City’s existing community facilities districts, the members of the Council would serve, ex officio, as the members of the Board of Directors of the Districts (the CFD Board). At such Council meeting, the Council would convene as the CFD Board for each of the respective Districts and hold the organizational meetings of the CFD Board, at which resolutions would be adopted by the CFD Board that would, among other things, call an election to authorize the sale of a total of $300,000,000 in bonds for the Districts ($35,000,000 for District No. 1, $75,000,000 for District No. 2, $70,000,000 for District No. 3, $75,000,000 for District No. 4 and $45,000,000 for District No. 5).
It is anticipated that such bonds, if the CFD Board decides to issue them, will be used to acquire from the Developer public infrastructure constructed by it, in and for the benefit of the District, including certain infrastructure addressed in Exhibit B to each of the CFD Agreements, which must be provided by the Developer. Issuance of any such bonds would be at the sole discretion of the CFD Board.
The CFD Agreement includes a target secondary tax rate of $2.65 per $100 of limited assessed valuation. The actual rate for payment of debt service on bonds could go higher, if for some reason the total assessed valuation within the District falls or some other unforeseen event makes it necessary to raise the tax rate to cover the bond obligations, though staff will continue to recommend issuance of bonds conservatively in an effort to avoid such result. To address such contingency, the CFD Agreement includes a requirement that the Developer execute a Standby Contribution Agreement in connection with each bond issuance pursuant to which the Developer will be required to contribute amounts for payment of debt service if collections generated by the target secondary tax rate of $2.65 per $100 of limited assessed valuation is not sufficient for payment of debt service on bonds. Such obligation will be further supported by a cash deposit or letter of credit provided by the Developer that can be accessed in the event the Developer does not make a payment pursuant to the Standby Contribution Agreement.
The CFD Agreement provides for the levy of a $0.30 per $100 of limited assessed valuation operation and maintenance tax under certain circumstances. Notwithstanding the foregoing, under no circumstances will the target tax rate exceed $2.65 per $100 of limited assessed valuation. It is not expected that the operation and maintenance tax will be levied by any of the Districts during the 25-year time frame.
The Developer’s financial obligations under this document include: (a) five separate letters of credit in the amount of $350,000, due upon formation of the Districts, with limited release provisions, the purpose of which is to collateralize the Developer’s obligations to the Districts to provide for indemnification and payment of expenses of the Districts; (b) five separate deposits of $50,000 with the Districts to cover initial costs of the CFD which is to be replenished to $25,000 when such deposits are expended.
As described above, adoption of the resolutions does not form the Districts, it only provides authority to the City to execute the CFD Agreement for each of the Districts in the future if all steps for formation of the Districts are completed to the satisfaction of staff. Upon approval of this resolution, Staff will return in a separate meeting, at least 30 days after this evening’s meeting, to ask Council to approve the formation of the Districts.