City of Corona
Staff Report
400 S. Vicentia Ave.
Corona, CA 92882
File #: 22-0506
REQUEST FOR CITY COUNCIL AND
CORONA UTILITY AUTHORITY ACTION
DATE: 06/15/2022
TO: Honorable Mayor and City Council Members
Honorable President and Board Members
FROM: Finance Department
SUBJECT:
A resolution authorizing the issuance of bonds of Community Facilities District No. 2018-2 (Sierra Bella) of the City of Corona designated 2022 Special Tax Bonds, Series A, and approving certain financing documents.
EXECUTIVE SUMMARY:
Presented for the City Council’s consideration is a resolution authorizing the issuance of bonds of Community Facilities District No. 2018-2 (Sierra Bella) of the City of Corona 2022 Special Tax Bonds, Series A, in an aggregate principal amount not to exceed $16,500,000 for the purpose of financing certain public facilities for the benefit of the District and approving certain financing documents with respect to the sale of the Bonds.
RECOMMENDED ACTION:
That the:
a. City Council adopt Resolution No. 2022-059, authorizing the issuance of bonds of Community Facilities District No. 2018-2 (Sierra Bella) designated 2022 Special Tax Bonds Series A, appointing Fiscal Agent, approving Fiscal Agent Agreement and Purchase Contract, and authorizing negotiation of terms of the sale of said bonds, approving Preliminary Official Statement and authorizing preparation of final Official Statement and approving Continuing Disclosure Certificate.
b. City Council authorize the Mayor, the City Manager, and the Finance Director to execute all related service agreements.
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File #: 22-0506
c. Corona Utility Authority review, ratify, and to the extent necessary, direct the City Council to take the above actions.
BACKGROUND:
Community Facilities District 2018-2 (Sierra Bella) of the City of Corona (the “District”) was established on September 19, 2018, by adoption by the City Council (the “City Council”) of the City of Corona (the “City”) of Resolution No. 2018-095. The City Council also adopted Resolution No. 2018- 096 determining the necessity for the District to incur bonded indebtedness for the District in an aggregate principal amount not to exceed $20,000,000. Pursuant to a special election held within the District, with the qualified voters of the District, of whether such indebtedness should be incurred by the District for the purpose of financing certain public facilities for the benefit of the District.
The District contains approximately 137 gross acres, located southwest of Green River Road in the southwestern portion of the City. The District is generally bounded by existing residential developments to the north, the upper foothills of the Santa Ana Mountains to the south, vacant land and rural residential to the west, and undeveloped land to the east. The District is planned for 237 single-family detached homes at buildout and is being developed by Lennar Homes of California, LLC, a California limited liability company.
ANALYSIS:
Resolution No. 2022-059 is presented for City Council’s consideration to authorize the issuance and sale of bonds of Community Facilities District No. 2018-2 (Sierra Bella) of the City of Corona 2022 Special Tax Bonds, Series A (“the Bonds”) in an aggregate principal amount not to exceed $16,500,000, based on the latest proposed facilities costs. These bonds will be sold to finance storm drain facilities, flood control facilities, water and wastewater facilities, park facilities, street improvements, traffic signals, and landscaping improvements, as well as incidental expenses related to the planning, design, and completion of such facilities (the “Facilities”) for the benefit of the District.
Pursuant to Section 53345.8 of the California Government Code and the Goals and Policies of the City, the City Council, as the legislative body of the District, may sell bonds of the District only if it determines prior to the sale of such bonds that the value of the real property that would be subject to the Special Tax to pay debt service on the bonds will be at least four (4) times the principal amount of the bonds to be sold and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Mello-Roos Community Facilities Act of 1982 (Section 53311, et seq., of the California Government Code) on property within the District, or a special assessment levied on property within the District.
The appraised value of the taxable property within the District, based upon the appraisal prepared by Kitty Siino & Associates, Inc. (the “Appraiser”), and as set forth in the report of the Appraiser dated May 10, 2022 (the “Appraisal”), is $192,471,291. The appraised value of the taxable property in the District, as set forth in the Appraisal, will be more than four (4) times such principal amount of the City of Corona Page 2 of 4 Printed on 6/8/2022
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Bonds, and there are no other special tax or assessment bonds of the District.
Resolution No. 2022-059 authorizes the Mayor, the City Manager, and the Finance Director to proceed with the issuance of the Bonds and to execute and deliver the final form of the Bond Purchase Contract between the City on behalf of the District and Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) within certain parameters, which are (a) the true interest cost on the Bonds shall not exceed six and a half percent (6.50%), (b) the Underwriter’s discount for the purchase of the Bonds shall not be greater than an amount equal to one and a half percent (1.50%) (exclusive of original issue discount) of the aggregate principal amount of the Bonds, and (c) the last maturity of the Bonds shall be paid and redeemed no later than September 1, 2052.
Exhibit A to Resolution No. 2022-059 sets forth certain good faith estimates with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates include the principal amount of the bonds, true interest cost of the bonds, finance charges of the bonds, amount of proceeds to be received, and total payment amount. These estimates have been provided to the City by the CSG Advisors Incorporated, the City’s municipal advisor, in consultation with the Underwriter.
The bond financing documents, the form of which are provided as Exhibits 3 - 6 in this report, include a Fiscal Agent Agreement, a Purchase Contract, a Preliminary Official Statement, and a Continuing Disclosure Certificate.
The Fiscal Agent Agreement provides for the terms of the Bonds to be issued and provides for certain funds and accounts into which proceeds of the Bonds will be deposited and invested until spent on the Facilities. Additionally, the Fiscal Agent Agreement creates certain other funds and accounts which provide for the payment of principal and interest on the Bonds, including the redemption of the Bonds.
The Purchase Contract provides the conditions which must be met in order to successfully deliver the Bonds to the Underwriter, and the price to be paid for the Bonds.
The Preliminary Official Statement describes the terms of the Bonds and describes the security for payment of the Bonds. Once the terms of the Bonds are set (i.e., price, interest rate, and maturity), that information is included in a final Official Statement which is used by the Underwriter to provide to the investing public.
The Continuing Disclosure Certificate, which is included as an exhibit to the Preliminary Official Statement, requires that the City provide certain information regarding the development and the special taxes on a regular basis to the secondary marketplace.
Should Resolution No. 2022-059 be approved, the Bond sale will proceed according to a schedule, which calls for the Bonds to be delivered to the Underwriter in July of 2022 in exchange for the purchase price that will be received on the date of closing. The bond proceeds will be allocated and disbursed according to the priorities set in the Funding and Acquisition Agreement approved at formation in 2018.
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FINANCIAL IMPACT:
The sale of the Bonds has no fiscal impact on the City. The Bonds to be issued by the City, for and on behalf of the District, will be the sole responsibility of the property owners through the levy of Special Taxes on the properties within the District. The City has no responsibility for the debt service associated with the Bonds. The costs of issuance will be borne by the bond proceeds. The administration costs for the Bonds will be built into the annual levy process and reimbursed by the special taxes collected.
Under the Rate and Method of Apportionment for the District, adopted by the City Council on September 19, 2018, the maximum annual special tax is ranging from $4,187 per parcel to $5,383 per parcel for parcels classified as single-family residential property, depending upon the size of the residence, and $26,299 per acre for parcels classified as non-residential property or multifamily property. The Bonds generally have a 30-year term. However, the final terms will be determined through the issuance and sale of the Bonds.
ENVIRONMENTAL ANALYSIS:
This action is exempt pursuant to Section 15061(b)(3) of the Guidelines for the California Environmental Quality Act (“CEQA”), which states that a project is exempt from CEQA if the activity is covered by the commonsense exemption that CEQA applies only to projects that have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. This action merely adopts the resolution and authorizes the approval of other documents necessary to issue the Bonds, and there is no possibility that adopting the resolution will have a significant effect on the environment. Therefore, no environmental analysis is required.
PREPARED BY: LIEN-CHI CANTUBA, ACCOUNTING SUPERVISOR
REVIEWED BY: KIM SITTON, FINANCE DIRECTOR
Attachments:
1. Exhibit 1 - Project Map
2. Exhibit 2 - Resolution No. 2022-059
3. Exhibit 3 - Fiscal Agent Agreement
4. Exhibit 4 - Purchase Contract
5. Exhibit 5 - Preliminary Official Statement
6. Exhibit 6 - Continuing Disclosure Certificate
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