Agenda Item No: O.4
AGENDA REPORT
DATE: April 1, 2025
TO: Mayor and Council
FROM: David Gassaway, City Manager
SUBJECT: Resolution 2025-51 FN City of Fairfield Community Facilities District No. 2016 -1 Special Tax Bonds Issuance and Sale
Authorizing the Issuance and Sale of Special Tax Bonds for City of Fairfield Community Facilities District No. 2016-1 (Villages at Fairfield) with Respect to its Improvement Area B, and Approving and Authorizing Related Documents and Actions
Funding Source: N/A
Contact: John Furtado, (707) 428-7629
RECOMMENDED ACTION
Adopt resolution.
STATEMENT OF ISSUE
The council previously conducted proceedings under the Mello-Roos Community Facilities Act of 1982 (Mello -Roos Act) to form (i) “City of Fairfield Community Facilities District No. 2016 -1 (Villages at Fairfield)” (CFD 2016 -1) and (ii) “Improvement Area B of the City of Fairfield Community Facilities District No. 2016-1 (Villages at Fairfield)” (Improvement Area B).
The City is authorized to levy special taxes upon the land within Improvement Area B and issue bonds in the aggregate principal amount of $25,000,000 secured by the special taxes levied in Improvement Area B for financing certain public improvements (Authorized Facilities), al l as described in those proceedings. In 2019, the City issued $19,865,000 Improvement Area B of the City of Fairfield Community Facilities District No. 2016-1 (Villages at Fairfield) Special Tax Bonds, Series 2019A (the “2019 Bonds”), leaving remaining bond authorization for Improvement Area B of $5,135,000.
Staff recommends that the council adopt the attached resolution in order to authorize the issuance and sale of Special Tax Bonds, Series 2025A (the “2025A Bonds”) with respect to Improvement Area B in an amount not to exceed $5,000,000, and approve and authorize related
documents an d actions, including the Preliminary Official Statement, Continuing Disclosure Certificate, First Supplement to Fiscal Agent Agreement, and Bond Purchase Agreement.
DISCUSSION
Background Information About the CFD and Improvement Area B; Development Agreem ent.
The property within the CFD is part of a larger development project that overlaps the CFD known as the “Villages at Fairfield” (the “ Villages at Fairfield ”). The Villages at Fairfield contains approximately 431 gross acres, divided into five separate developments (Villages I, II, III, IV, and Laurel Creek Plaza commercial center), and is currently approved and planned for 1,830 residential units and 22.2 acres of commercial, retail and mixed uses.
Rancho Tolenas Corporation, a California Corporation (the “Master Developer”), has acted as the master developer for the Villages at Fairfield and has sold and intends to sell the remaining portions of the Villages at Fairfield to merchant builders.
The property within the CFD is subject to development pursuant to a Second Amended and Restated Development Agreement, dated December 17, 2015 (as amended, the “Development Agreement”).
Development Status in Improvement Area B. Improvement Area B, designated as Village I, encompasses approximately 91.5 acres . The land within Improvement Area B has been developed by the following four builders, each of which acquired their property from the Master Developer (collectively, the “Merchant Builders”):
Villages at Fairfield, LLC, a California limited liability co mpany, doing business as “Discovery Builders”, which has developed its property in Improvement Area B into a development known as “Avery at The Villages;”
D.R. Horton BAY, Inc., a Delaware corporation (referred to in this Official Statement as “D.R. Horton ”), which has developed its property in Improvement Area B into a development known as “Iris at The Villages;”
Richmond American Homes of Maryland, Inc., a Maryland corporation has developed its property in Improvement Area B into a development known as “L arkspur at The Villages;” and
TRI Pointe Homes Holdings, Inc., a Delaware corporation has developed its property in Improvement Area B into a development known as “Lantana at The Villages.”
The development of Improvement Area B is now largely complete. As of January 22, 2025, 422 of the 432 single-family detached homes planned within Improvement Area B had been built and sold to individual homeowners and 10 were owned by D.R. Horton. As of late February 2025, 7 more homes were sold by D.R. Horton to individual homeowners, 2 homes were in escrow but not yet closed to individual homeowners, and 1 home was under construction.
2019 Bonds; Proposed 2025A Bonds. The City is authorized to levy special taxes an d incur indebtedness for and on behalf of CFD 2016 -1 to finance the costs of infrastructure associated with the Villages at Fairfield project.
As described above, the City is authorized to levy special taxes upon the land within Improvement Area B and issue bonds in the aggregate principal amount of $25,000,000 secured by the special taxes levied in Improvement Area B.
Pursuant to Resolution No. 2019-179, which was adopted by the council on July 16, and a Fiscal Agent Agreement, dated as of August 1, 2019 (“Master Fiscal Agent Agreement”), by and between the City and the Bank of New York Mellon Trust Company, N.A. (“Fiscal Agent”), the council previously issued on behalf of the CFD $19,865,000 Improvement Area B of the City of Fairfield Community Facilities District No. 2016-1 (Villages at Fairfield) Special Tax Bonds, Series 2019A (the “2019 Bonds”). As a result of the issuance of the 2019 Bonds and the $25,000,000 bonded indebtedness limit for Improvement Area B, the maximum principal amount of the 2025A Bonds is $5,135,000.
The City will use the proceeds of the 2025A Bonds to acquire authorized public improvements from the Master Developer, pursuant to the terms established by an Acquisition Agreement between the City and the Master Developer, as amended (the “Acquisition Agreement”).
Pursuant to the resolution, the maximum principal amount of the 2025A Bonds is $5,000,000 and the true interest cost of the 2025A Bonds cannot exceed 5.5%. Based on current market conditions, the 2025A Bonds are estimated to be issued in the amount of $2,570,000 and carry a true interest cost of approximately 4.97%.
The 2025A Bonds would be secured by and payable from special taxes levied in Improvement Area B on a parity basis with the 2019 Bonds.
Value to Burden Rat io. The City has not commissioned an appraisal of the property in Improvement Area B.
The tax year 2024 -25 assessed values of the taxable property in Improvement Area B total $244,208,027. The resulting value to burden ratio is based on (i) an estimated initial principal amount of the 2025A Bonds ($3,000,000) and (ii) the outstanding principal amount of all other outstanding bonds that are secured by a special tax or special assessment levied on property within Improvement Area B, including the 2019 Bonds ($19,455,000), is 10.9:1.
This value to burden ratio meets the 4:1 requirement in the City’s local goals and policies for community facilities districts.
Financing Schedule. The financing is expected to price and close in April 2025.
Proposed Resolution and Related Documents. In order to complete the financing, the council is being asked to approve each of the following:
Resolution. Resolution of the City Council authorizing the issuance of bonds for CFD 2016- 1 with respect to Improvement Area B and approving and authorizing related documents and actions.
Preliminary Official Statement. The Official Statement is the primary disclosure document for investors in the 2025A Bonds. A Preliminary Official Statement will be c irculated to potential investors prior to the pricing of the 2025A Bonds. After the 2025A Bonds have been priced, a Final Official Statement will be circulated to investors; the Final Official Statement should be identical to the Preliminary Official State ment except for the addition of pricing information (principal amount, interest rates, redemption terms).
The Preliminary Official Statement describes the special taxes to be levied in Improvement Area B and the status for the property within Improvement Area B.
The Preliminary Official Statement is prepared by Jones Hall, serving the City as disclosure counsel for this transaction, with the assistance of the financing team, including City staff; the Master Developer; the City’s municipal advisor; Stifel Nicolaus and Company, Incorporated (“Underwriter”), the underwriter of the 2025A Bonds; and the City’s special tax consultant.
The Preliminary Official Statement has been reviewed and approved for transmittal to the council by the City’s financing team. The distribution of the Preliminary Official Statement by the City is subject to federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require the Preliminary Official Statement to include all f acts that would be material to an investor in the 2025A Bonds.
Material information is information that there is a substantial likelihood would have actual significance in the deliberations of the reasonable investor when deciding whether to buy or sell the bonds. If the council concludes that the Preliminary Official Statement includes all facts that would be material to an investor in the 2025A Bonds, it must adopt a resolution that authorizes staff to execute a certificate to the effect that the Preliminary Official Statement has been “deemed final.”
The Securities and Exchange Commission (the “SEC”), the agency with regulatory authority over the City’s compliance with federal securities laws, has issued guidance as to the duties of the council with respect to its approval of the Preliminary Official Statement. In its “Report of Investigation in the Matter of County of Orange, California as it Relates to the Conduct of the Members of the Board of Supervisors” (Release No. 36761 / January 24, 1996) (the “Release”), the SEC stated that, if a member of the council has knowledge of any facts or circumstances that an investor would want to know about prior to investing in the 2025A Bonds, whether relating to their repayment, tax-exempt status, undisclosed conflicts of interest with interested parties, or otherwise, he or she should endeavor to discover whether such facts are adequately disclosed in the Preliminary Official Statement. In the Release, the SEC stated that the steps that a member of the council could take include becoming familiar with the Preliminary Official Statement and questioning staff and consultants about the disclosure of such facts.
The key sections of the Preliminary Official Statement are summarized below:
“THE 2025A BON DS”: This section summarizes the key terms of the 2025A Bonds, including payment dates and redemption provisions.
“SECURITY FOR THE 2025A BONDS”: This section summarizes key security terms, including the City’s pledge of special tax revenues, its covenant to levy special taxes according to the Rate and Method of Apportionment of Special Tax for Improvement Area B approved by the council (“RMA”) and its covenant to foreclose on parcels that are delinquent in the payment of special taxes. The 2025A Bonds are a limited obligation of the City, payable only from special taxes levied in Improvement Area B and mon ies in the funds and accounts established under the Fiscal Agent Agreement described below. “THE DISTRICT AND IMPROVEMENT AREA B”: This section summarizes certain features of Improvement Area B, including the assessed value of taxable property, overlapping taxes, assessments and debt , and anticipated debt service coverage provided by maximum special taxes that may be levied under the RMA. It also includes the status of development and property ownership in Improvement Area B.
“BOND OWNERS’ RISKS”: This section highlights the primary risks associated with the 2025A Bonds, natural disasters and failure of property owners to pay their special taxes. “LEGAL MAT TERS – Tax Exemption”: This section describes the tax -exempt nature of interest on the 2025A Bonds.
In addition to the Preliminary Official Statement, the council is being asked to approve the following documents:
Continuing Disclosure Certificate. Under SEC Rule 15c2 -12, the Underwriter may only purchase the 2025A Bonds if it has determined that the City is obligated to provide continuing disclosure, including annual updates of the financial and operating data included in the Official Statement and notices of certain specified events. First Supplement to Fiscal Agent Agreement. This document supplements the Fiscal Agent Agreement executed by the City in connection with the issuance of the 2019 Bonds and governs the 2025A Bonds and the use of specia l taxes from Improvement Area B to pay debt service on the 2025A Bonds on a parity basis with the 2019 Bonds. The fiscal agent is The Bank of New York Mellon Trust Company, N.A. The special taxes will be levied on the regular County tax roll and collected by the County from each taxable parcel in Improvement Area B. The County will remit these special taxes to the City. The City will remit them to the fiscal agent as provided for in the Fiscal Agent Agreement. The Fiscal Agent will use the revenues to (1) pay the administrative costs of the CFD and (2) pay the principal and interest on the 2025A Bonds to the bond owners. Bond Purchase Agreement. At the time the 2025A Bonds are sold, the City will enter into a Bond Purchase Agreement with the Underwriter, who will agree to underwrite the 2025A Bonds subject to satisfaction of the conditions described in the Bond Purchase Agreement. The resolution provides the Underwriter’s discount on the purchase of the 2025A Bonds shall not exceed 4% of the par amount of the 2025A Bonds.
FINANCIAL IMPACT
There is no General Fund or fiscal impact to the City. Debt service on the 2025A Bonds is payable only from special taxes levied annually on taxable properties within Improvement Area B in the manner set forth in the RMA. The costs of issuing the 2025A Bonds will be paid from the proceeds of the 2025A Bonds.
PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
N/A
ALTERNATIVE ACTION
The council may choose not to approve the attached resolution, in which case the 2025A Bonds would not be issued. However, pursuant to the Development Agreement, the City has agreed to cooperate with the Master Developer in forming CFD 2016 -1 to finance public facilities related to Villages at Fairfield.
COORDINATED WITH
City Attorney’s Office
STAFF CONTACT
John Furtado, director of finance
(707) 428-7629
[email protected]
ATTACHMENTS
Attachment 2: Proposed Resolution
Attachment 3: Appendix A
Attachment 4: Appendix E - Preliminary Official Statement, Including Continuing Disclosure Certificate
Attachment 5: Bond Purchase Agreement
Attachment 6: First Supplement to Fiscal Agent Agreement