Agenda Report
Fullerton City Council
MEETING DATE: JUNE 20, 2023
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: SUNAYANA THOMAS, DIRECTOR OF COMMUNITY AND ECONOMIC DEVELOPMENT
RAUL GODINEZ, INTERIM DIRECTOR OF PUBLIC WORKS
ELLIS CHANG, DIRECTOR OF ADMINISTRATIVE SERVICES
PREPARED BY: SUNAYANA THOMAS, DIRECTOR OF COMMUNITY AND ECONOMIC DEVELOPMENT
STEPHEN BISE, CITY ENGINEER / ASSISTANT PUBLIC WORKS DIRECTOR
ELLIS CHANG, DIRECTOR OF ADMINISTRATIVE SERVICES
SUBJECT: CITY OF FULLERTON COMMUNITY FACILITIES DISTRICT NO. 3 (THE PINES AT SUNRISE VILLAGE) FORMATION
SUMMARY
Sunrise Village Owner, LLC (the “Applicant) has petitioned the City to form a Mello-Roos Community Facilities District (“CFD”) to secure bond financing in an amount not to exceed $9,500,000 secured by special taxes levied on residential parcels within the mixed-use site known as The Pines at Sunrise Village (the “Project”).
RECOMMENDATION
Adopt the following resolutions:
RESOLUTION NO. 2023-XXX – RESOLUTION OF INTENTION TO ESTABLISH COMMUNITY FACILITIES DISTRICT CITY OF FULLERTON COMMUNITY FACILITIES DISTRICT NO. 3 (THE PINES AT SUNRISE VILLAGE) RESOLUTION NO. 2023-XXX – RESOLUTION OF INTENTION TO INCUR BONDED INDEBTEDNESS CITY OF FULLERTON COMMUNITY FACILITIES DISTRICT NO. 3 (THE PINES AT SUNRISE VILLAGE)
CITY MANAGER REMARKS
The action requested is approval of a Resolution of Intention to Establish a CFD No. 3 at the Pines at Sunrise Village., and to additionally authorize a resolution of intention to incur bonded indebtedness for the CFD.
PRIORITY POLICY STATEMENT
This item matches the following Budget Policy Priority Statements:
Fiscal and Organizational Stability
Infrastructure and City Assets.
FISCAL IMPACT
The City received an initial deposit (the “Initial Deposit”) from the Applicant in 2021 and a subsequent deposit (the “Subsequent Deposit”) in 2023 to initiate proceedings to form a community facilities district. The Initial Deposit and Subsequent Deposit, together with any additional deposits required pursuant to the terms of the Deposit and Reimbursement Agreement, should fully cover the costs for City staff and consultants to form the community facilities district. CFD No. 3 will annually levy special taxes on all residential taxable properties within CFD No. 3 in accordance with the Rate and Method of Apportionment (“RMA”) attached as Attachment B to the Resolution of Intention to pay for the costs of facilities, debt service on bonds and administration of CFD No. 3. Any bonds issued by CFD No. 3 do not constitute obligations of the City, secured solely by the special taxes levied on residential parcels in CFD No. 3.
DISCUSSION
The Applicant owns a 12.52-acre commercial retail property within the City (located at the southwest corner of the Euclid Street and Rosecrans Avenue intersection) which they propose to redevelop into a mixed-use site with 113 residential units and 23,000 square feet of commercial space known as The Pines at Sunrise Village (the “Project”). The Applicant has petitioned the City to form CFD No. 3 in accordance with the Mello-Roos Community Facilities Act of 1982 (the “Act”), as amended, to secure bond financing in an amount not to exceed $9,500,000 secured by special taxes levied on residential parcels within the Project. Staff presents a resolution of intention to form CFD No. 3 and a resolution of intention to incur bonded indebtedness on behalf of CFD No. 3 for City Council consideration.
Project Background
The Planning Commission approved the Project on December 7, 2022 and City Council approved the Project on January 3, 2023. The Project consists of 49 single-family detached units and 64 attached townhome units, for a total 113 dwelling units and 23,000 square feet of commercial space. The Project is located generally at the southwest corner of the Euclid Street and Rosecrans Avenue intersection, consisting of 12.52 acres of the Sunrise Village Shopping Center. The City has rezoned 9.93 acres of the 12.52 acres to Planned Residential, consisting of Parcels 1 and 2 for the 113 dwelling units. Parcels 3, 4 and 5 will remain General Commercial zoning designation. The Project has a Tentative Tract Map. The City will de-annex parcels 3, 4 and 5 from CFD No. 3 boundaries once a final map becomes available. The applicant intends to levy CFD No. 3 special taxes on the dwelling units in the Planned Residential area only.
Community Facilities District (CFD) Background
A CFD is a special district formed pursuant to the Act that allows for levy of a special tax on property within the district to fund the purchase, construction, expansion or rehabilitation of any real or tangible property, including public facilities and infrastructure improvements, with an estimated useful life of five years or longer. CFDs typically form in undeveloped areas to fund new public infrastructure or for infill areas undergoing redevelopment. The Rate and Method of Apportionment (RMA) for the CFD establishes a Special Tax used to finance public infrastructure and annual administrative expenses. New property owners assume responsibility to pay the Special Tax in the amount specified in the RMA as homes sell.
The City previously created CFD No. 1 and CFD No. 2 to fund certain infrastructure improvements in the Amerige Heights neighborhood.
The proposed CFD No. 3 complies with the City’s Amended and Restated Local Goals and Policies adopted by City Council on September 20, 2011 (“Local Goals and Policies”), which state that the total projected annual property tax rate on each residential parcel in the CFD shall not exceed 2% of the estimated sales prices or assessed values of the respective homes constructed in the CFD. Staff estimates the projected tax rate for each residential parcel in CFD No. 3 would total approximately 1.455% for Fiscal Year 2022-23, based on current estimated sales prices provided by the Applicant and the proposed special tax rates included in the RMA. The CFD No. 3 Special Tax would escalate at 2% annually.
Formation
The City initiated proceedings to create CFD No. 3 through the adoption of Resolution No. 2021-74 and Resolution No. 2021-75 on October 5, 2021 (the “Prior Proceedings”). City Council held a public hearing on December 7, 2021 and voted 3 to 2 to remand the project back to the Planning Commission for reconsideration of additional commercial space, reduction in density and aesthetic improvements. City Council subsequently abandoned the Prior Proceedings. This agenda item would supersede and rescind Resolution No. 2021-74 and Resolution No. 2021-75. The Applicant has submitted the Petition with Waivers to Create a Community Facilities District and Related Matters (Attachment 1) to form CFD No. 3. The following outlines the process to form CFD No. 3.
The Resolution of Intention marks the first step in the process to form CFD No. 3. The attached Resolutions declare the City’s intention to establish CFD No. 3 and intention to incur bonded indebtedness on behalf of CFD No. 3.
The second step requires holding public hearings on the matter. The Resolutions designate August 1, 2023 as the public hearing date. City Council will consider a resolution to form CFD No. 3, a resolution of necessity to incur bonded indebtedness within CFD No. 3 and a resolution calling a special election by the landowner voters within CFD No. 3 on the approval of the special taxes and the maximum bonded indebtedness proposed to incur at the public hearing. The landowner election would occur at the same meeting and City Council would subsequently consider a resolution approving the results of the election. The final step at the August 1, 2023 meeting would consist of the first reading of the Ordinance levying special taxes.
City Council would consider approval of the Improvement and Reimbursement Agreement concurrent with the public hearing item on August 1, 2023 which sets forth the terms, among others, pursuant to which the Applicant shall receive reimbursement for costs of the improvements in CFD No. 3 from certain funding sources of the CFD.
The formation of CFD No. 3 does not obligate the City to issue bonds. City Council would take the third step to consider approval of bond issuance at a future meeting once development of the Project has progressed, should the Applicant or subsequent developer desire to ultimately initiate bond financing.
The resolutions set forth the following parameters:
District Boundaries. The Applicant has requested that the boundaries of CFD No. 3 include the area of the Project as described in the Resolution of Intention Exhibit C and levy special taxes within the boundaries of CFD No. 3 in accordance with the RMA as described in the Resolution of Intention Attachment B. The applicant intends to de-annex Commercial Parcels 3, 4 and 5 from CFD No. 3 once a final map becomes available. Commercial Parcels 3, 4 and 5 will not be subject to CFD No. 3 special taxes.
Eligible Facilities to Finance. Resolution of Intention Exhibit A generally describes facilities proposed to finance (“Facilities”), which must have an estimated useful life of five years or longer and may locate within or outside the CFD No. 3 boundaries. The Resolution authorizes City Facilities, which the City shall own and operate and include the preservation of streets, curbs, gutters, landscaping and related improvements, park improvements included in the City’s park impact fee program and sewer improvements. The street improvements shall include improvements to Camino Loma, Rosecrans Avenue, Euclid Avenue, Paseo Dorado and Euclid Avenue.
The Applicant or subsequent developer would construct street improvements and subsequently receive reimbursement from CFD No. 3 bond proceeds. The Applicant or subsequent developer would fund the cost of the Applicant-constructed street facilities for amounts exceeding the financing amount supported by CFD No. 3.
The Resolution authorizes financing of School Facilities, which the Fullerton School District (“Fullerton SD”) and the Fullerton Joint Union High School District ("Fullerton JUHSD”) shall own and operate. The Applicant is in discussions with Fullerton SD and Fullerton JUHSD and awaits their feedback on the proposed School Facilities. City staff has requested the Applicant provide final direction on inclusion of School Facilities prior to the public hearing on August 1, 2023. Staff can adjust the authorized facilities list and RMA prior to the public hearing if necessary.
Maximum Bonded Indebtedness. The maximum bonded indebtedness of CFD No. 3 would set at $9,500,000. This is a “not to exceed” amount; the actual bond issuance amount may be lower than this amount. Additionally, if the cost of authorized facilities exceeds the maximum bonded indebtedness or the maximum amount supported by Special Taxes levied in CFD No. 3, the City shall not be responsible for the additional cost. The bonds shall be issued in such series and bear interest payable semi-annually or in such other manner as City Council determines, at a rate not to exceed the maximum rate of interest authorized by applicable law at the time of sale of such bond and shall mature no later than 40 years after their date of issuance.
Attachments:
Attachment 1 – Presentation
Attachment 2 – Draft Resolution No. 2023-XXX (Establish CFD) Attachment 3 – Draft Resolution No. 2023-XXX (Incur Indebtedness) Attachment 4 – Location Exhibit
Attachment 5 – Petition with Waivers to Create a Community Facilities District cc: City Manager Eric J. Levitt
Sunrise Village Owner, LLC is an investment vehicle for Shopoff Realty CFD No. 3 (The Pines at Sunrise Village) Formation
June 20, 2023 - Page 3