Agenda Report
Fullerton City Council
MEETING DATE: APRIL 16, 2024
TO: CITY COUNCIL
SUBMITTED BY: eLLIS CHANG, DIRECTOR OF ADMINISTRATIVE SERVICES PREPARED BY: ELLIS CHANG, DIRECTOR OF ADMINISTRATIVE SERVICES
TONI SMART, DEPUTY DIRECTOR OF ADMINISTRATIVE SERVICES
SUBJECT: COMMUNITY FACILITIES DISTRICT NO. 2 (AMERIGE HEIGHTS) BOND REFINANCING
SUMMARY
Consideration of Issuance of Special Tax Refunding Bonds (the “2024 Bonds”) to refinance outstanding 2014 Bonds for Community Facilities District No. 2 (Amerige Heights) (the “CFD”).
PROPOSED MOTION
Direct staff to engage a financing team to refinance the 2014 Community Facilities District No. 2 (Amerige Heights) Bonds to reduce special taxes for property owners in the CFD.
ALTERNATIVE OPTIONS
Approve the Proposed Motion
Do not approve the proposed motion
Other options brought by City Council.
STAFF RECOMMENDATION
Staff recommends the Proposed Motion.
CITY MANAGER REMARKS
The City Manager concurs with the Administrative Services Director’s recommendation.
PRIORITY POLICY STATEMENT
This item matches the following Budget Policy Priority Statements:
Fiscal and Organizational Stability
Infrastructure and City Assets.
FISCAL IMPACT
Issuing 2024 Bonds to refinance the outstanding 2014 Bonds does not create a direct obligation for the City. Special Taxes levied on the properties within the CFD would secure the proposed 2024 Bonds. Staff estimates refinancing the 2014 Bonds would provide, on average, more than $500 in annual savings to homeowners through an annual Special Tax levy reduction within the CFD, based on current market conditions. This action would not constitute final approval of the bonds nor does it commit City Council to issuing bonds.
BACKGROUND AND DISCUSSION
The City completed proceedings to form the City of Fullerton Community Facilities District No. 2 (Amerige Heights) in 2011. The CFD is in the City, consisting of approximately ten acres of property with approximately 5.4 acres of the property classified as taxable property. The CFD is fully built-out and contains 113 single-family detached homes.
The City, on behalf of the CFD, issued $7,570,000 Community Facilities District No. 2 (Amerige Heights) Special Tax Bonds, Series 2014 (the “2014 Bonds”) in May 2014. The 2014 Bonds bear interest at rates of 4.00% to 5.00% with a September 1, 2044 final maturity. The 2014 Bonds are currently $7,060,000 outstanding and can be redeemed without premium on any date.
Staff estimates refinancing the 2014 Bonds would provide, on average, more than $500 in annual savings to homeowners through an annual Special Tax levy reduction within the CFD, based on current market conditions. The refunding bond structure assumes use of bond insurance and a surety reserve, which enhances savings. Interest rates have remained volatile in 2024 and the final savings and refunding bonds interest rates will be determined when the bonds are priced and sold.
The City would engage a financing team, including a municipal advisor, underwriter, bond and disclosure counsel and special tax consultant to complete the financing process. Staff worked with the City’s Municipal Advisor, Urban Futures, Inc. (UFI), to obtain fee proposals from Stifel as Underwriter, Jones Hall as Bond and Disclosure Counsel and DTA as special tax consultant. Staff evaluated bids from these firms with the CFD No. 1 refunding in 2021. Each of the firms has extensive experience executing California CFD transactions and is very familiar with City CFD programs and policies. The Fee Proposals received for the 2024 Bonds are competitive and staff recommends retaining the firms familiar with the City CFD program.
The financing team, if City Council approves engaging the financing team and the refinancing plan, would proceed with next steps to complete financing. The financing team would return to City Council for authorization to issue the 2024 Bonds and approval of the financing documents format at a future meeting. cc: City Manager Eric J. Levitt
CFD No. 2 – 2024 Special Tax Refunding Bonds
April 16, 2024 - Page 4