City Council Chambers
29844 Haun Road
Menifee, CA 92586
City of Menifee
Finance Committee
Meeting Agenda
Lesa Sobek, C
ommittee Member
Dean Deines, Committee Member
Tuesday, March 14, 2023
2:00 PM Regular Meeting
AGENDA
1. CALL TO ORDER
2. ROLL CALL
3. PRESENTATIONS: NONE
4. PUBLIC COMMENTS
5. APPROVAL OF MEETING MINUTES
5.1 February 7, 2023 Minutes
6. DISCUSSION ITEMS
6.1 Proposed Bond Issue for Community Facilities District No. 2022-1 (Quartz Ranch) Recommended Action:
1. Review the proposed Series 1 bond issue request for Community Facilities District No. 2022- 1 (Quartz Ranch) (“CFD No. 2022- 1”) by Lennar Homes to finance the costs of certain public improvements for the development of a residential tract containing 379 units within the City; and
2. Recommend the finance team to proceed with preparation of the Official Statement and other legal documents related to the transaction for presentation to the City Council at a future City Council meeting.
6.2 10 Year
Financial Forecast Model
Recommended Action:
1. Receive and file summary report on City of Menifee’s 10 Y ear Financial Forecast Model.
7. STAFF COMMENTS
8. COMMITTEE REPORTS/COMMENTS ON COMMITTEE ACTIVITIES
9. FUTURE AGENDA ITEMS
1 Future
Meeting Date(s):
• Tuesday,
May 9, 2023 2:00 p.m.
• Tuesday, July 11, 2023 2:00 p.m.
• Tuesday, September 12, 2023 2:00 p.m.
• Tuesday, November 14, 2023 2:00 p.m.
10. ADJOURNME
NT
Decorum Policy Notes
Please use a speaker request form when you wish to address the Committee. The Committee anticipates and encourages public participation at its Committee meetings, both on agenda items and during the public comments period. Please use respect by not having your cell phones on, refrain from talking in the audience or outbursts that may be disruptive. While we encourage participation, we ask there be a mutual respect for the proceedings.
Agenda Materials
Materials related to an item on this Agenda, including those submitted to the Committee after distribution of the agenda packet, are available for public inspection by contacting the City Clerk, at (951) 672-6777 during normal business hours.
Compliance with the Americans with Disabilities Act
If you need special assistance to participate in this meeting, you should contact the City Clerk, at (951) 672-6777. Notification 72 hours prior to the meeting will enable the City to make reasonable arrangements to assure accessibility to this meeting.
2 City of Menifee
Finance Committee
Meeting Minutes
City Council Chambers
29844 Haun Road
Menifee, CA 92586
Lesa Sobek, Committee Member
Dean Deines, Committee Member
Tuesday, February 7, 2023
2:00 PM Special Meeting
MINUTES
1. CALL TO ORDER: The Meeting was called to order at 2:04 p.m.
2. ROLL CALL: Committee Members Deines and Sobek were present.
3. PRESENTATIONS: None.
4. PUBLIC COMMENTS: None.
5. APPROVAL OF MEETING MINUTES: None
6. DISCUSSION ITEMS:
6.1 Award Enterprise Resource Planning (ERP) Financial Management Software Solution (MUNIS) Contract
Recommended Action:
Recommended submittal to City Council for award of a Software as a Services (SaaS) Agreement with Tyler Technologies, Inc. for a comprehensive Enterprise Resource Planning (ERP) Financial Management Software Solution (MUNIS) and professional support services (technology and finance) for ERP Project Implementation (CIP 23-14)
Approved 2-0
7. STAFF COMMENTS: None.
8. COMMITTEE REPORTS/COMMENTS ON COMMITTEE ACTIVITIES:
None
9. FUTURE AGENDA ITEMS:
9.1 Next Meeting Dates: March 14, 2023 at 2:00 pm
ADJOURNMENT: The Meeting was adjourned at 2
:44 pm
3 CITY OF MENIFEE
SUBJECT:
MEETING DATE:
TO:
PREPARED BY:
REVIEWED BY:
Proposed Series 1 Bond Issue for Community Facilities
District No. 2022-1 (Quartz Ranch)
March 14, 2023
Finance Committee
Margarita Cornejo, Deputy Finance Director
Regina Funderburk, Chief Financial Officer
RECOMMENDED ACTION
1. R
eview the proposed Series 1 bond issue request for Community Facilities District No. 2022- 1 (Quartz Ranch) (“CFD No. 2022-1”) by Lennar Homes to finance the costs of certain public improvements for the development of a residential tract containing 379 units within the City; and
2. R
ecommend the finance team to proceed with preparation of the Official Statement and other legal documents related to the transaction for presentation to the City Council at a future City Council meeting.
DISCUSSION
T
he developer, Lennar Homes, owns a residential tract containing 379 proposed lots within the City. The proposed residential tract is located north of Holland Road, south of La Piedra Road , and west of Bradley Road. Table 1 provides a summary of the CFD 2022- 1 formation steps completed to date:
Ta
ble 1: Summary of CFD 2022-1 (Quartz Ranch) Formation:
Description Date
Finance Committee CFD Formation Review February 22, 2022 Resolution of Intention April 6, 2022
Resolutions of CFD Formation (City Council Approval) May 18, 2022/ 2nd Reading June 1, 2022
Request for Bond Issuance, Series 1 February 14, 2023
Finance Committee Bond Issuance Series 1 Review March 14, 2023 On F
ebruary 14, 2023, Lennar Homes requested the issuance of bonds for Community Facilities District No. 2022-1 (Quartz Ranch) to fund eligible facilities under the first series, (“Series 1”) of bonds.
4 City of Menifee Staff Report
Quartz Ranch – CFD Bond
March 14, 2023
Currently of the 190 proposed lots, all 190 lots have building permits issued, 62 sold & in escrow, and 77 Sold & Closed. Based on the builder’s projections by August they should have 100% of their building permits issued and 92% of their units closed. The builder is requesting to issue the bonds for approximately 50% of the lots within the project development for an estimated $10,365,000. The bond authorization limit for this District is not to exceed $ 27M. Due to current interest rates it is anticipated that all the eligible facilities of approximately $8.9M would be funded through the bond sale.
A
preliminary bond analysis was prepared by Spicer Consulting Group to evaluate the viability of the bond issuance estimating the valuation, delinquency history, and effective tax rates (ETR).
The development has a relatively strong value to lien ratio of 12.33:1, greater than the City’s policy of 4:1 and an estimated ETR less than 1.83-1.96%. The current FY 2023-24 will be the first year the CFD taxes are levied for the CFD, therefore there are no prior year delinquencies. Based on current interest rates the CFD taxes levied could be reduced by at least 10% while fully funding the eligible improvements. The improvements proposed to be financed include:
Ci
ty Development Impact Fees and Facilities
EMWD Fees
Menifee Union School District Fees
Perris Union High School Fees
Thi
s item is to discuss bond issuance criteria and review the proposed bond issuance for CFD No. 2022-1, Series 1 Bonds.
ATTACHMENTS
1. CFD 2022-1 Proforma Summary
2. Project Map
3. Preliminary Bond Sale Analysis
4. Boundary Map
5. CFD 2015-2 Annexation 29 Maintenance
6. Bond Issue Request
5 CFD 2022‐1 (Quartz Ranch)
Proforma Summary Sheet
Applicant: Lennar Homes
Assumptions
Average Coupon 4.75%
Priority Administration $30,000
Cost of Issuance $250,000
Capitalized Interest Period 2 Months
Special Tax Escalation 2%
Bond Term 30 Years
Underwriter Discount 2.00%
Total Special Tax Revenues – FY 2023‐24 $603,256
Estimated Sources and Uses
Sources
Par Bond Amount $10,365,000
Uses
Reserve Fund $876,643
Capitalized Interest $82,056
Underwriter Discount $207,300
Cost of Issuance $250,000
Improvement Fund $8,949,001
Allocation of Improvement Fund
Description Original Total Funded 2023A Bonds Remaining Eligible City Facilities $5,645,550 $5,654,550
City Fees $2,867,514 $1,437,540
City Premium $573,503 $287,508
EMWD Fees $6,398,657 $1,569,403
Menifee USD Fees $3,594,144 $0
Perris UHSD Fees $1,074,505 $0
Total $20,162,873 $8,949,001 $11,213,872
City Policy
Acreage Gross: 80.37; Net: 80.14
Development Description Detached Single Family Residential Number of Units (50 min) 379 Units; Bonding on 190
Estimated Home Size Range 1,823 SF to 4,134 SF
Average Home Size 2,559 SF
Average Estimated Home Price $603,256
Total Effective Tax Rate (2.00% Max) 1.92%
CFD Tax Rate Range $2,837 to $3,960
Escalation (2.00% Max) Yes, 2.00%
Maintenance CFD Annexing, CFD 2015‐2 Annex 29
Maintenance CFD Rate $745/Unit
6 ATTACHMENT #1
PROJECT LOCATION MAP
COMMUNITY FACILITIES DISTRICT NO. 2022-1 (QUARTZ RANCH)
Scott Rd
7 CITY OF MENIFEE
Community Facilities District No. 2022-1
(Quartz Ranch)
Preliminary Bond Analysis
As of 2/27/2023
Preliminary Bond Compliance Table
Requirement 2022-1
1. Value to Lien(1) 4.00:1 12.33:1
2. Delinquency Levels Less than 5% N/A
3. Effective Tax Rate(2) 2.00% 1.83% - 1.96%
(1) Value to Lien is based upon estimated sizing information and Proposed Home Prices. (2) Range includes estimated FY 2023-24 enrollment.
1. General Information & Development Status
District Formation Date May 19, 2022
District Assessed Value(1) N/A
Bond Structure 100% Assigned
Estimated Preliminary Par Amount
(2) $10,365,000
Preliminary Value to Lien(3) 12.33:1
(1) District Assessed Value information not available via Riverside County as of 2/14/2023 (2) Par amount estimated based on estimated 4.75% Interest Rate. (3) Value to Lien is based upon estimated sizing information and Proposed Home Prices. 3/1/2023 Ownership Status As Of
Tract No. Land Owner Map Recordation
Several Lennar Homes 11/15/2018
No. Lots @
Buildout
Permits Issued as of
2/14/2023
Developed
Percentage
Sold & In Escrow
to Date
Sold & Closed
to Date
Ave Monthly
Absorption
Five Month
Projection
379 Lots 190 Lots 50% 62 77 7 174 Lots
Remaining 189 Lots Projected Closed 92%
Projected Permitted 100%
2. Special Tax Levy & Delinquency Status
No. Parcels FY 2022-23 Levy Delinquencies(1)
190 Lots $0 N/A
(1) Delinquency information is unavailable as the FY 2023-24 levy is the district's inaugural levy.
3. Bond Issuance Impact to Property Owners
Avg Home
Value(1) Ad-Valorem Tax Other Taxes CFD Tax Total Tax ETR $580,773 $6,879 $1,100 $3,175 $11,154 1.92%
(1) Based upon Sales Price provided by Lennar on 3/1/2023.
4. Proposed Use of Proceeds (Preliminary)
Estimated Project Fund Capacity: $14,497,565
Sources Total
Bond Proceeds: Par Amount 10,365,000 $
Facilities Special Tax Levy FY 22-23(2) -$
Total Sources 10,365,000 $
Uses Total
Project Fund Proceeds 8,949,001 $
Underwriter's Discount 207,300 $
Capitalized Interest - 2 months 82,056 $
Debt Service Reserve Fund 876,643 $
Cost of Issuance 250,000 $
Total Uses 10,365,000 $
Net Bond Funds -$
(2) No Special Taxes levied for FY 22-23.
Criteria
Estimated Average Tax Bill for FY 23-24
8 9
10 11
12 13
14 15
16 17
28202 CABOT RD | SUITE 620 | LAGUNA NIGUEL, CA 92677
PHONE: (949) 542-7070 | FAX: (949) 542-7076
www.zimmermangroup.com
February 14, 2023
Rochelle Clayton
Assistant City Manager
City of Menifee
29844 Haun Road
Menifee, CA 92586
T. (951) 723-3701
E. [email protected]
RE: Bond Issuance Request, CFD No. 2022-1 (Quartz Ranch)
Dear Ms. Clayton,
On behalf of Lennar Homes (“Developer”), we are requesting the City of Menifee (“City”) move forward with the issuance of a series of bonds (“Bonds”) for CFD No. 2022-1 (Quartz Ranch) (“CFD”). The CFD is includes 379 lots within Tract Map No s. 28786, 28791, 28792, 28793, & 28794 (the “Project”). We would like to issue a series of bonds secured by roughly 50% of the lots within the Project (“Series 1 Bonds”).
A summary of the development status for the proposed Series 1 Bonds is included in the table below.
CFD No. 2022-1 (Quartz Ranch)
Development Status Units % of Total
Closed Homes 77 42%
Completed Homes (8 Models) 8 4%
Under Construction/Sold 43 24%
Under Construction/Unsold 11 6%
Finished Lots (Permitted) 43 24%
Series 1 Bonds - Total Units 182 100%
The attached Exhibit A shows the estimated bond sizing and debt service schedule for the Series 1 Bonds, which results in approximately $8.5M in construction proceeds. The construction proceeds would fund City impact fees and facilities, EMWD facilities, and Menifee Union S chool District facilities as shown in the "Allocation of Improvement Fund" section of Exhibit A. The purpose of issuing two series of bond is to limit the special taxes to be levied on property owned by the Developer. Given that interest rates have dropped over the last few months and the City recent suc cess in selling bonds, we believe it's on optimal time to move forward with the Series 1 Bonds.
We appreciate your consideration of this request and look forward to working with the City team to issue bonds for the Project. If you have any questions, please contact me at (949) 542-7072.
Sincerely,
John Zimmerman
Principal
CC: Regina Funderburk, City of Menifee – Chief Financial Officer Margarita Cornejo, City of Menifee – Deputy Finance Director Shane Spicer, Spicer Consulting Group
Jeremiah Acayturri, Lennar Homes – Project Manager
Geoff Smith, Lennar Homes – Vice President
18 EXHIBIT A
Lennar Homes - Quartz Ranch
City of Menifee CFD No. 2022-1 (Quartz Ranch)
Series 1 Bond Sizing and Debt Service Schedule
February 14, 2023
ISSUANCE ASSUMPTIONS ESTIMATED SOURCES AND USES ALLOCATION OF IMPROVEMENT FUND * Closing Date 7/1/2023 Sources Per Unit Total
Special Tax Escalation 2.000% Par Bond Amount 9,895,000$ City Fees 7,589$ 1,381,198$ Annual Admin Expense 30,000$ City Fee Facilities 1,518 276,240 Admin Expense Escalation 2.000% Uses EMWD Fees 16,883 3,072,706 Debt Service Coverage 110.000% Reserve Fund 831,632$ School Fees 12,230 2,225,948 Underwriter Discount 2.000% Capitalized Interest 75,828 City Facilities 8,701 1,583,548 Issuance Costs Estimate 250,000$ Underwriter Discount 197,900 Total 46,921$ 8,539,640$ Capitalized Interest (Months) 2.00 Costs Of Issuance 250,000 Special Tax Revenue 575,055$ Improvement Fund 8,539,640 Total Uses 9,895,000$ * Preliminary subject to change.
BOND DEBT SERVICE
Period Special Tax Capitalized Net Debt Debt Service
Ending Revenue Admin Principal Yield Interest Interest Service Coverage 9/1/2023 -$ 30,000$ -$ 0.000% 75,828$ 75,828$ -$ NA 9/1/2024 575,055 30,600 35,000 2.426% 454,969 - 489,969 111.12% 9/1/2025 586,556 31,212 50,000 2.626% 454,120 - 504,120 110.16% 9/1/2026 598,287 31,836 60,000 2.896% 452,807 - 512,807 110.46% 9/1/2027 610,253 32,473 70,000 3.036% 451,070 - 521,070 110.88% 9/1/2028 622,458 33,122 85,000 3.036% 448,944 - 533,944 110.37% 9/1/2029 634,907 33,785 100,000 3.236% 446,364 - 546,364 110.02% 9/1/2030 647,605 34,461 110,000 3.366% 443,128 - 553,128 110.85% 9/1/2031 660,557 35,150 125,000 3.486% 439,425 - 564,425 110.80% 9/1/2032 673,768 35,853 140,000 3.627% 435,068 - 575,068 110.93% 9/1/2033 687,243 36,570 160,000 3.868% 429,990 - 589,990 110.29% 9/1/2034 700,988 37,301 175,000 4.069% 423,801 - 598,801 110.84% 9/1/2035 715,008 38,047 195,000 4.207% 416,680 - 611,680 110.67% 9/1/2036 729,308 38,808 215,000 4.314% 408,477 - 623,477 110.75% 9/1/2037 743,894 39,584 240,000 4.402% 399,202 - 639,202 110.19% 9/1/2038 758,772 40,376 260,000 4.484% 388,637 - 648,637 110.75% 9/1/2039 773,948 41,184 285,000 4.346% 376,978 - 661,978 110.69% 9/1/2040 789,427 42,007 310,000 4.406% 364,592 - 674,592 110.80% 9/1/2041 805,215 42,847 340,000 4.466% 350,934 - 690,934 110.34% 9/1/2042 821,320 43,704 370,000 4.516% 335,749 - 705,749 110.18% 9/1/2043 837,746 44,578 400,000 4.566% 319,040 - 719,040 110.31% 9/1/2044 854,501 45,470 430,000 4.676% 300,776 - 730,776 110.71% 9/1/2045 871,591 46,379 465,000 4.676% 280,669 - 745,669 110.67% 9/1/2046 889,023 47,307 505,000 4.676% 258,926 - 763,926 110.18% 9/1/2047 906,803 48,253 545,000 4.676% 235,312 - 780,312 110.03% 9/1/2048 924,939 49,218 585,000 4.676% 209,828 - 794,828 110.18% 9/1/2049 943,438 50,203 625,000 5.013% 182,473 - 807,473 110.62% 9/1/2050 962,307 51,207 675,000 5.013% 151,142 - 826,142 110.28% 9/1/2051 981,553 52,231 725,000 5.013% 117,304 - 842,304 110.33% 9/1/2052 1,001,184 53,275 780,000 5.013% 80,960 - 860,960 110.10% 9/1/2053 1,021,208 54,341 835,000 5.013% 41,859 - 876,859 110.26% Total 23,328,860 1,271,383 9,895,000 4.750% 10,175,050 75,828 19,994,222 110.02% 19 CITY OF MENIFEE
SUBJECT: 10 Year Financial Forecast Model
MEETING DATE: March 14, 2023
TO: Finance Committee
PREPARED BY: Margarita Cornejo, Deputy Finance Director REVIEWED BY: Regina Funderburk, Chief Financial Officer
RECOMMENDED ACTION
1. Receive and file summary report on City of Menifee’s 10 Year Financial Forecast Model.
DISCUSSION
As part of the City’s efforts to enhance and expand overall financial management operations, the City has concentrated efforts into incorporating multi-year financial planning. Multi-year planning provides the City Council, City staff, and public with greater certainty on planned staffing, programs and services and the necessary revenues needed to accommodate these.
In the fall of 2022 the City engaged Urban Futures to prepare a base 10 Year Financial Model , which can be tailored and actively managed by staff in the regular financial management activities of the City. In development of the City’s 10 year Financial Model, working with Urban Futures, the model incorporated known and anticipated factors that may have a significant impact on future revenues and expenditures. The overall foundation of the model incorporates historical city revenues and expenditures, general and relevant economic trends and outlooks, and applicable econometrics/data.
Going forward staff will continue to proactively use the model in development of budgets and long- term financial planning.
ATTACHMENTS
None
20