28202 CABOT ROAD| SUITE 620 | LAGUNA NIGUEL, CA 92677
PHONE: (949) 542-7070 | FAX: (949) 542-7076
www.zimmermangroup.com
May 16, 2024
Margarita Cornejo
Deputy Finance Director
City of Menifee
29844 Haun Road, Menifee, CA 92586
[email protected]
Re: CFD No. 2022-3 (Legado) Improvement Area No. 2 Amendment Ms. Cornejo:
I am writing on behalf of BLC Fleming LLC to request the City of Menifee initiate the process of amending Improvement Area No. 2 of CFD No. 2022- 3 (Legado). As you are aware, Lennar Homes has purchased the property within Improvement Area No. 1 and is under contract to purchase the property within Improvement Area No. 2. The attached provides further information regarding the anticipated purchase of the Improvement Area No. 2 property, the details of the proposed CFD amendments, and how the amendments will lead to a more orderly CFD financing program for both the property owners and the City.
We would appreciate your review of the attached and the opportunity to discuss in further detail with City staff and finance team members. Thank you in advance for your consideration, and pl ease feel free to contact me with any questions or comments.
Sincerely,
Jim
Zimmerman
cc:
Rick Nelson; BLC Fleming, LLC
John Lucarelli; BLC Fleming, LLC
Geoff Smith; Lennar Homes
Shane Spicer; Spicer Consulting Group
CFD No. 2022-3 IA 2 Amendment
May 16, 2024
BLC Fleming, LLC (“Developer”) and the City of Menifee (“City”) previously worked together to form City CFD No. 2022-3 (Legado) (“CFD”) for the development project known as Legado (“Project”). The CFD included two separate improvement areas designated Improvement Area No. 1 (“IA 1”) and Improvement Area No. 2 (“IA 2”). Developer recently entered into a contract to sell the Project to Lennar Homes (“Lennar”), but the property is to be acquired in three separate “Phases” or takedowns. Lennar has closed on the Phase 1 property (491 homesites), but the closing of the Phase 2 property (201 homesites) and the Phase 3 property (330 homesites) is scheduled for two separate times in the future. The following image illustrates the property within each Phase.
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s shown below, the boundary of IA 1 is entirely within the Phase 1 property. However, IA 2 includes property in both Phase 2 and Phase 3.
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n connection with the closing of Phase 1, Developer and Lennar entered into several partial assignment agreements to effectively assign IA 1 of the CFD to Lennar for Phase 1 of the Project. The partial assignments related to the Reimbursement Agreement, t he Acquisition, Construction And Funding Agreement, and the Joint Community Facilities Agreement. Since Phases 2 and 3 will be acquired at different times, Developer and Lennar would like to amend the boundary of IA 2 and create a new Improvement Area No. 3 (“IA 3”). The new IA 2 boundary would consist of the Phase 2 property currently within the CFD, and the IA 3 boundary would consist of the Phase 3 property currently with in the CFD.
No new property would be added to the CFD.
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he proposed CFD amendment will keep things clear and orderly between the City, Developer and Lennar as the Project develops and as CFD bonds are issued. It is also possible that Phase 2 and/or Phase 3 could ultimately be acquired by a homebuilder other than Lennar. If that happens, having a separate improvement area for each builder in the CFD will keep the CFD bond issuance and reimbursement process very clean and avoid the potential for different parties wanting to access the same CFD funds for their respective development costs. The following image shows the proposed boundaries of IA 2 and IA 3 following the amendment.
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n addition, the tax zone structure that currently exists within IA 2 will stay the same as well as transfer over to the new IA 3. The tax zones are also noted in the image above. In addition to the preparation and approval of a new boundary map, the following items set forth the other CFD related documents that will need to be prepared to effectuate the boundary adjustment.
1. RM
As – The rate and method of apportionment (“RMA”) for IA 2 will need to be amended. The special tax rates for developed property pursuant to Section D.1.a. of the IA 2 RMA will not change; however, since the acreage of taxable property within IA 2 will change, the minimum taxable acreage will need to be reduced, and the special tax rate for approved property and undeveloped property will be modified accordingly. A new RMA for IA 3 will be prepared which, in all material respects, will be a duplicate of the IA 2 RMA. The developed property tax rates for IA 3 will be the same as those within IA 1 and IA 2.
2. Bond Authorization – The existing maximum bond authorization for IA 2 can be reduced, and a ne w
bond authorization for IA 3 will need to be established.
3. CFD Facilities – The fees and improvements currently authorized to be funded by the CFD would remain unchanged, except that such facilities would be authorized to be funded from any of IA 1, IA 2, or
IA 3.
4. CFD Agreements – Since the CFD funding agreement and JCFA with Eastern Municipal Water District reference only IA 1 and IA 2, amendments or separate agreements should be prepared and approved to incorporate the addition of IA 3.
5. CFD Special Tax Liens – Concurrent with the creation of IA 3 and the recordation of the IA 3 special tax lien on the Phase 3 property, the lien of IA 2 will need to be removed from the Phase 3 property.
As with any community facilities district formation, the Developer will deposit funds with the City to cover the costs of the requested CFD amendment. In addition, it is important to note that the proposed CFD amendment described herein is supported by both Developer and Lennar. Based on the development plan of the Project, this amendment will allow for a cleaner and more orderly CFD financing process for the Project, which is a benefit to Developer, City, Lennar, and any other potential homebuilders.