CITY OF MENIFEE
SUBJECT: Annual Update on Community Facility District Related Bond Premiums
MEETING DATE: July 9, 2024
TO: Finance Committee
PREPARED BY: Lauri Lockwood, Financial Analyst
REVIEWED BY: Travis Hickey, Chief Financial Officer
APPROVED BY: Armando G. Villa, City Manager
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RECOMMENDED ACTION
1. Receive annual report with updated details on Community Facility District related bond premiums.
DISCUSSION
In 1982, the Mello-Roos Community Facilities Act of 1982 (Government Code §53311-53368.3) was created to provide an alternate method of financing needed improvements and services. The Act allows any county, city, special district, school district or joint powers authority to establish a Mello-Roos Community Facilities District (“CFD”) which allows for financing of public improvements and services. CFDs are normally formed in undeveloped areas and are used to build necessary infrastructure improvements and/or provide essential services for incoming development. A CFD is created by a sponsoring local government agency and will include all properties that will benefit from the improvements to be constructed or the services to be provided.
Roughly five years ago, the City Council decided to allow developers to issue bonds to finance public facilities within CFDs. When that decision was made, the City Council also modified the “City’s Special Assessment and Community Facilities District Goals and Policy”, outlining what costs could be paid for with bond proceeds, the minimum expectations for credit quality and the maximum taxes allowable on properties within CFDs.
Within the revised policy, the City carved out an extra amount the City would receive if the developer pays City fees with bond proceeds. This amount is known as the “City Premium.” Per the policy, “when it is determined by the City that fees are to be financed, the City may collect a premium of the total fees to be financed. Such premium shall not exceed twenty percent (20%) of the total fees to be financed. The City may use the premium to finance public facilities and improvements directly benefiting and identified by the City as the most necessary to serve the
City of Menifee Staff Report
Update on CFD-related bond premiums
July 9, 2024
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specific needs of the portion of the City in which the Community Facilities District will be located.” Shortly after the closing date of the bond issuance, City staff submits a disbursement request to claim the amount of the City Premium and that amount is set aside for capital projects. During the development and review of the City’s five-year Capital Improvement Program (CIP) program, staff regularly looks for opportunities to use the bond premiums towards high priority projects.
The City closed on its first CFD bonds for CFD 2019-1 (Meadow Run) and CFD 2020-1 (McCall Mesa) on January 26, 2022. Since then, four other CFDs have issued bonds to finance public facilities. To date, the City has collected $1,933,007 in bond premiums summarized in Table 1 and allocated $128,076 toward projects. Today, a little more than $1.8 million remains in the capital projects account from the five other CFDs. However, the CIP Division has identified several prospective projects for several of the CFD premiums, as summarized within Table 1.
TABLE 1: City of Menifee CFD Bond Premiums Received
Looking forward, four other CFDs have been formed and are authorized for six bond issuances (CFDs with multiple improvement areas result in multiple bond issuances and multiple bond premiums). Three other CFDs will be officially formed and authorized for a total of six issuances after public hearings currently scheduled for the August 7, 2024, City Council Meeting. The exact amount of the City’s premiums that correspond to those 12 issuances will not be known until closer to the bonds’ issuance dates.
FISCAL IMPACT
There is no fiscal impact associated with the recommended action of this staff report as this is a receive and file report on the current CFD premiums.
ATTACHMENTS
1. Project Location Maps
CFD No.CFD NameSeries Issue Amount ($)City Fees FinancedPremium Amount ($) Premium Amount Allocated **CIP Project Year Appropriated2019-1Meadow Run2,750,000$ 640,380$ 128,076.00$ 128,076.00$ CIP 23-03: Bradley Rd/Paloma HS Entrance Street Improvement 22/23 2020-1McCall Mesa11,330,000$ 1,952,028$ 390,406.00$ -$ Proposed to be used for median improvements on Menifee Road. TBD 2020-1McCall Mesa3,580,000$ -$ -$ -$ N/A N/A 2020-2Del Oro 2,640,000$ 581,740$ 116,348.00$ -$ Proposed to be used for improvements to intersection of Albion and Antelope.TBD 2021-1Banner Park5,375,000$ 1,936,896$ 387,379.00$ -$ Proposed to be used to extend a pedestrian trail on Linderberger across Salt Creek.TBD 2021-1Banner Park6,435,000$ -$ -$ -$ N/A N/A 2021-2Sumac Ridge10,050,000$ 1,686,475$ 337,295.00$ -$ Proposed for pedestrian and bicycle improvements in the area for the new Menifee elementary school.TBD 2022-1Quartz Ranch11,525,000$ 2,867,514.00$ 573,503.00$ -$ Proposed for widening on Holland Road from just west of Bradley Road to Haun Road.TBD ** Premium amount is not based on the bond proceeds, but rather the amount of city fees financed with bond proceeds.