CITY OF MENIFEE
SUBJECT: Bond Premium Reimbursement with Lennar Homes for Community Facilities District No. 2022-3, Legado, IA1
MEETING DATE: October 14, 2025
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. Discuss the proposed bond premium reimbursement for Community Facilities District No. 2022-3, Improvement Area 1, and recommend presenting it to the City Council for consideration.
DISCUSSION
In June 2020, BLC Fleming entered into a Development Agreement (the DA) with the City of Menifee in relation to the 331-acre Legado property located northwest of Antelope Road and Chambers Avenue and south of Rouse Road. As part of that agreement, the developer was conditioned to construct certain neighborhood parks and paseos. Because the anticipated cost of constructing the parks and paseos was expected to exceed what the developer was required to pay, the parties agreed to enter into a reimbursement agreement wherein the City would use Development Impact Fees (DIF) collected from nearby properties to reimburse the developer for the excess costs.
Two years later, BLC Fleming worked with the City to form a Community Facilities District (CFD or CFD 2022-3) to issue bonds to finance public facilities required for the 1,022 homes planned within the residential development.
As a condition of using bond proceeds to finance project-related DIF, the Developer agreed to pay 20% premium to the City on all DIF amounts funded with such proceeds. The Legado development ultimately was divided into three separate improvement areas (IAs) or phases, known as IA1, IA2, and IA3, each of which has an associated City premium.
City of Menifee Staff Report
Bond Premium Reimbursement Agreement for CFD 2022-3, Legado October 14, 2025
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Last year, BLC Fleming entered into a contract to sell the project to Lennar Homes in three separate transactions corresponding to the three separate improvement areas. Lennar Homes has closed on the land in IA1 and is under contract to purchase IA2 and IA3. When Lennar purchased IA1 it assumed all responsibilities assigned to the developer for that area, including the requirement to construct the parks and paseos.
At this point, the estimated cost to build the parks and paseos has nearly doubled, rising from an estimated $3 million to nearly $5.9 million. The City and the developer now are working to amend the Development Agreement to address the resulting $2.9 million funding gap associated with the construction of the parks and paseos. Additionally, to assist in closing that funding gap, the City is proposing to allow the developer to be reimbursed from the CFD bond proceeds an additional $219,477, which is the amount of the IA1 bond premium. The developer would adhere to all standard reimbursement processes and could only be reimbursed for eligible facilities. The City premium is intended to be used for projects in the general area of the development that provide a specific benefit to residents of the development, and allocating the premium to go toward eligible CFD improvements would meet that goal. The reimbursement to the developer would not be made until after bonds are issued for IA1.
If the committee recommends moving forward with directing the use of the CFD bond premium from IA1, a separate agreement delineating the CFD premium reimbursement would be presented for City Council consideration. Alternatively, the CFD documents could be amended to waive the premium, allowing for more CFD bond proceeds to be available to Lennar for reimbursement.
FISCAL IMPACT
The $219,477 would come from CFD bond premium proceeds associated with CFD No. 2022-3 IA1. These funds are restricted for use on public improvements that directly benefit the development area. The reimbursement will not impact the City’s General Fund and will only be issued after bonds have been sold.
ATTACHMENTS
None.