CITY OF MENIFEE
SUBJECT: Issuance of Special Tax Bonds for Improvement Area 1 of Community Facilities District 2022-3, Legado
MEETING DATE: May 6, 2026
TO: Mayor and City Council
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. Adopt a resolution authorizing the issuance of special tax bonds and the execution and delivery of bond documents in connection with Improvement Area 1 of Community Facilities District 2022-3, Legado, located south of Rouse Road and west of Antelope Road; and
2. Authorize the Finance Department to establish the necessary revenue and expenditure budgets and corresponding appropriations for the bond issuance.
DISCUSSION
The City Council previously completed the necessary proceedings to establish Community Facilities District No. 2022-3 of the City of Menifee, Legado, (District). As part of the proceedings, the City Council declared the necessity to issue bonds on behalf of the District for Improvement Area 1 therein (Improvement Area 1 or the Improvement Area) pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (Act).
On September 21, 2022, the City Council adopted the Resolution of Formation, which established the District and designated Improvement Area 1 therein, authorized the levy of a special tax (Special Tax), determined the necessity to incur bonded indebtedness in an amount not to exceed $40 million within Improvement Area 1, and called an election on the proposition of incurring bonded indebtedness, levying the Special Tax and setting an appropriations limit. On the same date, an election was held within Improvement Area 1 in which the property owner approved the proposition authorizing the issuance of bonds in an amount not to exceed $40 million.
The Improvement Area is generally located east of Interstate 215 along the south side of Rouse Road, north of McCall Boulevard at Sherman Road in the northern portion of the City. The property
City of Menifee Staff Report
Issuance of Special Tax Bonds for Improvement Area 1 of CFD 2022-3, Legado May 6, 2026
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in the Improvement Area is being developed by Lennar Homes of California, LLC (Lennar) as a community named “Legado.”
The Improvement Area includes approximately 149 gross acres planned for 491 single-family detached homes. As of March 3, 2026, the date of value of the Appraisal, Lennar had completed and conveyed 127 homes within the Improvement Area to individual homeowners, and as of such date, Lennar owned eight completed model homes and 66 homes under construction. The remaining 290 lots were owned by KL LB Buy 1 LLC (the “Lennar Landbank”), which is serving as Lennar’s landbank for the development of the Improvement Area.
Annual debt service on the proposed Special Tax Bonds, Series 2026A (2026 Bonds) will be sized based on 267 parcels classified as Developed Property beginning in Fiscal Year 2026-27. The bond documents allow for the issuance of additional bonds payable from Special Tax revenues on parity with the 2026 Bonds. It is anticipated that parity bonds will be issued in 2027.
The resolution before the City Council authorizes the issuance of the 2026 Bonds and the execution and delivery of certain documents in connection therewith as further described below, including a second amendment to the Acquisition, Construction and Funding Agreement (Acquisition Agreement) and a first amendment to Joint Community Facilities Agreement (JCFA) with Eastern Municipal Water District. The amendments are for the purpose of providing for the fact that the District now includes three improvement areas (instead of two) as a result of certain change proceedings undertaken in July 2025.
Based on current market conditions, the 2026 Bonds are estimated to have a par amount of approximately $15,445,000 with a final maturity of September 1, 2056, representing a 30-year financing term. Proceeds from the 2026 Bonds, estimated at more than $13.5 million, will finance public improvements benefiting the development within the District. The final par amount and interest rate structure will be determined when the 2026 Bonds are priced and sold, which is currently expected to occur on or around May 14, 2026.
As required under Section 5852.1 of the California Government Code (Code), good faith estimates have been provided by the Municipal Advisor. Based on the anticipated par amount and current market conditions, the true interest cost is estimated to be 5.33% and finance charges are expected to amount to roughly $458,000.
The property owners are expected to pay Special Taxes of approximately $3,034.50 to $5,210.16 per parcel in Fiscal Year 2026-27, depending on the size of the home. Such Special Taxes will increase 2.0% annually.
Given the level of development noted above and pursuant to the City’s policy requiring additional security if any one party is responsible for more than 20% of annual debt service, Lennar will provide a Letter of Credit that may be drawn upon by the District to cover payment of special taxes levied on property owned by Lennar Homes/the Lennar Landbank. The initial term of the Letter of Credit is one year, with renewals until certain development and conveyance thresholds are met.
City of Menifee Staff Report
Issuance of Special Tax Bonds for Improvement Area 1 of CFD 2022-3, Legado May 6, 2026
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Documents to be Approved
Approval of the attached Resolution authorizes the sale of the proposed 2026 Bonds and the execution of the following documents attached to this staff report:
Preliminary Official Statement
Bond Indenture
Continuing Disclosure Certificate
Bond Purchase Agreement
Joint Community Facilities Agreement Amendment
Acquisition Construction and Funding Agreement Amendment Bond Counsel and the City Attorney have reviewed the attached legal and financing documents on behalf of the District and the City. If the resolution is approved, City staff will continue to work with the financing team to finalize the aforementioned documents. The pricing of the bonds is targeted for the middle of this month, with bond closing anticipated approximately two weeks later.
This item was presented to the Finance Committee at its March 16 meeting. A motion was made and approved to bring the item forward for City Council consideration.
STRATEGIC PLAN OBJECTIVE
Regular City Business
FISCAL IMPACT
The 2026 Bonds will be paid from Special Taxes levied in the Improvement Area. There is no fiscal impact to the City’s General Fund. The City will, however, be required to provide administration for the Improvement Area, which will be funded as part of the annual Special Tax levy.
The property owners are expected to pay Special Taxes of approximately $3,034.50 to $5,210.16 per parcel in Fiscal Year 2026-27, depending on the size of the home. Such Special Taxes will increase by 2.0% per year.
ATTACHMENTS
1. CFD 2022-3 IA 1 Project Map
2. CFD 2022-3 IA 1 Good Faith Estimates
3. CFD 2022-3 IA 1 Resolution
4. CFD 2022-3 IA 1 Preliminary Official Statement
5. CFD 2022-3 IA 1 Bond Indenture
6. CFD 2022-3 IA 1 Continuing Disclosure Certificate
7. CFD 2022-3 IA 1 Bond Purchase Agreement
8. CFD 2022-3 IA 1 Appraisal Report
9. CFD 2022-3 IA 1 Joint Community Facilities Agreement Amendment
10. CFD 2022-3 IA 1 Joint Community Facilities Agreement (Original)
11. CFD 2022-3 IA 1 Acquisition Agreement Second Amendment
12. CFD 2022-3 IA 1 Acquisition Agreement (Original and First Amendment)