City of Sacramento
City Council - 5PM Report
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File ID: 2022-02207 2/7/2023 Consent Item 7.
Delta Shores Community Facilities District No. 2019-01 (Improvements) Interpretation of the Amended and Restated Rate and Method of Apportionment of Special Tax for Improvement Area No. 1
File ID: 2022-02207
Location: District 7, Represented by Councilmember Jennings; District 8, Represented by Councilmember Vang
Recommendation: Adopt a Resolution Interpreting the Amended and Restated Rate and Method of Apportionment (RMA) for Improvement Area No. 1 (IA-1) of the Delta Shores Community Facilities District No. 2019-01 (Improvements)
Contact: Arwen Wacht, Senior Development Project Manager, (916) 808-7535, [email protected], Sheri Smith, Special Districts Manager, (916) 808-7204, [email protected], Department of Finance
Presenter: None
Attachments:
1-Description/Analysis
2-Resolution
3-Exhibit A - Revision to Exhibit 1 of the Amended and Restated RMA for IA-1 Description/Analysis
Issue Detail: On September 24, 2019, Council adopted Resolution No. 2019-0371 establishing the Delta Shores Community Facilities District No. 2019-01 (Improvements) (CFD), designating three separate improvement areas therein, Improvement Area No. 1 (IA-1), Improvement Area No. 2 (IA-2) and Improvement Area No. 3 (IA-3), and providing for the levy of special taxes within each of the three improvement areas to finance the acquisition and construction of certain public facilities. The CFD currently encompasses approximately 535 acres of the Delta Shores development project within the Delta Shores Planned Unit Development area.
On February 1, 2022, Council adopted Resolution No. 2022-0036 enacting changes to the Rates and
File ID: 2022-02207 2/7/2023 Consent Item 7.
Methods of Apportionment (RMA) of Special Taxes, changes to the appropriations limits, and changes to the authorized amounts of bonded indebtedness in and for the improvement areas designated in the CFD. Exhibit 1 of the Amended and Restated RMA for IA-1 identified 157 expected units with expected revenue of $340,376 for Village LDR-1, based on the maximum special tax rate as of FY2021-22 (subject to an escalator of two-percent per annum), and 81 expected units with expected revenue of $175,608 for Village LDR-2, based on the maximum special tax rate as of FY2021-22 (subject to an escalator of two-percent per annum). The developer has since identified that the expected units and expected revenue for Villages LDR-1 and LDR-2 as currently set out in Exhibit 1 of the Amended and Restated RMA for IA-1 were inadvertently reversed at the time of the drafting and approval of the Amended and Restated RMA for IA-1 such that Exhibit 1 of the Amended and Restated RMA for IA-1 should have reflected 81 expected units and expected revenue of $175,608 for Village LDR-1 and 157 expected units and expected revenue of $340,376 for Village LDR-2. The correction in the expected number of units and expected revenue between Villages LDR- 1 and LDR-2 is not expected to impact overall special tax revenue of IA-1 since the maximum special tax rates in both villages are identical as noted below:
· $2,168 per unit for property classified as Developed Property · $2,168 per unit for property classified as Final Subdivision Property However, maximum special tax rates for units within these two villages could be substantially impacted as development proceeds if Exhibit 1 of the Amended and Restated RMA for IA-1 is not corrected to reflect the actual originally expected units and expected revenue for the two villages.
City staff consulted with NBS, the City’s special-tax consultant to determine if there is a reasonable way to interpret and correct the expected units and revenues for these two villages. The Amended and Restated RMA for IA-1 allows the CFD Administrator to update Exhibit 1 with the revised units and expected revenue derived from the planned development of each village and also allows the City to interpret, clarify and/or revise the Amended and Restated RMA to correct any inconsistency, vagueness, or ambiguity as long as the correction does not materially affect the levy and collection of the Special Tax. Therefore, City staff has concluded that a reasonable approach is to interpret the Amended and Restated RMA for IA-1 and correct Exhibit 1 of the Amended and Restated RMA for IA -1 to reflect the correct expected units and revenues for Villages LDR-1 and LDR-2, as shown in the attached Exhibit A.
It is worth noting that City staff reached out to Orrick, Herrington & Sutcliffe LLP (Orrick), the City’s primary bond counsel, to determine whether the approach recommended by NBS to City staff conflicts with the Mello-Roos Act, which governs the CFD. Orrick advised that the recommended interpretation and correction of Exhibit 1 of the Amended and Restated RMA for IA-1 is a reasonable interpretation of the Amended and Restated RMA for IA-1.
Policy Considerations: Although the recommended action does not formally establish policy, it does constitute a precedent that, although nonbinding, may nevertheless be invoked should the City have
File ID: 2022-02207 2/7/2023 Consent Item 7.
to address similar interpretations in other Mello-Roos districts.
Economic Impacts: Not applicable.
Environmental Considerations:
California Environmental Quality Act (CEQA): Approval of the recommended interpretation is not a “project” subject to CEQA because it (a) has no potential to cause a significant effect on the environment; (b) approves a continuing administrative activity and is thus excluded from the definition of “project”; and (c) concerns a governmental funding mechanism that does not involve any commitment to any specific project that may result in a potentially significant physical impact on the environment. [14 Cal. Code Regs. §§ 15061(b)(3), 15378(b)(2), and 15378(b)(4)].
Sustainability: Not applicable.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: It is reasonable and equitable to interpret the Amended and Restated RMA for IA-1 as shown in attached Exhibit A, as it will remain in compliance and is consistent with the overall Amended and Restated RMA for IA-1, the Mello-Roos Act, and is not expected to result in a change in the overall expected units nor revenue for IA-1.
Financial Considerations: There are currently no financial impacts to any City funds. Any costs related to the changes in total special taxes will be paid for either by the Developer or by the taxpayers within IA-1.
Local Business Enterprise (LBE): Not applicable.
RESOLUTION NO. 2023-
Adopted by the Sacramento City Council
February 7, 2023
RESOLUTION INTERPRETING THE AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR IMPROVEMENT AREA NO. 1 OF THE DELTA SHORES COMMUNITY FACILITIES DISTRICT NO. 2019-01 (IMPROVEMENTS)
BACKGROUND
A. The City Council conducted proceedings under and 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), and all laws amendatory thereof or supplemental thereto (the “Act”), to form its Delta Shores Community Facilities District No. 2019-01 (Improvements), City of Sacramento, County of Sacramento, State of California (the “CFD”), to designate within the Community Facilities District “Improvement Area No. 1”, “Improvement Area No. 2”, and “Improvement Area No. 3” (each an “Improvement Area” and collectively the “Improvement Areas”), to authorize the levy of special taxes therein for the purpose of financing the acquisition and construction of certain public facilities, to establish the appropriations limit for each Improvement Area and to authorize the issuance of bonded indebtedness or other debt (as defined in the Act) (“Debt”) to finance such public facilities, all as set forth in the City Council’s Resolution No. 2019-0371 (the “Resolution of Formation”), Resolution No. 2019-0372 (the “Resolution Deeming it Necessary to Incur Bonded Indebtedness for Improvement Area No. 1”), Resolution No. 2019-0373 (the “Resolution Deeming it Necessary to Incur Bonded Indebtedness for Improvement Area No. 2”) and Resolution No. 2019-0374 (the “Resolution Deeming it Necessary to Incur Bonded Indebtedness for Improvement Area No. 3”) each adopted on September 24, 2019.
B. On February 1, 2022, the City Council adopted Resolution No. 2022-0036 (the “Resolution of Change”) in which it (i) replaced the Rate and Method of Apportionment of the special tax for Improvement Area No. 1 with the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1, increasing the aggregate principal amount of Debt that may be incurred in and for Improvement Area No. 1 from $8.0 million to $17.0 million and increasing the appropriations limit in and for Improvement Area No. 1 from the initial amount of $8.0 million for fiscal year 2019-20 to $17.0 million for fiscal year 2021-22; (ii) replaced the Rate and Method of Apportionment of the special tax for Improvement Area No. 2 with the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 2, decreasing the aggregate principal amount of Debt that may be incurred in and for Improvement Area No. 2 from $18.8 million to $18.0 million and decreasing the appropriations limit in and for 2 Improvement Area No. 2 from the initial amount of $18.8 million for fiscal year 2019-20 to $18.0 million for fiscal year 2021-22; and (iii) replaced the Rate and Method of Apportionment of the special tax for Improvement Area No. 3 with the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 3, increasing the aggregate principal amount of Debt that may be incurred in and for Improvement Area No. 3 from $39.6 million to $63.0 million and increasing the appropriations limit in and for Improvement Area No. 3 from the initial amount of $39.6 million for fiscal year 2019-20 to $63.0 million for fiscal year 2021-22.
C. Among other things, the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1 provides that the City Council may, by resolution, interpret, clarify and/or revise the RMA to correct any inconsistency, vagueness or ambiguity as it relates to the special tax, method of apportionment, classification of parcels, and definitions as long as such correction does not materially affect the levy and collection of the special tax. (RMA § G.)
D. The primary landowner of the CFD, M&H Realty L.P., has identified that the expected units and expected revenue for Villages LDR-1 and LDR-2 as currently set out in Exhibit 1 of the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1 were inadvertently reversed at the time of drafting and approval of the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1, such that Exhibit 1 of the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1 should have reflected 81 expected units and expected revenue of $175,608 for Village LDR-1 and 157 expected units and expected revenue of $340,376 for Village LDR-2, as shown on attached Exhibit A. Working with NBS (the City’s special tax consultant), City staff determined that the correction of the expected units and revenues is significant enough to require the interpretation and correction of the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1 by the City Council.
E. After consulting with NBS and Orrick, Herrington & Sutcliffe LLP (the City’s primary bond counsel), City staff determined that a reasonable way to address the correction is to interpret the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1 and revise Exhibit 1 of the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1 to correct the expected units and expected revenue for each of Village LDR-1 and LDR-2, as shown in the attached Exhibit A. The correction does not materially affect the levy and collection of the special tax.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
3 Section 1. The City Council finds that the statements in the background paragraphs A through E are true.
Section 2. The Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1 is hereby interpreted and corrected as follows:
Exhibit 1 of the Amended and Restated Rate and Method of Apportionment of the special tax for Improvement Area No. 1 is corrected as shown in the attached Exhibit A of this resolution.
Section 3. This interpretation of the Amended and Restated RMA for Improvement Area No. 1 is fair and equitable to all owners of property within the CFD and thus is consistent with Government Code § 53325.3, which says that the tax may be apportioned on any “reasonable basis as determined by the legislative body [i.e., the City Council].”
EXHIBIT A – REVISION TO EXHIBIT 1 OF THE AMENDED AND RESTATED RMA FOR IA-1
FIRST REVISION
EXHIBIT 1
EXPECTED UNITS/REVENUE PER VILLAGE FOR DEVELOPED PROPERTY (FISCAL YEAR 2021-22)
Land Use
Class Village 1
Expected
Units 2
Expected
Revenue 3
1 LDR-1
157
81 $340,376
$175,608
1 LDR-2
81 157
175,608
340,376
2 MDR-1 110 191,950
2 MDR-2 34 59,330
3 HDR-1 59 14,750
1 As shown on Exhibit 2 to this RMA.
2 There is a total of 441 Expected Units within Improvement Area No. 1. 3 The total Expected Revenue within Improvement Area No. 1 is $782,014, stated in Fiscal Year 2021-2022 dollars. On each July 1, commencing on July 1, 2022, the Expected Revenue shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year