City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2025-00093 1/14/2025 Consent Item 16.
First Amendment to Acquisition and Shortfall Agreement for the Delta Shores Community Facilities District No. 2019-01 (Improvements)
File ID: 2025-00093
Location: District 7, Represented by Councilmember Jennings; District 8, Represented by Councilmember Vang
Recommendation: Pass a Motion authorizing the City Manager or the City Manager’s designee to execute the First Amendment to Acquisition and Shortfall Agreement with the M&H Realty Partners VI, L.P. (M&H) and Jen California 27, LLC (JEN) for improvements to be constructed as part of the City of Sacramento Delta Shores Community Facilities District No. 2019-01 (Improvements) (CFD) in order to align the Agreement terms with the Resolution of Change Relating to the CFD and Improvement Areas Designated Therein adopted by Council.
Contact: Eric Frederick, Special Districts Manager, (916) 808-5129, [email protected], Department of Finance
Presenter: None.
Attachments:
1-Description/Analysis
2-Background
3-First Amendment to Acquisition and Shortfall Agreement Description/Analysis
Issue Detail: On September 24, 2019, City Council adopted a resolution to establish the CFD and three separate improvement areas therein: Improvement Area Nos. 1, 2, and 3 (Resolution No. 2019- 0371). The special tax levied within the CFD can be used as security for special tax bonds (Bonds) that can be issued by the City to partially reimburse the developer for the cost of public infrastructure.
To date, Bonds have been issued in Improvement Area No. 1 (IA-1) and Improvement Area No. 2 (IA- 2) of the CFD.
In connection with the acquisition of such infrastructure, on September 1, 2019, the City and M&H entered into an Acquisition and Shortfall Agreement (A&S Agreement) that prescribes how M&H is to construct the facilities and specify how the City will reimburse M&H from special-tax revenues and/or
File ID: 2025-00093 1/14/2025 Consent Item 16.
Bond proceeds (City Agreement No. 2019-15113). On May 13, 2024, M&H entered into a “Certificate of Partial Assignment and Assumption of Acquisition-and-Shortfall Agreement Delta Shores Community Facilities District 2019-01” (Assignment) with JEN, and the City consented to the Assignment. As outlined in the Assignment, M&H assigned the A&S Agreement with respect to Improvement Area No. 3 (IA-3) of the CFD to JEN, and JEN accepted and assumed such assignment.
The purposes of the A&S Agreement are as follows: (1) to provide for the formation of the CFD; (2) to provide for the design, construction, and acquisition of facilities from the proceeds of Bonds issued through the CFD or directly from special tax revenues of the CFD; and (3) to specify the terms and conditions, including prices and timing, for any reimbursement or other payment to M&H for the acquisition of facilities, and for payment of incidental expenses (e.g., the cost of issuing the Bonds and the expenses of administering the CFD), whether from the proceeds of the Bonds or special-tax revenues.
One of the terms related to the acquisition of facilities set forth in the A&S Agreement is an “expenditure limit,” or maximum amount that may be reimbursed from proceeds of the Bonds and special-tax revenues generated by the CFD. The A&S Agreement set forth an expenditure limit equal to $8.0 million for IA-1, $18.8 million for IA-2, and $39.6 million for IA-3.
On February 1, 2022, City Council adopted a Resolution of Change Relating to the CFD and the Improvement Areas Designated Therein (City Resolution No. 2022-0036) (Resolution of Change).
The Resolution of Change: (1) amended the rates and methods of apportionment of special taxes for all three improvement areas of the CFD, (2) changed the appropriations limits for each improvement area, and (3) changed the authorized indebtedness limit from $8.0 million to $17.0 million for IA-1, from $18.8 million to $18.0 million for IA-2, and from $39.6 million to $63 million for IA-3. As a result of these changes, the A&S Agreement should have been amended to correspondingly change the expenditure limits of the CFD and the three improvement areas, but that inadvertently did not happen.
On December 19, 2024, Bonds in the aggregate principal amount of $14,480,000 were issued for IA- 1 and generated approximately $12,117,000 in net proceeds available to finance the acquisition and construction of public facilities, which is higher than the $8,000,000 expenditure limit for IA-1 stated in the A&S Agreement. As a result, $4,117,000 cannot be reimbursed to M&H for verified eligible expenditures until the expenditure limit in the A&S Agreement is amended.
Bonds were also issued in IA-2 in the aggregate principal amount of $10,320,000, but this amount was lower than the current expenditure limit for IA-2 of $18.8 million. As part of that issuance, all bond proceeds have already been expended, and therefore, the proposed amendment to the A&S Agreement will have no effect on the already completed IA-2 bond issuance.
File ID: 2025-00093 1/14/2025 Consent Item 16.
The proposed amendment to the A&S Agreement will update the definition of “Expenditure Limit” for the CFD and its three separate improvement areas, so all Bond proceeds available to finance the Improvements can be utilized. Amending the A&S Agreement will more clearly define the expenditure limit for all three improvement areas of the CFD. Under the proposed amendment to the A&S Agreement, the revised expenditure limit for each Improvement Area of the CFD will be the amounts deposited in the improvement fund for such improvement area from time to time rather than a specific dollar amount because that amount can change between the time it is set and when Bonds are issued.
Policy Considerations: Amending the A&S Agreement will allow for a greater amount of tax-exempt municipal bond proceeds issued through the CFD (or directly from special tax revenues generated by the CFD) to be used to reimburse either M&H or JEN for the construction of facilities. Amending the A&S Agreement does not bind the City to make any expenditure, to incur any indebtedness, or to proceed with the Delta Shores development project.
Economic Impacts: None.
Environmental Considerations:
California Environmental Quality Act (CEQA): Under CEQA Guidelines, administrative proceedings related to a CFD (a CFD being a financing mechanism) or of a designated improvement area therein without commitment to any specific projects which could result in a significant impact to the environment does not constitute a project for purposes of CEQA and is therefore exempt from review [14 Cal. Code Regs. §15378(b)(4)].
Sustainability: Not applicable.
Commission/Committee Action: None.
Rationale for Recommendation: Approval of the amendment to the A&S Agreement will support new development within the City and will allow for the financing by the City of additional public infrastructure above what was provided for in the original A&S Agreement.
Financial Considerations: M&H and JEN will initially use their own funds to finance construction of the public improvements required by the City and other local agencies. Later, if and when bond proceeds and special taxes become available, the City will use such available moneys to purchase improvements constructed by either M&H or JEN consistent with the City’s Mello-Roos policies and with all applicable agreements, including the A&S Agreement. The payment of principal and interest on the bonds is secured by a special tax lien placed on each property within the CFD, without obligations placed on other funds of the City. Bond sales for IA-1 and IA-2 have already occurred, and one or more Bond sales will occur in IA-3 at some point in the future. There are no impacts on
File ID: 2025-00093 1/14/2025 Consent Item 16.
other funds of the City
Local Business Enterprise (LBE): Not applicable.
Background
The CFD currently covers approximately 535± acres of property within the Delta Shores Planned Unit Development. The Delta Shores project is proposed for single-family, multi-family, commercial, mixed-use, parks, open space, detention basins, schools, a community center, and a fire station. The Delta Shores project area is generally bounded by Freeport Boulevard to the west, the Sacramento Regional Wastewater Treatment Plant to the south and east, the Stone-Boswell property and the Sacramento Job Corps Center to the east, and Meadowview Road to the north.
Bond information and Change Proceedings
As approved by City Council, the CFD will finance, through the issuance of Mello-Roos special tax bonds or the incurrence of other debt for IA-1, IA-2 and IA-3, certain public improvements authorized for the CFD. On September 24, 2019, Council adopted Resolutions Nos. 2019-0372, 2019-0373, and 2019-0374 deeming it necessary to incur bonded indebtedness to finance the acquisition and construction of certain public facilities in each improvement area of the CFD. At that time the aggregate principal amount of debt proposed to be issued, in one or more series, on behalf of IA-1, IA-2, and IA-3 of the CFD, was not to exceed $8.0 million for IA-1, $18.8 million for IA-2 and $39.6 million for IA-3.
On January 25, 2022, at elections held in CFD, the qualified electors of each improvement area therein approved proposals to replace the original RMAs of each improvement area of the CFD with amended and restated RMAs and modify the total amount of debt authorized to be issued for each improvement area. Specifically, the total amount of debt authorized to be issued increased from $8.0 million to $17.0 million in IA-1, decreased from $18.8 million to $18.0 million in IA-2, and increased from $39.6 million to $63.0 million in IA-3. The costs and improvements eligible for CFD financing did not change.
On June 14, 2022, Bonds in the aggregate principal amount of $10,320,000 were issued in IA-2, and all bond proceeds have been expended to reimburse M&H for the construction of public infrastructure. The total amount of bond proceeds expended in IA- 2 was well below the $18.0 million limit for IA-2, and therefore the proposed amendment to the A&S Agreement will have no effect on the already completed IA-2 bond issuance.
On December 19, 2024, Bonds in the aggregate principal amount of $14,480,000 were issued for IA-1 and generated approximately $12,117,000 in net proceeds available to finance the acquisition and construction of public facilities, which is higher than the $8,000,000 expenditure limit for IA-1 stated in the A&S Agreement. As a result, $4,117,000 cannot be reimbursed M&H for verified eligible expenditures until the expenditure limit in the A&S Agreement is amended.
No Bonds have been issued to date for IA-3.
Project Area Map with Improvement Areas
A map of the project area that includes the location of the improvement areas of the CFD is provided below.
First Amendment to City Agreement No. 2019-1513 | Page 1 of 4 City of Sacramento
FIRST AMENDMENT TO ACQUISITION-AND-SHORTFALL AGREEMENT WITH M&H REALTY PARTNERS VI L.P. and JEN CALIFORNIA 27 LLC
(CITY AGREEMENT NO. 2019-1513)
This amendatory agreement is between the CITY OF SACRAMENTO, a California municipal corporation (the “City”), and M&H REALTY PARTNERS VI L.P., a California limited partnership (“Developer A”) and JEN CALIFORNIA 27 LLC (“Developer B”). Developer A and Developer B may each be referred to herein individually as a “Party” and collectively as the “Parties”.
Background
A. At Developer A’s request, the City has formed a community facilities district under the Mello- Roos Community Facilities Act of 1982, sections 53311 through 53368.3 of the California Government Code (the “ Act”), to finance the acquisition and construction of the public improvements described in Exhibit A to the Original Agreement (as defined below) , which will be owned by the City or by other public agencies (collectively the “Improvements,” and each an “Improvement”). The district is named City of Sacramento Delta Shores Community Facilities District No. 2019-01 (Improvements) (the “District”).
B. On September 1, 2019, the City and Developer A entered into an Acquisition-and-Shortfall Agreement, designated City Agreement No. 2019-1513 (the “Original Agreement”). The purposes of the Original Agreement were (1) to provide for the formation of the District; (2) to provide for the design, construction, and acquisition of facilities from the proceeds of special-tax bonds issued through the District (the “Bonds”) or directly from special tax revenues of the District; and (3) to specify the terms and conditions, including prices and timing, for any reimbursement or other payment to Developer A for the Improvements, and for payment of incidental expenses (e.g., the cost of issuing the Bonds and the expenses of administering the District), whether from the proceeds of the Bonds or special-tax revenues. Expenditure limits, or the total maximum amounts that City can pay to the Parties from special tax revenues or special- tax bond proceeds, were also set forth in the Original Agreement. Specifically, a total “District Expenditure Limit” of $66.4 million was established, as well as specific limits for each improvement area of the District as set forth below:
Improvement Area No. 1: $8.0 million
Improvement Area No. 2: $18.8 million
Improvement Area No. 3: $39.6 million
C. On September 25, 2019, at an election held in Improvement Area No. 1 of the District (“Improvement Area No. 1”), the qualified electors therein duly authorized the issuance of eight First Amendment to City Agreement No. 2019-1393 | Page 2 of 4 million dollars ($8,000,000) principal amount of special tax bonds under Act for the purpose of financing the acquisition and construction of certain public facilities. The qualified electors of Improvement Area No. 1 also authorized the levy and collection of a special tax under the Act to be used for the purpose of paying the interest on and principal of and redemption premiums, if any, on the bonds.
D. On January 25, 2022, at an election held in Improvement Area No. 1, the qualified electors therein increased the authorized principal amount of special tax bonds that may be issued under the Act for the purpose of financing the acquisition and construction of the Improvements to seventeen million dollars ($17,000,000). T he rate and method of apportionment of such special tax was also amended and restated under the Act at the same election. As a result of this increase in authorized principal amount, the Original Agreement should have been amended to correspondingly increase the Expenditure Limit (as defined in Section 6 of the Original Agreement) , but that inadvertently did not happen.
E. On May 13, 2024, the Parties entered into, and the City consented to, a Certificate of Partial Assignment and Assumption of, Acquisition-and-Shortfall Agreement Delta Shores Community Facilities District No. 2019-01 (the “ Assignment”). As outlined in the Assignment, Developer A assigned the Original Agreement with respect to Improvement Area No. 3 of the District to Developer B, and Developer B accepted and assumed such assignment. As a result of the Assignment, this amendment to the Original Agreement must be entered into between the City and both Parties.
F. On December 19, 2024, special tax bonds in the aggregate principal amount of $14,480,000 were issued for Improvement Area No. 1 and generated approximately $12,117,000 in net proceeds available to finance the acquisition and construction of public facilities, which is higher than the $8,000,000 expenditure limit for Improvement Area No. 1 stated in the Original Agreement. As a result, the Expenditure Limits set forth in the Original Agreement for the District and its three separate improvement areas need to be modified to be consistent with the authorizations and appropriations made by the qualified electors of the District.
With these background facts in mind, the City and Developer agree as follows:
1. Amendment to section 6 of the Original Agreement. Sections 6(a) and 6(b) of the Original Agreement are hereby deleted, and Section 6 is hereby amended to read as follows:
6. E
xpenditure Limit. The Resolution designated three improvement areas within the District – Improvement Area Nos. 1, 2 and 3 – with each area having the boundaries described in the boundary map of the District. The total amount that the City pays to the Developer under this agreement and any other agreements, from any combination of direct funding using Tax Revenues and reimbursement using Bond Proceeds (in total, the “District Expenditure Limit”), may not exceed, for each improvement area, the aggregate amount available from time to time in the Improvement Fund for the respective improvement area after the issuance of one or more series of new-money Bonds plus any interest earned on money in the Improvement Fund for such improvement area plus any First Amendment to City Agreement No. 2019-1393 | Page 3 of 4 special tax revenues generated from such improvement area that are deposited in the Improvement Fund and are available to directly finance the acquisition of Improvements pursuant to Section 4 of the Original Agreement. For the avoidance of doubt, the expenditure limit for an improvement area shall be the amounts deposited in the Improvement Fund for such improvement area from time to time rather than a specific dollar amount.
2. All Other Terms Remain in Force. Except as amended by section 1 above, all terms and conditions of the Original Agreement remain in full force.
3. Effective Date. This amendatory agreement becomes effective when all parties have signed it, as indicated by the dates in the signature blocks below.
4. Signatures and Counterparts. The parties may sign this agreement with electronic or digital signatures. In addition, the parties may sign this agreement in counterparts, each of which will be considered an original, but all of which will constitute the same agreement.
5. Entire Agreement. This amendatory agreement sets forth the parties’ entire understanding regarding the matters set forth in section 1 above and is intended to be their final, complete, and exclusive expression of those matters . It supersedes all prior or contemporaneous agreements, representations, and negotiations regarding those matters (whether written, oral, express, or implied) and may be modified only by another written agreement signed by all parties. (Signature Page Follows)
First Amendment to City Agreement No. 2019-1393 | Page 4 of 4 City of Sacramento
By: ________________________________
Leyne Milstein
Assistant City Manager
Date: _____________, 202_
Attest
Sacramento City Clerk
By: ________________________________
Signature
Approved
as to Form
Sacramento City Attorney
By: ________________________________
Jeffrey Massey
Senior Deputy City Attorney
Developer A
M&H Realty Partners VI L.P.
A California limited partnership
By: MHRP VI.L.P,
A California limited partnership,
Its General Partner
By: MERLONE/HAGENBUCH VI, INC.,
A California corporation
Its General Partner
By: _______________________
Name: ______________________
Title: _______________________
Date: _______________, 202_
By: _______________________
Name: ______________________
Title: _______________________
Date: _______________, 202_
Developer B
JEN California 27 LLC
A California limited liability company
By: ________________________
Name: _______________________
Title: ________________________
Date: _______________, 202_
First Amendment to City Agreement No. 2019-1393 | Page 4 of 4 City of Sacramento
By: ________________________________
Leyne Milstein
Assistant City Manager
Date: _____________, 202_
Attest
Sacramento City Clerk
By: ________________________________
Signature
Approved as to Form
Sacramento City Attorney
By: ________________________________
Jeffrey Massey
Senior Deputy City Attorney
Developer A
M&H Realty Partners VI L.P.
A California limited partnership
By: MHRP VI.L.P,
A California limited partnership,
Its General Partner
By: MERLONE/HAGENBUCH VI, INC.,
A California corporation
Its General Partner
By: _______________________
Name: ______________________
Title: _______________________
Date: _______________, 202_
By:
_______________________
Name: ______________________
Title: _______________________
Date: _______________, 202_
Developer B
JEN California 27 LLC
A California limited liability company
By: ________________________
Name: _______________________
Title: ________________________
Date: _______________, 202_
January 3
5 Clifton Taylor
Vice President