May 5, 2026
TO: City Council
REQUESTED BY: Kimberly Ganimian, Finance Director
APPROVED BY: Robert A. Johnson, City Manager
SUBJECT: Community Facilities District No. 2002-1 (Rancho San Jacinto, Phase 2) RECOMMENDATION:
Staff recommends that the City Council adopt Resolution No. 4119 approving the issuance of the City of San Jacinto Community Facilities District No. 2002-1 (Rancho San Jacinto, Phase 2) 2026 Special Tax Refunding Bonds (the "Refunding Bonds").
DISCUSSION:
Property within Community Facilities District No. 2002-1 (Rancho San Jacinto, Phase 2) (“CFD 2002-1”) was originally within the boundaries of the City’s Community Facilities District No. 2 (“CFD No. 2”). Subsequently, the City created CFD 2002-1 surrounding approximately 215 undeveloped acres which were removed from CFD No. 2.
In 2015, 39.2 acres were removed from CFD 2002-1 when they were sold to Eastern Municipal Water District. Development has since continued in CFD 2002-1 and it is now fully built-out and includes 890 single-family homes owned by individuals covering approximately 141 acres, subject to the special taxes levied in CFD 2002-1 (the “Special Taxes”).
The 2002 Special Tax Bonds issued by CFD 2002-1 were refunded with the 2016 Special Tax Refunding Bonds (“2016 Bonds”). Special Taxes levied within CFD 2002-1 are used to pay debt service on the 2016 Bonds.
Special Taxes have been levied on residential properties near the maximum tax rate since CFD 2002-1 was formed. Absent any change in circumstances, the Special Taxes will continue to be levied on residential properties at nearly 90% of the maximum tax rate. The City is now considering a proposed refunding of the 2016 Bonds in order to reduce the Special Taxes levied on homeowners in CFD 2002-1.
Refinancing the 2016 Bonds
There is currently an opportunity to refinance the outstanding 2016 Bonds to generate savings for property owners within CFD 2002-1. The proposed Refunding Bonds are estimated to have a par amount of approximately $8.2 million with a final maturity in 2034, or the same final maturity of the 2016 Bonds. In other words, there will be no extension of the financing term. The final interest rate structure will be determined if, and when, the Refunding Bonds are priced and sold.
Assuming City Council approves moving forward, the pricing date is estimated to be the week of May 11.
Based on current market conditions, net present value (NPV) savings is estimated at $551,000, or
4.8% of the par amount of the 2016 Bonds. To put estimated NPV percent savings into context, GFOA (Government Finance Officers Association) Best Practices frequently mentions a benchmark of 3% NPV savings to determine the appropriateness of a refinancing. Estimated annual cash flow savings over the life of the Refunding Bonds range from $352,000 in 2027 to $577,500 in 2034. Based on the 890 total parcels within CFD 2002-1, average annual savings per parcel from the reduction in debt service is estimated to range from $395 in 2027 to $649 in 2034. Estimated savings are net of all financing costs. The table below highlights detailed annual savings based on current interest rates.
Total Estimated Cash Flow Savings*
Fiscal
Year
2016 Bonds
Debt Service
Refunding Bonds
Debt Service
Estimated Cash
Flow Savings
2027 $1,526,500 $1,174,500 $352,000
2028 1,556,500 1,174,750 381,750
2029 1,587,500 1,173,000 414,500
2030 1,619,250 1,174,250 445,000
2031 1,651,500 1,173,250 478,250
2032 1,684,000 1,175,000 509,000
2033 1,721,500 1,174,250 547,250
2034 1,753,500 1,176,000 577,500
*All numbers are preliminary; subject to market conditions on the pricing date.
Issuance of Bonds
The City’s Municipal Advisor is recommending a negotiated sale of the Refunding Bonds with the underwriter. This recommendation is based on current market conditions as well as the credit quality of CFD 2002-1. A negotiated sale of the Refunding Bonds will give the investors time to complete analysis on the properties securing the Refunding Bonds. The recommended underwriter is Stifel, Nicolaus & Company, Incorporated, who is active in selling special tax bonds, such as the Refunding Bonds being considered by the City Council.
The attached resolution authorizes the sale of the Refunding Bonds in a principal amount not to exceed $11,455,000, at a true interest cost not to exceed 4.5%, and with a maximum underwriter’s compensation of 1.0% of the par amount of the Refunding Bonds. The resolution authorizes the City Manager, Deputy City Manager, the Finance Director, and the Mayor to award the sale of the Refunding Bonds within those parameters and take any additional actions required to issue the Refunding Bonds. The Refunding Bonds, however, will only be issued in the amount necessary to accomplish the refinancing, which may be less than the total authorized amount. The estimated close date of the Refunding Bonds is early June.
The resolution also approves and authorizes distribution of the Preliminary Official Statement (a draft is attached hereto), and approves the form of the Continuing Disclosure Certificate appended to the Preliminary Official Statement, as well as approves the form of a Fiscal Agent Agreement, the form of a Bond Purchase Agreement with Stifel, Nicolaus & Company, Incorporated and the form of an Escrow Agreement (all on file with the City Clerk). It also appoints Best Best & Krieger LLP to serve as Bond Counsel and Disclosure Counsel, Urban Futures, Incorporated to serve as municipal advisor and U.S. Bank Trust Company, National Association to act as Fiscal Agent for the Refunding Bonds.
The following descriptions describe the documents approved by the resolution:
• Fiscal Agent Agreement - This document contains the terms of the Refunding Bonds, including payment and redemption provisions, definition and pledge of Special Tax Revenues to pay the Refunding Bonds, rights and duties of the Fiscal Agent, remedies upon a default in the payment of the Refunding Bonds, and final discharge of the Refunding Bonds and other related matters.
• Escrow Deposit and Trust Agreement - This document contains terms by which the Fiscal Agent will hold funds on the behalf of the City and bond holders received from the refinancing to pay and discharge all of the indebtedness of the 2016 Bonds at or before maturity.
• Preliminary Official Statement - This is the City’s document pursuant to which the Refunding Bonds will be offered for purchase by the public. This document must contain all facts material to the Refunding Bonds, CFD 2002-1, and the City (with certain permitted exceptions to be completed in the final Official Statement) and must not omit any material facts that make the remainder misleading. • Bond Purchase Agreement - This document contains the obligation of the underwriter to accept and pay for the Refunding Bonds, provided that all of the covenants and representations of the City are met and certain other conditions excusing performance by the underwriter do not exist.
It is estimated that the cost to issue the Refunding Bonds is approximately $355,000. This includes fees of Bond Counsel, Disclosure Counsel, Municipal Advisor, Underwriter, NBS (the City’s Special Tax Consultant), and other issuance costs. The debt service estimates shown in the table above already take into account the cost to issue the Refunding Bonds.
FISCAL IMPACT:
None. The issuance of the Refunding Bonds is being undertaken for the benefit of the homeowners in CFD 2002-1 and has no fiscal impact on the City.
ATTACHMENTS:
Resolution No 4119
Fiscal Agent Agreement
Escrow Deposit and Trust Agreement
Preliminary Official Statement
Bond Purchase Agreement