Agenda Item: 1
CITY OF SANTA CLARITA
AGENDA REPORT
PUBLIC HEARINGS
CITY MANAGER APPROVAL:
DATE: May 24, 2022
SUBJECT: CONSIDERATION OF A PRE-ANNEXATION AGREEMENT
BETWEEN THE CITY OF SANTA CLARITA AND BLC TESORO,
LLC, INCLUDING CONSIDERATION OF THE PARTICIPATION IN
THE STATE OF CALIFORNIA BOLD PROGRAM AND
DEDICATION OF OPEN SPACE TO THE CITY OF SANTA
CLARITA
DEPARTMENT: Community Development
PRESENTER: Patrick Leclair
RECOMMENDED ACTION
City Council:
1. Receive the staff report, presentation, and conduct the public hearing;
2. Authorize the City Manager or designee to enter into a Pre-Annexation Agreement between the City of Santa Clarita and BLC Tesoro, LLC;
3. Authorize the City Manager or designee to enter into an Open Space Maintenance and Management Agreement with BLC Tesoro, LLC, for the dedication of approximately 770 acres of land to the City, including executing all documents associated with the on-going maintenance of the property; and
4. Adopt a resolution authorizing BLC Tesoro, LLC, to pursue the use of the Bond Opportunities for Land Development program through the California Municipal Finance Authority to levy special taxes for the Tesoro Highlands development, and authorize the City Manager or designee to execute the associated documents.
BACKGROUND
In 2010, the City initiated annexation proceedings for the communities of Copperstone, West Creek, and Tesoro del Valle. At that time, the communities of West Creek and Tesoro del Valle indicated they needed additional time to work with Los Angeles County (County) to perfect their
entitlements. The City Council voted to proceed with the annexation of the Copperstone community, and reevaluate the annexation of West Creek and Tesoro del Valle at a later date.
The Copperstone Annexation was completed in June 2012.
In 2016, the developer of the West Creek community informed the City they were interested in proceeding with annexation to the City. In April 2016, the City Council authorized the annexation application to be filed with Local Agency Formation Commission (LAFCO) for the annexation of the West Creek community. The West Creek Annexation was completed in October 2016.
On November 7, 2018, the County approved Vesting Tentative Tract Map (VTTM) 51644-1 (Tesoro Highlands) to allow the subdivision of 1,274.6 acres of land into 811 lots, including 696 single-family residence lots, 9 multi-family residence lots developed with 124 detached condominium units, 15 debris basin lots, 12 water quality basin lots, 3 water tank lots, 1 helipad lot, 5 senior recreation area lots, 1 senior recreation center lot, 6 linear park lots, 9 private park lots, 1 private recreation center lot, 29 open space lots, and 24 private driveway/private and future street lots, for a total of 820 residential dwelling units. The entirety of the Tesoro Highlands project is located within the Tesoro del Valle Annexation area.
Following County approval in 2018, the developer of the Tesoro Highlands project informed the City they were interested in proceeding with the annexation. On November 12, 2019, the City Council approved the Tesoro del Valle Annexation (Master Case 19-115) and directed staff to submit an annexation application to LAFCO. The Tesoro del Valle Annexation consists of approximately 1,786 acres of land, generally located along the City’s northern boundary north of Copper Hill Drive, west of San Francisquito Canyon Road, south of the Angeles National Forest, and east of the community of West Hills, in unincorporated Los Angeles County. The annexation includes the existing developed portions of the Tesoro del Valle community, along with the entitled Tesoro Highlands project. A map of the annexation area is attached.
On January 28, 2020, the City submitted an annexation application to LAFCO. The application is currently being reviewed by LAFCO, and the City anticipates the annexation to be complete by November 30, 2022.
PROPOSED PROJECT
The project proposed for the City Council’s consideration at this time includes the following:
1. Pre-Annexation Agreement - an agreement to clarify how annexation affects the entitled Tesoro Highlands project upon annexation.
2. Open Space Management and Maintenance Agreement - an agreement to transfer approximately 770 acres of open space to the City.
3. Participation in the State of California Bond Opportunities for Land Development (BOLD) Program - acknowledgment of the Tesoro Highlands intention to finance portions of their infrastrucutre and development impact fees through the BOLD Program
administered by the State of California through the formation of a Community Facilities District (CFD).
PRE-ANNEXATION AGREEMENT
In accordance with Section 17.27.100 of the Unified Development Code (UDC), the City Council may, at its sole discretion, enter into a Pre-Annexation Agreement (Agreement) and agree to specific terms and conditions prior to annexation to the City, accepting the development standards associated with an entitlement issued by the County for a development project, including permitted uses, parking, setbacks, floor area ratio, signage, architectural design elements, right-of-way improvements, landscaping, hillside development, and/or other standards determined by the City Council. BLC Tesoro, LLC (Owner), has agreed to the terms of the Agreement. The following is a summary of the major points in the Agreement:
1. The Owner agrees to support the annexation;
2. The City agrees to recognize and continue to treat County approvals, which are part of VTTM 51644-1 and its associated entitlements, as a vested right, provided the project is not substantially modified consistent with UDC Section 17.09-Minor Permit Modifications;
3. The City accepts permitted uses, parking, setbacks, right-of-way improvements, landscaping, hillside development, and other elements approved by the County as part of VTTM 51644-1;
4. The Owner is responsible for the construction and widening of Copper Hill Drive and the Bridge over San Francisquito Creek. The Owner will make a payment to the City to fund the design/permitting review and construction management of this improvement. This payment will be applied against the Bridge & Thoroughfare fee for the project. The timeline is expected to be nine months to complete the construction, and must be complete prior to the first Certificate of Occupancy in the Tesoro Highlands;
5. The Owner agrees to offer approximately 770 acres of open space for dedication to the City, with 712 acres initially and 58 acres in a future dedication. The City understands a portion of the open space being dedicated to the City is required habitat mitigation as part of the County approvals and will have restricted use, and the City shall determine, at its sole discretion, if it will accept the open space offered for dedication by the applicant;
6. The Owner will construct multi-use trail connections from their existing terminus at the Copper Hill Bridge on the east and west end of the bridge. The connections will extend the trails to Copper Hill Drive. If the Owner is unable to acquire the necessary property to construct the extensions, the City will commence proceedings to acquire the property at the Owner’s expense;
7. The City agrees to accept all public trails within VTTM 51644-1 and maintain said trails to City standards, including trails required by County approvals, and including the Cliffie
Stone Trail and the Outpost East Trailhead that will be transferred to the City upon annexation;
8. The City understands the Owner intends to form a Mello-Roos CFD through the BOLD Program to finance up to $38 million in public improvements and development impact fees. In addition, the CFD will fund an initial stewardship cost of $59,000 to the City, with an ongoing annual assessment to provide a $50,000 per year (with annual Consumer Price Index (CPI) increases) to the City for management and maintenance of the open space that is being dedicated to the City in the Tesoro Highlands; and
9. The Owner agrees to form a Drainage Benefit Assessment Area to maintain water quality devices within the existing development that will not be transferred to the Los Angeles County Flood Control District.
OPEN SPACE DEDICATION
As a part of the approval of the Tesoro Highlands project, the Los Angeles County Board of Supervisors required that the Owner find an entity to take ownership of, and provide permanent maintenance of, the open space within the development. The Owner has offered to dedicate the property to the City and has been working with City staff to craft the necessary agreements to transfer ownership to the City. The total open space to be dedicated to the City is approximately 770 acres and will be dedicated to the City in two phases.
An approximate 712-acre portion of the open space will be donated to the City initially. Portions of this property will have some environmental mitigation areas the Owner will be required to complete in coordination with other agencies. The City will inherit ongoing responsibilities for these mitigation areas after the initial five-year establishment periods have been completed.
An approximate 58-acre portion of the open space will be dedicated to the City once grading and development activities have been completed. This area has been reserved for future dedication to ensure that the total development and grading work can be completed, and the final dedication will include only the balance of open space without any manufactured slopes.
To fund the ongoing maintenance of the 770 acres of open space, the Owner was conditioned by the County to provide an on-going funding source. The initial year funding includes $59,000, with ongoing annual funding equal to a minimum of $50,000, plus an annual CPI escalator. The Owner will coordinate the annual funding as a special assessment through the CFD established through the BOLD Program administered by the state.
CFD/BOLD PROGRAM
Introduction
At the request of the Owner, staff has been provided information regarding the BOLD Program offered by the California Municipal Finance Authority (CMFA). Specifically, the Owner is proposing to leverage the BOLD Program to finance $38 million of governmental obligations. A breakdown is provided below:
• $19.7 million to fund storm drain improvements for County Flood Control District • $11.2 million to fund Bridge & Thoroughfare fees
• $4.5 million to fund certain street improvements
• $2.5 million to fund sewer fees for County Sanitation District
California Municipal Finance Authority
The City is a member of California Municipal Finance Authority (CMFA), a state-wide Joint Powers Authority (JPA) whose members are numerous public entities throughout California.
CMFA has the authority to issue bonds to meet its mission of supporting economic development, job creation, and social programs throughout the state, while giving back to California communities. By supporting member communities and their local charities with a portion of the revenue generated through the issuance of tax-exempt bonds for public, private, and non-profit entities, CMFA is able to directly contribute to building strong communities to support the health and welfare of the residents of California.
BOLD Program
The CMFA recognizes that new residential development often challenges the mission of municipalities to provide infrastructure and schools, since new development triggers the need to construct, acquire, or otherwise provide additional public facilities to accommodate that growth.
The BOLD Program offers a means to finance new or continuing construction of infrastructure and public facilities through bonds CMFA issues as an alternative to issuance of land-secured bonds directly by a public entity. The BOLD Program is designed to help local government municipalities, schools, and land developers throughout the state work together to cost- effectively finance public infrastructure projects and development fees.
Under the BOLD Program, bonds are issued by a CFD formed by CMFA under the Mello-Roos Community Facilities Act (the Act) of 1982 (California Government Code Section 53311 et seq.). The Act offers great financing flexibility and is commonly used by cities, schools, and other local agencies throughout the state to generate funds for the payment of public facilities, including development fees for facilities.
The BOLD Program is handled by a team of bond industry professionals with significant experience in CFDs in the state. All have highly specialized expertise in CFD bond issuance and sales, and are consistently ranked among the top firms in the field. In addition, if the City desires to use a municipal advisor of its own choosing to review the BOLD Program application and/or other BOLD Program documents, it may do so, with all related costs payable from bond proceeds. Specifically, the BOLD Program uses Jones Hall for bond counsel, Koppel & Gruber for special tax consulting services, and Piper Sandler & Co. for underwriting services.
Although the CFD would be formed within the City’s jurisdiction, little involvement is required.
The City Council is only required to take a single action to approve participation in the BOLD Program; thereafter, CMFA will work with staff to ensure the BOLD Program is meeting any goals the City sets. CMFA and its consultant team will form and approve the CFD. The CMFA will issue bonds on behalf of the CFD and will use the services of a special tax consultant and administrator to create the special tax formula and administer, levy, and collect the special taxes.
By working directly with developers, the BOLD Program facilitates financing for infrastructure and fee obligations of developers, covering a broad range of development cost obligations necessary for new development imposed by municipalities, including both facilities and/or impact fees. Using the BOLD Program alleviates staff time constraints and allows staff to focus on other aspects of processing land development projects.
The Owner and CMFA have agreed to include within the formation of the CFD a separate service special tax over the project to be levied in perpetuity to fund the management and maintenance of the open space described in the Pre-Annexation Agreement. This will generate a minimum of $50,000 per year in revenue, as described in an Open Space Management and Maintenance Agreement to be entered into by the City and the developer. This will be evaluated each year and may increase, based on the CPI.
Formation of the CFD requires the establishment of the annual special tax rates. The formula for computing special tax rates will be included in the resolutions to be adopted as part of the CFD formation proceedings. Typically, the formula will include a basic, undeveloped land tax with an increase in rate and shifting of the tax to developed lands at building permit stage. The total amount of taxes on developed land generally will not exceed 2 percent of its market value in its completed state, per industry standards.
Bonds are issued through CMFA, with little involvement from local agencies needed for the issuance process. The City will need to approve the use of a CFD to acquire public facilities and the financing thereof and enter into an acquisition or similar agreement to receive the bond proceeds and meet the general requirements to maintain the tax exemption of interest on the bonds. The CMFA adopts the resolutions needed to authorize and issue the special tax bonds and awards the sale to the bond underwriter.
Once the bond issuance occurs, bond proceeds are available for disbursement. The proceeds are held by a bond trustee and are not directly paid to the developer, but are available as directed by the developer and approved by the local agency to be used to meet obligations to the City, according to the structure and timing required for development approvals. Pursuant to an acquisition agreement or similar document, the City will determine and agree to its role in inspecting and accepting infrastructure and/or payment of financed impact fees.
The CFD may be formed early in the development process, with issuance of bonds at a later time or in multiple series. The following are the typical criteria for bond issuance.
• Minimum 4:1 value-to-debt ratio overlapping (assessed or appraised) • No discretionary approvals required for build-out of the portion of the CFD directly relating to the bond security
• Entitlements received that are necessary for phase to be bonded • Financing plan for backbone infrastructure complete or imminent and/or a performance bond is in place
Credit criteria will be reviewed by the underwriting team on a case-by-case basis to assure reasonable interest rates at the time of issuance. Additionally, similar credits can be pooled
together into a single bond issue, with pooling flexibility assuring the most cost-effective bond issuance for each project.
Administration of all aspects of the BOLD Program is handled by CMFA, without cost to or burden on the City. Federal regulations require annual disclosures to bond investors of information related to the bonds and the development project. The BOLD Program administrators will handle this continuing disclosure reporting in consultation with developers.
The CMFA shares a portion of its issuance fees directly with its member communities. In addition, a grant from a portion of the issuance fee is made to the California Foundation for Stronger Communities to fund charities designated by the member communities. A portion of the annual fees received by CMFA are in turn directed to charitable activities within California communities, particularly those of members and participating local government agencies. This unique commitment to give back directly to the communities in which they operate sets CMFA apart from other JPA conduit issuers.
Tax-exempt municipal bonds are sold through an offering document known as an Official Statement, which describes to potential purchasers of the bonds the terms, security, and repayment of the bonds, as well as details about the property securing the bonds. Since prior to home sales, the land is owned by the developer entity(ies), relevant information for the Official Statement needs to describe the developer and the development plan. The financing team will work with the developer to provide the required information and approve the final language to be provided to prospective bond buyers.
California law requires developers to disclose to home buyers the lien of any CFD special tax which will be present on the purchased property. The form of disclosure is simple and becomes part of the various sale documents presented to buyers for signature prior to a home sale.
ANNEXATION NEXT STEPS
Staff is coordinating with Los Angeles County and LAFCO to have the annexation of the Tesoro del Valle community to the City completed in November 2022. Additional public hearings before the LAFCO board are required in the fall to ensure this is completed in November.
ALTERNATIVE ACTION
Other action as directed by the City Council.
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FISCAL IMPACT
Annexation of the Tesoro del Valle area would generate a neutral/no-net fiscal impact to the City of Santa Clarita. Execution of the Open Space Maintenance and Management Agreement would result in a minimum of $50,000 annually to the City in order fund maintenance costs associated with the dedicated open space.
ATTACHMENTS
Public Hearing Notice
Resolution - Authorizing Participation in the BOLD Program Annexation Boundary Map
Pre-Annexation Agreement
Open Space Management and Mainenance Agreement
Pre-Annexation Agreement Exhibits (available in the City Clerk's Reading File) OSMMA Exhibits (available in the City Clerk's Reading File)