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97-1021_CAPISTRANO UNIFIED SCHOOL DISTRICT_H2a_Agenda Report0 • AGENDA ITEM October 21, 1997 TO: George Scarborough, City Manager FROM: Cynthia L. Pendleton, Administrative Services Director SUBJECT: Consideration of Joint Community Facilities District between City of San Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School District on behalf of the Pacific Point Project (SunCal Companies) RECOMMENDATION: 1. By Motion, appoint two City Council members to meet with representatives of the Capistrano Unified School District Board of Directors to obtain additional information prior to making a final determination. SITUATION: SunCal Companies, Inc., the current owner of the Pacific Point project properties has been in discussions with Capistrano Unified School District (CUSD) regarding the formation of a Community Facilities District. This Community Facilities District would be formed under the Mello -Roos Act and utilize public financing for the acquisition of the school site on Camino Las Ramblas and fund construction of school facilities at the newly acquired Kinoshita Farm Site. As part of these discussions, CUSD has requested the City and Water District consider entering into a joint community facilities agreement with CUSD authorized under the Community Facilities Act in order to fund City and District major backbone facilities such as water facilities, roadways, storm drains and other public improvements. By combining the City and District improvements with the CUSD financing, the project could realize a savings on its public financing of approximately $275,000. This would ultimately reduce the annual debt service on this public financing, thus reducing the annual property assessment paid by the property owner. If the City and District participated in a public financing separate from CUSD, certain costs would be duplicated and other economies of scale would not be realized. This Pacific Point project as well as the proposed financing program would provide a number of community wide benefits through public improvements and school facilities. At this time, staff recommends the City Council continue this item to November 4, 1997 and appoint two council members to meet with CUSD board members to discuss the merits of this project prior to making final determination on this project. FOR CITY COUNCIL AGE:,'��� 0 • Memorandum -2- October 21, 1997 The development agreements with the City and District for the Pacific Point project require various improvements some of which provide a community wide benefit. An example of those required facilities are as follows: 1. The water reservoir and appurtenances 2. Off-site storm drain facilities 3. Off-site roadway improvements as required under the existing phasing plan. These improvements include the following: Improvement and signalization of Camino Las Ramblas/Via California Improvements along Valle Road from San Juan Creek Road to I-5 off ramps Improvements at Camino Capistrano/San Juan Creek Road and I-5 Intersection In these agreements, the City and District agreed to consider proposals for the utilization of public district financing for required public improvements. Public district financing could include but is not limited to community facilities districts, assessment districts, or other bonded indebtedness programs to facilitate the project. In relation to CUSD, this public financing would provide funding for the Kinoshita site school and allow the acquisition of a school site at Via California and Camino Las Ramblas as well. Community Wide Benefits There are certain community wide benefits that would be attained from this development as well as from the public financing of school and other improvements. Kinoshita Site School - The City, Community Redevelopment Agency and the District have recently completed the Second Amendment to the CUSD Cooperative Agreement. Based on the amended agreement, the District acquired a 7.24 acre parcel adjacent to the Sports Park from the City/Agency. This site is identified as a K-6 grade level school, replacing Del Obispo school and will provide relief for the currently overcrowded Marco Forster Middle School and Del Obispo School site. The total project cost for this school is $9.2 million. The District's share of the cost is $4.6 million. $2.5 million of this obligation has been satisfied with the acquisition of the site. The Community Facilities District would provide the District with the balance of $2.1 million in matching funds for the school. Once the District can demonstrate its ability to fund their portion, the District would receive funds from the next successful State School Bond issue. Las Ramblas School Site - The acquisition of this school will provide CUSD with a future school site to meet the needs of the future homeowners in Pacific Point, Mesa and serve existing surrounding areas. • 0 0 Memorandum -3- October 21, 1997 Pacific Point Water Facilities - The infrastructure water facilities to serve the development consist of a domestic water reservoir, a booster station and transmission mains connecting to the existing distribution system. In addition to serving this development, the proposed domestic water facilities will serve the proposed Mesa project and will also augment existing service to the Meredith Canyon and McCracken Hill areas. Public District Financing Issues Public District Financing provides the developer with a means of financing infrastructure and other obligations through tax-exempt financing and passing that cost through to the property owner as a future tax assessment. The cost of borrowing using tax-exempt financing is also lower than conventional borrowing. Therefore, the developer's actual cost to build the unit is less and subsequently the ultimate sales price would be lower. Although, it cannot be guaranteed that a residential units sales price would be lower based on this process, the market will generally determine the sales price of similar units based on acquisition price and future costs. Should the City/ District choose to participate in the utilization of public district financing on this project, there are two alternatives. The first alternative is to participate in a Joint Community Facilities District ("Mello-Roos"Act) with CUSD providing for school facilities as well as City/District facilities . The second alternative is for the City/District to participate in a separate traditional assessment district (" 1913/1915" Act) that would provide for the City/District facilities only. There are similarities and differences between these types of districts. Contingent Liability - Public district financing has no contingent liability on the issuer, in this case CUSD or the City/District would not have any liability toward the future repayment of the bonds. Additionally, the issuer's ability to issue other general obligation debt is not impacted. Tax Rate - The rule of thumb maximum for an overlapping tax rate for each type of district is 2%. This means that when a governmental agency evaluates public district financing, they will generally attempt to keep the total tax rate from all entities at a maximum of 2%. In relation to the tax rates, traditional assessment districts have a fixed assessment set at the time of formation for each parcel for the life of the issue based on benefit. Community facilities district can have escalating tax rates that shift from undeveloped to developed property. As properties develop within a community facilities district, they are considered to have more of a benefit than similar property that are undeveloped. Type of Benefit - Community facilities districts allow improvements that provide a general benefit as opposed to traditional assessment districts which only allow improvements that provide a specific benefit. School facilities are a general benefit type improvement that would not be allowed under a traditional assessment district. The advantage of the Community Facilities District is that school facilities would be allowed. As previously discussed, the proposed Community Facilities District would provide funds for the 0 Memorandum ma 0 October 21, 1997 construction of the Kinoshita Site School as well as provide funds for the acquisition of an additional school site within the Pacific Point project. It is the developer's objective to keep the overlapping tax rate, including the existing tax rate within the district at or below 1.85%. Why a Joint Community Facilities District as opposed to two separate districts? By requesting a Joint Community Facilities District, the developer can avoid duplicating costs associated with separate issues such as bond counsel, financial advisors, sales costs, etc. Additionally, with a consolidated larger issue there would be a likely reduction in the underwriter's discount and percentage of cost of issuance to issue amount would be reduced. Staff estimates these cost savings to be approximately $275,000. By entering into a Joint Community Facilities District, CUSD would be the issuer. Therefore, the School District's name would be on the bonds. Additionally, all issues regarding the bonds including public information, public relations and annual rate setting would be the School District's responsibility. The only action required by the City would be the approval of a Joint Community Facilities Agreement. SunCal has indicated that they will not form a Community Facilities District to fund the completion of the Kinoshita Site School and acquire the Las Ramblas street school site unless the District will also be used to fund subdivision related improvements. COMMISSIONBOARD REVIEW AND RECOMMENDATIONS: Not Applicable FINANCIAL CONSIDERATIONS: The City and Water District would incur minimal costs associated with review and approval of the appropriate documents. To participate in a Joint Community Facilities District, the City and Water District would need to enter into a Joint Community Facilities Agreement. These documents would be prepared by School District and reviewed by the City prior to submittal to the City Council for approval. As previously indicated, the bonds would be in the name of the School District, therefore the City and Water District would have no costs associated with the cost of debt issuance. NOTIFICATION: SunCal Companies, Inc. Capistrano Unified School District 550 W. Orangethorpe 32972 Calle Perfecto Placentia, California 92870 San Juan Capistrano, California 92675 Attn: Marc L. Magstadt Attn: Dave Downey Memorandum ALTERNATE ACTIONS- -5- October 21, 1997 By Motion, appoint two City Council members to meet with representatives of the Capistrano Unified School District Board of Directors to obtain additional information prior to making a final determination. 2 By Motion, a. Approve the concept of a Joint Community Facilities District between the City of San Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School District for the Pacific Point project, and b. Direct staff to prepare the appropriate documents for City Council consideration. 3. Do not approve the concept of a Joint Community Facilities District and direct staff to evaluate separate public financing alternatives for public improvements with SunCal Companies. 4 Do not approve the concept of a Joint Community Facilities District. RECOMMENDATION: By Motion, appoint two City Council members to meet with representatives of the Capistrano Unified School District Board of Directors to obtain additional information prior to making a final determination. Respectfully Submitte , Cyhia L. Pend eton mstrative Services Director