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:,'���
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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.
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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
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Memorandum
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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