99-0803_CAPISTRANO UNIFIED SCHOOL DISTRICT_H1c_Agenda ReportAGENDAITEM
TO: George Scarborough, City Manager
FROM: Cynthia L. Russell, Administrative Services Director
August 3, 1999
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)
By motion, approve the attached Joint Community Facilities Agreement between the City
of San Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School
District.
SITUATI N:
Summary and Recommendation
The Capistrano Unified School District (CUSD) has requested that the City and Water
District enter into a Community Facilities District with CUSD. This Community Facilities
District (CFD) would be formed under the Mello -Roos Act and would use public financing
for the acquisition of the school site on Camino Las Ramblas and the construction of the
Kinoshita Elementary School. The CFD would also fund construction of certain major City
and Water District facilities required for the Pacific Point development.
Staff recommends that the City Council approve the attached Joint Community Facilities
Agreement.
Backaround
During the later part of 1997, CUSD advised the City Council that the owner of the Pacific
Point Project (SunCal Companies) had been in discussions with them regarding the
formation of a Community Facilities District. This CFD would be formed under the Mello -
Roos Act. The proposed District would utilize public financing for the acquisition of a
school site on Camino Las Ramblas and it would fund construction of school facilities at
the Kinoshita Farm Site.
FOR CITY COUNCIL AGEN;'____ ' l.1
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AGENDA ITEM -2- August 3, 1999
As part of these discussions, SunCal Companies had notified CUSD that they would not
participate in the Community Facilities District unless the City and Water District entered
into a Joint Community Facilities Agreement to fund certain major City and Water District
facilities that SunCal was required to construct for the Pacific Point Project. The
Community Facilities District would provide SunCal with a means of financing the required
City and Water District facilities with tax-exempt public financing by passing that cost to
the future property owners through tax assessments. In addition, by combining the City
and Water District improvements with the CUSD financing, the project could realize a
savings on its public financing of approximately $275,000.
Facing severely overcrowded conditions without viable alternatives to finance the school
facility at Kinoshita Farm or acquire the future school site on Camino Las Ramblas, CUSD
requested the City and Water District enter into a Joint Community Facilities Agreement
as requested by SunCal.
Following lengthy review and consideration of the Community Facilities District proposal,
the City Council declined to enter into a Joint Community Facilities Agreement. Instead,
in February of 1998, the City Council adopted an Urgency Ordinance, which required that
no new development be allowed unless a Mello -Roos Community Facility District for the
construction of permanent classroom facilities was established. This Urgency Ordinance
insured that a developer would provide Mello -Roos funding for new school facilities even
if the City chose not participate in any proposed joint facilities agreements.
At the end of last year, the California State Legislature acting at the behest of the
development industry included in SB50 a provision which prohibited California cities from
requiring developers to insure adequate school facilities are provided to meet the needs
of the children generated from their developments. This legislation rendered invalid the
City's Urgency Ordinance or any other City effort to require developers to address school
overcrowding caused by their development.
Continuing to face severe overcrowded conditions and without viable alternatives to
finance the school facilities, CUSD has again requested the City and Water District enter
into a joint community facilities agreement with CUSD as stipulated by SunCal.
In addition to funding the construction of the Kinoshita School and acquisition of the school
site at Camino Las Ramblas, the Joint Community Facilities Agreement would fund
construction of the following City and Water District facilities:
1. The water reservoir and appurtenances required for the development of Pacific
Point Project.
2. Off-site storm drain facilities
AGENDA ITEM -3- August 3, 1999
3. Off-site roadway improvements as required under the Pacific Point Project
phasing plan. The off-site roadway improvements include the following:
• Improvement and signalization of Camino Las Ramblas/Via California;
• Improvements along Valle Road from San Juan Creek Road to 1-5 off
ramp;
• Improvements at Camino Capistrano/San Juan Creek Road and 1-5
Intersection.
Consideration of the creation of a Community Facilities District raises a number of
questions. Some commonly asked questions and their corresponding answers are
identified below:
How are properties assessed in a CFD?
Basically, a formula is set when forming the CFD that provides for the maximum dollar
amount to be paid by developed properties and the maximum amount to be paid by
undeveloped properties. The assessment can never exceed the maximum amount. For
example, should the developer go bankrupt during development, the assessments
allocated to the undeveloped properties are not shifted to developed properties. This has
occurred outside the State of California, but our statutes prohibit this from happening?
What happens if the developer goes bankrupt with parcels still undeveloped?
The tax is still assessed as indicated above. The tax levy from any undeveloped property
that may exist is not shifted to developed property.
Are there financial risks to the City or Water District?
Public district financing has no contingent liability on the issuer; in this case CUSD or the
City/Water District would not have any liability toward the future repayment of the bonds.
Additionally, the issuer's ability to issue other debt is not impacted.
How does CUSD determine whether or not a project is viable prior to issuing debt
within a CFD?
Attached to this report is a memorandum providing a detailed description from the School
District regarding the safeguards related to CFD Bond issuance. CUSD follows the
California Debt Advisory Commission disclosure guidelines for land-based securities. In
summary, CUSD reviews projects for the following:
AGENDA ITEM -4- August 3, 1999
Evaluate economic viability of the project including profit margins, marketability, proposed
sales prices and available funding sources, proposed public facilities costs, debt to lien
ratio, etc. to determine whether developer assumptions are accurate and in fact still correct
prior to bond issuance.
Analysis of the financial wherewithal of the Developer and other property owners
responsible for 20% or more the special tax payments to support the bond issue should
the development not proceed as anticipated. This analysis also examines the Developer's
debt repayment history and commitments for conventional financing to support all expected
project cash flow needs.
Assure that maximum special tax rates, proper disclosure and other protections are
provided for as required by CUSD.
CUSD has established eight CFDs and sold seven CFD bond issues to finance over $125
million in school facilities over the past ten years. During this period of time, CUSD's CFD
special tax delinquency rate has averaged below 3%, despite a major economic recession,
and no draws have ever been made against any of the CFDs' reserve funds.
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.
What is the cost of the facilities proposed for construction?
Current
Facilities Proposal
School Facilities:
Kinoshita School Site $2,100,000
Las Ramblas School Site 4,800,000
Subtotal - School Facilities 6,900,000
AGENDA ITEM -5-
Non-School Facilities:
Water Facilities $2,671,000
Roadway & Storm Drain Improvements 2,194,000
Subtotal - Non -School Facilities 4.865.000
TOTAL $11.765.000
What is the number of units being built?
Current Proposal — 350
What is the proposed life of the bond issue and the terms?
August 3, 1999
Term of Bonds Interest Rate Issuance Costs
Current Proposal 30 year 7.00% 23.87%
What is the City's current property tax rate?
Currently, the City's tax rate is approximately 1.10%.
What is the estimated property tax rate and special tax anticipated from this CFD?
The total project valuation is maintained based on new valuation assumptions in the
market place. The following schedule shows a detail of the construction proceeds, current
tax and special tax by unit and summarized as follows:
Description Construction Proceeds Est. Special Tax
Current Developer Proposal Rate (1.63%) $11,765,000 $1,900-$5,800
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AGENDA ITEM -6-
PACIFIC POINT
COMMUNITY FACILITIES DISTRICT
PROJECTED PROPERTY TAX COMPARISONS
Current Proposal
July 13, 1999
August 3, 1999
Description
1999-00
Property
Value
Current
Property
Tax
Revised
Maximum
Special Tax
Proposed by
Developer
Maximum Tax Rate
1.10%
1.63%
Construction Proceeds
Generated
$11,765,000
(_> 5,500 SF)
$1,100,000
$12,100
$5,830
(4,500 - 5,499 SF)
$900,000
$9,900
$4,770
(3,500 - 4,499 SF)
$700,000
$7,700
$3,710
(2,500 - 3,499 SF)
$500,0001
$5,500
$2,650
(< 2,500 SF)
1 $360,000
$3,960
$1,900
What is the total special tax paid by the homeowner owner over the life of the bond issue?
Unit Type
(_> 5,000 SF)
(4,500 - 5,499 SF)
(3,500 - 4,499 SF)
(2,500 - 3,499 SF)
(< 2,500 SF)
Current Proposal
185,476
150,745
117,245
84,133
60,376
AGENDA_ ITEM -7- August 3, 1999
What is the cost of the developers undeveloped land tax (ULT) as compared to the
School Fees to be paid?
Proposal # of Uni School Fees ULT Difference
Current Proposal 350 $2,259,837 $1,838,632 ($421,205)
As you can see, the developer will pay less in undeveloped land tax than school fees.
Additionally, if the CFD is approved, the developer would not incur the costs of the required
public improvements totaling approximately $4.1 million. The developer represents that
the sales price of their product is reduced because the property is encumbered by a CFD.
They represent that by implementing a CFD, the net cost to the developer is higher than
without the CFD. Their position is that they are requesting this financing strategy from a
cash flow point of view. Since it is impossible to determine what the loss in sales price
might be, if any, this cost to the developer has not been calculated.
COMMISSION/BOARD 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. 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 Doomey
AGENDA ITEM -8- August 3, 1999
ALTERNATE ACTIONS:
1. By motion, approve the attached Joint Community Facilities Agreement between the
City of San Juan Capistrano, Capistrano Valley Water District and Capistrano
Unified School District.
2. Do not approve the Joint Community Facilities Agreement
3. Request additional information.
RECOMMENDATION:
By motion, approve the attached Joint Community Facilities Agreement between the City
of San Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School
District.
Respectfully Submitted,
Cynthia L. Russell
Administrative Services Director
Attachment: 1) Joint Community Facilities Agreement
2) Memorandum from CUSD
A:NELLWTR.DOC
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RESOLUTION NO. 99-8-17-3, APPROVING ARCHITECTURAL
CONTROL MODIFICATION 96-9 AND FLOODPLAIN PERMIT 99-1
(RESCO-SHURGARD) - A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF SAN JUAN CAPISTRANO, CALIFORNIA, CERTIFYING
THE ISSUANCE OF A MITIGATED NEGATIVE DECLARATION AND
APPROVING ARCHITECTURAL CONTROL MODIFICATION 96-9 AND
FLOODPLAIN PERMIT 99-1, A PROPOSAL TO CONSTRUCT CREEK
BANK STABILIZATION IMPROVEMENTS ALONG SAN JUAN CREEK
FOR A PARCEL LOCATED AT 32371 SAN JUAN CREEK ROAD
(RESCO-SHURGARD)
The motion carried by the following vote:
AYES: Council Members Jones, Hart and Mayor Greiner
NOES: Council Members Swerdlin and Campbell
ABSENT: None
RECESS AND RECONVENE
Council recessed at 7:30 p.m. to convene the San Juan Capistrano Community
Redevelopment Agency and the Capistrano Valley Water District, and reconvened at 7:38 p.m.
ADMINISTRATIVE ITEMS
CITY MANAGER
1. APPROVAL OF JOINT COMMUNITY FACILITIES DISTRICT BETWEEN THE
CITY OF SAN JUAN CAPISTRANO, CAPISTRANO VALLEY WATER
DISTRICT AND CAPISTRANO UNIFIED SCHOOL DISTRICT ON BEHALF OF
THE PACIFIC POINT PROJECT (SUNCAL COMPANIES) (600.50)
(CONTINUED FROM AUGUST 3. 1999) /i
Written Communications:
1. Report dated August 17, 1999, from the Administrative Services Director,
advising that the Capistrano Unified School District had requested that the City
and Water District enter into a Community Facilities District jointly with the
School District in order to use public financing for the acquisition of the school
site on Camino Las Ramblas and the construction of the Kinoshita Elementary
School. The Community Facilities District would also assist in the funding of the
construction of certain major City and Water District facilities required for the
Pacific Point Development. The Report advised that the anticipated tax rate of
1.63% would generate an $11,765,000 bond based on the estimated property
values, however, property values were being further evaluated and a
supplemental report would be provided prior to the meeting.
(2) Supplemental Report dated August 17, 1999, from the Administrative Services
Director, advising that further evaluation concluded that the estimated property
City Council Minutes -8- 8/1//99
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values should be based on $182 per square foot for finished construction, rather
than the initial estimate of $200 per square foot. Based on that conclusion, the
property $11,765,000 bond would result in an estimated total tax rate of 1.7%.
The Report recommended approval of the requested District.
Cynthia Russell, Administrative Services Director, made an oral presentation.
Approval of Joint Community Facilities District:
It was moved by Council Member Campbell, seconded by Council Member Jones and
unanimously carried that the Joint Community Facilities District between the City of San
Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School
District on behalf of the Pacific Point Project be approved with an anticipated tax rate
of no more than 1.7%.
2. APPROVAL OF AGREEMENT WITH THE BOYS & GIRLS CLUB OF
CAPISTRANO VALLEY, INC., AS SUB -GRANTEE FOR PURPOSES OF U.S.
DEPARTMENT OF HOUSINGAND URBAN DEVELOPMENT GRANT (600.30)
Written Communications:
Report dated August 17, 1999, from the Assistant City Manager, advising that in the
Federal Budget approved last October, the Boys & Girls Club of Capistrano Valley, Inc.,
had been awarded $500,000 through the Department of Housing and Urban
Development to assist with construction costs of a Club facility. The grant was
structured so that the funds must be passed to a local unit of government, the grantee,
and in this case the City of San Juan Capistrano, which in turn was obligated to ensure
that the grant funding was allocated to the Club in a manner that met all HUD
requirements. The City was also required to enforce compliance by the Sub -grantee,
the Boys & Girls Club of Capistrano Valley, Inc., with the terms of the agreement.
Jennifer Murray, Assistant City Manager, made an oral presentation.
Approval of Agreement:
It was moved by Council Member Campbell, seconded by Council Member Swerdlin
and unanimously carried that the Housing and Urban Development Grant Agreement
to set forth responsibilities with regard to the construction of the youth facility at the
Community Center be approved.
PLANNING DIRECTOR
CONTINUATION OF CONSIDERATION OF REZONE 98-5 AND TENTATIVE
TRACT MAP 15771; A SUBDIVISION OF 3.93 ACRES TO ALLOW A GATED
COMMUNITY OF 25 SINGLE FAMILY DETACHED UNITS AND PRIVATE
PARK LOCATED AT THE NORTHEAST CORNER OF VILLAGE ROAD AND
RANCHO VIEJO ROAD (OLSON COMPANY) (460.20/420.40) (CONTINUED
FROM JULY 20 1999)
Applicant:
The Olson Co., Attn.: Kim Willauer, 3020 Old Ranch Parkway, Seal Beach, CA 90740
City Council Minutes -9- 8/17/99