HomeMy WebLinkAbout0034_1_CFD 2006-1 (IA HH) 2019 Bonds - SRREPORT TO CITY COUNCIL
To:Honorable Mayor and Members of the City Council
From:Grant Yates, City Manager
Prepared by: Jason Simpson, Assistant City Manager
Date:November 12, 2019
Subject: Adopt Resolution Authorizing the Issuance of CFD 2006-1 IA HH Special
Tax Bonds and Bond Documents in Connection Therewith
Recommendations
adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE,
CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF THE CITY OF LAKE ELSINORE
COMMUNITY FACILITIESDISTRICT NO. 2006-1 (SUMMERLY) AUTHORIZING THE
ISSUANCE OF ITS SPECIAL TAX BONDS, SERIES 2019 (IMPROVEMENT AREA HH) IN A
PRINCIPAL AMOUNT NOT TO EXCEED SEVEN MILLION DOLLARS ($7,000,000) AND
APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN
CONNECTION THEREWITH
Background
The City of Lake Elsinore (the “City”) formed City of Lake Elsinore Community Facilities District
No. 2006-1 (Summerly) (the “District”) in 2006 pursuant to the Mello-Roos Community Facilities
District Act of 1982, as amended. The District comprises a portion of Summerly, a planned
residential community located in the southeast portion of the City. McMillin Summerly, LLC,
acquired the partially developedSummerly projectin 2010 and now serves as the master
developer. At build-out, the Summerly project is expected to include approximately 1,677 single-
family detached homes, commercial development, and recreational and open space.McMillin
Summerly, LLC reports that of the 1,677 homes planned within Summerly, 1,172 have been
completed and conveyed to homeowners.
Improvement Area HH of the District is a portion of Summerly andconsists of approximately 34
acres planned for atotal of 180 single family detached homes. Out of the total 180 proposed
homes, 45 have closed to individuals.
The 180 lots are being developed into three neighborhoods by three builders: Sendero by
Richmond American Homes (“Richmond American”), The Glen by Beazer Homes (“Beazer”)
and Laurel Pointe by D.R. Horton. McMillin Summerly, LLC no longer owns any property within
Improvement Area HH.The lots range in condition from completed, individually owned homes to
homes under construction and physically finished lots under builder ownership.
CFD 2006-1 (IA HH) 2019 Bonds
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The following chart illustrates the ownership and development status of the property within
Improvement Area HHas of October 1, 2019.
Ownership and Development Summary (October 1, 2019–Appraisal Date)
Sendero
(Richmond
American)
The Glen
(Beazer Homes)
Linden Pointe
(DR
Horton)Total
Closed to Individuals 23 5 17 45
Model Homes 2 2 2 6
Over 95% Complete 1 2 9 12
Under Construction 16 14 9 39
Finished Lots 23 34 21 78
65 57 58 180
The builders within Improvement Area HH currently expect to complete construction and sell all
remaining homes by mid-2020.
Based on current development and ownership status, the homes and lots owned by Beazer
Homes, DR Hortonand Richmond American are estimated to beresponsible for approximately
32%, 21% and 22%of the maximum Fiscal Year 2020-21Special Tax levy, respectively. Based
on such estimated shares of the Fiscal Year 2020-21 maximum Special Tax levy, each of such
merchant builders will be required to provide letters of credit or cash deposits securing the
payment of their respective share of the estimated Special Tax levy for two fiscal years. Each of
suchirrevocable lettersof credit or cash depositswouldbe released once the applicable builder
is responsible for 20% or less of the Maximum Special Tax levy.
The Resolution before the City Council authorizesthe issuance of special tax bonds (the “2019
Special Tax Bonds”) to finance impact fees related to City and Elsinore Valley Municipal Water
District capital improvements in connection with the development of the District. The Resolution
also authorizes the approval and execution of certain documents further described on the
following pages.
Discussion
The proposed 2019Special Tax Bonds are estimated to be issued in the principal amount of
approximately $5.23 million with a final maturity of September 1,2050 (30-year financing term).
As previously mentioned, proceeds from the 2019Special Tax Bonds will be used to finance
impact fees related to City and Elsinore Valley Municipal Water District capital improvements in
connection with the development of the District. The final structure and payment schedule will
be determined when the 2019Special Tax Bonds are priced and sold, which is expected to be
in early December. The bond closing is expected to occur approximately two weeks after the
pricing of the 2019Special Tax Bonds. The table belowhighlights financing statistics of the
2019Special Tax Bonds based on current market conditions.
Summary of Financing Statistics¹
2019Special Tax Bonds
Par Amount $5.23 million
Average Bond Yield 3.90%
CFD 2006-1 (IA HH) 2019 Bonds
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Estimated Cost to Home Owners
Average Annual Assessment²/³$1,774.82
¹Preliminary and subject to change.
²First full year of the assessment; based on 180 individual homeowners.
³Annual assigned special tax increases at approximately 2% per year.
The Fiscal Year 2020-21estimated Special Tax levy on homes within Improvement Area HH
range between $1,189 to $2,712, depending on the size of the home. Such rates increase at
2.0% per year.
AsrequiredunderSection5852.1oftheCaliforniaGovernmentCode,thegoodfaith
estimatesasprovidedbythe MunicipalAdvisorandUnderwriter are set forth in Exhibit A to this
staff report.
Documents to be Approved
Approval of the Resolution approves the form of and/or authorizes the execution and delivery of
thefollowing documents:
Preliminary Official Statement: The Preliminary Official Statement (the “POS”) is the
“offering document” for the 2019Special Tax Bonds. It provides a description of the
District, Improvement Area HH, the 2019Special Tax Bonds, theproposed development
within Improvement Area HH, and any other information that would be material to a
prospective investor’s decision on whether to purchase the 2019Special Tax Bonds.
While the City’s counsel, consultants, and the underwriter have participated in preparing
the POS, City Council and staff are ultimately responsiblefor ensuring that the POS is
accurate, contains no misleading information and does not omit any information
necessary to make the POS not misleading to investors.
Bond Indenture: The Bond Indenture is a contract entered into between the District and
Wilmington Trust, National Association, as the appointed Trustee for the 2019Special
Tax Bonds. This document contains terms of the 2019Special Tax Bonds including, but
not limited to, the payment and redemption provisions, the pledge of revenues to pay the
2019Special Tax Bonds, rights and duties of the Trustee, remedies upon a default in the
payment of the 2019Special Tax Bonds, and other related matters.
Continuing Disclosure Certificate: Executed for the benefit of bondholders, the
Continuing Disclosure Certificate obligates the District to file an annual report each
Fiscal Year which includes, among other things, the most recent audited financial
statements of the City and financial data relating to Improvement Area HH. The District
is also required to report certain events which are significant to bondholders if and when
they occur.
Bond Purchase Agreement: Pursuant to the Bond Purchase Agreement, the District
agrees to sell the 2019Special Tax Bonds to the underwriter and the underwriter agrees
to purchase the 2019Special Tax Bonds, subject to typical closing conditions. City staff,
the City’s municipal advisor, and bond counsel will sign off on the final pricing of the
2019Special Tax Bonds prior to the execution of the Bond Purchase Agreement.
CFD 2006-1 (IA HH) 2019 Bonds
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Bond Counsel and the City Attorney have reviewed the attached financing documents on behalf
of the City.If this resolution is approved, City staff will continue to work with the financing team
to finalize all of the aforementioned documents. As previously mentioned, the pricing date would
be targeted for some time in early December.
Fiscal Impact
There is no cost to the City; however, the property owners are expected topay between $1,189
to $2,712, depending on the size of the home, increasing at 2% per year through 2050.
Recommendation
Adopt a Resolution of the City Council approving the issuance of the 2019Special Tax Bonds in
the principal amount not-to-exceed $7million and the execution and delivery of bond financing
documents.
Exhibits
A -Good Faith Estimate
B –Resolution
C –Bond Indenture
D –Continuing Disclosure Certificate
E –Preliminary Official Statement
F -Bond Purchase Agreement
G -Appraisal Report