City Council Agenda
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Memo to: |
Manteca City Council |
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From: |
Toni Lundgren, City Manger L. David Nefouse, City Attorney Kevin L. Jorgensen II, City Engineer / Director of Engineering Brad Wungluck, Director of Development Services |
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Prepared by: |
Daniella G. Green, Assistant City Attorney |
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Date: |
June 17, 2025 |
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Subject: |
Authorizing Use of BOLD Program and Clarifying Options for Land-Secured Financing in the City |
Recommendation:
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Conduct a Public Hearing and adopt a resolution authorizing the BOLD Program and clarifying the options for Land-Secured Financing in the City.
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Background:
INTRODUCTION
In 2011 and 2024, the City authorized use of the Statewide Community Infrastructure Program (SCIP) offered by the California Statewide Communities Development Authority (CSCDA), which is a joint exercise of powers agency of which the City is a member. SCIP provides a land-secured financing option for developers to finance eligible facilities within the City. In 2023, the City formed its City of Manteca Community Facilities District No. 2023-1 (Villa Ticino West Facilities) for the same purpose - to allow the developer of the project to finance eligible facilities. Staff recommends authorizing a second Statewide program for financing eligible facilities, known as the Bond Opportunities for Land Development (BOLD) Program. BOLD is offered by the California Municipal Finance Authority (CMFA), which is a joint powers agency, of which the City is a member just like CSCDA.
The attached resolution would authorize use of the BOLD Program for financing eligible facilities, and clarify that the City may form its own community facilities districts for development projects or out-source to the SCIP or BOLD programs.
DISCUSSION
Background on CMFA. The City is a member of CMFA, a State-wide joint powers authority whose members are numerous cities, counties and other public agencies 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. Authorizing use of the BOLD Program will allow greater flexibility for the development community in the City, while maintaining City control of any financing option.
Background on the BOLD Program. 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.
Similar to SCIP, under the BOLD Program, bonds are issued by a community facilities district (CFD) formed under the Mello-Roos Community Facilities Act of 1982 (California Government Code Section 53311 et seq.) (Act). 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. CFDs can also be structured to pay for maintenance of public facilities and other services costs of the City, and the City has utilized this tool several times in the past.
Financing Team. 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 program documents may do so, with all related costs payable from bond proceeds. Specifically, the BOLD Program utilizes Jones Hall for bond counsel services, Goodwin Consulting Group for special tax consulting services, and Piper Sandler & Co. for underwriting services.
Benefits of BOLD Program to Local Governments. Although each BOLD Program 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 and CMFA thereafter works with staff to ensure the program is meeting the City’s objectives. CMFA and its consultant team will form and approve each CFD, CMFA will issue bonds on behalf of the CFD, and levy and collect the special taxes each year. By working directly with developers, the BOLD Program facilitates financing for infrastructure obligations of developers, covering a broad range of development cost obligations necessary for new development imposed by municipalities, including facilities. Using the BOLD Program alleviates local agency staff time constraints and allows staff to focus on other aspects of processing land development projects.
Determining Special Tax Rate. Formation of each 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% of its projected market value in its completed state, per industry standards.
Bond Issuance. 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 a joint community facilities agreement, acquisition agreement or similar agreement to receive the bond proceeds, and to meet the general requirements to maintain the tax exemption of interest on the bonds. CMFA adopts the resolutions needed to authorize and issue the special tax bonds and awards the sale to the bond underwriter.
Use of Bond Proceeds. Once the bond issuance occurs, bond proceeds are available to be disbursed. The proceeds are held by a bond trustee and available, as directed by the developer and approved by the local agency, to be used to meet obligations to the City and other local agencies 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.
Underwriting for Bond Issuance. 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 performance bond in place
Credit criteria will be reviewed by the underwriting team on a case-by-case basis to ensure reasonable interest rates at 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.
Giving Back to Local Communities. 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 (“CFSC”) 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 its member communities. This unique commitment to give back directly to the communities in which they operate sets CMFA apart from other JPA conduit issuers.
Information for Bond Marketing. 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 and 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.
Disclosure of Special Tax to Home 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.
Fiscal Impact:
All of the costs and expenses related to the formation, issuance of bonds, and ongoing administration for any CFD formed by the BOLD program is the responsibility of CMFA and there is no liability or fiscal impact on the City. The City can be reimbursed for any staff time expended on the program.
Documents Attached:
Attachment 1-Resolution
Attachment 2-PowerPoint Presentation