City Council Agenda
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Memo to: |
Manteca City Council |
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From: |
Shay Narayan, Finance Director |
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Prepared by: |
Shay Narayan, Finance Director |
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Date: |
October 1, 2024 |
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Subject: |
Issuance of Special Tax Bonds for and on behalf of Improvement Area No. 2 of the City of Manteca Community Facilities District No. 2023-1 (Villa Ticino West Facilities) |
Recommendation:
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Adopt a Resolution authorizing the issuance of Special Tax Bonds for and on behalf of Improvement Area No. 2 of the City of Manteca Community Facilities District No. 2023-1 (Villa Ticino West Facilities), approving and directing the execution of a Fiscal Agent Agreement and Bond Purchase Agreement, approving the form of Preliminary Official Statement, approving sale of such bonds, and approving other related documents and actions.
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Background:
City of Manteca Community Facilities District (CFD) No. 2023-1 (Villa Ticino West Facilities) (the “District”) was formed and established by the City on June 20, 2023, following a public hearing by the City Council, as legislative body of the District, and a landowner election which authorized the incurrence of bonded indebtedness in an aggregate principal amount of not to exceed $24,000,000 and approved the levy of special taxes. The District was formed with an initial “Improvement Area No. 1” and with land outside of that boundary designated as a “Future Annexation Area” expected to be bonded in the future as development of homes in the Villa Ticino West project proceeded. The principal amount of bonded indebtedness allocated to Improvement Area No. 1 was $6,500,000 and for land within the Future Annexation Area was $17,500,000. On April 30, 2024, $5,825,000 of bonded indebtedness for Improvement Area No. 1 of CFD No. 2023-1 (Villa Ticino West Facilities) Special Tax Bonds Series 2024 were issued.
In June 2024, in accordance with the CFD formation proceedings, owners of land within the Future Annexation Area submitted unanimous approval forms to (i) annex territory into the CFD from the Future Annexation Area as “Improvement Area No. 2” of CFD No. 2023-1 (Villa Ticino West Facilities)” (“Improvement Area No. 2”); (ii) approve the form of Rate and Method of Apportionment of Special Taxes for Improvement Area No. 2, and the levy of special taxes on taxable property within Improvement Area No. 2; (iii) authorize the issuance of bonds for Improvement Area No. 2 in a principal amount not to exceed $11,000,000; and (iv) establish an initial appropriations limit for Improvement Area No. 2 in the amount of $11,000,000, subject to escalation in accordance with law.
The Improvement Area No. 2 of CFD 2023-1 (Villa Ticino West Facilities) Special Tax Bonds Series 2024 (the “Bonds”) will be issued to finance a portion of costs of acquiring and constructing certain public infrastructure improvements necessary for development in the District, such as roadway, storm drain, water, sewer, and park improvements associated with the project and to fund a debt service reserve fund and costs of issuance.
The Bonds will have a 30-year term with a total estimated principal amount of approximately $10,125,000 and an initial debt service payment of approximately $511,719 in Bond Year 2025 (ending 9/1/2025), increasing over time to approximately $924,000 in the final Bond Year (ending 9/1/2054). Debt service on the Bonds is paid from annual special taxes levied on property in Improvement Area No. 2 only. The bonded debt will be structured so that the annual special taxes from Improvement Area No. 2 (less an amount for the District’s priority annual administrative expenses) are projected to provide at least 110% debt service coverage for the Bonds in all years. The final repayment schedule will be determined when the Bonds are priced and final interest rates are determined, which is expected to occur in the second week of October 2024. The estimated closing date and distribution of proceeds is expected to occur on or about October 24, 2024.
The special taxes will be levied by the City on behalf of Improvement Area No. 2 and collected by the San Joaquin County Treasurer-Tax Collector on taxable parcels within Improvement Area No. 2 in the same manner and at the same time as ad valorem property taxes. The repayment of principal and interest on the Bonds will be secured solely by the special taxes levied within Improvement Area No. 2 of the District, and the Bonds will not be a debt of the City’s general fund or any other fund not associated with CFD 2023-1. The remaining land in the Future Annexation Area of the District that is outside of Improvement Area No. 1 and Improvement Area No. 2 is expected to be annexed into the District within a year.
Summary of Documents
1. Preliminary Official Statement: Bond offering document that will be presented to potential investors of the Bonds and includes information about the City and the existing and expected development in Improvement Area No. 2. The document also includes a summary of the terms and payment obligations for the Bonds, as well as disclosure to investors about the risks of investing in the Bonds. The City’s Continuing Disclosure Certificate, included as an appendix within the Preliminary Official Statement, sets forth the information required to be disclosed to Bondholders after issuance. The final interest rates and terms will be inserted after the Bonds are priced and the document will be reissued as a final Official Statement.
2. Fiscal Agent Agreement: This document defines the payment terms and conditions, and funds and accounts of the Bonds which will be administered by the Fiscal Agent, U.S. Bank Trust Company, National Association, on behalf of the District, including the Debt Service Reserve Account. The Fiscal Agent Agreement also sets forth covenants such as a covenant for the City to commence and diligently pursue to completion any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of debt service on the Bonds.
3. Bond Purchase Agreement: This document provides the terms and conditions by which the Underwriter, Samuel A. Ramirez & Co., Inc., will purchase the Bonds, provided, however, that the aggregate principal amount of Bonds shall not exceed $11,000,000, nor shall the Bonds result in an Underwriter’s discount in excess of 1.50% of the principal amount of bonds issued, nor result in a true interest cost in excess of 5.75% (“Not-to-Exceed Parameters”). The final interest rates and terms will be inserted after the Bonds are priced.
Fiscal Impact:
The proposed Bonds will not be a direct obligation of the City of Manteca. Neither the faith and credit, nor the taxing power of the City, County, State, or any political subdivision thereof will be pledged to the repayment of the Bonds, except to the extent of the special taxes levied by the City. The Bonds will be special limited obligations of the City payable solely from special tax revenues levied within Improvement Area No. 2 of the District. All costs of issuance of the proposed Bonds will be paid from bond proceeds.
The following are the good faith estimates from the City’s underwriter and financial advisor, required pursuant to Government Code Section 5852.1:
(A) The true interest cost of the Bonds is estimated to be 4.95%.
(B) The finance charge of the Bonds (i.e., the sum of all fees and charges paid to third parties) is estimated to be $421,875.
(C) Proceeds from the sale of the Bonds, less the finance charge of the Bonds described in item (B) and any reserves or capitalized interest paid or funded with proceeds of the Bonds, are estimated to be $9,042,640.
(D) The total payment amount (i.e., the sum total of all debt service payments on the Bonds) is estimated to be $21,077,969.
These are good faith estimates only and are based on market rates as of September 9, 2024. Final results will likely differ based on market conditions as of the actual sale date and other factors. However, for the financing to proceed, the Not-to-Exceed Parameters must be met.
Documents Attached:
Attachment 1 - Resolution
Attachment 2 - Form of Preliminary Official Statement
Attachment 3 - Form of Fiscal Agent Agreement
Attachment 4 - Form of Bond Purchase Agreement