Agenda Item   



                                                                                                                        ASR Control  23-000832




legal entity taking action:

Community Facilities District No. 2023-1

board of supervisors district(s):


SUBMITTING Agency/Department:

County Executive Office   (Approved)

Department contact person(s):

Louis McClure (714) 834-5999 



Kim Engelby (714) 834-3530



Subject:  Community Facilities District 2023-1 Rienda Financing Approval


      ceo CONCUR

County Counsel Review

Clerk of the Board


Approved Resolution to Form




3 Votes Board Majority




    Budgeted: No

Current Year Cost:   See Financial Impact Section

Annual Cost: See Financial Impact Section




    Staffing Impact:


# of Positions:            

Sole Source:   N/A

    Current Fiscal Year Revenue: N/A

   Funding Source:     Bond Proceeds and Special Taxes: 100%

County Audit in last 3 years: No

   Levine Act Review Completed: Yes


    Prior Board Action:         5/23/2023 #58, 4/11/2023 #29, 11/8/2004 #1




Adopt the Resolution of the Board of Supervisors, acting in its capacity as the Legislative Body of Community Facilities District No. 2023-1 of the County of Orange (Rienda Phase 2B), authorizing the issuance of bonds in a principal amount not to exceed $75 million and the execution of documents and certain actions related thereto.






Approval of the Recommended Actions will allow for financing of public infrastructure at the time of development.






On November 8, 2004, your Board of Supervisors (Board) approved the Ranch Plan Development Agreement (Development Agreement) between the County of Orange and Rancho Mission Viejo allowing up to 14,000 dwelling units, as well as retail, office and recreational uses within a development area of approximately 7,700 acres with approximately 15,000 acres retained in open space.  Rancho Mission Viejo has proposed the formation of one or more community facilities districts (CFD) for the financing of public facilities and projects that are required pursuant to the Development Agreement, to be completed in phases, as development occurs.  Pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982 (Act), as amended, the County already formed three CFDs to finance improvements in Planning Area 2, known as Esencia.


Development has begun in Planning Area 3, and the County previously formed CFD 2021-1 and issued bonds to finance improvements for Phases 3.1 and 3.2a of Planning Area 3.  Planning Area 3 is located on approximately 2,100 acres in an unincorporated area of South Orange County, east of the new community of Esencia, and between the existing master planned community of Coto de Caza and Ortega Highway.  Upon build out, Planning Area 3 is expected to contain approximately 7,000 residential units, including market rate and affordable apartments, three million square feet of commercial development, schools, daycare facilities, a civic center and parks, trails and community recreation space.  The village name for the first five phases of Planning Area 3 is Rienda.  Rienda is planned to contain approximately 2,914 residential units, a market rate and an affordable apartment community, 475,000 square feet of commercial development, a K-8 school and a fire station.


In January 2022, the County Executive Office received an Infrastructure Finance Program District Application from Rancho Mission Viejo, on behalf of RMV PA3 Development, LLC (Developer), for the proposed formation of the second CFD within Planning Area 3 (CFD 2023-1).  On April 11, 2023, the Board held a public hearing and adopted resolutions that established CFD 2023-1, authorized the levy of a special tax, determined the necessity to incur bonded indebtedness and called an election within CFD 2023-1.  On April 11, 2023, an election was held within CFD 2023-1, at which the landowners eligible to vote approved the issuance of bonds for CFD 2023-1 in an amount not to exceed $95 million.  On May 23, 2023, the Board, acting as the legislative body of CFD 2023-1, adopted an ordinance that authorizes the levy of a special tax in accordance with the rate and method of apportionment approved at the election within CFD 2023-1.


CFD 2023-1 consists of approximately 49 acres, of which 26 acres are expected to be subject to the special tax at build-out.  Development within CFD 2023-1 is expected to include 514 for-sale market-rate residential units. The remainder of the property is anticipated to be used for recreational facilities, parks, open space, public property and property owned by the owners association.  The backbone infrastructure necessary to complete the development within CFD 2023-1, including major infrastructure (sewer, water, storm drains, utilities, arterial roads) to be installed by the Developer, has been substantially completed.  All five merchant builders have commenced construction of the model homes and the public grand openings for the homes are scheduled to occur at various times between November 2023 and the first quarter of 2024.


The estimated principal amount of the proposed 2023 Series A Special Tax Bonds (Bonds) is $62.5 million.  Due to municipal bond market conditions, the Bonds are expected to be sold at a discount of approximately $1 million which will generate proceeds of $61.5 million.  Of the $61.5 million, approximately $54.3 million will be deposited into the project fund.  Approximately $6 million will be deposited into the Bond reserve fund and the remaining funds will be used for capitalized interest.  The true interest cost of the Bonds is estimated at 6.06 percent (including a 25 basis point increase over current market rates) and the cost of issuance including underwriter’s discount and all other fees and charges paid to third parties is estimated at $628,700.  The not to exceed amount of $75 million in the resolution provides flexibility in the event municipal bond market conditions change from the estimated amounts above.


The proceeds of the Bonds will be used to pay the costs and expense of the acquisition and construction of facilities and improvements, fund the reserve account and pay the costs of issuing the Bonds. The facilities authorized to be constructed and acquired consist of roadway improvements, tunnels, regional hiking and biking trails, storm drains and basins, water and wastewater facilities, wet and dry utilities, bridges and pedestrian bridges, parks, traffic signals, school sites, school facilities and equipment, facilities and equipment relating to fire protection and suppression, sheriff substations and equipment, library facilities and equipment, and related infrastructure improvements, appurtenances and appurtenant work in connection with the facilities.


The tax rate within CFD 2023-1 is approximately 2.0 percent of the estimated market value of the units at the time of sale.  This estimated tax burden includes the overlapping debt of the Capistrano Unified School District and the Metropolitan Water District, as well as the base property tax rate of 1 percent.  With the estimated tax burden being 2 percent or less of the estimated market value, CFD 2023-1 is in compliance with the County’s policy. 


The Act provides that the legislative body of a CFD may sell bonds only if it determines, prior to the award of the sale of bonds, that the value of the real property that would be subject to the special tax to pay debt service on the bonds will be at least three times the principal amount of the bonds to be sold and the principal amount of all other bonds outstanding that are secured by a special tax or assessment levied on property within the CFD.  This is referred to as the value-to-lien test.  However, the Act and County policies also allow for the Bonds to be issued even if the value-to-lien test is not met so long as the issuance of the Bonds do not present unusual credit risk due to proper credit enhancement.  The deposit of a portion of the proceeds of the Bonds into an escrow fund until the value-to-lien test is met, as described below, is intended to provide such credit enhancement.


The market value of the land and improvements in CFD 2023-1 was appraised at $191.4 million, as of August 31, 2023, by Integra Realty Resources (Attachment D).  In accordance with industry practice, the County’s special tax consultant has calculated the direct and overlapping debt of the Capistrano Unified School District and the Metropolitan Water District allocable to CFD 2023-1 including the proposed Bonds.  Depending on interest rates at the time of sale, the principal amount of the proposed bonds may result in a value-to-lien ratio of less than 3 to 1.  If the value-to-lien ratio is determined to be less than 3 to 1, a portion of the proceeds of the Bonds will be deposited into an escrow account held with the Bond trustee and would not be released until the value of the land and improvements is sufficient to meet the 3 to 1 test.  If for any reason, the value does not meet the 3 to 1 test by July 15, 2026, those funds will be used to redeem a portion of the bonds on August 15, 2026 (such portion of the Bonds are referred to in the attached documents as the “Escrow Term Bonds”).  The value of the land and improvements in CFD 2023-1 is expected to increase with the continued development of the project and the 3 to 1 test is expected to be met before July 15, 2026.  


The Market Absorption Study (Attachment E) prepared by Empire Economics, Inc. (Empire) estimates the rate of absorption for the projects within CFD 2023-1.  Empire estimates the calendar year absorption schedules for the residential projects as follows: 110 units in 2024, 219 units in 2025, 160 units in 2026, and 25 units in 2027.  Empire’s conclusions are based on market conditions and a statistical comparison of the currently active comparable projects. 


The Policy Compliance Report (Attachment H) prepared by the Municipal Advisor, Fieldman, Rolapp & Associates, Inc., concludes that the County policies have been met and the economics of the project are sound.  The project serves a community need, the special taxes have been apportioned to the property owners on a reasonable basis and relate to the cost of the financed facilities.  An independent market economist and real estate appraiser were used, and the value of the property is at least three times the principal amount of the proposed bonds (excluding the amount deposited in the escrow account) and other overlapping debt.  In addition, the developer has a history of success in Orange County and has not defaulted on any special tax, assessment, loan or line of credit.


Consistent with the County’s practices regarding CFD financings, on May 25, 2023, the County filed a complaint in the Superior Court of the State of California (Court) for the County of Orange seeking judicial validation of the formation of CFD 2023-1.  On September 26, 2023, the Court entered a default judgment that validated the actions taken with respect to the formation of CFD 2023-1, the incurrence of bonded indebtedness and levy of the special tax.  The last day of the appeal period for the validation action was October 26, 2023.


The County Executive Office (CEO) recommends the issuance of the Bonds since the proposed Bonds are in compliance with County policies, the Act and other applicable statutes.  In addition, the value of CFD 2023-1 is expected to increase with the continued development of the project.  The analysis by Empire indicates a favorable project absorption period.  The developer has a history of success and experience in Orange County and CFD 2023-1 is consistent with the County’s formation and financing of previous CFDs and the County’s commitment to construct public improvements as development occurs.


The Public Financing Advisory Committee considered this item at a special meeting on October 19, 2023.  CEO provided a written summary of the results of the meeting to the Board.






There is no financial impact to the County as repayment of the bonds will be paid by the special taxes levied within CFD 2023-1.  CFD 2023-1 RMV (Rienda Ph 2B) Construction Fund 567 and CFD 2023-1 RMV (Rienda Ph 2B) Debt Service Fund 568 were established in FY 2023-24.  These funds were added after the adoption of the FY 2023-24 Budget.  Appropriations and revenues will be established through the Mid-Year Budget Report and will accurately reflect the details of the bond issuance as determined at pricing.










Attachment A - Resolution
Attachment B - Bond Indenture
Attachment C - Preliminary Official Statement (POS)
Attachment D - Appraisal Report
Attachment E - Market Absorption Study
Attachment F - Acquisition Funding and Disclosure Agreement
Attachment G - Bond Purchase Agreement
Attachment H - Policy Compliance Report
Attachment I - Continuing Disclosure Certificate