Agenda Item AGENDA STAFF REPORT ASR Control 24-000864
MEETING DATE:	12/03/24
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	5
SUBMITTING Agency/Department:	County Executive Office (Approved)
Department contact person(s):	Louis McClure (714) 834-5999
	Christine Gardea (714) 834-3014

Subject: Community Facilities District 2025-1 Intention to Form District/Issue Bonds

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Resolution to Form

Discussion

3 Votes Board Majority

Budgeted: Yes

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: Developer deposits: 100%	County Audit in last 3 years: No
Levine Act Review Completed: Yes

Prior Board Action: 1/12/2021 #20, 11/8/2004 #1

RECOMMENDED ACTION(S):

Adopt Resolution of Intention of the Board of Supervisors of the County of Orange to establish Community Facilities District No. 2025-1 of the County of Orange (Rienda 3), to designate Improvement Area No. 1 therein, to designate future annexation area and to authorize the levy of special taxes to pay the costs of acquiring or constructing certain facilities and expenses of the district and pay debt service on bonded indebtedness, and establish public hearing date for January 14, 2025 at 9:30 a.m. or as soon thereafter as practical.

Adopt Resolution of Intention of the Board of Supervisors of the County of Orange to incur bonded indebtedness within proposed Community Facilities District No. 2025-1 of the County of Orange (Rienda 3) and, with respect to proposed Improvement Area No. 1 therein, in an amount not to exceed $160,000,000.

SUMMARY:

The County Executive Office requests your Board adopt the attached resolution of intention to establish Community Facilities District 2025-1 authorizing the levy of a special tax and adopt the attached resolution to incur bonded indebtedness, which will begin the formation process of the community facilities district which provides an efficient financing mechanism for the construction of public improvements as development occurs.

BACKGROUND INFORMATION:

On November 8, 2004, your 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) and financing of the public facilities and projects that are required pursuant to the Development Agreement, to be completed in phases, as development occurs.

The County formed three CFDs (2015-1, 2016-1 and 2017-1) to finance improvements in Planning Area 2, known as the Village of Esencia (Esencia). The development of Esencia is nearly complete and consists of approximately 2,514 residential units, three apartment communities, 99,200 square feet of business park space, 130,000 square feet of self-storage, a K-8 school, a daycare facility, a forthcoming medical office building and a future 30-acre commercial retail space.

Development has begun in Planning Area 3, and the County formed CFD 2021-1 and CFD 2023-1 to finance improvements for Phases 3.1, 3.2a, and 3.2b 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 first 3 phases in Planning Area 3 are within the Village of Rienda. Phase 4 will introduce a brand-new Village, Gavilan Ridge, exclusively for the 55-plus homebuyer, followed by Phase 5 which will include additional neighborhoods in both Rienda and Gavilan Ridge. The first 5 phases in Planning Area 3 contain approximately 2,504 residential units, a market rate apartment community, a K-8 school and a fire station.

In March 2024, 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 third CFD within Planning Area 3 as requested in the attached Petition to the Board of Supervisors. The CFD requested in the March 2024 District Application (CFD 2025-1) is for Phase 3.3, Phase 3.4, Phase 3.5 and Phase 3.14, which includes 1,040 for-sale residential units on approximately 165 acres, 5.5 acres of clubhouses and amenities, 10 acres of park and recreation space and 41 acres of open space, streets and slopes. The Petition requests the establishment of CFD 2025-1, the formation of Improvement Area No. 1 within the CFD and designation of an area (Future Annexation Area) which may be annexed into Improvement Area No. 1 or as a separate improvement area (Improvement Area No. 2 of CFD 2025-1). Portions of the Future Annexation Area may be annexed to CFD 2025-1 upon the unanimous consent and approval of the owners of the property to be annexed in accordance with the Mello-Roos Community Facilities Act of 1982 (Act), as amended. When the Developer requests the annexation of any portion of the Future Annexation Area to CFD 2025-1, staff will return to your Board for approval and acceptance of the unanimous consent(s) and approval(s) at the time of annexation.

Of the eight residential parcels in proposed CFD 2025-1, 148 lots were sold to homebuilders in August and September 2024, representing 30 percent of the lots planned for Improvement Area No. 1. The remaining 353 lots are under contract with homebuilders and will be purchased by February 2025 and February 2026. Phase 3 is scheduled for grand opening in June 2025, and Phase 4 is scheduled for grand opening in February 2026 and grading has already commenced. The final map for both Phases 3 and 4 have been recorded as of November 2024.

Resolution of Intention to Establish CFD 2025-1

Adoption of the Resolution of Intention to establish CFD 2025-1 will accomplish the following:

1.	Declare the Board's intention to establish CFD 2025-1 and Improvement Area No.1 of CFD 2025-1 and the designation of future annexation area according to the boundaries described.
2.	Find and determine that the description of the facilities is sufficiently informative to allow taxpayers within the proposed CFD 2025-1 and the designation of Improvement Area No. 1 to understand what the funds of the CFD may be used to finance, and that the proposed facilities are necessary to meet the increased demands placed upon the County and certain other public agencies as a result of development occurring in CFD 2025-1.
3.	Declare the Board's intention to levy annually, in accordance with the procedures contained in the Act, a special tax within Improvement Area No. 1 of CFD 2025-1, secured by recordation of a continuing lien against all nonexempt real property within Improvement Area No. 1 of CFD 2025-1, sufficient to pay for the facilities and incidental expenses, and the principal and interest and other periodic costs on bonds or other indebtedness issued for Improvement Area No. 1 to finance the facilities and incidental expenses.
4.	Determine the rate and method of apportionment of the special tax applicable to Improvement Area No. 1 of CFD 2025-1, set forth in the attachment to the resolution, to be reasonable.
5.	Establish a date for a public hearing on the establishment of the proposed CFD 2025-1 and Improvement Area No. 1 of CFD 2025-1, the designation of the Future Annexation Area, the proposed rate and method of apportionment of the special tax for Improvement Area No. 1 and the proposed issuance of bonds to finance the facilities and incidental expenses. Such date and time to be January 14, 2025, at 9:30 a.m. or as soon thereafter as practical.
6.	Direct the Clerk of the Board to publish a Notice of Public Hearing, at least seven days prior to the date of the Public Hearing, in a newspaper of general circulation published in the area of the proposed CFD 2025-1 and Future Annexation Area.
7.	Direct the Clerk of the Board to mail a copy of the Notice of Public Hearing to the landowners within the boundaries of CFD 2025-1 at least 15 days prior to the Public Hearing.

Resolution of Intention to Incur Bonded Indebtedness

Adoption of the Resolution of Intention to incur bonded indebtedness within CFD 2025-1 will accomplish the following:

Declare the necessity to incur bonded indebtedness within the boundaries of the proposed Improvement Area No.1 of CFD 2025-1 in an amount not to exceed $160 million to finance the costs of the facilities and incidental expenses, as permitted by the Act.

State the purpose for incurring the bonded indebtedness.

State the Board's intention to authorize the sale of bonds of CFD 2025-1 for Improvement Area No. 1 in the maximum principal amount of $160 million and the final maturity of such bonds shall occur no later than in the 30th calendar year following the date of issuance of the bonds.

Finance Team

The financing professionals that will assist staff in the proposed formation and financing analyses are: CSG Advisors, municipal advisor; Stradling Yocca Carlson & Rauth, bond and disclosure counsel; Piper Sandler underwriter; DTA, special tax consultant; Stantec, district engineer; and Empire Economics, market economist. These financing professionals have current agreements in place for services related to the formation and financing of CFDs.

All costs incurred by the County to undertake the analyses required to determine the appropriateness of forming the proposed CFD 2025-1 and financing the facilities and improvements are covered under a reimbursement agreement between the County of Orange and the Developer approved by your Board on January 12, 2021 (Reimbursement Agreement). Under the Reimbursement Agreement, the Developer is required to periodically advance funds to the County to cover all costs associated with retaining the financing professionals, as well as County staff time.

Policy Compliance Report

CSG Advisors, the County's municipal advisor, will prepare a Policy Compliance Report. The purpose of the report is to provide a summary analysis of the major components in the CFD formation and special tax levy process, such as the CFD's overlapping debt and value-to-lien ratio, to determine the appropriateness of proceeding with the proposed financing in view of County policies. Staff will return to your Board with a copy of the completed Policy Compliance Report.

Conclusion

Should the Board adopt the resolutions, a special election will be held to authorize the issuance of bonds and the levy of special taxes for Improvement Area No. 1 in accordance with the procedures contained in Government Code Section 53326. The voting procedure at the election will be a landowner vote with each landowner who is the owner of record of land within Improvement Area No. 1 at the close of the Public Hearing, or the authorized representative, having one vote for each acre or portion owned within CFD 2025-1.

FINANCIAL IMPACT:

All costs incurred by the County to undertake the analyses required to determine the appropriateness of forming the proposed CFD 2025-1 and financing the facilities and improvements are covered under a Reimbursement Agreement between the County of Orange and the Developer approved by your Board on January 12, 2021. Under the Reimbursement Agreement, the Developer is required to periodically advance funds to the County to cover all costs associated with retaining the financing professionals, as well as County staff time. If bonds are issued, there is no financial impact to the County as repayment of the bonds will be paid by special taxes of CFD 2025-1.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - Resolution of Intention to Establish Community Facilities District No. 2025-1
Attachment B - Resolution of Intention to Incur Bonded Indebtedness within the Proposed Community Facilities District No. 2025-1
Attachment C - Petition to the Board of Supervisors
Attachment D - Government Code Section 53311