TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: Javier Carcamo, Finance Director
SUBJECT:
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Annexations No. 1 and No. 2 to Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta
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RECOMMENDATION
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Adopt Resolution No. 25-4841 entitled: A Resolution of the City Council of the City of Murrieta, Acting as the Legislative Body of Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta, Declaring Its Intention to Consider Annexing Territory to Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta (Rustic Meadows); and
Adopt Resolution No. 25-4842 entitled: A Resolution of the City Council of the City of Murrieta, Acting as the Legislative Body of Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta, Declaring Its Intention to Consider Annexing Territory to Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta (Kensington Apartments).
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PRIOR ACTION/VOTE
On April 5, 2016, the City Council adopted a Resolution amending the Land Secured Financing Policy (Vote: 5-0).
On October 3, 2023, the City Council considered an Amendment to the Community Facilities District Goals and Policies and directed staff to present the recommendations in a workshop (Vote 3-2).
On December 5, 2023, the City Council held a workshop on the proposed Amendment to the Community Facilities District Goals and Policies (Non-Action Item).
On December 5, 2023, the City Council Adopted Resolution No. 23-4717 Amending and Restating Community Facilities District Goals and Policies (Vote 5-0).
On May 6, 2025, the City formed Community Facilities District No. 2025-1 (Safety Services), Community Facilities District No. 2025-2 (Maintenance Services), and Community Facilities District No. 2025-3 (Discovery Village) (Vote 5-0).
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
BACKGROUND
Community Facilities Districts
Community Facility Districts (CFDs) are formed pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the Mello-Roos Act) and are a widely used financing mechanism, frequently used to fund infrastructure associated with new significant (large) development projects, such as water and sewer facilities, storm drain facilities, roads, and parks and to finance the provision of certain municipal services.
A simplified example of CFD implementation for bonded districts is as follows:
• A developer submits a petition to form the CFD to the City or Special District (water districts frequently form CFDs) to start formation proceedings.
• In the City’s case, staff presents the petition to the City Council for approval.
• The District is formed by a vote of the property owners.
• Once approved, the City approves the issuance of bonds, which are sold to investors.
• Proceeds from the sale of the bonds are used to build the infrastructure associated with the project.
• The bonds are paid off over time (typically 30 years) by the buyers of homes within the project as a part of their property tax bill.
The implementation of a maintenance CFD follows the first three (3) steps above. Once approved, a special tax can be levied on the property tax bill in accordance with the Rate and Method of Apportionment (RMA). Such special taxes will pay for the costs of maintenance services and administration of CFD No. 2025-2.
On December 5, 2023, the City Council adopted amendments to the Community Facilities District Goals and Policies. In addition to changes related to state law, other changes contained in the amended policy include:
• A list of eligible facilities that can be financed.
• Adding an escalator of up to two percent (2%) per year for facilities.
• Adding an escalator for service or maintenance CFDs to cover increases in the cost of providing services.
• Allowing Development Impact Fees (DIF) to be financed.
• Increasing the maximum cap on the assessed value of a property from one point eight percent (1.8%) to two percent (2.0%).
Additional Authorized Services
The Mello-Roos Act also authorizes the City to establish a CFD to finance certain public services through the levy of a special tax. The services that can be funded through a CFD include the following:
• Police protection services, including, but not limited to, criminal justice (limited to providing services for jails, detention facilities, and juvenile halls).
• Fire protection and suppression services, and ambulance and paramedic services.
• Recreation program services, library services, maintenance services for elementary and secondary school sites and structures, and the operation and maintenance of museums and cultural facilities.
• Maintenance and lighting of parks, parkways, streets, roads, and open spaces.
• Flood and storm protection services, including, but not limited to, the operation and maintenance of storm drainage systems, plowing and removal of snow, and sandstorm protection systems.
• Maintenance and operation of any real property or other tangible property with an estimated useful life of five or more years that is owned by the local agency or by another local agency (by agreement).
Community Facilities District No. 2025-2 (Maintenance Services)
On May 6, 2025, the City Council approved the formation of Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta and authorized CFD No. 2025-2 to levy a special tax in accordance with the Mello-Roos Act on parcels of residential property to finance public maintenance services. Services eligible to be financed by CFD No. 2025-2 include maintenance and lighting of parks, parkways, streets, roads, and open space, maintenance and operation of water quality improvements, including storm drainage and flood protection facilities, and public street sweeping. CFD No. 2025-2 currently consists only of the property within the Discovery Village development project that formed the district. The remainder of the City was designated as a “Potential Annexation Area.”
New development projects meeting certain design criteria are required by the City’s Community Facilities District Goals and Policies, as amended in December 2023, to annex to CFDs. Accordingly, the owner of property within the proposed Rustic Meadows development project and the owner of property within the proposed Kensington Apartments development project (collectively, the “Property Owners”) submitted petitions requesting that the property within their respective development projects be annexed into CFD No. 2025-2. If approved by the City Council and the Property Owners, the property within the Rustic Meadows development project would be annexed to CFD No. 2025-2 as “Tax Zone 1,” and the property within the Kensington Apartments development project would be annexed to CFD No. 2025-2 as “Tax Zone 2.”
The special taxes within Tax Zone 1 of CFD No. 2025-2 are $332 per residential unit, and the special taxes within Tax Zone 2 of CFD No. 2025-2 are $98 per residential unit. The special taxes in each of Tax Zone 1 and Tax Zone 2 will increase on each July 1, commencing on July 1, 2026 by i) the year-over-year percentage increase for the month of March in the Consumer Price Index (All Items) for all Urban Consumers for the Riverside-San Bernardino-Ontario California Standard Metropolitan Statistical Area, or a comparable replacement index for the area if this index is no longer published, since the beginning of the preceding Fiscal Year, or ii) by two percent (2.0%), whichever is greater.
The Resolutions of Consideration presented are the first step in the process of annexing property to CFD No. 2025-2. The attached resolutions declare the City’s intention to annex property to CFD No. 2025-2 and call for public hearings on the matters of the proposed annexations to CFD No. 2025-2 to take place on July 15, 2025, and at that time the City Council will formally consider the proposed annexations to CFD No. 2025-2 and hold elections on the proposed annexations to CFD No. 2025-2. It is expected that there are no registered voters residing within the boundaries of the proposed property to be annexed to CFD No. 2025-2, and accordingly, the elections will be landowner voting elections.
The owner of the property within the proposed Rustic Meadows project within the City is Whitewood-Murrieta, L.P. The Rustic Meadows project is located at the southeast corner of the intersection of Clinton Keith Road and Whitewood Road. At full buildout, the proposed Rustic Meadows project is proposed to include approximately 153 single-family homes and will be developed by Century Communities of California, LLC.
The owner of property within the proposed Kensington Apartments project is Murrieta Pacific Associates, Inc. The Kensington Apartments project is a proposed affordable housing project located near the corner of Washington Avenue and Magnolia Street, and is proposed to include approximately 126 units.
FISCAL IMPACT
The Property Owners have made deposits to pay for the costs of the annexation proceedings to CFD No. 2025-2. The deposit made by Century Communities may be reimbursed to Century Communities from proceeds of a future bond issuance by the separate facilities CFD being formed in connection with the Rustic Meadows development. If the proposed annexations are approved and subject to necessary Council and voter approvals, CFD No. 2025-2 will annually levy special taxes on all of the taxable property within the annexation property in accordance with the RMA (as attached to the Resolutions of Consideration). Such special taxes will be used to pay for the costs of maintenance services and administration of the CFD No. 2025-2. The levying of the special taxes for services is expected to alleviate some of the financial impact of the new development on the costs of providing such services to the Property by the City.
ATTACHMENTS
1. Landowner Petition to Annex to Community Facilities District No. 2025-2 (Maintenance Services) (Rustic Meadows)
2. Resolution No. 25-4841
3. Landowner Petition to Annex to Community Facilities District No. 2025-2 (Maintenance Services) (Kensington Apartments)
4. Resolution No. 25-4842