TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: Javier Carcamo, Finance Director
SUBJECT:
title
Formation of Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta
end
RECOMMENDATION
recommendation
Hold a Public Hearing regarding the formation of Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta;
Adopt Resolution No. 25-4824, entitled: A Resolution of the City Council of the City of Murrieta, California, Establishing Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta, Authorizing the Levy of a Special Tax Therein, Calling an Election and Approving and Authorizing Certain Actions Related Thereto;
Adopt Resolution No. 25-4825, entitled: A Resolution of the City Council of the City of Murrieta, California, Acting as the Legislative Body of Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta, Determining the Necessity to Incur Bonded Indebtedness in an Amount Not to Exceed $27,500,000 Within Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta and Calling an Election Therein;
Direct the City Clerk to hold an election within CFD No. 2025-3;
Adopt Resolution No. 25-4826 entitled: A Resolution of the City Council of the City of Murrieta, California, Acting in its Capacity as the Legislative Body of Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta Certifying Election Results;
Introduce Ordinance No. 616-25, entitled: An Ordinance of the City Council of the City of Murrieta, California, Acting in its Capacity as the Legislative Body of Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta Authorizing the Levy of Special Taxes; and
Approve a Joint Community Facilities Agreement with Eastern Municipal Water District for Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta.
body
PRIOR ACTION/VOTE
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 and adopted 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 the Community Facilities District Goals and Policies (Vote: 5-0).
On February 4, 2025, the City Council adopted a Resolution of Intention to establish Community Facilities District No. 2025-1 (Safety Services) and set a public hearing for the formation of the Community Facilities District for April 1, 2025 (Vote: 5-0).
On February 4, 2025, the City Council adopted Resolutions of Intention to establish each of Community Facilities Districts 2025-2 (Maintenance Services) and 2025-3 (Discovery Village) and set public hearings for the formation of the Community Facilities Districts for April 1, 2025 (Vote: 4-1).
On April 1, 2025, the City Council opened the public hearing on the formation and continued it until May 6, 2025 (Vote: 4-0-1).
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
BACKGROUND
On December 5, 2023, the City Council amended the City’s Community Facilities District Goals and Policies. The amendments included the ability to finance public safety services and maintenance services, adding an escalator to cover increases in the cost of providing services, changes to the list of eligible facilities that can be financed, allowing Development Impact Fees (DIF) to be financed, and increasing the maximum cap on the effective tax rate from 1.8% to 2.0% for Community Facility Districts (CFDs).
Historically, the City has conditioned new residential projects to pay for basic landscaping and lighting maintenance services pursuant to the Landscaping and Lighting Act of 1972 (LLD) of the Street & Highways Code. This funding mechanism includes limited services and requires the City to pay for the General Benefit portion of the assessment, typically up to 25% of the service costs. In addition, the City previously charged new development the following for services: (i) rooftop Fire tax, (ii) Community Services District assessment, and (iii) a Park and Recreation assessment totaling $125 per residential unit combined.
The owner of the property within the proposed Discovery Village project within the City is Discovery Village LLC (Property Owner), and the Property Owner requested the City to assist in forming three CFDs to provide public safety services, maintenance services, and facilities financing. The property to be included in the proposed CFDs is located at the southwest corner of the intersection of Whitewood Road and Baxter Road, east of Interstate 215. The Discovery Village Project (Project) is proposed to include approximately 365 single-family homes at full buildout. The Project was not conditioned to form the services’ CFDs but was conditioned to form a Landscape and Lighting Maintenance District to provide landscaping and lighting services.
Eastern Municipal Water District (EMWD) previously established a facilities CFD for the Discovery Village project for approximately $18 million in bond proceeds for improvements with a 2.0% overall effective tax rate that included the $125 assessment per Residential Unit (RU) for the rooftop Fire, Community Services District (CSD), and Park & Recreation, for basic public services and a potential LLD of approximately $200 per RU for Project specific landscaping and lighting from the City. At its March 19, 2025, board meeting, EMWD, at the request of the Property Owner, canceled the previously established CFD in anticipation of the formation of the City’s proposed CFDs.
On February 4, 2025, the City Council adopted various resolutions declaring its intention to form Community Facilities District No. 2025-1 (Safety Services) of the City of Murrieta (CFD No. 2025-1), Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta (CFD No. 2025-2) and Community Facilities District No. 2025-3 (Discovery Village) of the City of Murrieta (CFD No. 2025-3), and setting public hearings for April 1, 2025, on the formations of each CFD. On April 1, 2025, the City Council continued the public hearing scheduled for that date to May 6, 2025. The City Council will now be asked to hold three separate public hearings to consider forming each CFD and, if approved, following the public hearings, hold three separate special elections within each CFD regarding the levy of special taxes within each CFD.
Discovery Village Project and Community Facilities District No. 2025-3
The Property Owner submitted a petition requesting that the City form CFD No. 2025-3. The Property Owner has requested that the City form CFD No. 2025-3 to encompass the Property in accordance with the Mello-Roos Act to finance the costs of certain public improvements through the levy of a special tax and the issuance of bonds. The maximum amount of bonded indebtedness proposed is $27.5 million. The proceeds of bonds issued by CFD No. 2025-3 are expected to be used to finance public facilities to be owned and operated by the City and by EMWD, as well as financing the payment of DIF owed by the Property Owner to the City and EMWD.
The Property Owner has requested that the boundaries of CFD No. 2025-3 include the area described in Attachment A of the Resolution of Intention to Establish CFD No. 2025-3 adopted by the City Council on February 4, 2025, (CFD No. 2025-3 Resolution of Intention) and that special taxes be levied within the boundaries of CFD No. 2025-3 in accordance with the Rate and Method of Apportionment for CFD No. 2025-3 (CFD No. 2025-3 RMA) described in Attachment C to the Resolution of Intention. The proposed rates of the special tax range from $3,086.76 per unit for single-family homes less than 1,350 square feet to $4,772 per unit for single-family homes greater than 2,400 square feet and also include tax rates of $69,954 per acre of multi-family property and non-residential property. The special tax rates within CFD No. 2025-3 will increase two percent (2.0%) annually on July 1, of each year, commencing July 1, 2026.
The CFD No. 2025-3 Resolution of Intention was the first step in the process of forming CFD No. 2025-3 and, together with the Resolution of Intention to Incur Bonded Indebtedness by CFD No. 2025-3 adopted by the City Council on February 4, 2025, declared the City’s intention to establish CFD No. 2025-3 incur bonded indebtedness by CFD No. 2025-3, and called for a public hearing to take place on April 1, 2025. Notice of the Public Hearing was published in The Press-Enterprise and mailed to the Property Owner. On April 1, 2025, the City Council continued the public hearing called for such date to May 6, 2025.
In connection with the public hearing, Spicer Consulting Group has prepared a Public Hearing Report which describes and analyzes the facilities to be financed by CFD No. 2025-3 and the estimated costs of such facilities. Following the close of the public hearing, the City Council will be asked to adopt the Resolution of Formation for CFD No. 2025-3 and the Resolution Determining Necessity to Incur Bonded Indebtedness by CFD No. 2025-3 which, together, approve the formation of the CFD No. 2025-3, the levy of the special taxes in CFD No. 2025-3 in accordance with the CFD No. 2025-3 RMA and determines the necessity for the Facilities CFD to issue bonds in an amount not to exceed $27,500,000. Such resolutions call for an election to submit to the qualified voters of the CFD No. 2025-3 ballot measures on the approval of the special taxes, the issuance of bonds, and an appropriations limit for the CFD No. 2025-3.
The CFD No. 2025-3 Resolution of Formation also approves the execution and delivery of an Acquisition Agreement with the Property Owner. The Acquisition Agreement sets forth the terms pursuant to which CFD No. 2025-3 will acquire improvements constructed by the Property Owner from bond proceeds from CFD No. 2025-3 and how the Property Owner will be reimbursed for development impact fees from bond proceeds. In order to be eligible for acquisition, such facilities must be constructed in accordance with the terms and conditions of the Acquisition Agreement. The City and CFD No. 2025-3 are only required to pay for the acquisition of such facilities from the proceeds of bonds or special taxes levied in CFD No. 2025-3 and not from any other source.
The CFD No. 2025-3 Resolution of Formation also approves the execution and delivery of a Joint Community Facilities Agreement (Water District JCFA) with Eastern Municipal Water District (Water District) and the Developer, relating to certain facilities proposed to be financed by the District and owned and operated by the Water District. The form of the Water District JCFA is on file with the City Clerk.
On file with the City Clerk is a Certificate of the Registrar of Voters of Riverside County certifying that there are no registered voters residing within the boundaries of CFD No. 2025-3. Accordingly, under the Mello-Roos Act, only property owners owning land in CFD No. 2025-3 are eligible to vote in the election for CFD No. 2025-3, with each owner having one vote for each acre (or portion thereof) that they own within CFD No. 2025-3. The Property Owner has executed a consent and waiver of certain election procedures with respect to the election, including certain timing requirements with respect to the election, in accordance with the Mello-Roos Act. This allows the special election to be held on the same day as the formation. Accordingly, if the City Council approves the Resolution of Formation and the Resolution Determining Necessity to Incur Bonded Indebtedness, the City Clerk will conduct the election. The Property Owner will have delivered their ballot to the City Clerk in advance of the public hearing, and the City Clerk will announce the election results, and the City Council will be asked to adopt the Resolution Certifying the Election Results. Upon certification that two-thirds of the votes cast are in favor of the propositions voted upon in CFD No. 2025-3, the Resolution Certifying the Election Results will direct the City Clerk to record a notice of special tax lien on the property within CFD No. 2025-3. The City Council will then be asked to introduce the ordinance authorizing the levy of the special tax within CFD No. 2025-3, in accordance with the CFD No. 2025-3 RMA.
CFD No. 2025-1 (Safety Services) and CFD No. 2025-2 (Maintenance Services)
The Property Owner is required by the City’s Community Facilities District Goals and Policies, as amended in December 2023, to also request the formation of a Public Safety Services CFD and a Maintenance Services CFD. Accordingly, the Property Owner has submitted separate petitions requesting the formation of Community Facilities District No. 2025-1 (Safety Services) of the City of Murrieta (CFD No. 2025-1) and Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta (CFD No. 2025-2).
Both CFD No. 2025-1 and CFD No. 2025-2 will each initially consist only of the Property (i.e. the Discovery Village Project); however, the remainder of the City will be designated as a “Potential Annexation Area” and new development projects meeting certain design criteria will be required to annex to CFD No. 2025-1 and/or CFD No. 2025-2.
CFD No. 2025-1 would levy a special tax in accordance with the Mello-Roos Act on parcels of residential property to finance public safety services. Services eligible to be financed by CFD No. 2025-1 include police protection services (including but not limited to criminal justice services), fire protection and suppression services, and paramedic services. The special taxes within CFD No. 2025-1 are $250 per unit of affordable housing residential property, $468 per unit of multi-family residential property, and $580 per unit of single-family property and will increase annually each July 1 by four percent (4.0%), commencing July 1, 2026, excluding affordable housing residential property, which has a nonadjustable rate.
Although the Project was not conditioned to form CFD 2025-1, the request to form the Public Safety Services CFD will allow the project to mitigate its cost of public safety services brought on by the new residential units within the Project. The Property Owner has agreed to include these additional service costs.
CFD No. 2025-2 would levy a separate 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, street lighting, roads, and open space, maintenance and operation of water quality improvements, including storm drainage and flood protection facilities, landscaping, and public street sweeping. The special taxes within CFD No. 2025-2 for the Discovery Village Project are $274 per unit of single-family residential property and increase each July 1, by the greater of two percent (2.0%) or the year-over-year percentage increase for the month of March in the Consumer Price Index, commencing July 1, 2026.
The Maintenance Services CFD will provide funding for enhanced public maintenance services to include landscape maintenance, lighting, street sweeping and pavement management, park and trails maintenance, drainage and stormwater maintenance, and graffiti abatement. The ability to finance these Project-specific costs will alleviate the General Fund from subsidizing those services created by the new development of the Project and eliminate the additional costs incurred from the general benefit portion of those costs identified with each LLD formed, provided, however, that the costs must be additional services under the Act which has generally been determined to be the impact of the project on these services. The Property Owner has agreed to include these additional Maintenance Service costs.
The Resolutions of Intention for each of CFD No. 2025-1 and 2025-2 adopted on February 4, 2025, were the first step in the process of forming CFD No. 2025-1 and 2025-2, respectively. The Resolutions of Intention declared the City’s intention to establish CFD No. 2025-1 and CFD No. 2025-2 and called for public hearings on the matter of the formation of CFD No. 2025-1 and CFD No. 2025-2 to take place on April 1, 2025. On April 1, 2025, the City Council continued the public hearing scheduled for that date to May 6, 2025.
In connection with the public hearings, Spicer Consulting Group has prepared a Public Hearing Report that describes and analyzes the services to be financed by CFD No. 2025-1 and CFD No. 2025-2 and the estimated costs of such services. Following the closure of the public hearings for each of CFD No. 2025-1 and CFD No. 2025-2, the City Council will be asked to adopt Resolutions of Formation which approve the formation of CFD No. 2025-1 and CFD No. 2025-2 and the levy of the special taxes in each of CFD No. 2025-1 and CFD No. 2025-2 in accordance with their respective RMAs. The Resolutions of Formation call for an election to submit to the qualified voters of CFD No. 2025-1 and CFD No. 2025-2 ballot measures on the approval of the special taxes and appropriations limits for CFD No. 2025-1 and CFD No. 2025-2. The Resolutions also designate the rest of the City as future annexation areas pursuant to which future property owners may annex their properties to CFD No. 2025-1 and CFD No. 2025-2 by submitting a unanimous consent and waiver and without the need for a future public hearing or election.
On file with the City Clerk is a Certificate of the Registrar of Voters of Riverside County for both CFD No. 2025-1 and CFD No. 2025-2, certifying that there are no registered voters residing within the boundaries of each CFD. Accordingly, under the Mello-Roos Act, only property owners owning land are eligible to vote at the elections, with each owner having one vote for each acre (or portion thereof) that they own within CFD No. 2025-1 and CFD No. 2025-2. The Property Owner has executed a consent and waiver of certain election procedures for each of CFD No. 2025-1 and CFD No. 2025-2 with respect to the elections, including certain timing requirements with respect to the elections, in accordance with the Mello-Roos Act. Accordingly, if the City Council approves Resolutions of Formation, the City Clerk will conduct the elections. The Property Owner will have delivered its ballots for CFD No. 2025-1 and CFD No. 2025-2 to the City Clerk in advance of the public hearings, the City Clerk will announce the election results, and the City Council will be asked to adopt Resolutions Certifying the Election Results for each of CFD No. 2025-1 and CFD No. 2025-2. Upon certification that two-thirds of the votes cast are in favor of the propositions voted upon, the Resolutions Certifying the Election Results will direct the City Clerk to record notices of special tax lien on the property within CFD No. 2025-1 and CFD No. 2025-2. The City Council will then be asked to introduce ordinances authorizing the levy of the special tax within CFD No. 2025-1 and CFD No. 2025-2, in accordance with their respective RMAs.
Future Actions
If the three ordinances authorizing the levy of special taxes within each CFD are introduced, a second reading of each ordinance will be scheduled for the next City Council meeting.
FISCAL IMPACT
There is no fiscal impact of this action on the City. The Property Owner has made a deposit of $65,000 to pay for the costs of the formation proceedings which may be reimbursed to the Property Owner from the proceeds of a future bond issuance in accordance with the reimbursement agreement with the Property Owner. If established and subject to necessary City Council and voter approvals, each of the CFDs will annually levy special taxes on all the taxable property within the applicable District in accordance with the applicable RMA. Such special taxes will be used to pay for the costs of services or facilities, administration of the CFDs, and, in the case of CFD No. 2025-3, debt service on bonds. Any bonds issued by CFD No. 2025-3 are not obligations of the City and will be secured solely by the Special Taxes levied within CFD No. 2025-3. The levying of 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’s General Fund.
ATTACHMENTS
1. Landowner Waiver (CFD No. 2025-3)
2. Public Hearing Report (CFD No. 2025-3)
3. Resolution No. 25-4824 (CFD No. 2025-3)
4. Resolution No. 25-4825 (CFD No. 2025-3)
5. Resolution No. 25-4826 (CFD No. 2025-3)
6. Ordinance No. 616-25 (CFD No. 2025-3)
7. Certificate of the Registrar of Voters (CFD No. 2025-3)
8. Acquisition Agreement for Murrieta CFD 2025-3 (Discovery Village)
9. Joint Community Facilities Agreement with Eastern Municipal Water District