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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Annexation No. 2 to Community Facilities District No. 2025-2 (Maintenance Services) of the City of Murrieta
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RECOMMENDATION
recommendation
Acting as the Legislative Body of Community Facilities District (CFD) No. 2025-2 (Maintenance Services), hold a public hearing regarding Annexation No. 2;
Adopt Resolution No. 25-4872 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) Annexing Territory to Community Facilities District No. 2025-2 of the City of Murrieta (Maintenance Services) and Calling Elections Therein (Annexation No. 2 - Kensington Apartments);
Direct the City Clerk to hold an election with CFD 2025-2; and
Adopt Resolution No. 25-4873 entitled: A Resolution of the City Council of the City of Murrieta, California, Acting as the Legislative Body of Community Facilities District No. 2025-2 (Maintenance Services) Certifying Election Results of the July 15, 2025, Annexation and Special Tax Election (Annexation No. 2 - Kensington Apartments).
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PRIOR ACTION/VOTE
On April 5, 2016, the City Council adopted Resolution No. 16-3536 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 Community Facilities District Goals and Policies and adopted Resolution No. 23-4717 (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).
On June 3, 2025, the City Council adopted separate Resolutions of Intention (Resolution Nos. 25-4841 and 25-4842) regarding Annexation No. 2 and Annexation No. 2 to Community Facilities District No. 2025-2 (Maintenance Services) and set public hearings for the proposed annexation for July 15, 2025 (Vote: 5-0).
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
DISCUSSION
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 is as follows:
• A developer submits a petition to form the CFD to the City of Murrieta (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.
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; and
• Increasing the maximum cap on the assessed value of a property from 1.8% to 2%.
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 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 CFD No. 2025-2 is authorized 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 and designated the remainder of the City 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 CFD No. 2025-2. Accordingly, the owner of property within the proposed Kensington Apartments development project (the “Property Owner”) submitted a petition requesting that the property within its development project be annexed into CFD No. 2025-2. If approved by the City Council and the Property Owner, 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 2 of CFD No. 2025-2 are $98 per residential unit. The special taxes in each of 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 Resolution of Intention adopted on June 3, 2025, was the first step in the process of annexing property to CFD No. 2025-2. It declared the City’s intention to consider Annexation No. 2 and called for a public hearing on the proposed annexation to take place on July 15, 2025.
Following the close of the public hearing for the proposed annexation to CFD No. 2025-2, the City Council will be asked to adopt a Resolution of Annexation for Annexation No. 2 (Kensington Apartments) which approves the annexation to CFD No. 2025-2 and the levy of the special taxes in Tax Zone 2, in accordance with the Rate and Method of Apportionment for CFD No. 2025-2. The Resolution of Annexation also calls for elections to be held within Tax Zone 2 of CFD No. 2025-2 to submit to the qualified electors ballot measures on the approval of the annexations and the special taxes.
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 the proposed annexation area. 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 the annexation area. The Property Owner has executed a consent and waiver of certain election procedures for 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 the Resolution of Annexation, the City Clerk will conduct the elections. The Property Owner will have delivered its ballot to the City Clerk in advance of the public hearing, the City Clerk will announce the election results, and the City Council will be asked to adopt a Resolution Certifying the Election Results. Upon certification that 2/3rds of the votes cast are in favor of the propositions voted upon, the Resolution Certifying the Election Results will direct the City Clerk to record notices of special tax lien on the property within each of the proposed annexation areas.
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.
FISCAL IMPACT
The Property Owner has made a deposit to pay for the costs of the annexation proceedings to CFD No. 2025-2. If the proposed annexation is 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 Resolution of Intention). 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. At full build-out, special tax revenues are projected to total $12,263 annually for the Kensington Apartment project.
ATTACHMENTS
1. Landowner Waiver
2. Resolution No. 25-4872
3. Resolution No. 25-4873
4. Certificate of the Registrar of Voters