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City approves up to $8.5 million in special tax bonds for Nichols Ranch development
Summary
The council unanimously authorized a bond issuance not to exceed $8.5 million for Community Facilities District 2019-2 (Nichols Ranch) to reimburse Meritage Homes for infrastructure; staff estimated about $7.8 million in proceeds, required a two-year letter-of-credit (~$350,000) from Meritage, and cited average annual special taxes of roughly $2,600–$3,100.
The Lake Elsinore City Council unanimously approved a resolution authorizing the issuance of special tax bonds for Community Facilities District 2019-2 (Nichols Ranch), a 168-unit Meritage Homes development adjacent to Temescal Valley High School.
Bridal Forbath, staff presenting the item, said the resolution authorizes bond issuance in an amount not to exceed $8,500,000 and that current market sizing points to about $7,800,000 in bond proceeds to reimburse the developer for completed infrastructure and to pay project fees. Forbath told the council: “The resolution before you this evening proposes a bond issuance on amount not to exceed $8,500,000 and approves a variety of documents,” and explained the transaction would include a bond indenture, bond purchase agreement and preliminary official statement.
Because Meritage currently is responsible for more than 20% of the CFD’s special taxes, city policy requires the company to provide a letter of credit covering two years of debt service on the lots it owns; Forbath estimated that security at roughly $350,000. He added that average special-tax rates in the district are approximately $2,600 to $3,100 per year and escalate 2% annually.
Council members asked whether homeowners who already bought lots would face a new bill: Forbath confirmed, “They're already paying the tax. It was all part of their disclosures when they purchased the home. There's a notice, what we call a notice of special tax lien, that's been recorded over every lot within the property.” No members of the public requested to speak on the item, and the council voted on a motion by Councilman Johnson, seconded by Mayor Pro Tem Tisdale; the motion carried with all members present voting in the affirmative.
The staff presentation identified Stifel Nicolaus as the city's underwriter and said the bond documents include a continued disclosure agreement requiring annual updates to the marketplace.
Implementation notes from staff: require letter of credit from Meritage for two years of debt service, complete bond documentation and proceed with sale consistent with the adopted not-to-exceed amount.
