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Report regarding establishment of City of South San Francisco Community Facilities District No. 2021-01 (Public Facilities and Services). (Christina Fernandez, Assistant to the City Manager and Sky Woodruff, City Attorney)
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RECOMMENDATION
Recommendation
Staff recommends that the City Council 1) Hold a public hearing on the establishment of City of South San Francisco Community Facilities District No. 2021-01 (Public Facilities and Services) (the “CFD”); 2) adopt Resolution Establishing the CFD, authorizing the levy of the Special Taxes therein and calling an election related thereto; 3) Adopt Resolution determining the necessity to incur bonded indebtedness in an amount not to exceed $105,000,000 within the CFD and calling an election therein; 4) Conduct election; 5) Adopt Resolution certifying the election results; and 6) Introduce Ordinance authorizing the levy of special taxes within the CFD.
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BACKGROUND/DISCUSSION
Kilroy Realty and its affiliates (collectively “Kilroy”) own approximately 54.32 acres of land within the City located at Oyster Point. Kilroy is the assignee of Oyster Point Ventures, LLC pursuant to that certain Development Agreement entered into as of March 23, 2011 (the “Development Agreement”), with the City. Pursuant to the Development Agreement, the City agreed to cooperate in good faith with Kilroy to form a CFD pursuant to the Mello-Roos Community Facilities Act of 1982 (Mello-Roos Act) to finance certain public capital facilities and services benefiting the territory within the CFD. An affiliate of Kilroy filed a petition requesting the formation of the CFD and staff is recommending the formation of City of South San Francisco Community Facilities District No. 2021-01. A CFD is a defined geographic area in which the City is authorized to levy annual special taxes to be used to either finance directly the costs of specified public improvements and/or public services, or to pay debt service on bonds issued to finance the public improvements, as well as to pay costs of administering the CFD.
Kilroy intends to develop the property in the CFD as a life sciences campus consisting of research and development and office buildings, comprising a total of up to 2,379,210 gross feet of development. Construction is underway on phase 1 of the development consisting of three buildings totaling approximately 546,601 square feet. This CFD will fund the acquisition of certain capital improvements constructed by Kilroy and benefiting the development as identified Community Facilities District Report prepared by DTA (the “CFD Report”) and fund certain authorized public services. The authorized services include:
- Police protection services
- Roadway maintenance
- Streetlight maintenance and operations
- Traffic signal maintenance and operations
- Parks, waterfront and Bay Trail maintenance
- Landscaping, parkway, median and open space maintenance, including erosion prevention
- Public surface parking maintenance
- Operation and maintenance of public restroom buildings
- Operation and maintenance of storm drainage systems
The CFD Report describes the estimated costs of the public facilities and services to be financed by the CFD and contains the Rate and Method of Apportionment of the Special Tax for the CFD (the “RMA”). The RMA specifies that the Fiscal Year 2021-22 maximum rate for the Special Tax for Municipal Services will be $0.35 per square foot of non-residential floor area. The Special Tax for Municipal Services will be levied in perpetuity as necessary to meet the Special Tax Requirement for Municipal Services, unless no longer required to pay for Authorized Services as determined at the discretion of the City. The tax was calculated based estimated cost of the authorized services and administrative fees and planned development within the CFD. The rate will increase by two percent annually.
The RMA specifies that the Fiscal Year 2021-22 maximum rate for the Special Tax for Authorized Facilities will be $2.00 per square foot of non-residential floor area. The rate will increase by two percent annually.
The term of the Special Tax for Authorized Facilities shall be for earlier of the maturity of the final series of bonds issued by the CFD or Fiscal Year 2070-71. It is projected that bonds would be issued in one or more series over time. Kilroy has requested that the first series of Bonds be issued later this year.
On January 27, 2021, the City Council adopted Resolution No.18-2021 stating its intention to form the CFD and Resolution No. 19-2021 stating its intention to incur bonded indebtedness on behalf of the CFD. Both resolutions called for a public hearing to be held on March 10, 2021. Following the close of the public hearing and assuming that the owners of a majority of the acreage in the CFD do not protest its establishment, the City Council will consider adopting a Resolution establishing the CFD and authorizing the levy of the special tax therein and a Resolution determining the necessity to incur bonded indebtedness in the amount of not to exceed $105,000,000 to finance the authorized public facilities. Adoption of these Resolutions call for an election to be held immediately thereafter. Each of the property owners in the CFD have executed a waiver consenting to holding the election immediately following the public hearing and waiving certain election law requirements. Additionally, the City has receive a certificate from the Registrar of Voters for San Mateo County certifying that there are zero (0) registered voters reside within the boundaries of the CFD. Accordingly, under the Mello Roos Act, the election will be a landowner election with each landowner having one vote for each acre or portion thereof.
Following the City Clerk’s completion of the election tabulation, the City Council is asked to adopt a Resolution certifying the election results and assuming 2/3rds of the votes cast are in favor of the ballot propositions, introduce an ordinance authorizing the levy of the special tax. The City Council would be asked to enact the Ordinance on its March 24, 2021 meeting date along with approving the form of Acquisition Agreement which sets for the terms and procedures pursuant to which the CFD will reimburse Kilroy for the completed public improvements from proceeds of Bonds to be issued by the CFD.
FISCAL IMPACT
Staff estimates that, during the first Fiscal Year in which the Special Taxes will be levied (Fiscal Year 2022-23), the CFD will generate approximately $190,000 in annual special tax revenues for authorized services. This amount will grow as development within the boundary map is realized. The rate will increase by two percent annually. Any Bonds issued by the CFD will be secured solely by the Special Taxes levied for the authorized facilities on taxable property in the CFD and will not be secured by any pledge of or obligation on City funds. Kilroy has deposited with the City $50,000 to pay for the costs of forming the CFD. Such deposit will be repaid to Kilroy from Bond proceeds if and when Bonds are issued pursuant to a previously approved Reimbursement Agreement.
RELATIONSHIP TO STRATEGIC PLAN
Formation of CFD No. 2021-01 meets the City’s strategic goals of providing a high quality of life for our residents and employees by modernizing the Kilroy Oyster Point Marina area as an enjoyable space to work, visit, and recreate.
CONCLUSION
The CFD is needed to operate and maintain new public facilities that are being constructed at Oyster Point and to satisfy certain conditions set forth in the Development Agreement.
Staff recommends that the City Council 1) Hold a public hearing on the establishment of City of South San Francisco Community Facilities District No. 2021-01 (Public Facilities and Services) (the “CFD”); 2) adopt Resolution Establishing the CFD, authorizing the levy of the Special Taxes therein and calling an election related thereto; 3) Adopt Resolution determining the necessity to incur bonded indebtedness in an amount not to exceed $105,000,000 within the CFD and calling an election therein; 4) Conduct election; 5) Adopt Resolution certifying the election results; and 6) Introduce Ordinance authorizing the levy of special taxes within the CFD.
Attachments:
1. Resolution Establishing the CFD
2. Resolution Determining the Necessity to Incur Bonded Indebtedness
3. Resolution Certifying the Election Results
4. Ordinance Authorizing the Levy of the Special Tax
5. CFD Report
6. Property Owner Waivers
7. Certificate of Registrar of Voters.