Orange County Grand Jury • 2014-2015 • Agency Response
Response to: Mello-Roos: Perpetual Debt Accumulation and Tax Assessment Obligation 6/29/15, 522KB

Office of City Manager Erik Sund, Assistant City Manager*

Published: September 04, 2015 5 pages
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Findings and Recommendations 3 findings

F1
There is a lack of transparency to homeowners relative to how CFD funds are being used. This finding is not applicable to the City of San Clemente since there are no homeowners in CFD 99-1 which includes only commercial development. The parcels include Lowe's, Mobil, Albertsons, and other various business enterprises. There are no homeowners in this district.
Related Recommendations (1)
R1
Each local agency that established the CFD should create an oversight committee and an audit committee to provide for an independent, transparent view of the manner in which CFD funds are being expended. (F.1, F.2) The City of San Clemente reports the CFD 99-1 activity in a variety of ways which provide oversight. The audited annual financial statements, which include CFD 99-1 funds, are submitted to the governing board, sent to the County of Orange and are available on the City's website. The City Budget lists the outstanding debt on an annual basis. Investment information on the CFD is provided monthly to the Investment Advisory Committee. While one committee may be the correct approach in some circumstances the only expenditures for our CFD are for debt service (principal and interest) and administrative costs. A summary of anticipated costs through the life of the debt is provided on Attachment I. The creation of new CFD's are at a public meeting, with Agenda Reports and other information available on our website based on State mandated requirements. We will consider the use of a single committee in the future as part of the creation of new CFD's.
F2
There does not seem to be appropriate oversight and auditing of CFDs and special tax expenditures within the County of Orange. The City of San Clemente reports CFD 99-1 funds within its audited annual financial statement. The annual report is submitted to the governing board and sent to the County of Orange. The annual financial statements are also available on the City's website. The only expenditures of this district are for debt service (principal and interest) and administrative costs.
Related Recommendations (1)
R2
Audit report information, as delineated in California Government Code, 1982 53343.1, should be made available to the CFD taxpayers on a website after each fiscal year for each CFD number. (F.1, F.2) The City of San Clemente reports the CFD 99-1 within its audited annual financial statement. The City will comply with Government Code 53343.1, which states the following: "A community facilities district formed after January 1, 1992, shall prepare, if requested by a person who resides in or owns property in the district, after the last day of each fiscal year, a separate document titled an "Annual Report." The district may charge a fee for the report not exceeding the actual costs of preparing the report..." Office of City Manager 100 Avenida Presidio San Clemente, CA 92672 100 , 3 4 The CFD expenditures are for debt service (principal and interest) and administrative costs. A summary of anticipated costs through the life of the debt are provided on Attachment I. If further information is required regarding this matter, please contact the City's Finance Manager, Judi Vincent, at (949) 218-9601. Sincerely, 16/ Erik Sund Assistant City Manager C: Mayor and City Council 4 7 ATTACHMENT I – SUMMARY OF CFD 99-1 ACTIVITY THOUGH CALENDAR YEAR 2030 BOND DEBT SERVICE City of San Clemente CFD No. 99-1 2011 Special Tax Refunding Bonds ************ Period Annual Principal Debt Service Debt Service Ending Interest 03/01/2012 115,051.98 115,051.98 09/01/2012 111,340.63 381,392.61 155,000 266,340.63 03/01/2013 109,790.63 109,790.63 09/01/2013 170,000 109,790.63 279,790.63 389,581.26 03/01/2014 108,090.63 108,090.63 180,000 09/01/2014 108.090.63 288,090.63 396,181.26 03/01/2015 105,390.63 105,390.63 09/01/2015 195,000 105,390.63 300,390.63 405,781.26 102,465.63 102,465.63 03/01/2016 210,000 102,465.63 312,465.63 414.931.26 09/01/2016 99,315.63 99,315.63 03/01/2017 220,000 99,315.63 319,315.63 09/01/2017 418,631.26 95,603.13 03/01/2018 95,603.13 95,603.13 325,603.13 09/01/2018 230,000 421,206.26 03/01/2019 91,290.63 91,290.63 09/01/2019 240,000 91,290.63 331,290.63 422,581.26 03/01/2020 86,340.63 86,340.63 09/01/2020 245,000 86,340.63 331,340.63 417,681.26 03/01/2021 80,981.25 80,981.25 09/01/2021 250,000 80,981.25 330,981.25 411,962.50 03/01/2022 75,356.25 75,356.25 09/01/2022 260,000 75,356.25 335,356.25 410,712.50 03/01/2023 69,181.25 69,181.25 09/01/2023 275,000 69,181.25 344,181.25 413,362.50 03/01/2024 62,306.25 62,306.25 09/01/2024 290,000 62,306.25 352,306.25 414,612.50 03/01/2025 55,056.25 55,056.25 09/01/2025 305,000 360,056.25 55,056.25 415,112.50 03/01/2026 47,431.25 47,431.25 09/01/2026 325,000 47,431.25 372,431.25 419,862.50 39,103.13 03/01/2027 39,103.13 09/01/2027 335,000 39,103.13 374,103.13 413.206.26 03/01/2028 30,100.00 30,100.00 09/01/2028 355,000 30,100.00 385,100.00 415,200.00 03/01/2029 20,559.38 20,559.38 375,000 20,559.38 395,559.38 09/01/2029 416,118.76 10,481.25 10,481.25 03/01/2030 400,481.25 410,962.50 09/01/2030 390,000 10,481.25 5,005,000 2,804,080.21 7,809,080.21 7,809,080.21 In addition to the Debt Service schedule amounts, the City also incurs approximately $15,000 for the annual administration of the Community Facilities District related to fiscal agent fees, county property tax administration costs, arbitrage fees, and City overhead related charges. 1000 . ATTACHMENT I – SUMMARY OF CFD 99-1 ACTIVITY THOUGH CALENDAR YEAR 2030 BOND DEBT SERVICE City of San Clemente CFD No. 99-1 2011 Special Tax Refunding Bonds *********** Annual Period Debt Service Debt Service Ending Principal Interest 115,051.98 03/01/2012 115,051.98 266,340.63 381,392.61 09/01/2012 155,000 111,340.63 109,790.63 109,790.63 03/01/2013 109,790.63 279,790.63 389,581.26 09/01/2013 170,000 108,090.63 108,090.63 03/01/2014 180,000 108,090.63 288,090.63 396,181.26 09/01/2014 105,390.63 105,390.63 03/01/2015 195,000 300,390.63 405,781.26 09/01/2015 105,390.63 102,465.63 102,465.63 03/01/2016 102,465.63 312,465.63 414,931.26 09/01/2016 210,000 99,315.63 99,315.63 03/01/2017 220,000 99,315.63 319,315.63 418,631.26 09/01/2017 95,603.13 95,603.13 03/01/2018 325,603.13 230,000 95,603.13 421,206.26 09/01/2018 91,290.63 91,290.63 03/01/2019 91,290.63 331,290.63 422,581.26 240,000 09/01/2019 86,340.63 86,340.63 03/01/2020 331,340.63 09/01/2020 245,000 86,340.63 417,681.26 80,981.25 80,981.25 03/01/2021 330,981.25 411,962.50 09/01/2021 250,000 80,981.25 75,356.25 75,356.25 03/01/2022 75,356.25 335,356.25 410,712.50 09/01/2022 260,000 69,181.25 69,181.25 03/01/2023 69,181.25 344,181.25 413,362.50 09/01/2023 275,000 62,306.25 62,306.25 03/01/2024 62,306.25 352,306.25 414,612.50 09/01/2024 290,000 55,056.25 55,056.25 03/01/2025 305,000 55,056.25 360,056.25 415,112.50 09/01/2025 47,431.25 47,431.25 03/01/2026 47,431.25 372,431.25 419,862.50 09/01/2026 325,000 39,103.13 39,103.13 03/01/2027 39,103.13 374,103.13 413,206.26 09/01/2027 335,000 30,100.00 30,100.00 03/01/2028 09/01/2028 355,000 30,100.00 385,100.00 415,200.00 03/01/2029 20,559.38 20,559.38 395,559.38 09/01/2029 375,000 20,559.38 416,118.76 03/01/2030 10,481.25 10,481.25 410,962.50 09/01/2030 390,000 10,481.25 400,481.25 7,809,080.21 5,005,000 2,804,080.21 7,809,080.21 In addition to the Debt Service schedule amounts, the City also incurs approximately $15,000 for the annual administration of the Community Facilities District related to fiscal agent fees, county property tax administration costs, arbitrage fees, and City overhead related charges.
F3
While the assumption is that the CFD debt would be repaid in a finite period of time, there is a mechanism available to controlling entities to extend debt obligations and thereby extend the CFD special tax in perpetuity. Office of City Manager 100 Avenida Presidio San Clemente, CA 92672 e i Po 111 The City of San Clemente believes this flexibility is appropriate. This flexibility allows the taxpayers of the district to benefit from situations which may arise, such as interest rate changes, development changes that effect financial aspects, and making improvements to the debt financing that develop over time. For example, the City was able to refinance the original CFD 99-1 debt to provide present value savings of $509,000. This was able to be accomplished without extending past the life of the original issuance, however this may have been able to be accomplished in some circumstances. The refunding of this debt was taken to the City Council on January 18, 2011 and approved in open session. Recommendations
No recommendations for this finding

* This report's PDF did not contain easily extractable text and required Optical Character Recognition (OCR) for analysis. There may be minor errors in the extracted findings and recommendations due to OCR limitations with scanned documents.