(a) This section applies only to the Santa Margarita Water District.

(b) The Legislature finds and declares both of the following:

(1) In 1978, the voters of the Santa Margarita Water District authorized the sale of bonds for its improvement district number four in which the bond proceeds are available for water and sewer facilities.

(2) In 1998, the Capistrano School District created a Mello-Roos Community Facilities District in which the bond proceeds are available for water, sewer, roads, and other facilities for a portion of the area to be served by the improvement district.

(c) It is the intent of the Legislature to allow the Santa Margarita Water District the flexibility to establish equity with regard to the manner in which the district’s water and sewer bonds are repaid, recognizing that a portion of the water and sewer facilities for the improvement district area will be financed by bonds issued pursuant to the Mello-Roos Community Facilities Act of 1982 (Ch. 2.5 (commencing with Sec. 53311), Pt. 1, Div. 2, Title 5, Gov. C.), instead of all water and sewer facilities being financed by the district’s water and sewer bonds.

(d) For the purpose of making the annual estimate of the amount required to pay the principal of, and interest on, general obligation bonds of the Santa Margarita Water District for improvement district number four pursuant to Section 36424, the board of the district may designate two separate areas within the improvement district, with one area financed by the school district’s bonds under Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code and the other area not so financed.

(e) If the district exercises the authority authorized by this section, the amount of principal and interest allocated each year to the area without the bonds issued under Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code (1) shall not be less, to the extent possible, than the amount needed to repay the principal and interest actually owed on the water and sewer bonds if that amount is spread uniformly across all of the assessed value of property within the improvement district, and (2) shall not be more, to the extent possible, than that amount that would have been allocated if (A) all water and sewer facilities had been financed by the water district’s water and sewer bonds, subject to a limit of the amount of water and sewer bonds actually authorized, and (B) the entire improvement district was responsible to repay these amounts.

(f) The board shall not designate separate areas unless it receives a report from an independent financial consultant or engineer that the designation of the proposed areas and the allocation of the estimated amount required to repay the principal of, and interest on, the bonds to the areas, in accordance with subdivision (e), will not adversely affect the board’s ability to levy ad valorem assessments that will be sufficient to pay the principal of, and interest on, the bonds and the board determines that the designation of the areas and the allocation of the amount will not be adverse to the interests of the holders of the bonds. Notwithstanding subdivision (e), if the report indicates that the allocation described in subdivision (e) will adversely affect the board’s ability to levy ad valorem assessments that are sufficient to pay the principal of, and interest on, the bonds or that that allocation may be adverse to the interests of the holders of the bonds, the district may designate two separate areas within improvement district number four in accordance with subdivision (d) and levy ad valorem assessments in amounts necessary to avoid those adverse effects.

(Added by Stats. 2000, Ch. 25, Sec. 1. Effective May 24, 2000.)