HomeMy WebLinkAbout1989-01-10; City Council; 9815; GROWTH MANAGEMENT PROGRAM - FINANCINGv AB# 98 1.5 TITLE e- I .
MTG. 1/10/89 GROWTH MANAGEMENT PROGRAM - FINANCING ? :
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CIa OF CARLSBAD - AGENV BILL f/ ’I
RECOMMENDED ACTION:
1. Direct staff to proceed to investigate the use of a Community Facil. District in relationship to the City’s Growth Management Program return with the appropriate documents.
2. Adopt Resolution No.89-,3, authorizing the transfer of $75,000 fror contingencies account to hire consultants for necessary work in prep( documents for Community Facilities District.
ITEM EXPLANATION:
Since the adoption of the City of Carlsbad’s Growth Management Progri July 1, 1986, staff has been working to ensure that the appropriate final mechanisms are utilized to guarantee and provide for the constructic needed public facilities. On September 23, 1986, the City Council app the Citywide Facilities and Improvements Plan. This Plan establishec overall framework of the Growth Management Program. The Plan contaii background on the financing options available to the City for construction of public improvements. These included:
(a) Cash pay-as-you-go financing
(c) Credit for City fees (d) Debt financing
- Assessment Districts
- Speci a1 Benefit Di stri cts - Community Facilities Districts (Mello Roos) - Revenue Bonds
- Tax Increment Bonds
- Certificates of Participation - General Obligation Bonds
(b) Reimbursement agreements
The Plan also contained several financing policies adopted by the Council to be utilized with the Growth Management Program.
Since the adoption of the Citywide Facilities and Improvements Plan, and major property owners throughout the City began to prepare Facilities Management Plans as required by the Growth Management Pro At the present, twelve Local Facilities Management Plans have been ad
facilities will be provided as growth occurs to maintain conformance wil City’s adopted Public Facility Performance Standards. Each of these Faci 1 i ties Management P1 ans i ncl udes financing options avai 1 ab1 e to those needed improvements.
by the City Council. Each of these plans specifically identify how p
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Following the adoption of several privately prepared Local Facil i Management Plans, the property owners were conditioned to prepare and prc
to the City a detailed financing plan to ensure that all the pi f aci 1 it i es required coul d be provided. Staff has revi ewed several f i nai proposals presented by these property owners and has determined a nee( the City to develop an overall financing strategy. The basic assump- utilized in preparing that financial strategy are attached as Exhibit j a memorandum dated December 19, 1988 to the City Manager.
FINANCIAL IMPACT:
To proceed to investigate the Community Facilities District will re1 authorization to expend approximately $75,000. These funds will be recl
Council’s Contingency Account following this transfer will be $1,025,0
ENVIRONMENTAL IMPACT:
None. This item is a planning study to determine if a Community Fac District should be implemented and is categorically exempt under Articl Section 15262 of the California Environmental Quality ACT (CEQA). district is ultimately formed, additional environmental review wil undertaken at that time.
EXHIBITS :
1. Memorandum to City Manager, dated December 19, 1988. 2. Resolution No. 87-13
if a Community Facilities District is formed. The balance in the
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December 19, 1988
To: City Manager Assistant City Manager Community Development Director City Engineer
Assistant to the City Manager fl 9 From: Finance Director
CITYWIDE CAPITAL PROJECT FINANCING PROGRAM
1. GROWTH MANAGEMENT FINANCING
Introduction
The purpose of this memorandum is to overview the financing elements of Growth Management Program and to recommend a course of action to be foll in order to meet the Cityfs obligation to provide funding for major pu facilities.
The need to clearly define the Cityfs long-term approach to guaranteeinc financing of major public facilities has arisen as a result of the inabi of the individual Local Facilities Management Zone Financing Plan adequately address these facilities. The most significant problem associ with these individual plans is that they are utilizing the available capacity of the land without providing for major public facility impr ments. These plans are creating a piece meal approach to financing fi improvements and are beginning to dictate the timing of facilities wit
taking into account the overall citywide financing needs.
Backqround
In July 1986 the City Council adopted Ordinance No. 9808 which establi a Growth Management Program for the City of Carlsbad. comprehensive three-tiered planning system which ensures that pi facilities will be available as development occurs to maintain conforl; with the City’s public facility performance standards.
In September 1986, the City Council completed the first phase of the prc with the adoption of the Citywide Facilities and Improvements Plan. Plan identified various ways that public facilities could be finance( established several City Council financing policies. Attached as Ex1 #1 is a matrix which summarizes the pros and cons of each final alternative to be discussed below. Exhibit #2 is the complete Final Summary and Financing Policies contained in the adopted Citywide Facil and Improvements Plan.
This program
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Overview of Financinq Alternatives
The following financing alternatives for public facilities were identi in the Citywide Facilities and Improvements Plan:
A. Cash/Pay as YOU go. The City has used the various fees colle from development to pay for most public facilities.
B. Reimbursement Aqreements. This method would require developer construct or up-front funds necessary to provide a needed pu facility. Then, the developer would be reimbursed by the Cit, a later point in time.
C. Credit for City Fees. When in the public interest to constru pub1 i c faci 1 i ty earl i er than would be possi bl e under the pay-as- go program, the City could consider giving a developer credit future fees.
D. Debt Financinq. The Citywide Facilities and Improvements included several types of debt financing which generally fall the following three categories: taxes, assessments, or City fu bonded measures.
The specific pros and cons of each financing method are shown on Exhibit In general terms, the first three methods discussed put the developer control of the timing of future facilities and is a piece meal approac the City’s overall facility financing needs. Under Debt Financing, the has the ability to control the timing of facilities and meet its obligat of the Growth Management Program to provide major public facilities.
After reviewing the available debt financing options, staff believe that utilization of Mello Roos Community Facilities Districts can most effecti be used to implement the provisions of the Growth Management Program. M Roos will allow the City to define its’ complete financing program for m public facilities and guarantee the facility funding upfront.
Recommendations
Based upon the review of the available financing alternatives, its is recommended that the City pursue the utilization of a Mello Roos Commu
Growth Management Program. Facility District to ensure that the City can accomplish the goals of
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In summary the benefits of a Mello Roos Community Facilities District high1 ighted below:
1. Guarantees the City can meet its’ obligations established by the Gr Management Program.
Creates a complete financing plan for major facilities through build 2.
3. Guarantees facility funding upfront.
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Is not dependent on future development to guarantee facilities.
Ensures available debt financing will be used first to meet major pu facility needs.
Creates debt financing coordination between the City and other Spe Districts.
Puts the City in control of the timing of future development.
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8. Creates a uniform and consistent allocation of major facility c through the City. .
9. Does not force development to guarantee major facility improvemen
2. CITYWIDE MELLO ROOS COMMUNITY FACILITY DISTRICT
The following provides a brief overview of the Mello Roos CommL Facilities District, the formation process and some of the factors that k go into shaping the proposed citywide district. Please review information below and let me know of any areas you would like added, chz or deleted before we pass this along to the Council and School Board.
Bac kqround
The passage of Proposition 13 effectively eliminated the abil it: government to issue general obligation debt financed through the levy ( valorem taxes. Because general obligation bonds had been the primary fur vehicle for many types of governmental projects, governmental entities forced to look for other methods of financing infrastructure improvemc
In 1982, the state legislature responded to the long term financing prc with the creation of the Mello Roos Community Facility District Act. Act provided governmental entities with the ability to finance infrastruc through the creation of a special tax as allowed by Section 4 of Ari XIIIa of the Constitution. The special tax could be created with approval of 2/3 of the property owners (based on amount of property 01 or registered voters (based on one vote per person, if more than 12 v( reside in the district).
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Mello Roos districts may finance a wide range of facilities inclui schools, libraries, parks, streets and civic buildings. The Act gener provides that a governmental entity (City, School, JPA) may use a dist to finance any facility which the legislative body for that governmen empowered to construct.
The use of Joint Community Facilities Agreements between two or governments is allowed under sections added to the law in 1984. These j districts function similar to Joint Powers Authorities (JPA’s) use( finance public improvements in the past. Several successful joint PO districts have been formed in the state to construct schools, w facilities and city improvements.
The City of Carlsbad is considering the formation of a citywide Mello
district as part of a comprehensive capital project financing plan re1 to the City’s growth management program. With several Local Facilities P completed to date, it has become obvious that a coordinated approach t financing key capital improvements is necessary. The Mello Roos dist offers the City the ability to guarantee that these high priority proj can be constructed without dependence on continued development acti v The City staff will present this concept to the City Council at a reg meeting for discussion and comment. If Council finds the Mello Roos dist plan of interest, the staff will continue the process by reviewing concept with land owners and other governmental entities within the C A final plan could be presented to the Council during January, 1989.
District Description
The City of Carlsbad has an opportunity to create a Community Faci District (CFD) that includes the major land owners within the city. growth management program requires that developers must prepare a L Facilities Plan prior to any development. These plans must inclui
description of the financing methods to be used for each project reqL to meet growth management standards. As these plans are completed the has the opportunity to require participation in the CFD as a conditior meeting financing conditions for projects included in the district.
The projects proposed for CFD funding are of interest to all sectior Carlsbad, both developed and developing. Participation in the distric major land owners is necessary to the district’s success. The CUI district proposal anticipates that all unpopulated land in Carlsbad ( be eventually included in the district.,
CFD Participants
Any governmental agency may be participate in the CFD. The City has discussion with the Encinitas, San Marcos and San Dieguito school disti concerning their interest in the proposed district. As the staff worl define the proposed district, the exact amount of school participation be determined. At this time the Carlsbad Unified School District
indicated a definite interest in the CFD and has provided a project schc to be used in evaluating the CFD’s economic viability.
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District Formation Process
A CFD is a legally constituted governmental entity created for the pur of financing facilities (and in some cases services). It is created b, action of the legislative body of the local agency which sponsors it.
the event that more than one entity is involved, actions are taken by bodies to be included in the district.
Districts may be initiated by the legislative body, the property owne
by petition signed by 10% of the registered voters within the district
The formation process includes several steps. First, the legislative adopts a resolution of intention describing the district, the facilitie be financed and that a special tax will be levied to cover district co The action also directs the appropriate officers to conduct a study of proposed district and to file a report.
This staff report is presented to the legislative body at a public hear
Notice of the public hearing should be published in a newspaper and/or ma to each land owner or voter in the district boundaries. If a majo protest of the land owners (based on one vote per acre) or voters is rece at the public hearing, the district cannot be formed. Following the pu hearing the legislative body adopts a resolution of formation contai information similar to that contained in the resolution of intention.
Property to be included in the district need not be contiguous. Alth
the final district boundaries may be smaller than that included in resolution of intention, the district may not be enlarged beyond the ini boundaries at time of formation. Property may be annexed to the dist at a later date.
All proceedings are under the control of the legislative body. LAFCO no jurisdiction in the formation of a CFD. The city Attorney and Counsel should play a prominent role in guiding the Council through thc formation process.
Di scl osure
An area of concern when dealing with CFD’s is that of proper disclosur a potential property/home buyer. It is extremely important that the t of any property within the district fully understand the imp1 icatio owning property subject to a special tax over and above the usual tax t
buyer is properly informed and protected. Options such as being allow6 discharge the assessment at the time of purchase may be necessary as
of the district policies. Full disclosure is necessary to avoid prot in later years when the governing body sets the annual tax rates or c with property owner issues.
The city staff is exploring several alternatives to guarantee that the
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Proposed Projects
The following list of projects are currently recommended for inclusio a CFD. More precise timing and cost estimates will be developed as district formation process continues.
Community Facility District Proposed Schedule (Mil 1 ion Dol 1 ars)
Years Years Years YE Pro.iect Descri Dt i on cost 1-5 6- 10 11-15 - 16
School District: Carl sbad High $11.1 $11.1 - -
Valley Jr. High 2.3 2.3 - -
Alga Road School 9.0 9.0 - -
College Blvd. School 11.7 11.7 - - Cannon Road School 7.0 - 7.0 -
NE Elementary 6.4 - - 6.0 NW El emen t ary 7.6 7.0 - - SW Elementary No. 1 7.4 7.0 - -
SW Elementary No. 2 7.4 - 7.0 -
SW Elementary No. 3 7.0 7 SE Elementary 7.0 7.0 Continuation School 5.0 5 Reconstruction Ph. 1 8.0 - 8.0 - Reconstruction Ph. 2 8.0 8.0 Reconstruction Ph. 3 8.0 8 Maint. 8. Transp. Fac. 6.0 - 3.0 3.0
Re1 ocatabl es 4.1 4.1 -
Total School : $121.2 $48.1 $29.1 $24.0 $2
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City: Library $16.0 12.0 - 4.0
City Hall 13.0 1 Macario Park 14.0 - 7.0 - Faraday Ave. 3.0 3.0 - -
Cannon Road 6.5 6.5 - -
La Costa Ave. 5.0 5.0 - - 01 i venhai n Road 6.0 - 6.0 -
Leucadi a B1 vd. 3.5 - - - La Costa Intchg. 7.0 7.0 - - Poinsettia Intchg. 9.4 9.4 - - Pal. Arpt. Rd. Intchg. 9.45 9.45 - -
Pub Safety Serv. Cntr. 3.54 3.5 -
Total City: $96.35 $52.35 $16.5 $ 4.0 g
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The cash flow necessary to meet the debt service demands will depend o timing of the bond issues to finance the above projects. The district typically issue a series of bonds over a 20 year period as funds are req to meet construction demands.
Additional CFD Districts
In addition to the above list there are several projects which have benefit that may be financed by overlaying CFD’s or assessment distric certain property. For example, the construction of Rancho Santa Fe Alga Road/Poinsettia Lane, Cannon Road or other projects may be fin
through the levy of taxes or assessments on property included in the cit CFD. The decision to use debt financing in these areas is not preclud the establishment of the proposed CFD,
CFD Tax Rate
The primary reason for forming a CFD is to finance the construction of I: facilities or services. This requires that the district be allowed tc a special tax each year to meet debt service or operating expenses. resolutions of intention and formation describe the annual expenses financed through the levy of a special tax.
The legislative body must annually establish the special tax to be coll from each parcel in the district. In a single entity distric legislative body may be the city council or school board. In the c2 a joint CFD the legislative body is the JPA board charged with operatir CFD.
The estimated maximum tax rate for the proposed CFD are shown in the bel ow.
Community Facilities District * Estimated Tax Rates
City/ Est. Value Special County Estimated Tax Est. Market To Debt Tax Tax Percent Percent -- Citv School Total Debt Value Ratio
Resident i a1 . Single Family 405 800 1,205 11,840 200,000 17 0.60% 1.10%
Multi Family 275 800 1,075 10,560 150,000 14 0.72% 1.10%
Vacant (AC) 300 400 700 6,880 100,000 15 0.70% 1.10%
Devel oped (AC) 2,420 450 2,870 28,220 800,000 28 0.36% 1.10%
Vacant (AC) 400 50 450 4,420 100,000 23 0.45% 1.10%
Commerci a1
Industri a1 Developed (AC) 1,865 450 2,315 22,730 800,000 35 0.29% 1.10% Vacant (AC) 200 50 250 2,460 100,000 41 0.25% 1.10%
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The proposed tax structure includes a tax on vacant property as well as development as it occurs. (No existing developed property would be include the District.) This structure is necessary to guarantee that the district sufficient revenues to meet the financial demands.
CFD Process - City of Carlsbad
The City staff is proposing the following schedule for briefing the Coun School Board and property owners and forming the city wide district.
Week of November 28, 1988 * Provide City Council Briefing
Week of December 13, 1988 * Meet with School District to finalize proc * Conduct Property Owner Briefings * Finalize City Council Agenda Bill
January 3, 1989 * Bring item forward for City Council Action - Update Policy 38 - Mello Roos - Authorize Staff to hire necessary consult * Begin to finalize work on CDF
* Complete project timing analysis * Finalize tax rates * Prepare Joint Powers Agreement * Meet with property owners
January, 1989 * Begin to draft CDF overlays
February, 1989 * Submit complete programs and district to the City Council * Initiate District formation Process
July, '1989 * First districts formed * Initiate appropriate bond sales
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EXHIBIT #2
FINANCING SUMMARY
The adopted Citywide Facilities and Improvements Plan identified the vai ways that capital improvements could be financed. The capital facil
- those provided by developers as a condition of development approvals those provided by the City through a system of fees, taxes, or other fina sources.
It is the City’s responsibility to plan for the construction and maintenan City projects and to finance these projects in the best possible way. following describes some of the financing options available.
necessary to support the City of Carlsbad generally fall into two categor
A. Cash/Pav-as-vou-ao financing. The City has used this methl financing to pay for most capital improvements constructed to
In concept, the City charges the development community a seri fees which provide the source of income to pay for capital proj When enough cash has been assembled, the City constructs the capital project in order of priority. This method forces the to delay construction of various projects until funds have collected. These fees include: 1. Public Facilities Fee 2. Park-In-Lieu Fees 3. Planned Local Drainage Fees 4. Traffic Impact Fees 5. Bridge and Thoroughfare Benefit District Fee 6. Sewer Fees 7. Water Fees
Special Districts collect their own various fees.
B. Reimbursement Aqreements. In certain instances, a developer m
facility before funds have been collected. When this occur: City could adopt the policy of having the interested devc construct the project based on a reimbursement agreement. Th would pay the developer back for the portion of the project th to be funded by City resources over a period of time. Pa: would commence at the time the City had originally schedulf construction of the facility in the Capital Improvement Pri Moving the project forward in time is for the benefit a developer. Therefore, the City’s repayment would be 1 imi ted cost of the public portion of the project and no interest accrue to the developer. The use of this method of p financing does not eliminate the developer’s obligation to pa fees. The developer must still pay all City fees associate1 a development .
the City to move a project forward in time and to constr
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EXHIBIT #2 - Page i
C. Credit for City Fees. When it is in the public intere construct certain public facilities earlier than would be PO:
developer credit for fees that would otherwise be paid, up 1 cost of the public improvement. These credits would reduc amount of fees payable in future years from a certain develol
Fee credits must be used carefully to avoid elimination of .
alternatives exist for fee credits:
-- Full Fee Credit Immediately: Under this option, the developer who builds a public improvement would be el igible to deduct 100% of the cost of the improvement from fees payable. Once the fee credit is exhausted, the developer begins paying fees as normally assessed by the City. Under this option the developer gets immediate credit for the total cost of a project.
-- Partial Fee Credit - credit over time: In this option, the developer who builds a public improvement receives a credit for the cost of a publ ic improvement. However, the use of that credit is spread over a series of years. This allows the City to continue to receive at least a portion of fees designated for other capital projects while giving the developer credit for the construction
of publ ic improvements that would have otherwise been paid for by the City. No interest would accrue to the developer as a part of this arrangement.
Debt Financing. A range of debt financing alternatives are availa the City. If it is in the public interest to push a project ahead construct an improvement before funds are on hand, debt financing the answer. If the project is being pushed forward for the conve or benefit of a developer, that developer should bear the cost of is and interest over the life of the debt issue. The actual mechanic debt issue and how to determine the developer’s responsibility to s these costs would be defined as the method of debt financing was c
Some of the debt financing vehicles available are shown below:
Assessment Districts:
Under Council Policy No. 33, the City may assist a developer
the use of assessment districts if there is significant public b from the improvement. In cases where a City contribution may developer to pay the City contribution. The developer could ti reimbursed at a later date (i.e., in the year that the capital proje been originally scheduled for construction) or through a system of c as described earl i er.
under a pay-as-you-go program, the City can consider giv
from capital fees necessary to finance other projects.
D.
construction of various public improvements that may be financed t
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EXHIBIT #2 - Page 3
Spec! a1 BeneYI t Di st r i ct s :
State law allows the formation of a variety of special benefit distr These districts may be used to fund the construction of parks, libra police or fire facilities, and street lighting systems to name a These districts may be formed by a vote of the property owners who assess theme1 ves for the cost of improvements.
The developer and/or land owner bears the burden of debt service payn City participation in a district of this type is possible to the e of publ ic improvements that would have otherwise been the responsi I: of the City. However, the movement of capital improvements forwar time would require some concession from the developer in offsc interest, debt issue, or other additional costs.
Community Facility District: (Mello-Roos)
Under Council Policy No. 38, the City may assist through Mellc financing the construction of publ ic facilities in conjunction
similar to assessment districts, but provide a more flexible too governmental entities to finance a wider range of public infrastruc again through the issuance of tax exempt bonds. Facilities which n financed by a Mello-Roos District include parks, parkways, open 5 schools, libraries, gas pipelines, telephone lines and can be us eliminate special assessment 1 iens. These districts may alsc operating costs to the extent the services are in addition to already being provided prior to the formation of the district.
Revenue Bonds :
The City may elect to issue revenue bonds to finance improvements rt to utility functions or other City services that generate a fe service, although other City functions could support the use of r( bonds. If public improvements are being installed ahead of schedi accommodate a developer, the City would expect the developer to c many of the costs of such an issue as described above.
Tax Increment Bonds:
Public improvements in the City’s redevelopment area can be fii through the use of tax increment bonds. The Redevelopment Agenc developed a plan for the construction of publ ic improvements usinc method of financing. A developer asking for public improvements constructed ahead of schedule must consider the agency’s abil it willingness to defer other projects.
development. Mello-Roos Community Facility Districts (CFD’s) OF
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EXHIBIT #Z - Page 4
Certificates of Participation:
Certain public facilities such as buildings can be financed t Certificates of Participation. This is in effect a lease agr between the City and another agency. A developer wishing to push pr forward might consider constructing facilities such as a library o station using this financing tool. The developer may be asked t certain costs or to accept credit in lieu of payment for c improvements.
General Ob1 igation Bonds:
construction of public improvements. This can only be done wi' approval of 2/3 of the voters in an election. It is unlikely th City will have the ability to use this method of funding public pr which benefit specific developments.
The City has the ability to issue General Obligation Bonds to fu
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EXHIBIT #2 - Page 5
The adopted Citywide Facil ities and Improvements P1 an contains the foll financing policies:
1. Recognize that those projects identified in the Public Facil Fee Calculation are the ultimate responsibility of the City to however, the priority for funding projects is at the discreti the City Council.
2. Recognize that the Capital Improvements Program will pl significant role in helping to establish compliance wi.th the ad performance standards. Priority for the funding of projects s go to in fill areas or areas of the City where existing deficie exist.
Agree to consider assisting developers with credits against f fees, reimbursement agreements, forming assessment districts, only when it is clearly in the public interest to do so 1 rectify public facility deficiencies and not to induce grow prematurely upgrading pub1 ic facilities.
Recognize that all credit or reimbursement arrangements will be based upon the City's plans for timing of certain public facili For example, if a developer wanted to put in an improvement tha City had not planned for 5 years and was not necessary to re
provide credits or reimbursement until the 5th year, if at a1
Recognize that public facility improvements made up front or of City plans by developers must provide the funds necessa cover annual operating costs for the facility until the tim City had previously planned to provide the facility.
6. With the recent reduction in residential densities and ov restriction on residential development, recognize that it m necessary to start charging fees to commercial and industrial uses in cases where they are not presently assessed. For exa commerci a1 and industrial developments do not pay park fees a1 t they will increasingly impact these facilities. With the redL in residential land uses and density, it may be necessary to c commercial and industrial to make up the deficit.
FINANCING POLICIES
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RESOLUTION NO. 89-13
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE HIRING OF CONSULTANTS TO STUDY THE CITYWIDE MELLO ROOS DISTRICT PROPOSAL AND TRANSFERRING FUNDS
WHEREAS, the City Council has determined it is in the best inti
the City to investigate the forming of a Mello Roos Community Fat
District; and
WHEREAS, the City Council has directed staff to further pui
concept of forming said district; and
WHEREAS, City staff must now hire consultants to assi
establishing assessment district boundaries, guidelines, and tax ra
and
WHEREAS, the estimated cost for said consulting services is $75<
WHEREAS, all preliminary costs related to the formation of the
will be recovered from the issue of bonds by the district;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the
Carl sbad, as foll ows :
1. That City staff is authorized to proceed with the investic
the Community Facilities District concept and the hiring of consul! 19
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2. That the amount of $75,000 is hereby transferred from t
Council's Contingency Account to Account 001-840-1310-2479.
PASSED, APPROVED AND ADOPTED by the Carlsbad City Council at a
meeting thereof held on the 10th day of January, 1989, by the fc
vote, to wit:
AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Lar
NOES: None
ABSENT: None Lh' //$, .<\
/, &z?& y[/-.t3 UDE A. LE I ayor
ATTEST: AiZit~+iAdNCi~i-,
(SEAL)