HomeMy WebLinkAbout1998-04-14; City Council; 14635; CFD No. 1- 77 0 7
CITY OF CARLSBAD -AGENDA BILL c
AB#= I:;& RESOLUTION I DEPT HD. k--
MTG. 04/l 4/98 MAKING CERTAIN INTERPRETATIONS
DEPT. FIN FOR COMMUNITY FACILITIES DISTRICT #I
CITY ATTY. b&G
CITY MGR.q
RECOMMENDED ACTION:
Adopt Resolution No. 923 -110 making interpretations of the rate and method of
apportionment of special taxes for Community Facilities District #I.
ITEM EXPLANATION:
In 1982, the State Legislature responded to the need for a high quality method of financing public improvements by approving the Mello-Roos Community Facilities Act of 1982. This act allows voters
to approve a special tax to be levied upon their property to fund the construction or acquisition of
facilities or services.
The City of Carlsbad and property owners of specific vacant land in Carlsbad worked together to form
Community Facilities District No. 1 (CFD #I) in June 1991 to provide funding for a variety of infra-
structure projects needed to meet growth management requirements. CFD #I generally provides for
the establishment of two types of special taxes: an annual tax on undeveloped property and a one-
time tax on developed property.
When Community Facilities District No. 1 was formed, the drafters of the documents realized that they could not anticipate all possibilities that may arise as the special tax formulas in CFD #I were applied
to development. Thus, they included a section in the formation documents that allows interpretations
to be made by the City by resolution when needed to clarify any vagueness or ambiguity in the
application of the special tax formula. The situations noted below have each occurred subsequent to
the formation of the CFD and are not addressed in the formation documents.
ISSUE 1: THE TAXATION OF SECOND DWELLING UNITS
In July of 1994, Council adopted an ordinance which added to the Municipal Code a definition and
regulations for the development of Second Dwelling Units. This type of dwelling unit had not been
previously defined within the Municipal Code or within any of the City’s fee programs. The establishment of this category brought up the question of the appropriate taxing category for applying
the CFD #I special tax (one-time developed land category).
The appropriate taxing category for this type of development was discussed in depth by City staff
including members of the Planning, Engineering and Finance Departments as well as our special tax
consultant. Staff’s recommendation is to define second dwelling units as falling into the Special Development Tax - One-Time Land Use category of “RMH (8.01 to 15 ,DU’s/AC). This is the lower of
the two rate categories available. This tax is levied at the time of development based upon the density of the project. Defining second dwelling units in this manner will keep the rate and method
consistent with other fee programs and consistent within the CFD #I for similar types of units. A letter
from the special tax consultant is attached as Exhibit 2.
Page 2 of Agenda Bill # ,-$ (57s
ISSUE 2: PROPERTY PURCHASED BY A TAX-EXEMPT ENTITY FOLLOWING THE
FORMATION OF THE CFD #I
The Government Code allows a Community Facilities District (CFD) to levy special taxes on property
purchased by a tax-exempt entity after the initial formation of the CFD. There are two distinct types of
property in CFD #I which fall under this classification. The first is property which, although taxable at
formation, was assumed would be developed as non-taxable in the future. This assumption was
made based on either the general plan, local facilities management plan or other planning document.
An example of this type of development would be the dedication or purchase of property by a school
district for the construction of school facilities.
The second type of property is that which, at the time of formation of CFD #I, was assumed would be
developed as taxable property in the future but then was purchased by a tax-exempt entity. An
example of this type of development is the purchase of property by the City for a municipal golf
course.
Since there is a distinct difference in these two types of situations and since the calculation of the
maximum tax rates was based upon these different assumptions, staff and the special tax consultant
believe that the situations should be treated differently. Staffs recommendation is that property
purchased by a tax-exempt entity which was originally assumed to be developed as non-taxable will
be exempt from the levy of CFD #I special taxes. Property purchased by a tax-exempt entity which
was originally assumed to be developed as taxable will be levied all applicable CFD #I special taxes.
This treatment will ensure that there is no detriment to the other land owners within the CFD due to
the purchase of property by a tax exempt entity. It will also ensure that such a purchase will not have
a negative effect on the ability of the CFD to pay its fair share of the public facilities.
FISCAL IMPACT:
ISSUE 1:
To the extent these dwelling units are additional, uncontemplated dwelling units, this revenue would
be an additional source of revenue for the CFD #I. If sufficient additional revenue was received in
CFD #I from this or from other sources, it may result in tax rates for CFD #I to be less than that
which was originally contemplated in the formation documents.
ISSUE 2:
There will be no fiscal impact because the potential special taxes on the property which will be
exempted from taxation was never included in the revenue estimates for CFD #I.
EXHIBITS:
1) Resolution No. qg/lr0 making certain interpretations of the rate and method of
apportionment of special taxes for Community Facilities District #I.
2) January 31, 1998, letter from Special District Financing and Administration.
d
RESOLUTION NO. 98-110
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF CARLSBAD, CALIFORNIA, APPROVING
THE INTERPRETATIONS MADE BY THE
APPEALS PANEL FOR COMMUNITY FACILITIES
DISTRICT #I
WHEREAS, the State Legislature approved the Mello-Roos
Community Facilities Act of 1982 which allows voters to approve a special
tax to be levied upon their property to fund the construction or acquisition
of facilities or services, and
WHEREAS, the City Council of the City of Carlsbad approved the
formation of Community Facilities District No. 1 (CFD #I) in June 1991 to
provide funding for a variety of infra-structure projects needed to meet
growth management requirements, and
WHEREAS, CFD #I generally provides for the establishment of
two types of special taxes: an annual tax on undeveloped property and a
one-time tax on developed property, and
WHEREAS, the formation documents for CFD #I allows
interpretations to be made by the City by resolution when needed to clarify
any vagueness or ambiguity in the application of the special tax formula.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the
City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
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2. That the following interpretations are made to the “Rates
and Method of the Apportionment of Special Taxes” for Community
Facilities District #l:
a. Second dwelling units as defined by the Carlsbad Municipal
Code fall into the Special Development Tax - one-time land use category
of ‘RMH (8.01 to 15 DU’S/AC)~ for applying the special taxes under the
Community Facilities District #l,
b. If, at the formation of CFD #I, it was assumed that the
property would be developed as non-taxable and that property was
subsequently purchased by a tax-exempt entity, then it will be exempt
from the levy of CFD #I special taxes. Alternately, if, at the formation of
CFD #I, it was assumed that property would be developed as taxable and
that property is subsequently purchased by a tax-exempt entity, then it will
continue to be subject to all applicable CFD #I special taxes.
PASSED, APPROVED AND ADOPTED at a regular meeting of
the Carlsbad City Council held on the April 14 day of 9
1998 by the following vote, to wit:
AYES: Council Members Lewis, Ktllchin, Hall & Finnila
NOES: None
ABSENT: Wgaard
All-EST:
KAREN R. KUNDTZ, Assistant City Clerk
(SEAL)
EXHIBIT 2 5’ -SDFA
SPECIAL DISTRICT FINANCING
& ADMINISTRATION
16960 Via Tazon
Suite 190
San Diego CA 92127
619-676-3684
Fax 676.3685
January 31, 1998
Lisa Hildabrand
Finance Director
CITY OF CARLSBAD
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Re: CITY OF CARLSBAD, COMMUNITY FACILITIES DISTRICT NO. 1 AND
THE TAXATION OF SECOND DWELLING UNITS
In July of 1994, Council adopted an ordinance which added to the Municipal
Code a definition and regulations for the development of Second Dwelling Units.
This type of dwelling unit had not been previously defined within the Municipal
Code or within any of the City’s fee programs. The establishment of this
category of dwelling unit brought up the question of the appropriate special tax
category under which these dwelling units should be levied the Special
Development Tax - One-Time.
The basis for the establishment of the rate and method of apportionment for the \ City of Carlsbad CFD No. 1 was three impact fee programs, the Traffic Impact
Fee or TIF, the Bridge and Thoroughfare District No. 1 or BTD, and the Public
Facilities Fee or PFF.
As the special tax consultant to the City of Carlsbad for Community Facilities
District No. 1, we reviewed these impact fee programs to define a Special
Development Tax - One-Time for Second Dwelling Units. The purpose of the
definition is to keep the rate and method consistent with the impact fee programs
and consistent within the CFD for the taxation of similar types dwelling units.
Our analysis concluded that it would be accurate to define second dwelling units
as falling into the Special Development Tax - One-Time land use category of
“RMH (8.01 to 15 DUWAC).” Our conclusion was reached after the analysis of
the following facts:
l The category of second dwelling units was not covered or anticipated by the
original rate and method of apportionment.
. L . - .
January 31, 1998
L. Hildabrand
Page 2
l This is not a case of hardship for one or a limited group of property owners.
l The category was overlooked our missed at the time of formation. The
clarification of this missed category of developed land use will bring the rate
and method of apportionment for the CFD back into consistency with the fee
programs, it’s original intent.
l If the issue of second dwelling units had been known at the time of formation
of the CFD, a distinct category would have been established with a Special
Development Tax - One-Time rate equal to that of “RMH (8.01 to 15
DUWAC).”
l This clarification does not cause the maximum tax to be exceeded.
All other components of the rate and method of apportionment would remain
unchanged. These include, but are not limited to; Improvement Area,
Subsequent Initial Fiscal Year, and Developed Property, all as defined in the
Special Tax Report.
Please be in contact with any additional inquires.
Barbara Hale-Carter
Principal
c: F. Mackenzie Brown; Brown, Diven & Henstchke