HomeMy WebLinkAbout2002-12-17; City Council; 17021; Revisions to Council Policies 33 & 38AB# 17,021
MTG . I 2/17/02
DEPT. FIN
CITY OF CARLSBAD - AGENDA BILL
TITLE:
REVISIONS TO COUNCIL POLICIES NO. 33 AND 38
REGARDING THE FINANCING OF PUBLIC
IMPROVEMENTS CITY MG
RECOMMENDED ACTION:
Adopt Resolution No. 2002-369 approving the new Council Policy No. 33 on the financing of Public
Improvements and repealing existing Council Policies No. 33 and 38.
ITEM DESCRIPTION:
Council Policies No. 33 and 38 were created to set forth the City Council’s position on the use of
Assessment Districts and Mello-Roos Community Facilities Districts in the City of Carlsbad. Council
Policy No. 33 was first adopted in 1984 with the last revision occurring in 1998, while Policy No. 38
was adopted in 1987 and last revised in 1992.
The recent review of these policies was prompted by the need to clarify the City’s position on a few
issues related to the improvements to be financed and the use of tax-exempt debt. In addition, some
minor changes in the law for Community Facilities Districts needed to be incorporated. Since both
types of financing districts are typically used for similar projects, staff is also recommending that the
policies be combined to cover the use of all types of Special Districts, including 191 1/1913 Act
Assessment Districts, Mello-Roos Community Facilities Districts, and Bridge and Thoroughfare
Districts.
Although the document has been completely rewritten and updated, there are essentially no major
changes in policy being recommended to the Council. This action combines the policies into one,
extends the policy to Bridge and Thoroughfare Districts, and expands some portions of the previous
policies to incorporate current practices and clarify certain sections. The main provisions of the policy
are summarized below. The portions that have been changed or expanded are in bold.
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Primary Purpose: To complete the links in the City’s traffic circulation system. The policy states
that the City Council will not favor a proposed Special District that contemplates the construction
of a portion of an arterial street unless it is extended in a logical way to connect with and improve
the City’s existing traffic circulation system. Other improvements may be considered by the
City Council on a case-by-case basis. The policy does not address the financing of public
services.
Public Improvements Allowed to be Included in a SDecial District:
a. Arterial streets, highways, major bridges, and freeway interchanges identified on the traffic
circulation element of the Carlsbad General Plan. If the primary purpose of completing a
circulation link is met, and overriding public interest is shown, then public facilities
increasing’ traffic capacity for a circulation element may be considered. Right-of-way
must be dedicated or acquired prior to formation of the Special District and is
generally not authorized to be financed through a Special District except under special
circumstances as authorized by the City Engineer.
b. Other improvements, if appurtenant to the street and highway improvements described
above, including:
i. Sewer lines or other sewer facilities.
ii. Water lines and other water facilities.
Page 2 of Agenda Bill # 17,021
iii. Drainage facilities.
iv. Landscape and irrigation facilities.
v. Reclaimed water facilities in right-of-way.
vi. Grading for eligible public streets.
vii. Environmental mitigation as required for the improvements.
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viii. Bicycle and pedestrian facilities if located on land or easements owned or
dedicated to the City and accepted as part of the Citywide trail system.
c. Incidental costs as described and approved by the City Engineer. Specific exemptions are
shown in the policy.
Timinq of Payment for Acquisition of Improvements: If the developer is building the
improvements, the City will not pay for them from District monies until they can be opened
to the public. At that time, the City may pay up to 90% of the eligible expenses. Full
payment will occur when the City accepts the improvements.
Request for Formation: If the request is being made by a property owner, the application for
formation of a Special District shall have concurrence of not less than 65% of.the owners of the
properties.
Pre-Formation Costs: Deposits shall be made to the City for any costs to be incurred by the City
or its consultants prior to the formation of the District and issuance of bonds.
Special District Review Committee: The membership of this committee is the same as the
previous Policy 33 committee with the addition of the City Engineer.
Requirements for Special Taxes: These have been further refined compared to the current
Policy 38, although the intent has remained the same.
Pass-Throuqh of AssessmentslTaxes: The policy states that it is the City’s desire that any
assessment or special tax obligation be discharged prior to the sale of individual lots. Under the
policy, property owners of residential land within a Community Facilities District (CFD) must
discharge the special tax obligation applicable to the property prior to the sale of individual lots.
For commerciaVindustriaI property within a CFD and any property within an Assessment District,
the City Council may approve a pass-through of the obligation to a prospective purchaser at its sole discretion. This is consistent with current policies.
Limits on Assessmentsflaxes: The policy states that the total of the taxes, assessments,
and special taxes appearing on the property tax bill shall not exceed 1.8% of the initial
sales price as of the date of the close of escrow of the initial sale of any residential
dwelling unit to such residential homeowner. While this has been past practice, it was not
formally in the City’s policy in the past.
IO. Value-to-Lien Ratio: The new policy does not change the requirement that the project must have
a 4:l value-to-lien ratio in order to issue bonds, with a minimum of 3:l if the ratio is
recommended by the underwriter and/or financial advisor to the City and if the City Council finds
the reduced ratio to be within acceptable parameters. The new policy clarifies that this ratio
is required on a total project basis as well as on a village-by-village basis.
11. Disclosure to Property Owners: No significant changes. The property owners must prepare a
disclosure program that complies with all laws and meets the approval of the City Council.
d
Page 3 of Agenda Bill ## 17,021
FISCAL IMPACT:
The adoption of the revised policy has no direct fiscal impact on the City. Rather, it creates a
framework for the consideration of how and when the City will use public debt for the payment of
public facilities. The revision of the policies is intended to clarify the City Council’s position and to
provide better guidance to both the development community and staff when considering a project.
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Resolution No. 2002-369 approving the new Council Policy No. 33 on the financing of Public
Improvements and repealing existing Council Policies No. 33 agd 38.
Revised Council Policy No. 33 - Policy for Use of Special Districts in Financing Capital
Improvements (revised December 2002).
Current version of Council Policy No. 33 - Policy for Use of 191 5 Act Bonds.
Current version of Council Policy No. 38 - Policy for Use of the Mello-Roos Community Facilities
of 1982.
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RESOLUTION NO. 2002-369
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF CARLSBAD, CALIFORNIA,
APPROVING A NEW COUNCIL POLICY NO. 33
ON THE FINANCING OF PUBLIC IMPROVEMENTS AND
REPEALING EXISTING COUNCIL POLICIES NO. 33 AND 38
WHEREAS, Council Policies No. 33 and 38 were created to set forth the City
Council’s position on the use of Assessment District and Mello-Roos Community Facilities
Districts in the city of Carlsbad; and
WHEREAS, a recent review of these policies was prompted by the need to clarify
the City’s position on issues related to the improvements to be financed and the use of tax-
exempt debt; and
WHEREAS, the update of the policies was also necessitated by changes in the
Community Facilities District law; and
WHEREAS, the Policies No. 33 and 38 can be combined because both types of
financing districts are typically used for similar projects; and
WHEREAS, the document has been rewritten to cover the use of all types of
Special Districts including 191 Ill 91 3 Act Assessment Districts, Mello-Roos Community
Facilities Districts, and Bridge and Thoroughfare Districts.
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.
2. That existing Council Policies No. 33 and 38 are hereby repealed.
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3. That the attached Council Policy No. 33, as revised, is hereby adopted to
provide guidance to property owners and staff in the use of Assessment Districts, Community
Facilities Districts, and Bridge and Thoroughfare Districts.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council
In the 17th day of DECEMBER , 2002, by the following vote, to wit:
AYES: Council Members Lewis, Finnila, Kulchin, Hall, Packard
NOES: None
ABSENT: None
ATTEST:
(SEAL)
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RESOLUTION NO. 2002-369
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF CARLSBAD, CALIFORNIA,
APPROVING A NEW COUNCIL POLICY NO. 33
ON THE FINANCING OF PUBLIC IMPROVEMENTS AND
REPEALING EXISTING .COUNCIL POLICIES NO. 33 AND 38
WHEREAS, Council Policies No. 33 and 38 were created to set forth the City
Council's position on the use of Assessment District and Mello-Roos Community Facilities
Districts in the city of Carlsbad; and
WHEREAS, a recent review of these policies was prompted by the need to clarify
the City's position on issues related to the improvements to be financed and the use of tax-
exempt debt; and
WHEREAS, the update of the policies was also necessitated by changes in the
Community Facilities District law; and
WHEREAS, the Policies No. 33 and 38 can be combined because both types of
financing districts are typically used for similar projects; and
WHEREAS, the document has been rewritten to cover the use of all types of
Special Districts including 191 111 91 3 Act Assessment Districts, Mello-Roos Community
Facilities Districts, and Bridge and Thoroughfare Districts.
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.
2. That existing Council Policies No. 33 and 38 an? hereby repealed.
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3. That the attached Council Policy No. 33, as revised, is hereby adopted to
provide guidance to property owners and staff in the use of Assessment Districts, Community
Facilities Districts, and Bridge and Thoroughfare Districts.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council
In the 17th day of DECEMBER , 2002, by the following vote, to wit:
AYES: Council Members Lewis, Finnila, Kulchin, Hall, Packard
NOES: None
ABSENT: None
ATTEST:
Page 1 of 15 CITY OF CARLSBAD
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
~ Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
BACKGROUND
The City Council often receives requests fiom property owners to use special districts to fund public
improvements. These “Special Districts” include Assessment Districts formed pursuant to the Municipal
Improvement Act of 19 13 (Streets and Highways Code Section 10000 and following) (the “191 3 Act”),
with Improvement Bonds issued pursuant to the Improvement Bond Act of 1915 (Streets and Highways
Code Section 8500 and following) (the “1915 Act”), Community Facilities Districts formed pursuant to
the Mello-Roos Community Facilities Act of 1982 (Government Code Section 533 11 and following) (the
“Mello-Roos Act”), and Bridge and Thoroughfare Districts (Government Code Section 66484 and
Carlsbad Municipal Code Section 20.08.140). The City Council has found it necessary to determine
circumstances under which the City Council will approve Special District formation and financing as a
guide to those who would seek to request it.
The ability of a property owner or developer to obtain financing of public improvements from the
proceeds of tax-exempt bonds provides substantial economic benefits to such owner or developer. These
benefits include the financing of such improvements at interest rates substantially lower than
conventional financing interest rates, if such conventional financing is available, and/or the ability to
obtain financing without providing equity compensation to the lender. For this consideration, the City
Council has determined that tax-exempt financing should only be used if the public interest. would be
served thereby in addition to the benefit conferred on the properties within the proposed Special District.
The Mello-Roos Act requires that a public agency initiating proceedings to form a Community Facilities
District after January 1, 1994 must first consider and adopt local goals and policies concerning the use of
the Mello-Roos Act. Ths policy shall act as such a statement of local goals and policies pursuant to this
statutory requirement and as a consolidation and replacement of the existing Policy 33 and Policy 38 and
shall also provide guidance in the approval of Bridge and Thoroughfare Districts. Thus, the existing
Policies No. 33 and 38 have been repealed.
PURPOSE
The primw purpose for the City Council’s approval of Special District financing is to complete the links
in the City’s traffic circulation system. The City Council in that regard will not favor a proposed Special
District that contemplates the construction of a portion of an arterial street unless it is extended in a
logical way to connect with and improve the City’s existing traffic circulation system. The City may
require that proponents of a Special District expand the area to be included within a proposed Special
District as may be necessary to complete linkages in the City’s traffic circulation system. Other
improvements may be considered by the City Council on a case-by-case basis. This policy does not
address the funding of public services.
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Page 2 of 15 CITY OF CARLSBAD
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
The underlying principals behind this policy are:
To protect the public interest;
To ensure fairness in the application of the assessments, special taxes, or fees to current and
future property owners;
To ensure fill disclosure to current and future property owners of the Special District;
To ensure the creditworthiness of any Special District debt;
To protect the City’s credit rating and financial position;
To ensure that the applicants for Special District proceedings, other than City-initiated
proceedings, pay all costs associated with the formation of any Special District;
To establish one policy regarding the requirements that must be met before the City Council will
consider approving the financing of public improvements using Special Districts;
To provide City staff, the residents of the City, and owners and developers of property located
within the City with guidance in the application for and consideration of the establishment of
Special Districts; and
To incorporate the requirements of new legislation pertaining to the use of Special Districts.
It is not the intent of this policy to relieve any developer of responsibilities for the construction of public
improvements or satisfaction of other conditions of development related to the subdividing of property,
the processing of tentative or final maps, or master plan developments. This policy does not supersede
any law, but the intent is to further restrict or clarifj its use.
POLICY
Statement:
I. FINDING OF PUBLIC INTEREST
The City may allow the financing of public improvements under the provisions of this policy if, in
the City’s opinion, the public interest would be served thereby in addition to the benefit conferred
on the properties within the proposed Special District.
Each applicant for the establishment of a Special District must comply with the applicable
requirements contained herein unless the City Council expressly grants an exception to such policy
or policies as they apply to a specific application.
Page 3 of 15 CITY OF CARLSBAD
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 1211 7/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
Facilities Allowed:
2. AUTHORTZED PUBLIC IMPROVEMENTS
Improvements proposed to be financed through a Special District must be public improvements that
will be owned, operated, or maintained by the City or other public agency or public utility. The City
Council shall have the final determination as to the eligibility of any improvements for financing, as
well as the prioritization of financing of such improvements. Such improvements generally include,
but are not limited to:
A. Streets and Highways: Arterial streets, highways, major bridges, and freeway interchanges
identified on the traffic circulation element of the Carlsbad General Plan. If the primary
purpose of completing a circulation link is met, and overriding public interest is shown, then
public facilities increasing traffic capacity for a circulation element may be considered. Right-
of-way must be dedicated, offered for dedication, or acquired prior to formation of the Special
District. Right-of-way withid the boundaries of the Special District is generally not authorized
to be financed through a Special District except under special circumstances as recommended
by the City Engineer.
B. Other Public Improvements: If appurtenant to the types of street and highway improvements
described in (A) above, the following additional improvements may be considered:
Sewer lines or other sewer facilities: Sewer lines must be located within the rights-of-way
of the arterial streets when the City Engineer determines it is necessary that they be so
located.
Water lines and other water facilities: Water lines must be located within the rights-of-way
of the arterial streets when the City Engineer determines it is necessary that they be so
located.
Drainage facilities.
Landscape and irrigation facilities.
Reclaimed water facilities in rights-of-way.
Grading for eligible public streets.
Environmental mitigation required for the improvements being financed through the
Special District.
Bicycle and pedestrian facilities, if located on land or easements owned or dedicated to the
City and accepted as part of the Citywide trail system.
Such other improvements as may be authorized by law and which the City Council
determines are consistent with the policies herein.
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Page 4 of 15 CITY OF CAFUSBAD
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements , Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
~~~ ~
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
3.
Such improvements may be limited by the type of Specia1,District utilized or at the discretion oj
City Council. Any improvements already included in an existing fee program are not eligible ta
be financed by a Special District. Generally, other facilities may be considered if initiated bg
City Council or the owners of existing developed property. All improvements must be located in
public rights-of-way dedicated or otherwise granted to the City or other public agency.
INCIDENTAL COSTS
Eligible Incidental Costs that may be financed from the proceeds of bonds issued for a Special
District or the assessments, special taxes, or fees levied within a Special District shall be limited to
those incidental costs directly related to the improvements financed from the proceeds of such
bonds or revenues. These incidental costs are eligible to the extent that such costs have been
included in the calculation of the assessment, special tax, or fees. “Administrative Procedures for
Reimbursable Public Works Projects,” as issued from time to time by the City Engineer, are
provided and detail eligible incidental costs for public works construction projects.
Ineligible Incidental Costs. Costs considered ineligible to be financed from the proceeds of Special
District bonds or the assessments, special taxes, or fees levied within a Special District include, but
are not limited to, the following:
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I.
Development impact fees.
Administrative or overhead expenses, financial consultant, or legal fees incurred by an
applicant for the formation of a Special District. This limitation does not apply to amounts
advanced by the applicant to the City pursuant to the provisions of this policy to pay for pre-
formation costs incurred by the City. (See “Pre-Formation Costs, Deposits, and
Reimbursements.”)
Land-use planning and subdivision costs and environmental review costs related to such land-
use planning and subdivision.
Environmental impact studies, unless directly related to the project and done separately for the
project.
Endowments for mitigation land.
Construction loan interest.
Costs incurred prior to the City Council’s acceptance of a request to begin work on the
formation of a Special District, a reimbursement, or acquisition agreement, or the adoption of a
resolution of intention to form the Special District, whichever comes first.
Subdivision financial analysis.
Attorney’s fees incurred by the property owners or their agents, except as recommended by the
City Attorney related to condemnation proceedings.
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CITY OF CARLSBAD Page 5 of 15
Policy No. 3 3
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
J. On-site right-of-way and easements.
K. Other overhead expenses incurred by the applicant.
4. STAGE OF THE IMPROVEMENTS
Any public improvements proposed to be financed through a Special District must meet all design
and construction requirements and standards as may be established by the City and in accordance
with current State laws. A public improvement proposed to be acquired fiom the proceeds of bonds,
assessments, fees, or special taxes shall not be paid for out of Special District funds until all
components, including appurtenant improvements, of such improvement are completed, bonds are
sold if applicable, and such improvement has been opened to the public or could be opened to the
public but for the fact that such opening has been withheld or delayed solely by the City.
An “improvement” shall be generally defined as a particular street with independent usage,
including all appurtenant improvements such as sewer, drainage, and utility improvements
appurtenant to the street. The City Engineer shall have the authority and discretion to establish one
or more separate improvements consistent with the definition thereof for any Special District. Each
improvement established by the City Engineer for any Special District and all components,
including any appurtenant improvements, included within each such improvement must be
described in the acquisition and financing agreement for such Special District. Any deviation of the
description of an improvement shall be approvedby the City Engineer.
The City Engineer may authorize the partial release of funds of up to ninety percent (90%) of the
cost of any such. improvement to pay for the acquisition of such improvement when such
improvement, including all components thereof, can, in the opinion of the City Engineer, be opened
by the City for use by the public. Ten percent (10%) of the cost of any improvement shall not be
paid for until final acceptance of such improvement by the City and the City Engineer or his or her
designee has certified the final cost of such improvement.
Prior to formation, any required environmental review and an environmental certification for
development within the proposed Special District and the improvements proposed to be financed by
the Special District must be completed, land use entitlement approvals for such development must
be obtained, and right-of-way for all improvements proposed to be financed by the Special District
must be dedicated or an irrevocable offer to dedicate must be received by the City.
Prior to the sale of bonds, if applicable, design of substantially all improvements to be financed
from the proceeds of such bonds must be completed (100%) and bids for construction received.
The City may enter into acquisition agreements prior to the formation of the Special District. Any
acquisition under such agreement shall be conditional upon formation of the Special District and, if
CITY OF CARLSBAD Page 6 of 15
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment ‘Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
applicable, issuance of bonds for such Special District. Except as provided below, the purchase
price of any improvement shall not exceed the estimated costs for such improvement per the
acquisition agreement, the engineer’s report, or Community Facilities District report, as applicable,
for the Special District when such Special District was formed. Any costs above this amount will
be eligible for inclusion in the purchase price for an improvement only if there are eligible hnds
remaining upon completion of all of the improvements to be financed by a Special District. For
Bridge and Thoroughfare Districts, or Community Facilities Districts that do not or cannot issue
debt, construction to be completed by the developers will be reimbursed through fees or special
taxes, if and when collected.
Employee Bulletin Boards, Press, File
Property Owner Requirements:
5.
6.
CONCURRENCE OF PROPERTY OWNERS
Where a Special District is initiated by the property owners, the application for the consideration of
the establishment of a Special District shall have the concurrence of the affected area’s property
owners representing not less than 65%, by area, of the land proposed to be assessed, taxed, or
subject to the payment of fees. The application for consideration shall include an acceptance of this
policy and, when applicable, a waiver of the property owners’ rights under the Majority Protest Act.
The City Council is in nQ way required to proceed with the formation of a Special District if the
City Council finds that the creation of the Special District, the financing of the improvements by a
Special District, or the construction of the improvements will not be in the best interest of the City.
FINANCIAL CAPABILITY AND STABILITY OF THE PROPONENTS
Any application for the establishment of a Special District shall contain such information and be
submitted in such form as the Finance Director may require. In addition to such information as the
Finance Director may require, each application must contain:
A. Proof of authorization to submit the application on behalf of the owner of the property for
which the application is submitted if the applicant is not the owner of such property.
B. Evidence satisfactory to the Finance Director that the applicant represents or has the consent of
the owners of not less than 65%, by area, of the property proposed to be subject to the levy of
the fees, assessments, or special taxes.
C. A business plan for the development of the property within the proposed Special District and
such additional financial information as the Finance Director may deem necessary to
adequately review the financial feasibility of the Special District. The applicant must
demonstrate to the satisfaction of the Finance Director the ability of the owner(s) of the
property proposed to be developed to pay the fees, assessments or special taxes for the Special
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Page 7 of 15 CITY OF CARLSBAD
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
District and any other assessment, special taxes and ad valorem taxes on such property until
full build-out of the property.
Employee Bulletin Boards, Press, File
7. PRE-FORMATION COSTS, DEPOSITS, AND REIMBURSEMENTS
Except for those applications for Special Districts where the City is the applicant, all City and
consultant costs incurred in the evaluation of applications and the proceedings to form a Special
District and issue bonds, if applicable, will be paid by the applicant by advance deposit with the
City of monies sufficient to pay all such costs.
Each application for the formation of a Special District shall be accompanied by an initial deposit in
an amount to be determined by the Finance Director to be adequate to fund the evaluation of the
application and begin the proceedings to form the Special District and issue bonds, if applicable. If
additional funds are required to pay pre-formation costs, the Finance Director may make written
demand upon the applicant for such additional hnds and the applicant shall deposit such additional
funds with the City within five (5) working days of the date of receipt of such demand. Upon the
depletion of the funds deposited by applicant for pre-formation costs, all proceedings shall be
suspended until receipt by the City of such additional finds as the Finance Director may demand.
The deposits shall be used by the City to pay for costs and expenses incurred by the City incident to
the evaluation of the application and proceedings for the formation of the Special District and the
issuance of bonds (if applicable) including, but not limited to, legal, special tax or assessment
consulting, engineering, appraisal, market absorption, financial advisor, administrative and staff
costs and expenses, required notifications, printing, and publication costs.
The City shall refund any unexpended portion of the deposits upon the occurrence of one of the
following events:
A. The formation of the Special District and the issuance of the bonds, if applicable;
B. The formation of the Special District or the issuance of the bonds is not approved by the City
C. The proceedings for the formation of the Special District and the issuance of bonds are
Council; or
abandoned at the written request of the applicant.
Except as otherwise provided herein, the applicant shall be entitled, at the option of the City, to
reimbursement of or credit against special taxes or assessment installments for all amounts
deposited, if such amounts are recovered in the Special District. Any such reimbursement shall be
payable solely from the proceeds of the bonds, special taxes, or fees as applicable.
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CITY OF CARLSBAD Page 8 of 15
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Emuloyee Bulletin Boards, Press, File
8.
9.
STAGE OF THE DEVELOPMENT PROJECT
Development projects shall be at the stage of land use entitlements and design where all criteria of
the policy can be adequately assessed. All property to be included in a Special District shall have
already received environmental review and approval of all land use entitlements such as zoning,
master plans, specific plans, or Local Facilities Management Plans and regulatory permits. The City
Council may approve a Special District that includes some land without such approvals if the
improvements to be financed are consistent with the General Plan and if the City Council finds the
improvements are required in the public interest.
DEVELOPMENT RIGHTS
Approval of a Special District and construction of the public improvements does not, in and of
itself, vest any rights to the then existing land use approvals for the property ta be assessed or taxed
for such improvements or to any particular level, type, or intensity of development or use.
Applicants for a Special District must include an express acknowledgement of this policy and shall
expressly waive on their behalf and on behalf of their successors and assigns any cause of action at
law or in equity including, but not limited to, taking or damaging of property, for reassessment of
property or denial of any right protected by USC Section 1983 which might be applicable to the
properties to be assessed.
Formation Process:
10. CREATION OF THE SPECIAL DISTFUCT REVIEW COMMITTEE
It is the intention of the City Council that proponents of a Special District have an early opportunity
to have the proposal reviewed by City staff for compliance with this policy. In that regard, the City
Council hereby directs the creation of the Special District Review Committee. The Committee shall
consist of the City Manager, City Attorney, Community Development Director, Planning Director,
City Engineer, Administrative Services Director (Chairperson), Finance Director, and Public Works
Director. The Committee shall meet to review a proposal for a Special District for the purpose of
determining whether or not the requirements of this policy have been satisfied.
Committee review shall take place prior to the presentation of a Special District proposal to City
Council. Whenever any such proposal is presented to the City Council, it shall be accompanied by a
report containing the findings and recommendations of the Committee made in regard to such
proposal. The Committee may require the proponents to furnish any additional information
necessary to the evaluation of the proposed Special District. The Committee may require all or any
part of the deposits provided for in this policy to be made prior to commencing their review of the
proposed Special District.
Page 9 of 15 CITY OF CAFUSBAD
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
t Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
11. SELECTION OF CONSULTANTS
The City shall select all consultants, such as, but not limited to, the assessment engineer or special
tax consultant, bond counsel, financial consultant, and if required, underwriter and appraiser.
12. FEASIBILITY STUDY
If the City Council determines it necessary, a financial feasibility study may be required by a
consultant selected by the City to be accomplished at the expense of the proponents of the Special
District to ascertain whether or not the proposed Special District is financially feasible and whether
or not the proposed bonds will find market acceptance.
Assessment /Special Tax Considerations:
13. APPORTIONMENT METHODOLOGY / REQUIREMENTS
The City or the special tax consultant or assessment engineer, as applicable, selected by the City
shall determine the special tax formula or method of assessment spread. The prime emphasis in the
establishment of the special tax formula uiill be fairness to the fbture property owner who will be
paying the taxes over the years. The methodology for spreading assessments shall be based upon
the benefit to the properties assessed. The methodology utilized shall adhere to the following
requirements:
A. The annual assessment or special tax shall be sufficient to include an amount necessary to pay
for the expenses incurred by such Special District in the levy and collection of the assessment,
special tax, or fee and the administration of the bonds and the Special District.
B. For special taxes:
The maximum projected annual special tax revenues must equal 110% of the projected
annual gross debt service of any bonds of the Community Facilities District.
The special tax formula shall include provisions to protect against changes in density
resulting in the generation of insufficient special tax revenue to pay annual debt service and
administrative expenses. As a condition of approval of the downsizing of the development
by the applicant or the applicant’s successor-in-interest, the City Council may require the
prepayment of a portion of the special tax obligation as may be necessary in the
determination of the City to ensure that adequate debt service coverage exists with respect to
any outstanding bonds. Alternatively, the City Council may require security in a form and
amount deemed necessary by the City to provide for the payment of debt service on the
bonds.
A partial and/or total prepayment option shall be included in any rate and method of
apportionment of special taxes to pay for public improvements.
Q’
Page 10 of 15 CITY OF CARLSBAD
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
C.
D.
4) The applicable special tax to pay for public improvements levied against any parcel used for
private residential purposes must be discharged prior to the sale of the individual lot.
5) The rate and method of apportionment of a special tax to pay for public improvements shall
specifjr a fiscal year or number of years beyond which the special tax may not be levied on
any parcel.
All developed and undeveloped property within any Special District that is not otherwise
statutorily exempt from the levy of the assessment, fee, or special taxes shall bear its appropriate
share of the Special District’s aggregate obligation from the date of formation of the Special
District consistent with the other goals and policies set forth herein.
The City Council will not approve a Special District unless all assessments, fees, or special
taxes apportioned to publicly owned parcels within the District have been paid or discharged to
the City’s satisfaction.
14.
15.
DISCHARGE OF ASSESSMENT OR SPECIAL TAX OBLIGATION
It is the City’s desire that any assessment or special tax obligation be discharged prior to the sale of
individual lots. Under this policy, property owners of residential land within a Corninunity Facilities
District must discharge the special tax obligation applicable to the property prior to the sale of
individual lots. For commercial/industrial property within a CFD and any property within an
assessment district, the City Council may approve a pass-through of the obligation to a prospective
purchaser at the City’s sole discretion.
MAXI” AGGREGATE TAXES AND ASSESSMENTS
If the City Council approves a pass-through of the assessment or special tax obligation, it is the
policy of the City that the total of the following taxes, assessments, and special taxes appearing on
the property tax bill shall not exceed 1.8% of such initial sales price of any residential dwelling unit
to such residential homeowner:
A. Ad valorem property taxes.
B. Voter-approved ad valorem property taxes in excess of 1% of the assessed value of the subject
property.
C. The maximum annual special taxes levied by all Community Facilities Districts under
consideration and any other Community Facilities Districts or other public agency charges on
the tax roll.
D. The annual assessment installments, including administrative surcharge, for any existing or
proposed assessment district, whether such assessment installments are utilized to pay debt
service on bonds issued for such assessment district or to pay for maintenance or services.
CITY OF CARLSBAD Page 11 of 15
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
~~~
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
16.
While there is no specific limit on the rate of assessment or taxation of commercial or industrial
property, the City Council reserves the right to limit the rate of such taxation or assessment to
ensure the economic feasibility of such property.
The applicant for the establishment of any Special District shall be required to enter into an
agreement with the City or the Special District requiring the prepayment by the applicant of that
portion of the obligation applicable to any parcel used for residential purposes in order to reduce the
annual maximum obligation to the standards described above.
DISCLOSURE TO PROPERTY PURCHASERS
Property owners for all Special Districts will be required to provide for full and complete disclosure
of such Special District applicable to the property to prospective purchasers. The disclosure must
include all of the following in addition to such other provisions as may be required by State law, the
Municipal Code of the City, or as the applicant may deem necessary:
A. Provide full disclosure of the proposed Special District and all other assessment and special tax
financing applicable to the property (whether imposed by the City or any other public agency),
including the maximum annual payment, monthly payments, principal, average interest rate,
duration of payments, list of facilities to be funded, and the tax formula or method of spread in
easily understood terms.
B. List the amount of the assessment or special tax payments in all sales brochures, all advertising
and all purchase documents adjacent to the sales price of the property and in the same size type.
C. Where an assessment or special tax is authorized t6 be passed through, give prospective
purchasers an option to have the obligation lien discharged prior to the close of escrow or to
assume the obligation by a pass-through as a part of the sales price of the property.
D. Specify in all disclosure documents the name, title, telephone number, and address of a
representative of the City as provided to the applicant who may be contacted by any prospective
purchaser of property within a Special District for further information regarding the Special
District and the lien.
The disclosure progi-am will be subject to City Council approval. The City Council’s goal is to
provide complete and concise disclosure to any subsequent property purchaser.
Requirements of Debt Issuance:
17. TERMS AND CONDITIONS OF BONDS
The following Section is only applicable to assessment districts and Community Facilities Districts.
Bridge and Thoroughfare Districts are unable to issue debt. Bonds shall be issued in accordance
Page 12 of 15 CITY OF CARLSBAD
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
with the Improvement Bond Act of 1915 for assessment districts and Chapter 2.5, Part 1,
Division 2, Title 5 of the Government Code, commencing with Section 5331 1 for Community
Facilities Districts unless the City Council determines otherwise.
Bonds issued under this policy may be sold through competitive or negotiated sale as determined by
City Council. The City Council will consider recommendations from staff andor the City’s
financial consultant in selecting a method of sale.
The terms and conditions of any bonds issued by the City for any Special District including without
limitation the sizing, timing, term, interest rates, discount, redemption features, flow of funds,
investment provisions, and foreclosure covenants shall be established by the City. Each bond issue
shall be structured to adequately protect bond owners and to avoid negatively impacting the bonding
capacity or creditworthiness of the City. Unless otherwise approved by the City Council, the
following shall serve as minimum bond requirements:
Employee Bulletin Boards, Press, File
A.
B.
C.
D.
A reserve fund or other security recommended by City staff, the City’s financial advisor,
and/or underwriter shall be established for each bond issue in an amount recommended by the
City’s financial advisor andor underwriter.
Interest shall be capitalized for a bond issue only so long as necessary to place the charges on
the assessment roll. Interest may be capitalized for a longer term (not to exceed an aggregate of
18 months) on an exception basis at the sole discretion of the Finance Director, taking into
consideration the value-to-lien ratio, the expected timing of initial residential occupancies,
expected absorption and build-out of the project, the expected construction and completion
schedule for the public improvements to be funded from the proceeds of the bond issue in
question, the size of the bond issue, the development pro forma and the equity position of the
applicant, and such other factors as the Finance Director may deem relevant.
In instances where multiple series of bonds are to be issued, the City shall determine what
improvements shall be financed from the proce.eds of each series of bonds.
Neither the faith, credit, nor taxing power of the City shall be pledged to the payment of the
bonds. The sole source of revenue for the payment of the bonds shall be the assessments or
special taxes, capitalized interest, if any, and monies on deposit in the reserve fund established
for such bonds.
18. REQUIRED VALUE-TO-LIEN RATIO / APPRAISAL.
Project property value-to-lien ratio, i.e., the full cash value of the properties subject to the levy of
the assessments or special taxes, including the value of the improvements to be financed, compared
to the aggregate amount of the lien to be created, plus any prior or anticipated fixed assessment liens
and/or special tax liens, must be 4:l. A project may be approved with a ratio between 4:l and a
Page 13 of 15 CITY OF CARLSBAD
Policy No. 33
COUNCIL POLICY STATEMENT ‘ Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
minimum of 3 : 1 if the ratio is reconmiended by the underwriter and/or financial advisor to the City
Employee Bulletin Boards, Press, File
19.
20.
21.
and if the City Council finds the reduced ratio to be within acceptable parameters. The required
value-to-lien ratio shall be determined with respect to all taxable property within the Special District
in the aggregate and with respect to each discrete development area as defined by the Finance
Director.
In addition, the City Council may, it its sole discretion, accept a form or forms of credit
enhancement such as a letter of credit, bond insurance, or the escrow of bond proceeds to offset a
deficiency in the required value-to-lien ratio as it applies to the taxable property within the Special
District in the aggregate or with respect to any development area.
The appraisal shall be undertaken by, done under the direction of, and addressed to the City. The
value of the property proposed to be assessed shall be performed by a certified real estate appraiser
(MAI) selected and retained by the City or the City’s financial advisor.
MARKET ABSORPTION STUDY
The City may require a market absorption study for any Special District proposed to include new
development. In any case, the City shall retain, at the applicant’s sole expense but subject to
reimbursement as provided for herein, a consultant to prepare a report to verify or establish the
projected market absorption for and the projected sales prices of the properties proposed to be
included within the Special District. If a market absorption study is conducted, the appraiser shall
utilize the conclusions of the market absorption study in conducting the appraisal of the properties
within the proposed Special District or shall justify, to the satisfaction of the City Manager, why
such conclusions were not utilized in conducting such appraisal.
PRIORITIZATION OF PUBLIC IMPROVEMENTS
The City reserves the right to establish priorities for payment or reimbursement.
RESPONSIBILITY FOR THE COST OF FORECLOSURE
The City Council may require the proponents of the Special District to enter into an agreement with
the City to be responsible for the cost of any judicial foreclosures that the City determines are
necessary in regard to the Special District bonds. The City may, at its option, retain an attorney to
prosecute the foreclosures in a timely manner in the name of the City, and the proponent shall agree
to be responsible for all costs of such foreclosures. If the City Council approves a pass-through of
the obligation to the purchaser of an individual lot, the proponents shall be relieved of their
obligation under such agreement for such lot.
..
i i.
CITY OF CARLSBAD Page 14 of 15
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 124 7/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
~ ~~
Copies to: city council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
22. SURPLUS FUNDS
It is the City Council's policy that, in the event that there are surplus funds generated through the
creation of the Special District and the sale of bonds, if applicable, these surplus funds shall be used
as follows:
A. To complete any work related to the project that the City Council determines is equitable and
reasonable as allowed by statutes.
B. The City Council may direct staff to use a portion of this surplus to offset the annual levy of
assessments or special taxes to property owners in following years in a manner consistent with
the applicable statutes. Under this policy, an amount of up to 5% of the total bond issue size
not to exceed $1 million may be used to offset the annual levy without further Council action.
C. Unless otherwise directed by the City Council, any amount in excess of that used to offset the
annual levy described in (B) above will be used to call bonds at an appropriate bond call date.
PROCEDURE:
I.
2.
3.
CONTACT FOR PROPONENT(S)
Whether there is one or multiple proponents of a proposed Special District, an authorized
spokesperson shall be designated to act for the proponent(s) in their dealing with the City. The
spokesperson shall be responsible for collecting any fees for deposit with the City, providing any
necessary information to the City, and for communicating, as necessary, back to the other
proponent(s).
REQUEST TO BEGIN WORK
Any request for the City to begin work on the feasibility or formation of a Special District shall
contain such information and be submitted in such form as the City Finance Director may require.
In addition to the information required by Section 6 above, each application must contain data on
the proposed Special District to include, but not be limited to: a description of the improvements
and estimated cost of such improvements proposed to be funded by the Special District, written
justification of how these facilities comply with this policy, a construction and phasing schedule of
the improvements and the development project, and map(s) that identify the proposed boundary of
the Special District.
INITIAL, PRESENTATION TO THE SPECIAL DISTRICT REVIEW COMMITTEE
In the initial meeting of the Special District Review Committee, the City Engineer will provide an
overview of the proposed project and the requested public facilities to be financed. This overview
will state whether or not the proposed public facilities generally adhere to this policy and describe
the timing requirement of the public facilities in conjunction with the estimated build-out of the
development project. The Finance Director shall present a brief summary of the financial stability
CITY OF CARLSBAD Page 15 of 15
Policy No. 33
COUNCIL POLICY STATEMENT Date Issued 12/17/02
Effective Date 12/17/02
General Subject: Financing of Public Improvements Cancellation Date None
Supersedes No. 6/23/98
Specific Subject: Policy for Use of Assessment Districts, Community Facilities Districts, and
Bridge and Thoroughfare Districts
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
of the proponents as provided by the proponents, confirmation of the consent of 65% of the prop-
Employee Bulletin Boards, Press, File
4.
5.
6.
owners by area, and an estimate of the pre-formation costs. Recommendation of the Special Districl
Review Committee shall be communicated to the proponents of the Special District.
AUTHORIZATION TO PROCEED
Upon review of the proposed Special District and after considering the report of the Committee, the
City Council shall determine whether or not to authorize staff to proceed. It is the policy of the City
Council to limit projects to the criteria set forth in this policy. The City Council reserves to itself
the authority to approve or disapprove any proposed Special District. Any exceptions to the criteria
of this policy will be approved only upon an express finding by the City Council that the proposed
Special District is so effected with a public interest that the City should assist in providing tax-free
financing for the improvement in order to satisfL a public need. If the City Council authorizes the
assessment of feasibility and proceeding with the formation of the Special District, City staff and
the proponents shall proceed to do that in accordance with State law and the requirements of this
policy.
ASSESSMENT OF FEASIBILITY AND FORMATION
The City Engineer and/or Finance Director shall obtain contracts with consultant(s) as required to
review the feasibility of the project and collect a pre-formation deposit as determined by the Finance
Director. The feasibility of the project as prepared by staff or consultant shall be presented to the
Special District Review Committee. Should the Special District Review Committee recommend
against the proposed Special District, such recommendation along with the feasibility study will be
communicated to the proponents of the Special District. Should the Special District Review
Committee recommend that formation of the Special District should be recommended to City
Council, a preliminary schedule shall be determined along with requirements of the proponents to
submit any additional information or deposit of fbnds. The recommendations of the Special District
Review Committee, preliminary schedule, and requirements of the proponents, as discussed, shall
be transmitted to the proponents.
If needed, additional meetings of the Special District Review Committee shall be held to determine
if formation of the Special District should be recommended to City Council.
REQUEST FOR FORMATION
The report of feasibility and recommendation of formation of the proposed Special District by the
Special District Review Committee shall be taken to City Council for consideration. If the City
Council approves proceeding with the formation of the Special District, City staff and the
proponents shall proceed to do that in accordance with State law and the requirements of this policy.
- END OF POLICY -
Page 1 of 6
CITY OF CARLSBAD
Policy No. 33
Effective Date 6/23/98
General Subject : Assessment District Financing Cancellation Date None
of Public Improvements Supersedes No. 7/28/92
COUNCIL POLICY STATEMENT Date Issued 6/23/98
Specific Subject: Policy for Use of 1915 Act Bond
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
BACKGROUND
In the past few years, the City Council has received several requests from property owners of major
planned developments to use 1915 Act Assessment District bond financing for public improvements to
be constructed as a condition of such developments. The City Council has determined that tax-exempt
financing and 19 15 Act bonds should only be used if a mutual benefit to the City can be found in
addition to the special benefit conferred to the properties within the development. Council has
determined further that such a mutual benefit can be found in the construction of arterial streets that
compliment the City’s arterial street system by linking communities within the City. The use of
assessment district financing for arterial streets may include sewer and water lines when the Public
Works Director determines it is necessary that they be located within the street right-of-way. Projects
may also include other incidental construction such as drainage facilities located within an eligible
arterial highway and environmental mitigation required for the improvements.
Council has also determined that it is necessary to establish circumstances under which the City Council
will approve assessment district financing as a guide to those who would seek to request it.
PURPOSE
To establish a policy regarding the requirements which must be met before the City Council will approve
the financing of public improvements using 191 5 Act assessment district bonds.
To establish a procedure for processing applications for assessment district financing and a staff review
committee to apply the requirements of this policy to such applications. The committee may also
consider recommending that the City initiate a district.
The policy is primarily intended to apply assessment districts proposed for property which is
predominantly undeveloped where the developers in the area propose to use public financing in lieu of
private financing for appropriate public improvements.
It is not the intent of this policy to relieve any developer of responsibilities for public improvements or
conditions of development related to the subdividing of property, the processing of tentative or final
parcel maps, or master plan developments.
Page 2 of 6
CITY OF CARLSBAD
Policy No. 3 3
Effective Date 6/23/98
General Subject: Assessment District Financing Cancellation Date None
of Public Improvements Supersedes No. 7/28/92
COUNCIL POLICY STATEMENT Date Issued 6/23/98
Specific Subject: Policy for Use of 191 5 Act Bond
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
POLICY
Employee Bulletin Boards, Press, File
1. The City may allow the financing of public improvements under the provisions of this policy where
the public facilities represent, in the City’s opinion, a mutual benefit to the community and a
special benefit to the prospective residents of the development.
2. Facilities which may be considered shall be public facilities in dedicated rights-of-way easements,
and for which a public agency has on-going responsibility to maintain and operate. The types of
facilities to be financed are limited to:
(a) Arterial streets identified on the circulation element of the Carlsbad General Plan.
(b) Sewer and water lines to be located within the right-of-way of arterial streets when the Public
(c) Drainage facilities and public utilities may be included which are appurtenant and incidental to
(d) Environmental mitigation required for the project.
Works Director determines it is necessary that they be so located.
such streets.
3. Project property value to lien ratio should be 4:l after the installation of the improvements to be
financed. A project may be approved with a ratio between 4: 1 and a minimum of 3:l if the ratio is
recommended by both bond counsel and the underwriter and if the City Council finds the reduced
ratio to be within parameters acceptable to them. The value of the property proposed to be assessed
shall be determined by an M.A.I. appraisal, performed by an appraiser selected by the City.
4. Projects shall be at the stage where all criteria of this policy can be adequately assessed.
Developments proposed for inclusion in a district shall have already received environmental review
and shall have already received all legislative approvals such as zoning, master plans, specific plans or
Local Facilities Management Plans. The City Council may approve a district that includes some lands
without legislative approvals if the improvement to be constructed is consistent with the General Plan
and if the City Council finds the improvement is required in the public interest.
5. Assessment districts shall have the concurrence of the affected area’s property owner’s representing
not less than 60 percent, by area, of the land proposed to be assessed. The petition shall include an
acceptance of this policy and a waiver of the property owners’ rights under the Majority Protest Act.
The city Council is in no way required to proceed with the formation of an assessment district if the
Council finds that the creation of the district or the construction of the improvements will not be in the
best interest of the City.
Page 3 of 6
CITY OF CARLSBAD
Policy No. 33
Effective Date 6/23/98
General Subject: Assessment District Financing Cancellation Date None
of Public Improvements Supersedes No. 7/28/92
COUNCIL POLICY STATEMENT Date Issued 6/23/98
Specific Subject: Policy for Use of 1915 Act Bond
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
6. The City shall select the assessment engineer, bond counsel, required, the financial consultant and, if
required, an underwriter. In making such selections the City will take suggestions from the project
proponents into account. The design engineer in consultation with and subject to approval of the City.
The bond counsel, underwriter and financial consultant will provide the City with a Statement of
Conflict of Interest related to real estate holdings within the district. The design engineer and
assessment engineer shall provide a Statement of Conflict of Interest as required under Section
87100.1 of the Government Code (see attached).
Employee Bulletin Boards, Press, File
7. Bonds issued under this policy may be sold through a competitive or negotiated sale as determined by
the City Council. The Council will consider recommendations from staff and the City's financial
consultant in selecting a method of sale.
8. A sum sufficient to pay all fees and costs for the proposed assessment district prior to award of
contract shall be deposited with the City by the proponents of the district. The proponents shall also
be required to deposit with City a sum sufficient to cover all City costs incurred in connection with
review of a proposed district including staff review, legal review, administration, plan checking,
investigation, City Council review, inspection and property appraisals. These sums will be retained by
City to the degree used if the district is not successfully completed or if such costs are not recovered by
City from the district. If the district is confirmed any sum not retained by City shall be refunded in
cash or applied as a credit against the assessments at the option of the proponents.
9. Improvements shall be constructed in accordance with the Municipal Improvement Act of 1913, and
the assessment district bonds shall be issued in accordance with the Improvement Bond Act of 191 5,
unless the City Council determines otherwise.
lO.Generally, there shall be no overlapping bond assessments or tax liens on the proposed special
assessment district at the time assessments are to be affirmed by the City. The City Council, upon the
advise of bond counsel, may approve an overlap provided the combined assessments are within the
property value ratios of Paragraph 3 of this policy.
11 .The proponents of the district must demonstrate to the satisfaction of the City Council that interim
financing or other means is available for the developments to be included within the district adequate
to meet all assessment obligations between the time the district is formed and the pay off of the bonds
or their assumption by the purchasers of the individual homes within the proposed development. As
part of the review, the City Council may also consider any indebtedness presently existing against the
properties to be assessed. The district proponents must bring all property tax bills current and agree to
keep them current prior to confirmation of the district.
Page 4 of 6
CITY OF CARLSBAD
COUNCIL POLICY STATEMENT
General Subject: Assessment District Financing
of Public Improvements
Specific Subject: Policy for Use of 1915 Act Bond
Policy No. 33
Date Issued 6/23/98
Effective Date 6/23/98
Cancellation Date None
Supersedes No. 7/28/92
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
12. If the City Council determines it is necessary, a financial feasibility study me be required by a
consultant selected by the City to be accomplished at the expense of the proponents of the district to
ascertain whether or not the proposed development will find market acceptance. The City Council
may accept a private sale bond purchase agreement from a qualified underwriting firm on terms and
conditions satisfactory to the City in lieu of such a study.
Employee Bulletin Boards, Press, File
13. As part of the structuring of the financing for the district the City Council shall require that an
adequate reserve fund be established to cover any potential defaults. The City is not required to
advance monies to the reserve fund to pay for delinquencies. It is the City’s intent that its General
Fund not be obligated in any way for future delinquencies.
14. The City Council may require the district proponents to enter into an agreement with the City to be
individually and jointly responsible for the cost of any foreclosures which the City determines are
necessary in regard to the assessment district bonds. The City may, at its option, retain an attorney to
prosecute the foreclosures in a timely manner in the name of the City and the proponent shall agree to
be responsible for all costs of such foreclosures. If the City Council approves a pass through of a
bond to the purchaser of an individual lot, the proponents shall be relieved of their obligations under
the agreement for such lot.
15. It is the policy of the City Council in approving basic legislative authorization for developments such
as master plans for planned communities, to give such approvals as part of the City’s on-going
planning process. That is, the City reserves the right to modify the approvals in the future as they
determine the public interest may require. Such approvals, when given, are subject to a condition
that the construction of any part of a development does not vest any rights to complete other portions
of the development. Construction of public improvements pursuant to an assessment district in
undeveloped land, shall not vest any rights to the existing legislative approvals for the property to be
assessed or to any particular level, type or intensity of use. Proponents of a district shall include an
acknowledgment of this policy as part of their petition and shall expressly waive on their behalf and
on behalf of their successors and assigns any cause of action based on the case of Fury v. County of
Sacramento which might be applicable to properties to be assessed.
16. It is the City’s desire that proponents discharge the assessment district bonds applicable to their
property prior to the individual sale of individual lots. The City Council may approve a pass through
of the bond obligation to a prospective purchaser at their sole discretion. A developer wishing to
secure approval of a pass through must apply to the City in writing, requesting permission to do so.
The letter must contain a plan of how the prospective buyer will be notified and the steps taken to
accomplish the pass through.
Page 5 of 6
CITY OF CARLSBAD
Policy No. 33
Effective Date 6/23/98
General Subject: Assessment District Financing Cancellation Date None
of Public Improvements Supersedes No. 7/28/92
COUNCIL POLICY STATEMENT Date Issued 6/23/98
Specific Subject: Policy for Use of 1915 Act Bond
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
The required procedure shall include, but not be limited to, all of the following:
Employee Bulletin Boards, Press, File
a) Provide for full disclosure of this and any other assessment financing applicable to the property to
prospective purchasers including principal interest rate, duration and amount of monthly payments.
b) List the amount of the assessment lien in all sales brochures, all advertising and all purchase
documents adjacent to the sales price of the property and in the same size type.
c) Give prospective purchaser an option to have the assessment lien discharged prior to close of
escrow or to assume the assessment lien by a pass through as a part of the sales price of the
house or by a reapportionment of the assessment. (Sample disclosure forms are attached to this
policy). Once the request is received from the developer, it will be placed on the Council
agenda for consideration after a complete review of the request by staff and the Policy 33
Committee.
17. The principal purpose for the City Council’s approval of assessment district financing is to complete
the links in the City’s circulation system. The City Council in that regard will not favor a proposed
district which contemplates the construction of a portion of an arterial street unless it is extended in a
logical way to connect with the City’s existing circulation system. The City may require that
proponents of a district expand the area to be included within a proposed district as may be necessary
to complete such circulation.
18. It is the Council’s policy that, in the event that there are surplus funds generated through the creation
of an assessment district and the sale of bonds, these surplus funds shall be used as follows:
(a) To complete any work related to the project that the Council determines is equitable and
reasonable as allowed by the 19 1311 91 5 Act statutes.
(b) The Council may direct staff to use a portion of this surplus to offset assessments to property
owners in following years in a manner consistent with the 1913/15 Act statutes. Under this
policy, an amount of up to 5 percent of the total bond issue size not to exceed $1 million may be
used to offset annual assessments without further Council action.
(c) Unless otherwise directed by Council, any amount in excess of that used to offset assessments as
described in (b) above will be used to call bonds at an appropriate bond call date, as determined
by staff and the City’s financial advisor.
Page 6 of 6
CITY OF CARLSBAD
Policy No. 33
Effective Date 6/23/98
General Subject: Assessment District Financing Cancellation Date None
of Public Improvements Supersedes No. 7/28/92
COUNCIL POLICY STATEMENT Date Issued 6/23/98
Specific Subject: Policy for Use of 1915 Act Bond
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
PROCEDURE:
1.
2.
3.
It is the intention of the City Council that proponents of a district have an early opportunity to have
the proposal reviewed by City staff for compliance with this policy. In that regard, the City Council
hereby directs the creation of the Project Review Committee. The Committee shall consist of the
City Manager, City Attorney, Community Development Director, Planning Director, Public Works
Director, Administrative Services Director (Chairperson), and Finance Director. The Committee
shall meet on request with proponents of a district to review a project to determine whether or not the
requirements of this policy have been satisfied. Committee review shall take place prior to the
presentation of an assessment district project to the City Council. Whenever any such project is
presented to the Council it shall be accompanied by a report containing the findings and
recommendations of the Committee made in regard to such project. The Committee may require the
proponents to furnish any information necessary to the evaluation of the proposed district. The
Committee may require all or any part of the deposits provided for in this policy to be made prior to
the commencing their review of the project.
Upon review of the proposed assessment district and after considering the report of the Committee,
the City Council shall determine whether or not to approve proceeding with the formation of the
district. It is the policy of the City Council of the City of Carlsbad to limit projects to the criteria set
forth in this policy. The City Council reserves to itself the authority to approve or disapprove any
proposed improvement district based upon the evidence received at the hearings held by the City
Council. Any exceptions to the criteria of this policy will be approved only upon an express finding
by the City Council that the project is so affected with a public interest that the City should assist in
providing tax free financing for the improvement in order to satisfy a public need. If the City Council
approves proceeding with the formation of the district, City staff and the proponents shall proceed to
do that in accordance with State Law and the requirements of this policy.
Where there are multiple proponents of a proposed district they shall designate a spokesman
authorized to act for the proponents in their dealings with the City. The spokesman shall be
responsible for collecting any fees for deposit-with the City, providing any necessary information to
the City, and for communicating as necessary back to the proponents.
CITY OF CARLSBAD
Policy No. 38
Effective Date 7/28/92
General Subject: Assessment District Financing Cancellation Date None
COUNCIL POLICY STATEMENT Date Issued 7/28/92
of Public Improvements Supersedes No. 11/14/89
Specific Subject: Policy for Use of the Mello-Roos
Community Facilities Act of 1982
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
BACKGROUND:
The City Council has adopted a Growth Management Program which contemplates the construction of a
large number of various public facilities in the coming years. The City Council recognizes that the
Mello-Roos Community Facilities Act of 1982 provides a flexible tool which may be useful in providing
financing for the construction of public facilities in conjunction with development.
The City Council anticipates that from time-to-time they will receive requests from property owners of
major planned developments to use the Mello-Roos legislation for the construction of public facilities.
PURPOSE:
To establish a policy which will permit the use of the Mello-Roos Community Facilities Act to assist in
providing needed public facilities.
To provide a procedure for processing applications for Community Facilities District financing and to
provide a staff committee to review such applications and to consider initiating Districts for Council
consideration where appropriate.
The policy is primarily intended to apply to Community Facilities Districts proposed for property which
is predominantly undeveloped where the City elects to use public financing for appropriate public
improvements.
POLICY:
1. The City may allow the financing of public improvements or services under the provisions of this
policy where the public facilities or services represent, in the City’s opinion, a significant public
benefit.
Page 2 of 5
CITY OF CARLSBAD
Policy No. 38
Effective Date 7/28/92
General Subject: Assessment District Financing Cancellation Date None
COUNCIL POLICY STATEMENT Date Issued 7/28/92
of Public Improvements Supersedes No. 11/14/89
Specific Subject: Policy for Use of the Mello-Roos
Community Facilities Act of 1982
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
2.
3.
4.
5.
Facilities which may be considered shall be public facilities of general benefit such as administrative
facilities, libraries, fire stations, parks, schools, major drainage facilities, arterial highways, major
bridges and freeway interchanges. The City Council may support the use of Mello-Roos District
financing for other public facilities if a finding of significant public benefit can be made.
For all Districts, the City shall select the special tax consultant, bond counsel, and, if required, the
financial consultant. The design engineer and the underwriter will also be selected by the City but in
consultation with proponents of the District. The bond counsel, special tax consultant and financial
consultant shall provide the City with a Statement of Conflict of Interest related to real estate
holdings within the district. The design engineer shall provide a Statement of Conflict of Interest as
required under Section 87 100.1 of the Government Code (see attached).
Where Districts are initiated by property owners, a sum sufficient to pay all fees and costs for the
proposed Community Facilities District shall be deposited with the City by the proponents of the
district prior to award of any contract. The proponents shall also be required to deposit with City a
sum sufficient to cover all City costs incurred in connection with review of a proposed district
including staff review, legal review, administration, plan checking, investigation, City Council
review and inspection. These sums will be retained by City to the degree used if the district is not
successhlly completed, or if such costs are not recovered by City from the district. Where the
district is successfully completed, deposits may be credited against taxes or reimbursed by the
district under the terms of a prior agreement.
If the City Council determines it is necessary, a financial feasibility market absorption study may be
required prior to initiation of a district. Where such a study is required, the City will select and retain
the consultant with funds deposited by project proponents. It is expected that the project property
value-to-debt ratio should be no less that 4:l after the installation of the improvements to be financed.
A project may be approved with a ratio between 4:l and a minimum of 3:l if the ratio is
recommended by both bond counsel and the underwriter and if the City Council finds the reduced
ratio to be within parameters acceptable to them. The value of the property proposed to be taxed
shall be determined by an M.A.I. appraisal, performed by an appraiser selected by the City.
Page 3 of 5
CITY OF CARLSBAD
Policy No. 38
Effective Date 7/28/92
General Subject: Assessment District Financing Cancellation Date None
COUNCIL POLICY STATEMENT Date Issued 7/28/92
of Public Improvements Supersedes No. 11/14/89
Specific Subject: Policy for Use ofthe Mello-Roos
Community Facilities Act of 1982
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
6.
7.
8.
Property owners for all districts will be required to provide for full and complete disclosure of any
Community Facilities District or Assessment District financing applicable to the property to
prospective purchasers. The disclosure should include, at a minimum, the following:
a. The maximum tax on the property;
b. The duration of the tax;
c. A list of the specific facilities the tax is for; and
d. The tax formula used in easily understood terms.
If the tax formula is such that a list of known payments for each year can be computed, a complete
list of payments for each year can be computed, a complete list of payments for the term of the bond
shall be made for each parcel.
The Disclosure Program shall be designed by the City in consultation with the City’s financing team
and the property owners. The Disclosure Program will be subject to Council approval. The City
Council’s goal is to provide complete and concise disclosure to any subsequent property purchaser.
The disclosure program may be similar to that suggested under Council Policy 33.
The City or a consultant selected by the City will determine the taxing formula. The prime emphasis
in this determination will be fairness to the future property owner who will be paying the taxes over
years. Although this policy does not fix the method of determining the formula, strong consideration
should be given to (a) a fixed annual amount or (b) a fixed amount increased annually by a small
percentage.
To the extent that the Community Facilities District has been formed to finance the construction of
public infrastructure, it is the Council’s policy that any and all future tax obligations related to a
residential parcel be discharged in full at the time building permits are issued for construction of a
residential unit. Builders of non-residential property shall be provided with the option of discharging
their future tax obligation at the time building permits are pulled, or allowing the developed property
to assume the tax liability basis.
~~~~
Page 4 of 5
CITY OF CARLSBAD
Policy No. 38
Effective Date 7/28/92
COUNCIL POLICY STATEMENT Date Issued 7/28/92
General Subject: Assessment District Financing Cancellation Date None
of Public Improvements Supersedes No. 11/14/89
Specific Subject: Policy for Use of the Mello-Roos
Community Facilities Act of 1982
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
PROCEDURE:
1. Proponents desiring to form d Mello-Roos District shall submit an application requesting a study for
the establishment of a Community Facilities District which shall do all of the following:
a. Request the City Council to consider proceedings to establish a Mello-Roos Community
Facilities District.
b. Describe the boundaries of the territory proposed for inclusion in the District.
c. State the types of facilities to be financed by the district.
d. Provide a detailed financial alternative analysis exploring alternative funding options and
demonstrating the advantages which make a Mello-Roos Community Facilities District the most
desirable financing mechanism for the proposed improvements.
e. Be signed by not less than ten percent (10%) of the registered voters residing within the proposed
district or by owners of not less than ten percent (10%) of the land area within the proposed
district.
2. It is the intention of the City Council that proponents of a district have an early opportunity to have
the proposal reviewed by City staff for compliance with this policy. In that regard, the City Council
hereby directs the creation of the Project Review Committee. The Committee shall consist of the
City Manager, City Attorney, Community Development Director, Financial Management Director
(Chairperson), Finance Director, Planning Director, City Engineer, and City Assessment Engineer.
The Committee shall meet on-request with proponents of a district to review a project to determine
whether or not the requirements of this policy have been satisfied. Committee review shall take place
prior to the presentation of a Community Facilities District project to the City Council. Whenever
any such project is presented to the Council, it shall be accompanied by a report containing the
findings and recommendations of the Committee made in regard to such project. The Committee
may require the proponents to furnish any additional information necessary to the evaluation of the
proposed district.
Page 5 of 5
CITY OF CARLSBAD
Policy No. 38
Effective Date 7/28/92
General Subject: Assessment District Financing Cancellation Date None
COUNCIL POLICY STATEMENT Date Issued 7/28/92
of Public Improvements Supersedes No. 11/14/89
Specific Subject: Policy for Use of the Mello-Roos
Community Facilities Act of 1982
Copies to: City Council, City Manager, City Attorney, Department and Division Heads,
Employee Bulletin Boards, Press, File
3. Upon review of the proposed Community Facilities District and after considering the report of the
Committee, the City Council shall determine whether or not to approve proceeding with the
formation of the district. It is the policy of the City Council of the City of Carlsbad to limit projects
to the criteria set forth in this policy. The City Council reserves to itself the authority to approve or
disapprove any proposed Community Facilities District based upon the evidence received at the
hearings held by the City Council. Any exceptions to the criteria of this policy will be approved only
upon an express finding by the City Council that the project is so affected with a public interest that
the City should assist in providing tax-free financing for the improvement in order to satis@ a public
need. If the City Council approves proceeding with the formation of the district, City staff and the
proponents shall proceed in accordance with State law and the requirements of this policy.
4. Where there are multiple proponents of a proposed district, they shall designate a spokesman
authorized to act for the proponents in their dealings with the City. The spokesman shall be
responsible for collecting any fees for deposit with the City, providing any necessary information to
the City, and for communicating as necessary back to the proponents.
December 17,2002
AGENDA ITEM #
OI Mayor city Collnen
WAttonw
City Manager
CIb, Clerk
Mayor Bud Lewis and City Council Members
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Re: Agenda Item regarding Draft Council Policy Statement for Financing of Public
1ElproVeae;rts
Dear Mayor and Council Members:
We are sorry that these comments are being made at such a late date, however it is due to
the fact we were not informed of the agenda item until Thursday, December 12,2002.
We have quickly tried to provide a comprehensive review by our attorney and provide
those to you.
Attached, as an exhibit to this letter, is our attorney’s comment. Aside from these
comments, we commend the staffs effort to establish a set of guidelines to help them
through a very important and difficult process. In light of the size of the guidelines, our
comments are relatively small, but generated from prior experience in the formulation of
Community Finance Districts (CFD).
We hope these comments are helpful to finalize your worthwhile efforts to establish a
Policy Statement.
Sincerely yours,
Larry Ehelson
Principal
cc:
City Manager
Lloyd Hubbs
Jim Elliott
Lisa Hildebrand
1420 BRISTOL STREET NORTH SUITE 100 - NEWPORT BEACH - CA 92660
TEL: 949.752.2066 . FAX: 949.752.8776
HEWITT & O'NEIL LLP
ATTORNEYS AT LAW
December 17,2002
MEMORANDUM
TO: Larry Nelson
FROM: John P. Yeager
RE: City of Carlsbad New Council Policy No. 33 Re Policy fbr Use of
Assessment Districts, Community Facilities Districts and Bridge and
Thoroughfare Districts
You have asked me to review and comment on the revised City of
Carlsbad City Council Policy No. 33 that is currently scheduled to be considered by the
City Council on December 17, 2002. The following comments relate primarily to how
the Policy might affect the CFD you have proposed in the City.
1. Case-by-Case Exceptions. Section 1 of the Policy allows the City
to grant exceptions to its provisions as they apply to a specific application for a financing
district. This is a very important provision because it is likely in your case, and virtually
every other financing district that will be formed in the City, that exceptions will be
required in order to make for an efficient financing that accomplishes the goals of the
City and applicant.
2. Financing of Facilities Included in Fee Programs. Section 2.B. of
the Policy provides that any public improvements already included in an existing fee
program are not eligible to be financed by a City financing district. Although I do not
believe this requirement affects your proposed district, it is potentially problematic and
very bad policy. The City will find that in some cases the only way to provide public
improvements in a timely manner is to allow them to be financed through a financing
district, whether or not the improvements are included in some fee program. I have never
seen this type of a requirement imposed in any other jurisdiction. In fact, in many
jurisdictions, public improvements included in fee programs are the preferred priority for
financing through a special district.
3. Requirement for Environmental and Land Use Entitlements and
Riht-of-Way. Section 4 of the Policy requires that all environmental review for a
project and the proposed public improvements must be completed, all land use
entitlements must be obtained and all right-of-way dedicated or irrevocably offered for
dedication prior to formation of a district. It should be noted that Section 8 of the Policy
provides an exception to these requirements and allows for formation of the district when
some of the land in the proposed district lacks all environmental and land use approvals if
19900 MACARTHUR BOULEVARD, SUITE 1050 IRVME. CA 92612
EMALL: COUNSEL@HEWITTONEIL.COM (949) 798-0500 (949) 798-051 1
the proposed improvements are consistent with the General Plan and the City Council
finds that the improvements are required in the public interest. The City may be required
to invoke this exception if the Tchang property is not fully entitled prior to formation of
your proposed CFD. It should be noted as well that an exception to the Policy may be
required if an offer of dedication of the right-of-way within the Tchang property is not
made in connection with formation of the CFD.
4. Requirement for Bids Prior to the Sale of Bonds. Section 4 of the
Policy also states that prior to the sale of bonds, “design of substantially all of the
improvements to be financed fiom the proceeds of such bonds must be completed (1 00%)
and bids for construction received.” I do not know what the parenthetical reference to
“100%’ is intended to mean. The use of the term “substantially” would suggest that
design of 100% of the proposed improvements and bids for construction of 100% of the
improvements is not a prerequisite to the issuance of bonds. I am also not sure if in your
case bids will have been received for all of the improvements to be financed with the
proceeds of the first series of bonds for your proposed CFD. Where a district is financing
multiple improvements, it is both impractical and inefficient to require that bids be
received before bonds are issued. In all CFDs, and most assessment districts, it is also
advisable to identify eligible improvements with estimated costs exceeding the amount of
expected bond proceeds in order to be able to use the bond proceeds in the most efficient
manner possible. If bids have not been received for all of the improvements you wish to
finance with the first series of bonds, we may need to request an exception to this
provision of the Policy.
Please call me if you have any questions regarding this memorandum.
PY/sml
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