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Home My WebLink About2019-07-10; Community Facilities District No. 1 History; Rocha, LauraTo the members of the: CITY COUNCIL Date~ CA _y_ CC ✓ CM L too .::t._ocM(3).::t..._ July 10, 2019 To: From: Via: Re: Council Memorandum Honorable Mayor Hall and Members of the City Council Laura Rocha, Deputy City Manager, Adr!]j nistrative Services Elaine Lu key, Chief Operations Officer -~ Community Facilities District No. 1 History {city of Carlsbad Memo ID# 2019081 This memorandum provides additional information and the history of Community Facilities District No. 1. Background City Council and property owners of specific vacant land in the City of Carlsbad worked together and formed Community Facilities District (CFD) No. 1 on May 7, 1991, under the Mello-Roos Community Facilities Act (Act) of 1982. This Act allows voters to approve a special tax levied on their property to fund the construction or acquisition of facilities or services through a CFD. City Council held a Public Hearing, an election, and subsequently formed the CFD to fund facilities. Discussion The purpose of the CFD was to establish a funding mechanism that would allow growth management standards to be met which would therefore allow for development to continue. Certain key infrastructure projects were taken out of existing fee programs (Bridge and Thoroughfare District No. 1, Public Facilities Fees and Traffic Impact Fees) and placed into CFD No. 1, as detailed below. These projects were or are now partially funded through the levy of taxes from property within the CFD and partially funded from the existing fee programs for property outside the CFD. The initial boundaries included zones with property currently in the development process and provided for annexation into the CFD of property with future development potential. It specifically excluded zones 1, 2, 3, 4 and 6. These zones were excluded from the CFD as they were identified as "in-fill" projects only. At formation, the idea was that entire zones would annex at one time. This did not happen as projects were annexed at first discretionary approval, excluding a master plan or specific plan. Administrative Services Branch Finance Department 1635 Faraday Avenue I Carlsbad, CA 92008 I 760-602-2430 t Honorable Mayor Hall and Members of the City Council July 10, 2019 Page 2 CFD No. 1 was authorized to fund the following infrastructure projects needed to meet growth management requirements. CFD No. 1 cannot fund any other projects. The current status of these projects is shown in Attachment A. Civic Facilities Library Public Works office/warehouse City Hall Veteran's Memorial Park 1-5 Interchanges Palomar Airport Road La Costa Avenue Poinsettia Lane Road Segments La Costa Avenue Olivenhain Road Cannon Road Faraday Avenue At the time of formation, it was determined that the impact of the property within the CFD, both initially and including subsequent anticipated annexations, based on zoning and land use projections, was at the ratio of 65% from residential projects and 35% from non-residential projects. This relationship and resulting funding requirements were used to establish the initial special tax rates. Since formation, the CFD revenues and expenditures have been accounted for separately utilizing the 65%/35% ratio between residential and non-residential. Review by legal counsel determined that this ratio cannot be changed absent modification proceedings. Pursuant to City Council Policy No. 22, the CFD tax cannot be passed through on property developed with a residential use, instead the tax must be paid off when the building permit is issued. The tax on non-residential developments may be paid off at building permit or it may be paid over a 25-year period as a one-time option of the property owner. City Council Ordinance NS-155 (Ordinance) established the annual maximum tax rates that may be levied in CFD No. 1. The maximum tax rate for property is increased each year using an index pursuant to the Ordinance. The maximum special tax rate for property within the CFD is adjusted each year by one-half of the annual change in the Los Angeles inflationary factor in the Engineering News Record (ENR) Cost Indexes by city. The maximum special tax rate for property not yet included in the CFD is adjusted by the full ENR percentage change until the fiscal year of annexation. Although the Ordinance established a ceiling for future tax rates, it did not create the individual tax levy to be placed on each property every year. The City Council sets the tax levy each year depending on the funding needs for the projects. CFD No. 1 has three basic types of taxes: • Vacant land tax: This is a tax levied per acre on all vacant land (residential, commercial and industrial) in the CFD and paid through the County of San Diego property tax bill. City Council has not levied this tax since 2003. • One-time tax: This tax is paid by the property owner when a building permit is issued. It is based on the density of the project and number of units for residential properties or the type of development and square feet for non-residential properties. The current tax rates are shown in the annual Staff Report setting the annual tax rates. Honorable Mayor Hall and Members of the City Council July 10, 2019 Page 3 • Pass-through annual tax: This annual tax results when an owner of non-residential property chooses to pay their tax over time rather than at permit issuance. Once this option is chosen, it cannot be paid off early. This annual tax can be placed on the tax rolls for 25 years and cannot exceed 13.81% of the one-time tax but may be set at a lower percentage. The proposed rate for fiscal year 2019-20 is 7.5% of each property's one-time payoff special tax. The tax rates are set at a certain percentage of the maximum allowable tax. A history of the tax rates is shown in Attachment B. The actual tax rates set by the City Council are based on the cash flow requirements needed to fund the remaining projects considering the most recent growth projections for the city and the project schedules as shown in the Capital Improvement Program. Current and Proposed Tax Rates by Type: Residential Property Non-Residential Property Current Proposed Current Proposed Tax Rate Tax Rate Tax Rate Tax Rate FY 2018-19 FY 2019-20 FY 2018-19 FY 2019-20 Vacant Land Tax None None None None One-Time Tax 55% of max 65% of max 10% of max 10% of max Pass Through Tax NA NA 7.5% 7.5% Next Steps Staff will return to the City Council on July 23, 2019, to present the annual Staff Report seeking City Council approval to establish the fiscal year 2019-20 special taxes for Community Facilities District No. 1. Attachment: Attachment A -Project Schedule Attachment B -History of Tax Rates cc: Scott Chadwick, City Manager Celia Brewer, City Attorney Kevin Branca, Finance Director CFD No.1 Attachment A -Project Schedule July 1, 2019 Current and Future Projects: Civic Center Civic Center (Farmer's Bldg Purchase) Library (Future Cole Expansion) Orion Center (Public Works Center) Veteran's Memorial Park Completed Projects: Cannon Road @ 1-5 Cannon Road West Faraday Avenue La Costa Avenue La Costa Interchange Library (Learning Center) Library (S. Carlsbad) Olivenhain/Rancho Santa Fe Road Palomar Airport Road Interchange Poinsettia Interchange Total Project Budget $ 51,028,105 15,733,172 5,988,000 34,536,266 23,898,200 422,840 6,528,546 5,423,394 6,200,095 7,329,516 4,501,717 14,443,717 5,700,000 2,667,496 6,469,457 $ 190,870,521 Carryforward Unexpended Budget Total Exp to Date 2018-19 $ 278,105 $ 750,000 15,733,172 - -- 5,457,295 29,078,971 378,200 20,000 422,840 6,528,546 5,423,394 6,200,095 7,329,516 4,501,717 14,443,717 5,700,000 2,667,496 6,469,457 $ 81,533,550 $ 29,848,971 Future Expenditures Year 1 Year6 Yearl0 Year 11 Budgeted Budgeted Budgeted Budgeted Total Future 2019-20 2024-25 2028-29 2029-30 Expenditures $ -$ 50,000,000 $ -$ -$ 50,750,000 ----- ---5,988,000 5,988,000 ----29,078,971 80,000 -23,420,000 -23,520,000 - - - - - - - - - - - - $ 80,000 $ 50,000,000 $ 23,420,000 $ 5,988,000 $ 109,336,971 Attachment B History of Tax Rates CFD No. 1 Residential Non-Residential Pass-Through Tax Fiscal Year Vacant Land Tax One-Time Tax Vacant Land Tax One-Time Tax (Max 13.81%) 1992 74% 100% 17% 100% N/A 1993 74% 100% 38% 100% N/A 1994 74% 100% 38% 100% 9.5% 1995 74% 100% 38% 100% 9.5% 1996 74% 100% 38% 100% 9.5% 1997 74% 100% 40% 100% 9.5% 1998 70% 100% 50% 100% 9.5% 1999 50% 90% 60% 100% 8.7% 2000 40% 90% 60% 100% 8.7% 2001 40% 90% 40% 90% 8.7% 2002 20% 80% 20% 60% 8.7% 2003 0% 70% 20% 60% 8.7% 2004 0% 60% 0% 60% 8.7% 2005 0% 50% 0% 40% 8.7% 2006 0% 30% 0% 30% 7.5% 2007 0% 50% 0% 30% 7.5% 2008 0% 60% 0% 30% 7.5% 2009 0% 60% 0% 30% 7.5% 2010 0% 50% 0% 30% 7.5% 2011 0% 50% 0% 30% 7.5% 2012 0% 55% 0% 25% 7.5% 2013 0% 55% 0% 25% 7.5% 2014 0% 55% 0% 25% 7.5% 2015 0% 55% 0% 25% 7.5% 2016 0% 55% 0% 25% 7.5% 2017 0% 55% 0% 10% 7.5% 2018 0% 55% 0% 10% 7.5% 2019 0% 55% 0% 10% 7.5% 2020 0% 65% 0% 10% 7.5%