COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 1 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
BACKGROUND
The Mello-Roos Community Facilities Act of 1982 (the “Mello-Roos Act”) and Ordinance No. 2730, as amended from time to time and codified in Chapter 3.60 of the Chula Vista Municipal Code (the “CFD Ordinance”) allows for the creation of Community Facilities Districts (CFDs) to finance certain public capital facilities and services, especially in developing areas and areas undergoing rehabilitation.
As a prerequisite to forming CFDs pursuant to the Mello -Roos Act, each local jurisdiction must first consider and adopt local goals and policies as described therein . The City firs t adopted the City of Chula Vista Statement of Goals and Policies Regarding the Establishment of Community Facilities Districts (the “Goals and Policies”) on January 13, 1998, via Resolution No. 18860. The Goals and Policies were subsequently amended in July 1998, December 1998, November 2013, and April 9, 2019 via Resolution Nos. 19103, 19300, 2013-225, and 2019-051 respectively. Inclusion of the “Goals and Policies” in the City Council Policy Manual is recommended and are applicable to CFDs formed under the Mello-Roos Act and the CFD Ordinance.
PURPOSE
The purpose of this Statement of Goals and Policies is to provide the City staff, the residents of the City, and the owners and developers of property located within the City with guidance in the application for, and consideration of, the establishment of community facilities districts for the purpose of financing or assisting in financing the acquisition or construction of public infrastructure or the provision of authorized public services to benefit an d serve either existing or new development or a combination thereof. The underlying principals behind this policy are the protection of the public interest, assuring fairness in the application of special taxes to current and future property owners, assuring full disclosure of the existence of any special tax liens, ensuring the creditworthiness of any community facilities district special tax bonds, protecting the City's credit rating and financial position and assuring that applicants for all community facilities district proceedings other than City initiated proceedings pay all costs associated with the formation of any community facilities district.
POLICY
The City Council of the City of Chula Vista (hereafter the “City Council”) hereby establishes and states its goals and policies concerning the use of Chapter 2.5 of Part I of Division 2 of Title 5 of the Government Code of the State of California (hereafter the “Act”) in providing adequate public infrastructure improvements and public services for the City of Chula Vista (the “City”). The following goals and policies shall apply to all community facilities districts hereafter formed or proposed to be formed by the Cit y. Any policy or goal stated herein may be supplemented or amended by resolution
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 2 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
of the City Council.
The scope of this policy is limited to the proposed formation of community facilities districts for the limited purpose of financing or assisting in finan cing the acquisition or construction of public infrastructure, development impact fees (“DIFs”) applicable to public infrastructure and/or the provision of authorized public services.
Introductory Statement
The City will consider applications initiated by owners or developers of vacant property proposed to be developed, owners of property within existing developed areas , registered voters residing in existing developed areas, or the City itself for the establishment of community facilities districts to fina nce authorized public improvements or to provide authorized public services which benefit or serve existing or new development or a combination thereof. A community facilities district or an improvement area within a community facilities district proposed to be established to finance public improvements, DIFs or authorized services to serve new development may be referred to as a “Development Related CFD.” Each application for the establishment of a community facilities district must comply with the applicable goals and policies contained herein unless the City Council expressly grants an exception to such policy or policies as they apply to a specific application.
Finding of Public Interest or Benefit
The City Council may authorize the initiation of proceedings to form a community facilities district to finance authorized public improvements , related DIFs or to provide authorized public services if the City Council determines that the public improvements and related DIFS, to be financed or public services to be provided or, in the case of a Development Related CFD, the attributes of the new development will provide, in the opinion of the City Council, a public benefit to the community at large as well as the benefit to be derived by the properties within the community facilities district.
Examples of public benefit to the community at large may include, but are not limited to the following:
1. Construction of a major public facility which meets a community need including, but not limited to, a major arterial which will provide a vital roadway facility to alleviate congestion, water storage facilities which will remedy inadequate fire flow, and storm drainage facilities which are a part of the storm drainage master plan.
2. Provision of public infrastructure sooner t han would otherwise be required for a particular development project.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 3 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
3. Construction of public infrastructure to serve commercial or industrial projects which will expand the City's employment and/or sales tax base.
4. Provision of maintenance or other authoriz ed public services such as landscaping, lighting, storm drain, flood control or open space maintenance necessary to promote or maintain quality of life and public safety within existing or developing areas of the City.
5. Provision of maintenance at public parks.
Authorized Public Facilities
Improvements proposed to be financed through a community facilities district must be public improvements which will be owned, operated or maintained by the City or another public agency or public utility or to which the Ci ty is authorized to contribute revenue. The types of improvements eligible to be financed must serve a whole neighborhood or commercial or industrial area or greater.
Such improvements include:
1. Streets and highways satisfying one or more of the following criteria:
A. identified in the Circulation Element of the City as collectors or arterials; B. no direct access by abutting properties; or
C. minimum daily traffic volume of 3,500 ADT.
D. Located within a City park or a portion thereof.
2. Sewer lines or other sewer facilities serving a minimum of 500 single family dwellings or equivalent dwelling units or such other area of the community as the City Manager, or his or her designee, may determine to otherwise be consistent with the intent of these goals and policies to be located within authorized streets and highways or within other public rights -of-way shown on the master plan of sewer facilities.
3. Water mains with a minimum diamete r of 10" or other water facilities to be located within authorized streets and highways or within other public rights -of-way shown on the master plan of water facilities.
4. Drainage facilities serving a minimum of 100 acres or such other area of the community as the City Manager, or his or her designee , may determine to otherwise be consistent with the intent of these goals and policies or draining an eligible street.
5. Landscaping and irrigation facilities meeting one of the following criteria:
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 4 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
A. Located within the right-of-way of a street or highway shown on the Circulation Element of the City's General Plan;
B. Located adjacent to an adopted scenic route; or
C. Located within dedicated open space.
6. Reclaimed water facilities serving an area which benefits the area within the proposed community facilities district.
7. Dry utilities serving a minimum of 500 single family dwelling units or equivalent dwelling units or such other area of the community as the City Manager, or his or her designee , may determine to otherwise be consistent with the intent of these goals and policies; provided, however, the amount of special tax bond proceeds allocable to such dry utilities may not exceed that amount permitted under Federal tax law and regulations to ensure the tax exempt statu s of interest on the applicable special tax bonds.
8. Grading for eligible public streets; provided, however, grading for a Development Related CFD must meet one of the following criteria:
A. Grading within the vertical planes of the right-of-way; B. Slopes to City-owned open space or open space easement areas; or C. Offsite roadway grading.
If the cut and fill within (A) and (B) do not balance, the cost of excavating, hauling and compacting fill in the street is authorized to be financed. If there is excess materia l in the street right-of-way, only the cost of excavating and hauling to private property within the development project is eligible to be financed. The determination of balance will be made on a total eligible street grading basis, not on an individual street basis.
9. Such other improvements as may be authorized by law and which the City Council determines are consistent with the policies herein.
The City Council shall have the final determination as to the eligibility of any improvement for financing, as well as the prioritization of financing of such improvements. Generally, “in-tract” (e.g., local streets or utilities) improvements which serve r esidential development will not be considered eligible to be financed through a community facilities district unless requested by the owners or registered voters of an existing residential development to remedy a threat, found to exist by the City Council, to the public health or safety resulting from an existing deficiency in public improvements to
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 5 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
serve such existing development.
Any public improvements proposed to be financed through a community facilities district must meet all design and construction requirements and standards as may be established by the City. Any public improvement, the construction of which is completed following the adoption of the resolution of formation of a community facilities district, proposed to be acquired by the City from the owner or developer of property within a Development Related CFD must be constructed as if such improvements had been constructed under the direction and supervision, or under the authority of, the City.
Public improvements proposed to be acquired from the proceeds of special tax bonds or special taxes shall not be acquired until all improvements for a particular Project (as defined below) are completed and accepted by the City and the City Manager, or his or her designee , has certified the final cost o f such improvements. For purposes of this paragraph, a “Project” shall be defined as all improvements within a particular street or easement including street improvements, sewer, drainage, utilities and grading and which are authorized to be acquired by th e community facilities district pursuant to an acquisition and financing agreement by and between the City, acting on behalf of itself and the community facilities district, and the property owner or developer who is responsible for the construction of the public improvements (the “'Acquisition/Financing Agreement”). If improvements within more than one (1) Project are authorized to be acquired through the community facilities district, then the improvements within each Project may be acquired separately as all improvements within such Project are completed and accepted by the City and the final costs certified. Each Project established for any community facilities district and all improvements included within each such Project must be described in the Acquisition/Financing Agreement for such community facilities district. If the Acquisition/Financing Agreement has established more than one (1) Project for any community facilities district, the Acquisition/Financing Agreement may authorize the partial re lease of funds to pay for the acquisition of each Project when such Project is completed and accepted by the City.
The City Council may, in its sole discretion, elect to deviate from or waive the foregoing policy in its consideration of the approval of an Acquisition/Financing Agreement for a community facilities district to authorize the payment of the purchase price for each discrete component of a Project, i.e., an individual improvement within a Project such as a sewer line within a Project which also includes street, water and drainage improvements. In electing to deviate from or waive the foregoing policy, the City Council may condition the payment of the purchase price for discrete components as the City Council deems necessary to ensure the financial integrity of the community facilities district financing.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 6 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
Authorized DIFs
The following DIFs may be financed:
1. Eastern Transportation DIF (ETDIF)
2. Western Transportation DIF (WTDIF)
3. Bayfront Transportation DIF (BFDIF)
4. Sewer Capacity Fees and Sewer Basin DIFs
5. Public Facilities DIF (PFDIF)
6. Traffic Signal Fees
7. Parkland Acquisition & Development Fees (PAD)
Including other DIFs applicable to public infrastructure that may be enacted by the City Council in the future and determined by the City Manager to be eligible to be financed by CFD.
Financing of DIFs applicable to public infrastructure will generally be on a taxable, rather than tax - exempt, basis, unless, at the City’s discretion, individual circumstances permit tax -exempt financing of the DIFs being considered.
According to the City’s municipal code DIFs are due at the time of building permit issuance and some may be deferred to final inspection. If proceeds of special tax bonds proposed to be used to pay DIFs are not available at time of building per mit issuance or final inspection, the developer of property within a Development Related CFD will be required to provide liquid security for the payment of the DIFs in the event that the of special tax bonds are not issued within 18 months of final inspect ion.
Timeframe for bond issuance may be extended by the City Manager or designee in his/her sole discretion. Acceptable forms of liquid security including cash or an irrevocable letter of credit, but not bonds or set-aside letters, in an amount equal to th e remaining amount of the DIFs.
Prioritization of Public Improvements
It is the policy of the City to apply proceeds of any CFD financing to first fund public improvements benefiting the City and any DIFs relating to public improvements within the City. After provision is made for such funding, proceeds of any CFD may be applied to other public improvements to be owned, operated or maintained by other public agencies or public utilities , as provided in a joint community facilities agreement
Authorized Public Services
Public services proposed to be financed through a community facilities district may include:
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 7 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
1. Maintenance of parkways, medians and open space, including but not limited to, maintenance of walls, fences, trail systems, pedestrian access system s and other facilities within such open space, maintenance and preservation of habitat within such open space, and biota and other forms of monitoring of plants, wildlife, use of wildlife corridors and habitat quality as a part of any such open space maintenance program.
2. Maintenance of public parks, including but not limited to park frontages, planting and irrigation, hardscape, flatwork, site furniture, metal work, site amenities/features, trails, structures, athletic facilities, bio-retention facilities, and storm water maintenance.
3. Maintenance of naturalized drainage and flood control facilities including, but not limited to, channels and detention and desiltation basins.
4. Such other services as may be authorized by the Mello-Roos Act or by ordinance of the City adopted pursuant to the charter authority of the City and which the City Council determines are consistent with the goals and policies herein and are in the best interest of the City and the residents and property owners within the community facilities district.
Incidental Costs
Eligible Incidental Costs
Eligible incidental costs which may be financed from the proceeds of special tax bonds issued for a Development Related CFD or the special tax levied within a Development Related CFD shall be limited to those incidental costs directly related to the improvements financed from the proceeds of such special tax bonds or special tax revenues and may include:
1. Usual and customary design and engineering costs including:
A. Civil engineering
B. Soils engineering
C. Landscape architecture
D. Surveying and construction staking
E. Utility engineering/coordination
2. Construction administration and supervision not to exceed, in aggregate, 1.75% of the total construction cost of the applicable public improvements.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 8 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
3. Special engineering studies related to "collector" or "transmission" facilities. Eligibility of such studies must be reviewed and approved by the Director of Development Services, or his or her designee.
4. Plan check and inspection fees (less any refunds).
5. Capacity or connection fees related solely to the public improvements being acquired or constructed as permitted under the Mello-Roos Act.
6. Capitalized interest on any community facilities district special tax bonds as authorized by the City Council pursuant to these goals and policies.
7. Costs of acquisition of off-site rights-of-way and/or easements including the following:
A. Appraisal costs, including title reports.
B. Costs of preparing acquisition plats.
C. Appraised value or actual cost of right-of-way or easement, whichever is less.
D. Legal fees and cost related to eminent domain proceedings approved by the City Attorney.
8. Reimbursement of funds advanced by the applicant to pay for (i) preformation costs and/or (ii) costs of issuance incurred by or on behalf of the City.
9. Costs of environmental review, permitting and mitigation limited to the specific public improvements proposed to be financed through the community facilities district.
The costs associated with item (1) and (2) above shall not exceed a total of 3 5% of total improvement costs financed. Unless specified otherwise above, the City Manager, or his or her designee, shall review all incidental costs to ensure that such costs are customary and reasonable.
Ineligible Incidental Costs
The following costs are not eligible to be financed from the proceeds of community facilities district special tax bonds:
1. Administrative or overhead expenses, financial or legal fees incurred by an applicant for the formation of a community facilities 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 preformation costs incurred by the City. (See “Preformation Cost Deposits and Reimbursements” below.)
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 9 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
2. Land use planning and subdivision costs and environmental review costs related to such land use planning and subdivision.
3. Planning Studies unless off-site.
4. Environmental impact reports unless off-site.
5. Construction loan interest.
6. Subdivision financial analysis.
7. Attorneys’ fees related to the land use entitlement or subdivision process unless off-site.
8. On site right-of-way and easements.
9. Any compe nsation payable to the City as consideration for the City's agreement to provide the financing mechanism for the financing of the authorized improvements and eligible incidental expenses and to acquire the authorized improvements pursuant to the terms and conditions of an agreement with the City and the property owner or developer as appropriate.
10. Other overhead expenses incurred by the applicant.
Required Value-To-Debt Ratio
It is the policy of the City that the value-to-debt ratio for a community facilities district must be at least 4:1. The calculated value -to-debt ratio shall reflect the full cash value of the properties subject to the levy of special taxes, including the value of the improvements to be financed from the proceed s of the issue or series of special tax bonds for which the value -to-debt ratio is being computed, compared to the aggregate amount of the special tax lien proposed to be created plus any prior fixed assessment liens and/or special tax liens. The required value-to-debt ratio shall be determined with respect to all taxable property within the community facilities district in the aggregate and with respect to each development area for which no final subdivision map has been filed.
A community facilities district with a value -to-debt ratio of less than 4:1 but equal to or greater than 3:1 may be approved, in the sole discretion of the City Council, upon a determination by the City Manager, after consultation with the Finance Director , the bond counsel, the underwriter and the financial advisor, that a value -to-debt ratio of less than 4:1 is financially prudent under the circumstances of the particular community facilities district. In addition, the City Council may, in 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-debt ratio as it applies to the taxable property within the community facilities di strict in the aggregate or with respect to any
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 10 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
development area.
The value-to-debt ratio shall be determined based upon the full cash value of the properties subject to the levy of the special tax as shown on the ad valorem assessment roll or upon an appr aisal of the properties proposed to be assessed; provided, however, the City Manager may require that the value - to-debt ratio be determined by an appraisal if, in his or her judgement, the assessed values of the properties proposed to be assessed do not re flect the current full cash value of such properties. The appraisal shall be coordinated by, done under the direction of, and addressed to the City. The appraisal shall be undertaken by a state certified real estate appraiser, as defined in Business and Pr ofessions Code Section 11340. The appraiser shall be selected and retained by the City or the City's financial advisor. The costs associated with the preparation of the appraisal report shall be paid by the applicant for the community facilities district and shall be subject to possible reimbursement as provided for herein. The appraisal shall be conducted in accordance with assumptions and criteria established by the City, based upon generally accepted appraisal standards or state recommended standards for similar appraisals conducted for the same purpose.
The City reserves the right to require a market absorption study for any Development Related CFD. In any such 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 community facilities 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 community facilities district or shall justify, to the satisfaction of the City Manager, why such conclusions were not utilized in conducting such appraisal.
Criteria for Appraisals
Definition of Appraisal
For purposes of these goals and policies, an appraisal shall mean a written statement independently and impartially prepared by a qualified appraiser setting forth an opinion of defined value of an adequately described property as of a specific date, supported by the presentation and analysis of relevant market information.
Contents of the Appraisal
An appraisal should reflect nationally recognized appra isal standards, including, to the extent appropriate, the Uniform Standards of Professional Appraisal Practice. An appraisal must contain
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 11 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
sufficient documentation, including valuation data and the appraiser's analysis of such data, to support the appraiser's opinion of value. At a minimum, the appraisal shall contain the following:
1. Purpose of the Appraisal. This should include the reason for the appraisal, a definition of all values required, and the property rights being appraised.
2. Area, City and Neighborh ood Data . These data should include such information as directly affects the appraised property together with the appraiser's conclusions as to significant trends.
3. Property Data. This should include a detailed physical description of the property, its size, shape, soil conditions, topography, improvements, and other physical characteristics which affect the property being appraised. The availability, capacity of, and proximity to, utilities and other infrastructure should also be discussed.
4. Title Condition. The condition of title to the property appraised should be discussed based upon the appraiser’s examination of a title report of the property appraised. The appraiser should analyze and discuss those title issues which are concluded to impact the value of the property being appraised.
5. Improvement Condition.
A. The appraiser shall value the property within the community facilities district on an “as-is” basis taking into consideration the value associated with the public improvements to be funded from the proceeds of the issue of bonds for which the appraisal is being undertaken. The property in the community facilities district shall be valued as if it were free and clear of any special taxes and assessments, if any, so that a proper comparison of value -to-debt can be determined. In determining his or her conclusion of value, the appraiser may consider the value of the property in the community facilities district under different market conditions. This may consist of valuing the property as if it were sold to a single purchaser in bulk or sold to several purchasers in portions or pieces.
B. Land parcels which have been developed with residences and subsequently sold should at a minimum indicate land parcel size, number of lots, density, number of plans, squar e footage, room counts, year construction was initiated, year of completion, and when sales were initiated.
C. Land parcels with residential product under construction or with standing inventory should be described as in A. above and include a summary of the stage
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 12 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
of development regarding the number of units completed, number of models, status of units under construction, finished lots and mass -graded or raw lots. In addition, a comment on the marketability of the units (architecture, size, etc.) is appropriate.
D. Land parcels which have been developed with income -producing (or owner - occupied) commercial/retail, industrial, hotels, apartments, offices, etc., should be described as follows:
i. Commercial-Retail - Land parcel size; basic construction type; typical tenant improvements (and who is responsible for their construction); leasable area, when construction was initiated; and date of completion. ii. Industrial - Land parcel size; basic construction type, whether single or multi-tenant; typical office build -out as percentage of total area, when construction was initiated; and date of completion.
iii. Hotels – Land parcel size; basic construction type; number of rooms; dining, recreation, convention space, meeting rooms, and other amenities.
iv. Apartments - Land parcel size; basic construction type; number of stories; number of units; unit mix; size; total rentable area, when construction was initiated; and date of completion.
v. Office - Land parcel size; basic construction type; typical tenant improvements/allowance; net re ntable area, when construction was initiated; and date of completion.
6. General Plan Classification. Describe the General Plan classification of the subject and comparable properties.
7. Zoning. Describe the zoning for the subject and comparable properties. N ote any discrepancy between General Plan classification and zoning. If rezoning is imminent, discuss further under Item 8 below.
8. Analysis of Highest and Best Use . The report should state and support the highest and best use to which a property can be put and recognize that land is appraised as though vacant and available for development to its highest and best use, and the improvements are based on their actual contribution to the site.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 13 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
9. Statement of Value. The appraiser's opinion of the value of the specified property rights, prepared according to all relevant and reliable approaches to value consistent with commonly accepted professional appraisal practices. If a discounted cash flow analysis is used, it should be supported by at least one other valuation method such as sales comparison approach utilizing sales of properties that are in the same stage of development. If more than one valuation approach is used, the appraiser shall include an analysis and reconciliation of such approaches to support the appraiser's opinion of value.
10. Certification. Certification of appraiser and permission to reproduce and use the appraisal report as required for bond issuance.
Maximum Aggregate Taxes and Assessments
It is the policy of the City that the maximum annual special tax installment applicable to any parcel used for residential purposes (not including motels, hotels, campsites, or other short -term lodging, as determined by the City) shall not exceed one perce nt (1%) of the sale price of newly developed properties subject to the levy of the special tax (the “Newly Developed Properties”) as of the date of the close of escrow of the initial sale of any residential dwelling unit to such residential home owner.
As a distinct and separate requirement, the total of the following taxes, assessments described in 4. below and special taxes appearing on the property tax bill, shall not exceed two (2%) of such initial sales price of Newly Developed Properties:
1. Ad valorem property taxes.
2. Voter approved ad valorem property taxes in excess of one percent (1%) of the assessed value of the subject properties.
3. The maximum annual special taxes levied by the community facilities district under consideration and any other communit y facilities district or other public agency excepting therefrom special taxes levied by a community facilities district formed or under consideration for formation for the purpose of providing services such as open space maintenance, landscape maintenance and preserve maintenance. No reduction from such annual special tax shall be permitted for credits by school districts for general obligation bond ad valorem taxes levied by school districts.
4. The annual assessment installments, including any administrativ e surcharge, for any existing assessment district where such assessment installments are utilized to pay debt service on bonds issued for such assessment district. Annual assessment installments for maintenance and services shall not be included in the assessments calculated in determining the aggregate tax, assessment and special tax obligation for a parcel.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 14 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
The applicant for the establishment of any Development Related CFD which includes residential development subject to the foregoing limitations shall be required to enter into an agreement with the City or the community facilities district or otherwise provide for in the Rate and Method of Apportionment of Special Tax requiring the prepayment by the applicant of that portion of the special tax obligatio n applicable to any parcel used for residential purposes in order to reduce the annual maximum special tax obligation so that the maximum annual special tax installment shall not exceed 1% of the sales price for such parcel and the total taxes, assessments and special taxes does not exceed 2% of such sales price, or otherwise provided for in the Rate and Method of Apportionment of Special Tax a reduction in the maximum special tax obligation so that the total taxes, assessments and special taxes does not exceed 2% of such sales price
Special Tax Requirements
The rate and method of apportionment of the special tax for any community facilities district shall adhere to the following requirements:
1. The maximum special tax shall be adequate to include an amount necessary to pay for the expenses incurred by such community facilities district in the levy and collection of the special tax and the administration of the special tax bonds and the community facilities district.
2. The maximum projected annual special tax revenues must equal 110% of the projected annual gross debt service on any bonds of the community facilities district.
3. A backup special tax shall be required for any Development Related CFD to protect against changes in density resulting in the generation of insufficient special tax revenues to pay annual debt service and administrative expenses, unless the City Manager, or his or her designee, based on the advice of the financial advisor, special tax consultant or underwriter determines that a backup specia l tax is not needed under the special tax formula for such Development Related CFD . The City Council may additionally or alternatively require that as a condition of approval of the downsizing of the development in a Development Related CFD at the request of the applicant or the applicant's successor- in-interest, the applicant or the applicant's successor -in-interest, as applicable, may be required to prepay such 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 or otherwise provides security in a form and amount deemed necessary by the City Council to provide for the payment of debt service on the bonds.
4. All developed and undeveloped property within any community facilities district which is not otherwise statutorily exempt from the levy of special taxes shall bear its appropriate share of the
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
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505-04 15 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
community facilities district ’s aggregate special tax obligation from the date of for mation of the community facilities district consistent with the other goals and policies set forth herein.
5. A partial and/or total prepayment option or a reduction of maximum special tax shall be included in any rate and method of apportionment of special t axes to pay for public facilities. No prepayment shall be permitted of a special tax levied to finance authorized services and/or maintenance.
6. The maximum special tax may escalate 2% per annum for 11 years, with escalation commencing in the fiscal year following the adoption of the RMA.
7. The rate and method of apportionment of a special tax to pay for public facilities shall specify a fiscal year beyond which the special tax may not be levied on any parcel used for private residential purposes. A special ta x to pay for public services and/or maintenance shall have no termination date unless established by the City Council.
8. The rate and method of apportionment of a special tax to pay for public services and/or maintenance shall include life -cycle replacement costs for maintained facilities, as determined by the City Manager, or his or her designee.
9. The rate and method of apportionment of a special tax to pay for public services and/or maintenance shall authorize annual inflationary adjustments to the maximum s pecial tax. The authorized adjustments shall be based upon industry standard published indices, or such other data as may be approved by the City Manager, or his or her designee. In all instances, it shall be the policy of the City to employ the most specific applicable index. Examples include applying the Consumer Price Index for Urban Wage Earners and Clerical Workers to labor costs and applying the Construction Cost Index to asset replacement costs.
Terms and Conditions of Special Tax Bonds
All terms and conditions of any special tax bonds issued by the City for any community facilities 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 special tax bond issue shall be structured to adequately protect bond owners and to avoid negatively impacting the bonding capacity or credit worthiness of the City. Unless otherwise approved by the City Council, the following shall serve as minimum bond requirements:
1. A reserve fund shall be established for each bond issue to be funded out of the bond proceeds in an amount equal to 10% of the original proceeds of the bonds or such lesser amount as may be required by federal tax law.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
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EFFECTIVE
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505-04 16 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
2. Interest shall be capitalized for a bond issue only so long as necessary to place the special tax installments on the assessment roll; provided, however, interest may be capitalized for a term to be established in the sole discretion of the City Council on a case-by-case basis, not to exceed an aggregate of 24 months, taking into consideration the value-to-debt ratio, the expected timing of initial occupancy dates for the private improvements being constructed, expected absorption and buildout 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 City Council may deem relevant.
3. In instances where multiple series of bonds are to be issued, the City shall determine what improvements shall be financed from the proceeds of each series of bonds.
4. Neither the faith, credit or 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 special taxes, capitalized interest, if any, and moneys on deposit in the reserve fund established for such bonds.
Discharge of Special Tax Obligation
It is the policy of the City that the special tax obligation related to the financing of the acquisition or construction of public improvements may be prepaid and discharged in whole or in part at any time.
The applicant for the formation of a Development Related CFD must provide notice and opportunity for the purchasers of property within such community facilities district to prepay the special tax obligation applicable to such property at the time of the close of escrow.
The applicant for the formation of a Development Related CFD must prepare and present a plan, satisfactory to the City Council, prior to the public hearing to consider the formation of such community facilities district describing how the prospective purchaser will be notified of the existence of the special tax lien and the options which the prospective purchaser has regarding the prepayment and discharge of the special tax obligation.
Disclosure Requirements to Prospective Property Purchasers in Development Related CFD's
1. Disclosure Requirements for Developers . Developers who are selling lots or parcels that are within a Development Related CFD shall provide disclosure notice to prospective purchasers that complies with all of the requirements of Section 53341.5 of the Government Code, as well as disclose any option to prepay the special tax, whether at escrow closing or in the future. The disclosure notice must be provided to prospective purchasers of property at or prior to the time the contract or deposit receipt for the purchase of property is executed. Deve lopers shall keep
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
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505-04 17 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
an executed copy of each disclosure document as evidence that disclosure has been provided to all purchasers of property within a Development Related CFD. Developer shall transmit a copy of such disclosure documents upon closing of the fi rst escrow to homebuyer and shall further transmit a copy of such disclosure documents for any subsequent closing to the extent such disclosure documents have been materially amended. Developer shall be solely responsible for the content and delivery of su ch disclosure documents, and for any damages due as a result of failure to comply with Section 53341.5, and the obligation to transmit copies of such disclosure documents in no way transfers responsibility or liability to the City. To that end, the City ma y require that the Developer indemnify the City from any claims relating to such disclosure documents.
2. Disclosure Requirements for the Resale of Lots. Upon request, the City Finance Department shall provide a notice of special taxes to sellers of property (other than developers) which will enable them to comply with their notice requirements under Section 1102.6 of the Civil Code.
This notice shall be provided by the City within five working days of receiving a written request for the notice. A reasonable fee may be charged for providing the notice, not to exceed any maximum fee specified in the Mello-Roos Act.
3. Compliance With Federal Securities Laws. The City shall use all reasonable means to ensure compliance with applicable federal securities laws in connection with the issuance of debt and the provision of annual information regarding any Development Related CFD established by the City with respect to which bonds have been issued, including requiring any developer in a Development Related CFD who is mater ial to the bond issue to transmit appropriate information to the City or its designee for disclosure to bond investors.
Preformation Cost Deposits and Reimbursements
Except for those applications for community facilities districts where the City is the applicant, all City and consultant costs incurred in the evaluation of applications and the proceedings to form a community facilities district and issue special tax bonds therefor will be paid by the applicant by advance deposit with the City of moneys sufficient to pay all such costs.
Each application for the formation of a community facilities district shall be accompanied by an initial deposit in an amount to be determined by the City Manager to be adequate to fund the evaluation of the application and undertake the proceedings to form the community facilities district and issue the special tax bonds therefor. The City Manager may, in his or her sole discretion, permit an applicant to make periodic deposits to cover such expenses rather than a single lump sum deposit; provided, however, no preformation costs shall be incurred by the City in excess of the amount then on deposit for such
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 18 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
purposes. If additional funds are required to pay required preformation costs, the City Manager may make written demand upon the applicant for such additional funds 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 preformation costs, all proceedings shall be suspended until receipt by the City of such additional funds as the City Manager 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 the proceedings for the formation of the community facilities district and the issuance of the special tax bonds therefor, including, but not limited to, legal, special tax consultant, engineering, appraisal, market absorption, financial advisor, admin istrative 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:
1. The formation of the community facilities dist rict or the issuance of the special tax bonds;
2. The formation of the community facilities district or the issuance of the special tax bonds is disapproved by the City Council;
3. The proceedings for the formation of the community facilities district and the is suance of the special tax bonds are abandoned at the written request of the applicant; or
4. The City has determined that the special tax bonds will not be issued and sold.
Except as otherwise provided herein, the applicant shall be entitled, at the option of the applicant, to reimbursement of, or credit against , special taxes for all amounts deposited with the City to pay for costs incident to the evaluation of the application and the proceedings for the formation of the community facilities district and th e issuance of the special tax bonds therefor upon the formation of the community facilities district and the successful issuance and sale of the special tax bonds for the community facilities district. Any such reimbursement shall be payable solely from the proceeds of the special tax bonds.
The City shall not accrue or pay interest on any moneys deposited with the City.
Selection of Consultants
The City shall select and retain all consultants necessary for the evaluation of any application and the proceedings for the formation of a community facilities district and the issuance of the special tax bonds
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 19 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
therefor, including, but not limited to, spe cial tax consultant, bond counsel, financial advisor, underwriter, appraiser, and market absorption analyst after consultation with the applicant.
Land Use Approvals
Properties proposed to be included in a Development Related CFD must have received such discretionary land use approvals as may, in the determination of the City Manager, or his or her designee, be necessary to enable the City to adequately evaluate the community facilities district including the properties to be included and the improvements proposed to be financed. The City will issue bonds secured by the levy of special taxes within a Development Related CFD when (i) the properties included within such community facilities district have received those applicable discretionary land use approv als which would permit the development of such properties consistent with the assumptions utilized in the development of the rate and method of apportionment of the special taxes for such community facilities district ; (ii) applicable environmental review has been completed; and (iii) the City has determined that the other prerequisites to a bond sale have been satisfied. Approval of a Development Related CFD does not vest any right to develop in accordance with existing land use approvals or regulations, nor does it constitute an approval of, or obligate the City to approve, any other entitlement, including without limitat ion zoning, specific plan, subdivision, or specific plan amendment.
Application Procedure for Development Related CFD's
Any application for the establishment of a community facilities district shall contain such information and be submitted in such form as the City Manager may require. In addition to such information as the City Manager may require, each application must contain:
1. 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.
2. Evidence satisfactory to the City Manager that the applicant represents or has the consent of the owners of not less than 67%, by area, of the property proposed to be subject to the levy of the special tax.
3. For any Development Related CFD proposed to finance improvements to benefit new development, a business plan for the development of the property within the proposed community facilities district and such additional financial information as the City Manager may deem necessary to adequately review the financial feasibility of the community facilities district. For Development Related CFD ’s proposed to finance improvements to benefit new development, the applicant must
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 20 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
demonstrate to the satisfaction of the City Manager the ability of the owner of the property proposed to be developed to pay the special tax installments for the community facilities district and any other assessments, special taxes and ad valorem taxes on such property until full build out of the property.
The ability of a property owner or developer to obtain financing of public improvements or DIFs from the proceeds of tax-exempt or taxable bonds provides substantial economic benefits to such owner or developer not the least of which may be 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. In providing such financing for a Development Related CFD the City Council believes that the City is providing valuable consideration to the property owner or developer and should be receive consideration in exchange. It is the goal of the City to ensure that the City and the remainder of its residents, property owners and taxpayers are compensated for the consideration provided to the property owner or developer of a Development Related CFD and that such compensation should be one percent (1%) of the tot al bonded indebtedness issued for such a community facilities district. Prior to the issuance of special tax bonds for any Development Related CFD, the applicant shall pay to the City the pro rata amount of any compensation payable to the City as considera tion for the City's agreement to provide the financing mechanism for the financing of the authorized improvements , DIFs and eligible incidental expenses and to acquire the authorized improvements pursuant to the terms and conditions of an agreement between the City and the property owner or developer as appropriate.
Community Facilities Districts for Energy Efficiency, Water Conservation, and Renewable Energy Improvements
Introductory Statement
Senate Bill No. 555 (Statutes 2011, Chapter 493) amended the Mello-Roos Act to authorize the use of community facilities districts for financing energy efficiency, water conservation, and renewable energy improvements to privately or publicly owned real property and buildings.
In particular, Senate Bill No. 555 added section 53328.1 to the Mello-Roos Act, thereby authorizing special taxes to be levied only with the unanimous consent of all owners of property to be taxed by such a district.
In light of the legislative findings in section 8 of Senate Bill No. 555, the C ity Council may determine to establish one or more programs through which the City may use section 53328.1 of the Mello-Roos
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 21 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
Act and the related provisions added to the Mello-Roos Act by Senate Bill No. 555 to provide special tax financing for improvements and properties that meet the criteria set forth in the hearing report prepared in connection with the establishment of any such program (each a “Program”). The City will administer each Program or contract with a third -party to administer such program (a “Program Administrator”).
With respect to financings done through a Program, the goals and policies set forth in this section, as such goals and policies may be amended from time to time, supersede any other goals and policies adopted by the City concerning the use of the Mello-Roos Act.
1. Eligible Improvements. A program may be used to finance or refinance the acquisition, installation, and improvement of energy efficiency, water conservation, and renewable energy improvements on real property and in or on buildings, whether the real property or buildings are privately or publicly owned, subject to the following:
A. For privately owned real property and buildings, each owner must consent in advance to the financing, in writing.
B. Financing through a Program is n ot available for the initial construction of privately-owned residential buildings unless that initial construction is undertaken by the intended owner or occupant.
The City is not establishing any priorities with respect to the financing of Eligible Impro vements.
Priority for financing shall be considered on a case by case basis as determined by the City or the applicable Program Administrator in accordance with the hearing report prepared in connection with the related Program, as amended or modified from time to time (each a “Hearing Report”). No services (as defined by Government Code Section 53313) will be financed through any Program.
1. Notice to Prospective Owners. To ensure that prospective purchasers of property subject to a special tax levied thro ugh a Program are fully informed about the tax, the related Program Administrator will record a notice of special-tax lien for each participating property as required by the Mello-Roos Act and will provide the seller of each with a disclosure notice that satisfies section 53340.2 of the Mello-Roos Act and California Civil Code section 1102.6b.
2. Financing Limits . For each property. the minimum funding request and maximum amount financed shall be determined in accordance with the Hearing Report. It is not expected that the City will issue bonds in connection with any Program. If the City issues bonds in connection with a Program, the City will establish policies concerning the credit quality of such bonds on a case by case basis.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
POLICY
NUMBER
EFFECTIVE
DATE PAGE
505-04 22 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
3. Underwriting Requirements for Financings. For each property, the financing of Eligible Improvements on that property must meet the eligibility requirements set forth in the Hearing Report.
The Hearing Report may b e amended or modified from time to time as specified therein or the City Council may waive or modify any requirement in the Hearing Report on a case by case basis.
4. Maximum Annual Special Tax . The total annual aggregate amount of property taxes and assessments on each property that participates in a Program, including the special tax imposed through such Program may not exceed five percent (5%) of the value of the property. The value of the property will be derived from the assessed value, the appraised va lue, or an estimate of value based upon data supplied by a reputable real estate information service. If appraisals are used to determine value for any purpose of a Program, the definitions, standards, and assumptions to be used in such appraisals shall be determined on a case by case basis by the City or the related Program Administrator.
5. Administration Costs. The annual special tax for each property that participates in a Program must be in an amount sufficient (i) to finance or refinance the Eligible Improvements for such property and (ii) to pay the property’s pro -rata share of the City’s and the related Program Administrators costs to administer such Program.
6. Minimum Standards; Waiver and Amendment . The policies set forth in this section reflect the minimum standards under which the City will make use of the Mello-Roos Act to finance Eligible Improvements. The City may, in its discretion, require additional measures and procedures, enhanced security and higher standards in particular cases. The City may, in its discretion and to the extent permitted by law, waive any of the policies set forth herein. Such waivers are granted only by action of the City Council. The goals and policies set forth in this section may be amended at any time and from time to time by the City.
Special Tax Refunding Bonds
1. Any issuance of debt to refinance outstanding special tax bonds will be subject to the City Debt Policy. The City Debt Policy provides that, when refinancing debt for debt service savings, the City’s goal is to realize a minimum net present value debt ser vice savings equal to or greater than 5% of the refunding principal amount of bonds.
2. It is the further policy of the City that any debt service savings achieved by refunding outstanding special tax bonds shall accrue to the property owners in the form of lower special taxes in future years. It is the policy of the City that savings may not be used to fund additional Authorized
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Statement of Goals and Policies Regarding
Establishment of Community Facilities
Districts
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505-04 23 OF 23
ADOPTED BY: (Resolution No.) DATED:
AMENDED BY: Resolution No. (date of resolution)
Public Facilities or DIFs or to reimburse for Authorized Public Facilities or DIFs paid by owners or developers.