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ITEM TITLE
Community Facilities Districts: Discontinue City Participation in the California Municipal Financing Authority’s Bond Opportunities for Land Development Program Report Number: 23-0268
Location: No specific geographic location
Department: Development Services
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act (“CEQA”) State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt a resolution to discontinue the City’s participation in the California Municipal Financing Authority’s Bond Opportunities for Land Development Program for Community Facilities Districts.
SUMMARY
On August 10, 2021, the City Council adopted a policy to participate in the California Municipal Financing Authority’s (“CMFA’s”) Bond Opportunities for Land Development (“ BOLD”) program to accommodate the formation of Community Facilities Districts (“CFDs”) and the sale of bonds to finance public facilities. CMFA is a joint powers authority of which the City of Chula Vista is a member. Under the BOLD program CMFA oversees formation, administration and the sale of bonds which is otherwise the responsibility of the City.
To date, the Council has approved three CFDs formed under this program. One of the intended benefits of the BOLD program was to reduce the amount of City oversight and staff time required for CFD formation and implementation. The intended reduction of staff time has not been realized. For this and other reasons, staff is recommending that the City no longer participate in the BOLD program.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with CEQA and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
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BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
DISCUSSION
In 2021, developers working on projects within Chula Vista approached City staff requesting that the City entertain participating in CMFA’s BOLD program for the formation of CFDs for their development projects. CMFA is a statewide joint powers authority whose members are public entities throughout the State. CMFA has the same powers as its member agencies and can issue municipal bonds on behalf of a member. The City of Chula Vista is a member of CMFA, h aving utilized CMFA for other types of bond financing in the past but not the BOLD program. CMFA oversees the formation of CFDs, sale of bonds and ongoing district administration. The BOLD Program is facilitated through bond professionals chosen by CMFA wi th specialized expertise in CFD formation, bond issuance and sales including bond counsel, underwriter, special tax consultant. As such, the City doesn’t designate the financing team and is not involved in the bond issuance process except for a closing certificate to be delivered at closing of each bond issue relating to the facilities being financed with bond proceeds.
The City’s participation in the BOLD Program was intended to result in more efficient delivery of local agency services to residential and commercial development due to the following:
(1) CMFA, not the City, would form the CFD and administer the CFD . Input from City staff was sought on key provisions in the CFD documents, CMFA approves all formation documents, reducing work for City staff and City Council;
(2) CMFA meets every 3 weeks and can hold special meetings in order to expedite the CFD formation process and bond issuance process;
(3) CMFA consultants field questions from residents within the CFD regarding the amount of special tax and use of special tax;
(4) CMFA consultants coordinate the annual special tax levy with the County of San Diego, and track and assist in the collection of any delinquencies; and (5) If requested by the City, CMFA utilizes a program administrator for the BOLD Program to review invoices and other documentation related to disbursement of bond proceeds, thereby relieving City staff of this burden.
Unfortunately, these efficiencies have not been realized to date, requiring a significant amount of City staff time for the three CFDs that have been formed to date. Staff believes that the BOLD program likely works well for smaller cities with simpler projects. The developers have likely paid more in consulting costs as the City has needed to hire its own bond counsel and financial consultant, paid for by the developers or through bond proceeds, to work through complex issues.
One of the driving factors behind the developer’s desire to use the BOLD program was to avoid being subject to certain provisions in the City’s Goal and Policies. These provisions include (1) the prohibition on financing development impact fees; (2) the prohibition on the escalation of the maximum special tax to pay for public facilities; (3) the payment to the City of compensation equal to one percent (1%) of the total P a g e | 3
authorized bonded indebtedness; (4) the requirement that an appraisal be coordinated by, done under the direction of, and addressed to the City; and (5) the requirement that all consultants including the appraiser, be selected and retained by the City. Since the CFDs were not going to be sponsored by the City, the Council agreed to waive these provisions of its Goals and Policies but required adherence to the balances of the provisions.
The City’s direct oversight of CFD formation and bond sales is preferable and better serves homeowners of Chula Vista. The City Council has the authority to deny approval of the use of the BOLD program for any specific developer . However, staff believes it is in the best interest of the City to discontinue participation in the BOLD program, and to terminate any authority granted to CMFA to accept applications from property owners seeking to participate in the BOLD program.
To address some of the developer’s concerns, the City has proposed certain amendments to the CFD Goals and Policies. The proposed amendments will be considered by the City Council under a s eparate action tonight.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property holdings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.) Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
There is no current year fiscal impact to the General Fund or Development Services Fund as a result of this action.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact to the General Fund or Development Services Fund as a result of this action.
1. City Council Resolution No. 2021-148, dated August 10, 2021
Staff Contact: Kimberly Elliott, Facilities Financing Manager, Development Services Laura C. Black, AICP, Director of Development Services