City of Hesperia
STAFF REPORT
DATE: August 1, 2023
TO: Mayor and Council Members
FROM: Rachel Molina, City Manager
BY: Casey Brooksher, Assistant City Manager
SUBJECT: Public hearing, landowner election, and actions related to formation of Community Facilities District No. 2023-1 (Silverwood Maintenance and Services)
RECOMMENDED ACTION
It is recommended that the City Council: 1) Conduct the public hearing and consider written and oral protests; 2) Adopt Resolution No. 2023-55 of formation of a Community Facilities District and Future Annexation Area; 3) Adopt Resolution No. 2023-5 3 calling a special landowner election for a community facilities district, and direct the City Clerk to complete the landowner elections; 4) Adopt Resolution No. 2023-5 4 declaring the results of the special landowner election and, if the election is successful, direct recording of Notice of Special Tax Lien; and 5) Introduce Ordinance No. 2023-1 1 levying special taxes within the Community Facilities District (including any territory that annexes into the Community Facilities District from the Future Annexation Area).
BACKGROUND
The Mello-Roos Community Facilities Act of 1982 (Government Code Section 53311 and following) (the “Act”) contains the statutory framework pursuant to which the City of Hesperia (the “City”) or other local agencies may form a community facilities district (“CFD”) for the purpose of financing certain authorized public services or maintenance. A CFD may finance such services or maintenance through the levy of special taxes within the geographic boundaries of the CFD. Additionally, to the extent a CFD is formed to pay for public facilities, bonds secured by such special taxes may be issued for a CFD. No bonds may be issued for a CFD formed to fund services. The property owners have filed petitions requesting the formation of the CFD.
In 2022, the City and its consultant NBS completed the Fiscal Impact Analysis (FIA) for the Silverwood Development. This analysis identified the fiscal impacts of the new development to the City. Additionally, the study looked to determine a funding mechanism for enhanced public safety services as well as funding for enhanced roadway maintenance services and trail maintenance for future Silverwood development.
To mitigate the negative fiscal impacts associated with these enhanced services, th e City is currently considering the formation of a CFD to fund maintenance and associated services related to the new Silverwood development. The City adopted Local Goals and Policies related to the use of CFDs at the April 1, 2008, City Council meeting as Resolution No. 2008-032, as required by the Act.
A petition was filed by the property owner, Tapestry Development Phase I LLC, requesting the City Council undertake proceedings under the Act and waive all applicable election notices and
SECOND READING AND ADOPTION
Staff Report to the Mayor and Council Members
Public hearing, landowner election, and actions related to formation of a CFD.
August 1, 2023
waiting periods to expedite the completion of the district formation. On June 20, 2023, the City Council adopted a Resolution of Intention to fo rm the CFD and the Future Annexation Area, approving the Rate and Method of Apportionment of Special Tax ("RMA") for the CFD, calling a public hearing, and directing the Assistant City Manager to prepare and file with the City Clerk a CFD Report describing the services that will be provided by the CFD and an estimate of the fair and reasonable costs to provide the services and incidental expenses associated with the CFD.
ISSUES/ANALYSIS
Following tonight’s public hearing, the City Council may establish the CFD, and the Future Annexation Area, and call for a special landowner election. The property owner will vote on: (1) the levy of the special taxes on taxable property in the CFD pursuant to the RMA; and (2) the appropriations limit for the CFD.
The proposed proceedings for the CFD will establish a Future Annexation Area that coincides with the boundary of the Silverwood Specific Plan Area in order to allow for streamlined annexation of additional properties' zones into the CFD in the future. Parcels within the Future Annexation Area will be annexed to the CFD only with the unanimous approval of the owner of the parcels, as described in the Resolution of Formation, without further public hearings or additional proceedings.
Rate and Method of Apportionment
The Resolution of Intention included a description of the RMA. Pursuant to the RMA, the proposed special tax is to be levied on all taxable, non-exempt parcels within the CFD boundary.
Specifically, the RMA includes proposed special taxes for various land use categories as shown below. The RMA also includes additional details on inflationary increases for special taxes, procedures for appeals, exemptions, and other relevant information . The developer will be utilizing BOLD Financing Bonds under a separate CFD, CFD No. 2023 -11 (City of Hesperia – Silverwood), of which $200 per Unit will be allocated to the City for a total of $600 per Unit (for Non-Age Qualified Single -Family Detached Prop erty). The RMA includes transition language once the CMFA CFD No. 2023-11 Bonds have been fully repaid and the District determines that no additional BOLD Financing bonds are to be issued . As a result, the initial maximum special tax rates prior to the t ransition year will be $400 per Unit for Non-Age Qualified Single -Family Detached Property, which is approximately 67% of the $600 maximum special tax rate per Unit as shown in Table 1. Accordingly, all other rates were reduced by approximately 33% in order to determine the maximum special tax rates prior to the transition year as shown in Table 2 , which includes the $400 per Unit from the CFD and $200 per Unit previously issued from BOLD. After the transition year, the Maximum Special Tax for each parcel of Taxable Property will increase as shown in Table 2 below:
Staff Report to the Mayor and Council Members
Public hearing, landowner election, and actions related to formation of a CFD.
August 1, 2023
TABLE 1 – PRIOR TO THE TRANSITION YEAR
MAXIMUM SPECIAL TAX RATES
FISCAL YEAR 2023/24*
Land Use Category
Maximum
Special Tax Rate Per
Non-Age Qualified Apartment Property $340.00 Unit
Non-Age Qualified Single-Family Attached Property 360.00 Unit Non-Age Qualified Single-Family Detached Property 400.00 Unit Age Qualified Single-Family Attached Property 360.00 Unit Age Qualified Single-Family Detached Property 380.00 Unit Hotel Property 0.09 BSF
Retail/Restaurant Property 0.14 BSF
Office Property 0.23 BSF
*On each July 1, commencing on July 1, 2024, the Maximum Special Tax Rate shall be increased by the Tax Escalation Factor.
TABLE 2 – COMMENCING IN THE TRANSITION YEAR
MAXIMUM SPECIAL TAX RATES
Land Use Category
Maximum
Special Tax Rate Per
Non-Age Qualified Apartment Property $510.00 Unit
Non-Age Qualified Single-Family Attached Property 540.00 Unit Non-Age Qualified Single-Family Detached Property 600.00 Unit Age Qualified Single-Family Attached Property 540.00 Unit Age Qualified Single-Family Detached Property 570.00 Unit Hotel Property 0.13 BSF
Retail/Restaurant Property 0.21 BSF
Office Property 0.34 BSF
*On each July 1, commencing on July 1, 2024, the Maximum Special Tax Rate shall be increased by the Tax Escalation Factor.
The special taxes set forth in the table on the previous page are proposed to be levied within the boundaries of the CFD alone.
Additionally, the City and the Developer h ave agreed to periodically review the aforementioned rates on the following schedule based on the Developer’s phasing of development:
After completion of Phase 1
Prior to the start of Phase 5
Prior to the start of Phase 6
Staff Report to the Mayor and Council Members
Public hearing, landowner election, and actions related to formation of a CFD.
August 1, 2023
Next Steps
The City Council will conduct the public hearing. The public hearing provides an opportunity for public inquiry into the formation of the CFD (including the RMA and the proposed services) and the Future Annexation Area. At the conclusion of the public hearing, the City Council is asked to consider and adopt the following resolutions:
1. A Resolution Establishing the Formation of a Community Facilities District and Future Annexation Area
2. A Resolution Calling a Special Election for a Community Facilities District After calling the special election and receiving the sealed ballot, the City Clerk will open and tabulate the ballot and announce the results of the election. The number of votes allocated to the property owner is based on the number of acres; the Act specifies that each p roperty owner in the CFD will be allocated one vote for each acre or portion of an acre of taxable property owned in the CFD. The City Clerk will then complete the election canvass.
Assuming two-thirds of the votes cast at the election are in favor of the ballot measure, the City Council will consider and is asked to adopt the following resolution and introduce the following ordinance:
A Resolution Declaring Results of a Special Landowner Election and Directing the Recording of a Special Tax Lien (the City Clerk's canvass will be attached to this Resolution) and An Ordinance Authorizing the Levy of Special Taxes in Community Facilities District (the "Ordinance").
Following these actions, the City Clerk will record a Notice of Special Tax Lien against the parcels in the CFD within 15 days after the election. The Ordinance authorizes and levies the Special Tax in perpetuity within the CFD (including any properties that annex into the CFD from the Future Annexation Area) in accordance with the RMA. The Ordinance will go into effect 30 days from the date of final passage, which is anticipated for the City Council meeting on August 15, 2023.
FISCAL IMPACT
In order to provide enhanced public safety, roadway and trail maintenance services , the Fiscal Impact Analysis identified the necessary funding amounts by development type . As a policy matter with a goal of not hindering new Silverwood development, the City has determined to set an initial maximum special tax rate of $ 600 for Non-Age Qualified Single -Family Detached Property, which is approximately 70% of the rate identified in the Fiscal Impact Analysis. As so, all other rates were reduced by approximately 30% in order to determine the initial maximum special tax rates.
However as mentioned above, the developer will be utilizing BOLD Financing under a separate community facilities district, CFD No. 2023-11 (City of Hesperia – Silverwood). As a result, the initial maximum special tax rates prior to the transition year will be $400 fo r Non-Age Qualified Single-Family Detached Property, which is approximately 67% of the $600 maximum special tax rate as shown in Table 1 . Accordingly, all other rates were reduced by approximately 33% in order to determine the maximum special tax rates pr ior to the transition year as shown in Table
2. The RMA includes transition language once the CMFA CFD No. 2023 -11 bonds have been fully repaid and the District determines that no additional BOLD Financing bonds are to be issued.
After the transition year, the Maximum Special Tax for each parcel of Taxable Property will
Staff Report to the Mayor and Council Members
Public hearing, landowner election, and actions related to formation of a CFD.
August 1, 2023
increase as shown in Table 3 below. The following table includes the estimated budget to mitigate negative fiscal impacts and provide services as well as the costs to administer the CFD.
TABLE 3 – COMMENCING IN THE TRANSITION YEAR
Description
Maximum
Special Tax
Rate
Anticipated
Number of
Units
Estimate
Special Tax
Revenue
Non-Age Qualified Apartment Property $510.00 1,328 $677,280 Non-Age Qualified Single-Family Attached Property 540.00 1,709 922,860 Non-Age Qualified Single-Family Detached Property 600.00 8,097 4,858,200 Age Qualified Single-Family Attached Property 540.00 454 245,160 Age Qualified Single-Family Detached Property 570.00 4,075 2,322,750 Hotel Property 0.13 270,000 35,100
Retail/Restaurant Property 0.21 750,000 157,500
Office Property 0.34 350,000 119,000
Undeveloped Property 1,844.58 N/A Acre
CFD Administration Costs 6,000
$9,343,850
The cost of formation of the CFD is approximately $38,500, which will be borne by the Petitioners.
ALTERNATIVE(S)
1. The Council may provide alternative direction to Staff.
ATTACHMENT(S)
1. Resolution No. 2023- 55 Establishing the Formation of a Community Facilities District and Future Annexation Area
2. Resolution No. 2023-53 Calling a Special Election for a Community Facilities District
3. Resolution No. 2023-54 Declaring Results of a Special Landowner Election and Directing the Recording of a Special Tax Lien
4. Ordinance No. 2023-11 Authorizing the Levy of Special Taxes in Community Facilities District
5. CFD Special Tax Report