Item #09
Date: July 2, 2024
To: Mayor and City Council
From: Dan Flores, Community Development Director
Jim Schaad, City Manager
Subject: Approve Resolution to Join Statewide Community Infrastructure Program (“SCIP”) Recommendation
Pass a Motion to 1) have the Council conduct the noticed public hearing to receive comments regarding the Statewide Community Infrastructure Program (SCIP) and the proposed action and 2) adopt Resolution No. 2024-XX, to join SCIP and become a participating member agency in this program.
Description:
This item includes a brief staff presentation regarding the California Statewide Communities Development Authority (“CSCDA”) and participation in the Statewide Community Infrastructure Program (“SCIP”), which is sponsored by CSCDA, followed by City Council discussion, a public hearing to take public testimony on SCIP and bonds to be issued by CSCDA, and consideration of a resolution making certain findings and authorizing certain matters necessary for the City of Marysville (the “City”) to participate in SCIP.
Background and Discussion
CSCDA is a joint powers authority sponsored by the League of California Cities and the California State Association of Counties. 530 cities, counties, and special districts throughout California are members of CSCDA, including the city. SCIP was instituted by CSCDA in 2002 to allow owners of property in participating cities and counties to finance the development impact fees that would be payable by property owners upon receiving development entitlements or building permits through a pooled special assessment districts program. SCIP was expanded to include financing of public capital improvements directly in addition to just fees and has now been further expanded to include community facilities districts (“CFDs”), as provided for in the proposed SCIP resolution. Since its inception, SCIP has issued over $1 billion in land-secured special assessment and CFD bonds for development projects in California.
Item #09
If a property owner chooses to participate, and the City approves the application, the selected public capital improvements, facilities, and/or development impact fees owed to the City will be financed by the issuance of tax-exempt bonds by CSCDA. CSCDA will form the district and impose an assessment or special tax, as applicable, on the owner’s property to repay the portion of the bonds issued to finance the fees paid with respect to the property (no one developer within the SCIP pool is responsible for the payment related to any other project). With respect to impact fees, the property owner will either pay the impact fees at the time of permit issuance, and will be reimbursed from the SCIP bond proceeds when the SCIP bonds are issued, or the fees will be funded directly from the proceeds of the SCIP bonds. In both cases, the fees are subject to requisition by the city at any time to make authorized fee expenditures, and the city is never at risk for payment of its fees. If improvements or facilities are contemplated, the proposed SCIP resolution includes a form of the acquisition agreement, which outlines how a developer will be reimbursed for improvements as they are certified complete by the city.
The benefits to the property owner include:
Only property owners who choose to participate in the program will have assessments or special taxes imposed on their property.
Instead of paying cash for public capital improvements and/or development impact fees, the property owner receives low-cost, long-term tax-exempt financing of those fees, freeing up capital for other purposes.
The property owner can choose to pay off the assessments or special taxes at any time.
For home buyers, paying for the costs of public infrastructure through an assessment or special tax is superior to having those costs "rolled" into the cost of the home. Although the tax bill is higher, the amount of the mortgage is smaller, making it easier to qualify. Moreover, because the assessment/special tax financing is at tax-exempt rates, it typically comes at a lower cost than mortgage rates.
Owners of smaller projects, both residential and commercial, can have access to tax-exempt financing of infrastructure. Before the inception of SCIP, only projects large enough to justify the formation of an assessment or community facilities district had access to tax-exempt financing. SCIP can finance projects as low as $500,000, which would not be economical on a stand-alone basis.
The benefits to the city include:
As in conventional assessment district and CFD financing, the City is not liable to repay the bonds issued by CSCDA or the assessments or special taxes, as applicable, imposed on the participating properties.
CSCDA handles all district formation, district administration, bond issuance, and bond administration functions. A participating city, county, or special district can provide tax-exempt financing to property owners through SCIP while committing virtually no staff time to administer the program.
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Providing tax-exempt financing helps participating cities and counties cushion the impact of rising public capital improvement costs and development impact fees on new development. Many developers rely on assessment district or CFD financing through SCIP in making the decision to purchase land, thereby improving the City’s competitive advantage in attracting new development.
The availability of financing will encourage developers to pull permits and pay fees in larger blocks, giving the participating city, county, or special district immediate access to revenues for public infrastructure, rather than receiving a trickle of revenues stretched out over time. As part of the entitlement negotiation process, the possibility of tax-exempt financing of fees can be used to encourage a developer to pay fees upfront.
In some cases, the assessments or special taxes on successful projects can be refinanced through refunding bonds. Savings achieved through refinancing may be directed to lower property taxes subject to applicable federal tax limitations.
The proposed SCIP resolution authorizes CSCDA to accept applications from owners of property within our planning jurisdiction to apply for tax-exempt financing of public capital improvements and development impact fees through SCIP. It also authorizes CSCDA to form assessment districts and community facilities districts within our city’s boundaries, conduct assessment and special tax proceedings, and levy assessments and special taxes against the property of participating owners. It approves the form of an acquisition agreement, attached to the SCIP resolution as Exhibit B, to be entered into between the City and the participating property owner/developer, if applicable, to provide the terms and conditions under which financing for public capital improvements will be provided and to establish the procedure for disbursement of bond proceeds to pay for completed facilities. It also authorizes miscellaneous related actions and makes certain findings and determinations required by law.
Attachments:
1) Resolution No. 2024-XX
2) EXHIBIT B