TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: Matt Loesch
SUBJECT: See Below DATE: September 14, 2026
Approved
Date:
9/24/26
COUNCIL DISTRICT: 7
SUBJECT: Actions Related to the Intent to Annex Territory to Community Facilities District No. 8
RECOMMENDATION
Adopt a resolution of intention to:
(a) Annex Annexation Area No. 4 to Community Facilities District No. 8 (Communications Hill);
(b) Levy a special tax on land within Annexation Area No. 4; (c) Set a Public Hearing for November 10, 2026, at 1:30 p.m. regarding the annexation; and
(d) Call an election immediately following the close of public hearing.
SUMMARY AND OUTCOME
City Council formed Community Facilities District No. 8 (CFD 8) in 2002 to provide enhanced services to the Communications Hill Specific Plan area. The district levies a special tax that only pays for authorized district services that are above standard City services. As the area continues to develop, the developer of Phase 3.2 of the Communications Hill 2 project has submitted a petition to annex property into CFD 8.
Adoption of the resolution will allow the City to initiate the annexation process, which meets the legal requirement to allow affected property owners to vote on the proposed annexation. The public hearing on November 10, 2026, will allow public testimony to be presented to City Council. At the close of the public hearing, the City Council will conduct a special election whereby property owners within the annexation areas cast ballots in favor of, or opposed to, the special tax, with votes weighted by the acreage of land owned. If the annexation is approved, the special tax will commence in Fiscal Year 2027-2028 and will include a Consumer Price Index adjustment.
COUNCIL AGENDA: 10/6/26
FILE: 26-1032
ITEM: 2.9
HONORABLE MAYOR AND CITY COUNCIL
September 14, 2026
Subject: Actions Related to the Intent to Annex Territory to Community Facilities District No. 8
BACKGROUND
In 1992, the City Council adopted a Specific Plan for Communications Hill to define the criteria to develop the area as a dense, highly urbanized residential neighborhood. This neighborhood is also expected to include a village center consisting of small shops and restaurants. The Specific Plan calls for numerous small parks, terraces, recreational paths, bicycle lanes, and public staircases throughout the hilly neighborhood, making Communications Hill a unique community in San José.
CFD 8 and the associated special tax were approved by qualified voters in September 2002 to accommodate the maintenance needs of Communications Hill. In February 2004, the northern portion of Communications Hill was annexed to CFD 8 with the same special tax. As KB Home South Bay, Inc. commenced the development of the remaining residential and industrial portion of Communications Hill (Communications Hill 2), the first two phases of the Communications Hill 2 project were annexed to CFD 8 in June 2016 with the same special tax. In April 2020, CFD 8 was altered to add authorized services and amend the original Rate and Method of Apportionment, but with no change to the maximum special tax. In June 2025, Phase 3.1 of the Communications Hill 2 project was annexed to CFD 8 with the same special tax. The boundaries of CFD 8 currently include properties on the southern portion of the hill fronting Hillsdale Avenue and properties on the northern portion of the hill fronting Curtner Avenue, with the expectation that the remainder of the hill will be added to the district during the development process with a bridge connecting the northern and southern areas.
Phases 3 and 4 of the residential portions of the Communication Hill 2 project are taking steps toward development. The developer has submitted a petition requesting the annexation of Phase 3.2 under permit 2025-103452 Improvement Plan into CFD 8 (CFD 8 Annexation Area No. 4) to fund the maintenance of certain enhanced public improvements in connection with its current project. This phase will add 226 residential units to the district’s existing 2,005 residential units. City staff have studied the proposal and believe that annexing Phase 3.2 into CFD 8 is feasible.
ANALYSIS
Staff recommends City Council initiate the annexation proceeding to add Phase 3.2 of the Communications Hill 2 property to CFD 8. Properties in the proposed CFD 8 Annexation Area No. 4 will be subject to the same special tax levy as specified in CFD 8’s Rate and Method of Apportionment. Table 1 below presents the various attachments that provide details about the proposed annexation.
HONORABLE MAYOR AND CITY COUNCIL
September 14, 2026
Subject: Actions Related to the Intent to Annex Territory to Community Facilities District No. 8
Table 1. Attachment Descriptions
Attachment Name Reference Description
CFD 8 Annexation Map Attachment A Shows the properties proposed to be annexed to the district.
CFD 8 Authorized
Services Attachment B Services allowed contingent upon
available funding.
CFD 8 Rate and Method
of Apportionment Attachment C Includes criteria for taxation, maximum tax, and annual adjuster.
The maximum annual special taxes for the land uses are adjusted annually each January 2 based on the change in the annual average of the Consumer Price Index, All Urban Consumers, for the San Francisco-Oakland-Hayward Area. The special tax levy is determined based on the amount needed to provide authorized services and can be adjusted annually up to the maximum special tax without limitation. Table 2 below lists the maximum special tax and the actual special tax levy for Fiscal Year 2026-2027.
Table 2. Special Tax Rates
Land Use Maximum Tax Tax Levy
Residential $1,234.59 $912.86
Non-Residential $555.16 $410.50
Annexations to a Community Facilities District must be in accordance with the Community Facilities District Financing Procedure contained in the San José Municipal Code, which incorporates and modifies the Mello-Roos Community Facilities Act of 1982. For Community Facilities Districts, a two-thirds vote of the qualified electors within the annexation area casting ballots is required to approve the special tax.
If fewer than 12 registered voters reside in the annexation area, as is the case for CFD 8 Annexation Area No. 4, the property owners are the qualified electors, with votes apportioned according to acreage. Since the proposed annexation currently has one property owner, KB Home South Bay, Inc., the developer has waived the lengthy noticing requirement, expediting the election process as outlined in the schedule below, shown in Table 3.
HONORABLE MAYOR AND CITY COUNCIL
September 14, 2026
Subject: Actions Related to the Intent to Annex Territory to Community Facilities District No. 8
Table 3. Legislative Process Schedule
Date Milestone
October 6, 2026
• Adopt a Resolution of Intention
• Set a Public Hearing
• Set Election
October 13, 2026 Mail Ballots and Notice of Public Hearing November 3, 2026 Publish Notice of Public Hearing
November 10, 2026 Conduct Public Hearing and Election
November 25, 2026 Record Notice of Special Tax
The public hearing on November 10, 2026, will allow public testimony to be presented to the City Council. City Council must consider all objections or protests to the proposed special tax levy. The hearing may be continued, if necessary, to allow staff to respond to City Council's inquiries. At the close of the public hearing, the City Council will conduct a special election whereby property owners within the district cast ballots in favor of, or opposed to, the special tax, with votes weighted by the acreage of land owned. If approved, the proposed special tax will begin in Fiscal Year 2027-2028 and will continue to be adjusted annually.
To be included in the vote, each completed ballot must be received by the City Clerk prior to the close of the public hearing. Although this is a mailed ballot election, property owners may submit their ballot to City Council at the public hearing.
EVALUATION AND FOLLOW-UP
The public hearing on November 10, 2026, will allow public testimony to be presented to City Council. At the close of the public hearing, the City Council will conduct a special election. If the district is approved, staff will propose appropriation and funding sources recommendations for City Council approval.
FISCAL IMPACTS
KB Home South Bay, Inc. provided funding of $41,457 to pay for annexation costs to the district, which was collected in Fiscal Year 2025-2026. The funding was recognized and has been rebudgeted into the Fiscal Year 2026-2027 Adopted Operating Budget.
Notably, any unused funds will be returned to the developer. However, if all funds are exhausted prior to the certification of election results, the developer must provide additional funds to continue the process.
HONORABLE MAYOR AND CITY COUNCIL
September 14, 2026
Subject: Actions Related to the Intent to Annex Territory to Community Facilities District No. 8
BUDGET REFERENCE
Fund
#
Appn.
#
Appropriation
Name
Total
Appropriation
Amount for
Contract
2026-2027
Proposed
Mid-Biennial
Capital
Budget Page*
Last Budget
Action (Date,
Ord. No.)
373 231N
Community
Facilities District
No.8 Annexation
Feasibility
Project
$41,457 N/A N/A 6/16/2026,
31336
* The 2026-2027 Proposed Mid-Biennial Capital Budget was approved on June 9, 2026, and adopted on June 16, 2026, by the City Council. Page number is N/A because funding for this appropriation was added during the Adopted Budget process.
COORDINATION
This memorandum has been coordinated with the City Attorney’s Office, City Manager’s Budget Office, and the Planning, Building, and Code Enforcement Department.
PUBLIC OUTREACH
This memorandum will be posted on the City Council Agenda website for the October 6, 2026 City Council meeting. These actions were initiated at the request of the property owner and developer and prepared by the Public Works Department. City staff have met with the property owner and developer regularly regarding the district and their development plans.
If approved by City Council on October 6, 2026, the Notice of Public Hearing, along with the property owner ballot, will be mailed on or before October 12, 2026, and the Notice of Public Hearing will be published on November 3, 2026. The notice will include the text of the Resolution of Intention, the time and place of the hearing, a statement that public testimony will be heard, and a description of the voting procedure.
BOARD, COMMISSION, COMMITTEE RECOMMENDATION AND INPUT
No board, commission, or committee recommendation or input is associated with this action.
HONORABLE MAYOR AND CITY COUNCIL
September 14, 2026
Subject: Actions Related to the Intent to Annex Territory to Community Facilities District No. 8
CEQA
Determination of Consistency with the Communication Hill 2 Project Final Environmental Impact Report (EIR) (Resolution No. 77172), and addenda thereto. The Project does not involve new significant impacts beyond those analyzed in the above EIR.
PUBLIC SUBSIDY REPORTING
This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution.
/s/
MATT LOESCH
Director of Public Works
For questions, please contact J. Guevara, Deputy Director, Public Works Department, at [email protected].
ATTACHMENTS:
Attachment A – CFD 8 Annexation Map
Attachment B – CFD 8 Authorized Services
Attachment C – CFD 8 Rate and Method of Apportionment
ATTACHMENT A
CFD 8 Annexation Map
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ANNEXATION AREA BOUNDARY LINE STREET RIGHT OF WAY
COMMUNITY FACILITIES DISTRICT FUTURE STREET
NO. 8 BOUNDARY LINE
PHASE BOUNDARY LINE
PROPERTY LINE
FUTURE PROPERTY LINE
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RAILROAD TRACKS
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CITY OF SAN JOSE, COUNTY OF SANTA CLARA
STATE OF CALIFORNIA
ANNEXATION MAP NO. 4
OF COMMUNITY FACILITIES DISTRICT NO. 8
(COMMUNICATIONS HILL)
FISCAL YEAR 2026-2027 SHEET20F2
ATTACHMENT A
CFD 8 Annexation Map
ATTACHMENT B
CFD 8 Authorized Services
B-1
CI
TY OF SAN JOSE
COMMUNITY FACILITIES DISTRICT NO. 8
(COMMUNICATIONS HILL)
DE
SCRIPTION OF SERVICES
C
FD No. 8 is being formed to fund the maintenance of various improvements and amenities that are required to achieve the type of community envisioned in the Communications Hill Specific Plan. Maintenance of the improvements may include necessary repairs, replacements, equipment, supplies, water, fuel, power, electricity, supervision and all other items needed for safe and proper maintenance of the items set forth below. This list of items identifies those improvements and amenities which are authorized to be funded by CFD No. 8; however, not all items on this list are guaranteed to be funded by the CFD.
I
tems Authorized to be Maintained
• Median island landscaping
• Backup landscaping
• Parkstrip landscaping
• Street trees
• Pavers/decorative pavement
• Special entrances/gateways
• Separated sidewalks and associated landscaping
• Maintenance access roads
• Bike paths
• Stairways
• Stairway lighting and landscaping
• Retaining walls
• Graffiti removal and normal painting on soundwalls within right-of-way • Trails/paved pathways
• Open spaces
• Slopes
• Drainage ditches
• Terraces
• Biological mitigation/conservation areas
• Plazas
• Storm water detention ponds
• Decorative street lighting
ATTACHMENT B
CFD 8 Authorized Services
B-2
CI
TY OF SAN JOSE
COMMUNITY FACILITIES DISTRICT NO. 8
(COMMUNICATIONS HILL)
ALTERATION NO. 1A
DE
SCRIPTION OF ADDITIONAL SERVICES
T
he services shown below are proposed to be added to the existing list of services financed by Community Facilities District No. 8 (Communications Hill) (the “CFD No. 8”) of the City of San Jose. This list of items identifies those services which are authorized to be funded by CFD No. 8; however, not all items on this list are guaranteed to be funded by the CFD.
A
uthorized Services
• Police protection services, including, without limitation, private security, community service officer and park ranger services for trails, terraces, overlooks, and staircases designated as parkland and common areas within CFD No. 8
ATTACHMENT C
CFD 8 Rate and Method of Apportionment
C - 1
CITY OF SAN JOSE
COMMUNITY FACILITIES DISTRICT NO. 8
(COMMUNICATIONS HILL)
RAT
E AND METHOD OF APPORTIONMENT OF SPECIAL TAX
A
Special Tax applicable to each Assessor’s Parcel in Community Facilities District No. 8 (Communications Hill) [herein “CFD No. 8”] shall be levied and collected according to the tax liability determined by the City Council, through the application of the appropriate amount or rate for Taxable Property, as described below. All of the property in CFD No. 8, unless exempted by law or by the provisions of Section E below, shall be taxed for the purposes, to the extent, and in the manner herein provided, including property subsequently annexed to CFD No. 8 unless a separate Rate and Method of Apportionment of Special Tax is adopted for the annexation area.
A. DE
FINITIONS
T
he terms hereinafter set forth have the following meanings:
“
Acre or Acreage” means the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel Map, or if the land area is not shown on an Assessor’s Parcel Map, the land area shown on the applicable final subdivision map or other parcel map recorded at the Santa Clara County Recorder’s Office.
“
Act” means, collectively, the Mello -Roos Community Facilities Act of 1982, as amended, Chapter 2.5 of Part 1 of Division 2 of Title 5 commencing at Section 53311 of the California Government Code, and Chapter 14.27 of Title 14 of the Municipal Code of the City.
“A
dministrator” means the individual(s) designated by the City to administer the CFD in accordance with the authority and powers granted by the City Council. “
Airspace Parcel” means an Assessor’s Parcel that shares common vertical space of an underlying land parcel with other parcels that have been assigned Assessor’s Parcel numbers.
“
Assessor’s Parcel” or “Parcel” means a lot, parcel or Airspace Parcel shown on an Assessor’s Parcel Map with an assigned Assessor’s Parcel number. “
Assessor’s Parcel Map” means an official map of the County Assessor of the County of Santa Clara designating parcels by Assessor’s Parcel number.
ATTACHMENT C
CFD 8 Rate and Method of Apportionment
C - 2
“Church Property” means any Parcel within the CFD that meets both of the following criteria: (1) a structure has been built that is used as a place of worship, rectory, convent or private school, and (2) the Parcel is exempt from ad valorem property taxes because it is owned by a religious organization.
“C
ity” means the City of San Jose.
“C
ity Council” means the City Council of the City of San Jose, acting as the legislative body of CFD No. 8.
“
Developed Property” means, in any Fiscal Year, all Taxable Property for which a building permit for new construction has been issued prior to June 30 of the preceding Fiscal Year.
“F
iscal Year” means the period starting July 1 and ending on the following June 30. “I
ndex” means the Consumer Price Index of the San Francisco -Oakland-San Jose area for all urban consumers.
“M
aximum Special Tax” means the maximum Special Tax, determined in accordance with Section C below that can be levied on Taxable Property in any Fiscal Year. “N
on-Residential Property” means Parcels of Developed Property within CFD No. 8 that are not Residential Property.
“
Public Agency” means the federal government, State of California or other local governments or public agencies.
“
Residential Property” means Parcels of Developed Property for which a building permit was issued for construction of a residential structure, including single family detached, duplex, triplex, fourplex, townhome, condominium or apartment units. “S
pecial Tax” means a special tax levied in any Fiscal Year to pay the Special Tax Requirement.
“
Special Tax Requirement” means the amount necessary in any Fiscal Year to (i) pay authorized maintenance expenses, (ii) create a sinking fund for replacement of facilities, (iii) pay administrative expenses of CFD No. 8, (iv) cure delinquencies in the payment of Special Taxes levied in prior Fiscal Years or (based on delinquencies in the payment of Special Taxes which have already taken place) are expected to occur in the Fiscal Year in which the tax will be collected.
ATTACHMENT C
CFD 8 Rate and Method of Apportionment
C - 3
“Subsequent Non-Residential Property” means (i) a Parcel of Non-Residential Property which had, in any prior Fiscal Year, been taxed as Residential Property, or (ii) a Parcel that was, in the City’s sole discretion, expected to be Residential Property and subsequently had a building permit issued for a non-residential use. Notwithstanding the foregoing, if the City determines that, in conjunction with a particular Parcel being changed from a residential to a non-residential designation, there was a corresponding transfer of the residential land uses to another Parcel in CFD No. 8, the City may but is not required to categorize that Parcel as Subsequent Non-Residential Property. “T
axable Property” means all Assessor’s Parcels within the boundaries of CFD No. 8 which are not exempt from the Special Tax pursuant to law or Section E below. “U
nit” means a residential dwelling unit, including individual single-family detached, duplex (2 units), triplex (3 units), fourplex (4 units), townhome, condominium, or apartment units.
B. DAT
A FOR ANNUAL ADMINISTRATION OF SPECIAL TAX
A
fter July 1 of each Fiscal Year, the Administrator shall categorize all Parcels of Taxable Property in CFD No. 8 as either Residential Property, Non-Residential Property or Subsequent Non-Residential Property, as defined in Section A above. For each Parcel of Residential Property, the Administrator shall determine the number of Units on the Parcel by referencing the building permit, site plan, condominium plan, apartment plan or other development plan for the Parcel. If an individual Assessor’s Parcel contains both Residential Property and Non-Residential Property, the Administrator shall determine both the number of Units on the Parcel and the Acreage of the Parcel for purposes of applying the Maximum Special Tax as set forth in Section C.3 below.
C. M
AXIMUM SPECIAL TAX
1. R
esidential Property
T
he Maximum Special Tax for Residential Property in CFD No. 8 is $667 per Unit for Fiscal Year 2002-03. Beginning January 2, 2003 and each January 2 thereafter, this Maximum Special Tax shall be adjusted by applying the increase, if any, in the Index that has occurred since January of the prior year. Each annual adjustment of the Maximum Special Tax shall become effective on the subsequent July 1.
ATTACHMENT C
CFD 8 Rate and Method of Apportionment
C - 4
2. Non-Residential Property
T
he Maximum Special Tax for Non-Residential Property in CFD No. 8 is $300 per Acre for Fiscal Year 2002-03. Beginning January 2, 2003 and each January 2 thereafter, this Maximum Special Tax shall be adjusted by applying the increase, if any, in the Index that has occurred since January of the prior year. Each annual adjustment of the Maximum Special Tax shall become effective on the subsequent July 1.
3. Sub
sequent Non-Residential Property
T
he Maximum Special Tax for Subsequent Non-Residential Property shall be determined in the first Fiscal Year in which the property is categorized as Subsequent Non-Residential Property. If the Parcel had been taxed as Residential Property in the prior Fiscal Year, the Maximum Special Tax for the Parcel shall be equal to the Maximum Special Tax levied on the Parcel in the prior Fiscal Year adjusted by the increase, if any, in the Index that has occurred since January of the prior year. Beginning the next January 2, and each January 2 thereafter, the Maximum Special Tax on the Parcel shall again be adjusted by the increase, if any, in the Index that has occurred since January of the prior year. Each annual adjustment of the Maximum Special Tax shall become effective on the subsequent July 1.
I
f the Parcel of Subsequent Non-Residential Property had never been taxed as Residential Property, but had been expected to be developed as Residential Property, the Administrator shall apply the following steps to determine the Maximum Special Tax for the Parcel:
S
tep 1: Estimate the number of Units that were expected to be developed on the Parcel before the land use changed to a non- residential use;
S
tep 2: Multiply the Maximum Special Tax per Unit for Residential Property for the then current Fiscal Year by the number of anticipated Units from Step 1 to determine the Maximum
Special Tax for the Parcel.
B
eginning the next January 2, and each January 2 thereafter, the Maximum Special Tax on the Parcel shall again be adjusted by the increase, if any, in the Index that has occurred since January of the prior year. Each annual adjustment of the Maximum Special Tax shall become effective on the subsequent July 1.
ATTACHMENT C
CFD 8 Rate and Method of Apportionment
C - 5
D. METHOD OF LEVY AND COLLECTION OF THE SPECIAL TAX
E
ach Fiscal Year, the Special Tax shall be levied on all Parcels of Developed Property as follows:
S
tep 1: Determine the Special Tax Requirement (see definition in Section A above) for the Fiscal Year in which the Special Tax will be collected; S
tep 2: Calculate the total Special Tax revenues that could be collected from Developed Property within the CFD based on application of the Maximum Special Tax rates determined pursuant to Section C above; S
tep 3: If the amount determined in Step 1 is greater than the amount calculated in Step 2, levy the Maximum Special Tax on all Parcels of Developed Property in the CFD. Even though the Special Tax Requirement is greater than the total Special Tax revenues that can be collected in CFD No. 8, only the Maximum Special Tax may be collected unless a higher Maximum Special Tax is approved by two- thirds of the registered voters voting in an election to increase the Maximum Special Tax.
I
f the amount determined in Step 1 is equal to the amount calculated in Step 2, levy the Maximum Special Tax on all Parcels of Developed Property in the CFD.
I
f the amount determined in Step 1 is less than the amount calculated in Step 2, levy the Special Tax against all Parcels of Developed Property in equal percentages up to 100% of the Maximum Special Tax for each Parcel until the amount of the Special Tax levy equals the Special Tax Requirement for that Fiscal Year.
T
he Special Tax for CFD No. 8 shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 8 may (under the authority provided in the Act), in any particular case, bill the taxes directly to the property owner off the County tax roll, and the Special Taxes will be equally subject to penalties and foreclosure if delinquent.
E. L
IMITATIONS
N
otwithstanding any other provision of this Rate and Method of Apportionment of Special Tax, no Special Tax shall be levied on land that has been conveyed to a Public
ATTACHMENT C
CFD 8 Rate and Method of Apportionment
C - 6
Agency, except as otherwise provided in Sections 53317.3 and 53317.5 of the Mello- Roos Community Facilities Act of 1982. In addition, no Special Tax shall be levied on Church Property except that, if a Parcel that had been taxed in any prior Fiscal Year as Residential Property, Non-Residential Property or Subsequent Non-Residential Property becomes Church Property, the City has the discretion to levy a Special Tax against such Parcel if the Special Tax revenues generated from the Parcel are needed to meet the Special Tax Requirement.
F. INTERPRETATION OF SPECIAL TAX FORMULA
The City reserves the right to make minor administrative and technical changes to this document that do not materially affect the rate and method of apportioning Special Taxes.
In addition, the interpretation and application of any section of this document shall be left to the City’s discretion. Interpretations may be made by the City by ordinance or resolution for purposes of clarifying any vagueness or ambiguity in this Rate and Method of Apportionment.