RESOLUTION NO. 2022-9059
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN MARCOS ADOPTING THE “CITY OF SAN MARCOS FIFTH AMENDED AND RESTATED COMPREHENSIVE GOALS AND POLICIES REGARDING THE ESTABLISHMENT OF COMMUNITY FACILITY DISTRICTS” WHEREAS, the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California, provides that local government, including the City of San Marcos (the “City”), may initiate proceedings to establish a community facilities district pursuant to the Act only if the legislative body thereof has first considered and adopted local goals and policies concerning the use of the Act; and, WHEREAS, on June 9, 1998 the City, acting pursuant to Section 3, 5 and 7 of Article XI of the Constitution of the State of California and the Charter of the City, adopted Ordinance No. 98-1031 enacting the City of San Marcos Community Facilities District Procedural Ordinance (the “CFD Procedural Ordinance”) to, among other provisions, make certain procedural changes to facilitate the use of the Act to finance certain public facilities and services not authorized pursuant to the Act; and, WHEREAS, the City has amended and superseded the prior CFD Procedural Ordinance from time to time to amend the authorization and procedures for the formation of the community facilities districts by the City to finance additional public facilities and services not authorized by the Act or the then existing Procedural Ordinance as the City Council deemed necessary at such time and to make certain additional procedural changes respecting such formation and financing under the Act; and, WHEREAS, the City Council has requested further revisions to such goals and policies to modify the practices for the use of community facilities districts and the ways in which the use of the community facilities districts as financing tools can serve in the best interests of the City as reflected in the existing goals and polices; and, WHEREAS, the revised goals and polices have been incorporated into the “City of San Marcos Fifth Amended and Restated Goals and Policies Regarding the Establishment of Community Facilities Districts” (the “Amended Goals and Policies”) attached as Attachment “1” hereto and incorporated herein by this reference, which have been presented to this City Council for its consideration.
NOW, THEREFORE, BE IT RESOLVED AS FOLLOWS:
Section 1. The above recitals are all true and correct.
Section 2. Pursuant to the provisions of the Act and the CFD Procedural Ordinance, the Amended Goals and policies are hereby adopted. A copy of the Amended Goals and Policies shall be kept on file in the office of the City Clerk.
Section 3. This resolution shall become effective upon its adoption.
PASSED, APPROVED AND ADOPTED by the City Council of the City of San Marcos, California, this 26th day of July 2022, by the following roll call vote:
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: COUNCILMEMBERS:
________________________
Rebecca D. Jones, Mayor
City of San Marcos
ATTEST:
_________________________
Phillip Scollick, City Clerk
City of San Marcos
ATTACHMENT 1
Fifth Amended and Restated Goals and Polices
CITY OF SAN MARCOS
FIFTH AMENDED AND RESTATED
COMPREHENSIVE GOALS AND POLICIES
REGARDING THE ESTABLISHMENT
OF
COMMUNITY FACILITIES DISTRICTS
PURPOSE AND SCOPE
The City Council of the City of San Marcos (the "City Council") hereby amends and restates its goals and policies (the "Goals and Policies") concerning the use of the Mello-Roos Community Facilities Act of 1982 (Chapter 2.5 of Part I of Division 2 of Title 5 of the Government Code of the State of California), as amended, in providing adequate public services and public infrastructure improvements for the City of San Marcos (the "City"). The Goals and Policies shall apply to all community facilities districts hereafter formed or proposed to be formed by the City. Any goal or policy stated herein may be supplemented, amended or waived by resolution or motion adopted by the City Council.
The purpose of the 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 within the City for the purpose of financing or assisting in financing the provision of authorized public services and/or the acquisition or construction of public infrastructure to benefit and serve either existing or new development or a combination thereof. The underlying principles 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, insuring 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.
The scope of the Goals and Policies is limited to the proposed formation of community facilities districts for the limited purpose of financing or assisting in financing the provision of authorized public services and/or the acquisition or construction of public infrastructure.
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 or registered voters residing in existing developed areas or the City itself for the establishment of community facilities districts to provide authorized public services or to finance authorized public improvements which benefit or serve existing or new development or a combination thereof. It is not the City’s goal to provide financing for infrastructure necessary to serve new development for the purpose of enhancing or maximizing the rate of return for the developers of or investors in such developments.
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 or waiver of such policy or policies as they apply to a specific application.
DEFINITIONS
"Act" means the Mello-Roos Community Facilities Act of 1982, as such act may be amended from time to time. "Aggregate Tax Burden" shall mean, as to any parcel located within the boundaries of any Community Facilities District the formation of which is under consideration by the City for the purpose of financing Facilities, the total tax burden of the following property taxes, assessments and special taxes:
A. ad valorem property taxes;
B. the portion of voter approved ad valorem property taxes in excess of one percent (1%) of the assessed value of the subject properties; C. the maximum annual special taxes authorized to be levied by the Community Facilities District under consideration and any other community facilities district or other public agency; D. the annual assessment installments, including any administrative surcharge, for any existing assessment district where such assessment installments are utilized to pay debt service on bonds issued for such assessment district; E. annual assessments levied within an assessment district to pay for maintenance or services; and F. any homeowners’ association, merchants’ association or like private assessments.
The term "Aggregate Tax Burden" shall mean, as to any parcel located within the boundaries of any Community Facilities District the formation of which is under consideration by the City for the purpose of financing Services, the total tax burden from the property taxes, assessments and special taxes listed only in phrases A through E above applicable to such parcel.
The Aggregate Tax Burden shall include not only the foregoing property taxes, assessments, special taxes and, where applicable, homeowners’ association fees, merchants' association or like private assessments, as applicable, which are being levied at the time of formation of the community facilities district but such additional property taxes, assessments and special taxes which have been authorized but not yet levied, as estimated by the City. "Bonds" means bonds authorized and issued under the Mello-Roos Act. "City" means the City of San Marcos.
"City Costs" means all costs incurred by or for the City in the evaluation of an application for a Community Facilities District and in undertaking the proceedings to consider the formation of a Community Facilities District and issuing Bonds for a Community Facilities District. Such costs may include, but are not limited to, the cost of City staff time, fees of the City Attorney, bond counsel, disclosure counsel, financial advisor, special tax consultant, appraiser, market absorption analyst and any other consultant engaged by the City in such endeavors, and costs of providing necessary notification, printing and publishing. "Community Facilities District" or "District" shall mean a community facilities district formed or proposed to be formed by the City pursuant to the Mello-Roos Act and the Community Facilities District Ordinance. "Community Facilities District Ordinance" means Ordinance No. 2011-1348, as such ordinance may be amended from time to time, and/or any other ordinance of the City governing the use of the Act. "Developed Residential Parcel" means any parcel used for private residential purposes within a Community Facilities District. A parcel shall be deemed to be "used for private residential purposes" not later than the date on which an occupancy permit for private residential use is issued for such parcel. "Development Related CFD" means a Community Facilities District proposed to be established to finance authorized services or public improvements to serve new development within the City. "Facilities" means facilities the acquisition or construction of which are authorized to be financed under the Act and/or the City of San Marcos Community Facilities District Ordinance and these Goals and Policies. Equipment necessary and integral to the provision of Services authorized to be financed by a Community Facilities District shall not be considered to be “Facilities” unless and to the extent expressly designated as such in the resolution of formation of the Community Facilities District formed for the purpose of financing such Services. "Fiscal Year" means the twelve month period beginning July 1 of each year and terminating on June 30 of the following year. "Improvement Area" shall mean any portion of a Community Facilities District designated by the City Council pursuant to the Act as an "improvement area." The provisions of the Goals and Policies shall apply to any Improvement Area as if such Improvement Area were a separate Community Facilities District. "Minimum Value-to-Debt Ratio" means the aggregate full cash value of all of the properties within a Community Facilities District that are subject to the levy of special taxes by such Community Facilities District to pay debt service on the proposed issuance of Bonds for such Community Facilities District will be at least four times the sum of (a) the proposed principal amount of such Bonds and (b) the principal amount of all other bonds outstanding that are secured by a special tax levied on the taxable property within the Community Facilities District, other than the special tax authorized to be levied by the Community Facilities District or a special assessment levied on taxable property within the Community Facilities District. "Multiple Dwelling" shall have the meaning given such term in Section 20.16.510 of the San Marcos City Code, as such section may be amended from time to time. "One-Family Dwelling" shall have the meaning given such term in Section 20.16.490 of the San Marcos City Code, as such section may be amended from time to time. "PFF Facilities" shall have the meaning given the term "Public Facilities" in Section 17.44.020 of the San Marcos Municipal Code. "Public Facilities Fees" shall have the meaning given such term in Section 17.44.020 of the San Marcos Municipal Code, as such section may be amended from time to time. "Services" means services the provision of which is authorized to be financed under the Act and/or the Community Facilities District Ordinance and these Goals and Policies. "Two-Family Dwelling" shall have the meaning given such term in Section 20.16.500 of the San Marcos City Code, as such section may be amended from time to time.
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 or to provide authorized public services if the City Council determines that the public improvements 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 facilities, and storm drainage facilities which are a part of the storm drainage master plan.
2. Provision of public infrastructure sooner than would otherwise be required for a particular development project.
3. Construction of public infrastructure to serve commercial and/or industrial projects which will expand the City's employment and/or sales tax base.
4. Provision of new development that meets specific land use goals and objectives of the City.
5. Provision of maintenance or other authorized public services such as police protection services, fire protection and suppression services, 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.
ELIGIBLE FACILITIES
Facilities eligible to be financed by a community facilities district must, upon the completion of the construction or acquisition thereof, be owned by the City, another public agency or a public utility and must have a useful life of five (5) years or more. The list of eligible Facilities is detailed in Exhibit A attached hereto.
Equipment necessary and integral to the provision of Services authorized to be financed by a Community Facilities District shall not be considered to be “Facilities” unless and to the extent expressly designated as such in the resolution of formation of the Community Facilities District formed for the purpose of financing such Services.
In-tract improvements will not be eligible for financing as part of a Community Facilities District initiated by petition of the developer of property within such Community Facilities District.
Public Facilities Fees, other development impact fees, water and sewer connection and capacity fees and school mitigation fees shall not be eligible for financing as part of a Development Related CFD initiated by application or petition of the owner or developer of property proposed to be located within District.
Notwithstanding the foregoing limitation, the City may establish a Public Facilities Fee to pay for a specific PFF Facility or PFF Facilities which are necessitated by the development of a specific project or projects within the City. The City may provide that the acquisition or construction of such PFF Facility or PFF Facilities may be financed through a Community Facilities District encompassing all or a portion of such specific project or projects. If and to the extent that the cost of the acquisition or construction of such PFF Facility or PFF Facilities is financed through such Community Facilities District, the owners of properties within such Community Facilities District will be entitled to receive a credit against the applicable Public Facilities Fee obligation for such PFF Facilities imposed on such owners' properties in an amount not to exceed the lesser of the costs of the acquisition or construction of such PFF Facilities or such Public Facilities Fee obligation for such PFF Facilities imposed on such owners' properties.
The funding of Facilities to be owned, operated or maintained by public agencies other than the City shall be considered on a case-by-case basis. If such Facilities are consistent with the approved land use plans for the proposed Community Facilities District, the City may consider entering into a joint community facilities agreement in order to permit the financing of such facilities through such Community Facilities District.
The City Council shall have the final determination as to the eligibility of any Facility for financing.
ELIGIBLE SERVICES
The list of Services eligible to be financed through a Community Facilities District is set forth in Exhibit B hereto. The City Council shall have the final determination as to the prioritization of financing of such Services.
A Community Facilities District may not finance public services provided by any other public agency.
PRIORITIZATION OF FUNDING OF FACILITIES AND SERVICES THROUGH A COMMUNITY FACILITIES DISTRICT It is the policy of the City for any Community Facilities District to give: (a) first priority to financing the provision of Services benefiting the City; (b) second priority to financing the provision of Facilities benefiting the City; and (3) third priority to assist in the financing of other Facilities to be owned, operated or maintained by other public agencies or public utilities. The City Council shall have the final determination as to the prioritization of financing of any Facilities and/or Services.
SPECIAL TAX REQUIREMENTS
Reasonable Basis of Apportionment.
Special taxes must be allocated and apportioned on a reasonable and equitable basis to all categories and classes of property (other than exempt property) within a Community Facilities District. The City prefers that this apportionment of costs be based on the benefit that each parcel is to receive from the Facilities or Services. Exemptions from the special tax may be given to parcels which are (a) publicly owned, (b) held by property owners associations, (c) used for a public purpose such as permanent open space or wetlands, or (d) affected by public utility easements making impractical their utilization for other than the purposes set forth in the easement.
Maximum Special Taxes and Aggregate Tax and Assessment Burden.
Residential Properties.
One-Family and Two-Family Dwellings.
Located Outside of Any Mixed Use Specific Plan Area. The maximum annual special tax applicable to any Developed Residential Parcel consisting of One Family Dwellings and/or Two Family Dwellings located outside of any mixed use specific plan area shall not exceed three quarters of one percent (0.75%) of the base sales price, i.e., excluding upgrades and lot premiums, of any such Developed Residential Parcel to be subject to the levy of the special tax, determined as of the date of formation of such Community Facilities District. The base sales price of such Developed Residential Parcels shall be based upon (a) a price point analysis undertaken by a market absorption consultant retained by the City or (b) a price point analysis undertaken by a market absorption consultant retained by the applicant for a proposed Community Facilities District and which conclusions have been verified by a market absorption consultant retained by the City.
As a distinct and separate requirement, the Aggregate Tax Burden applicable to such Developed Residential Parcels shall not exceed one and three quarter percent (1.75%) of such base sales price of such Developed Residential Parcels, determined as of the date of formation of the applicable Community Facilities District.
Located Inside of a Mixed Use Specific Plan Area. The maximum annual special tax applicable to any Developed Residential Parcels consisting of One-Family Dwellings and/or Two-Family Dwellings located inside a mixed use specific plan areas shall not exceed one percent (1%) of the base sales price of such parcels, determined as of the date of formation of the Community Facilities District. That portion of the maximum annual special tax authorization exceeding 0.75% of such base sales price shall be allocated only to finance parking and/or transportation demand management measures and/or strategies as described in Exhibit B hereto (“Parking and/or Transportation Demand Management”). In addition, the Aggregate Tax Burden shall not exceed two percent (2%) of such base sales price.
Multiple Dwellings. The maximum annual special tax applicable to any Developed Residential Parcels consisting of Multiple Dwellings shall not exceed one percent (1%) of the base sales price of such parcels, determined as of the date of formation of the Community Facilities District. That portion of the maximum annual special tax authorization exceeding 0.75% of such base sales price shall be allocated only to finance Parking and/or Transportation Demand Management. In addition, the Aggregate Tax Burden shall not exceed two percent (2%) of such base sales price.
Nonresidential Properties. The maximum annual special tax applicable to any parcel used for nonresidential purposes within a Community Facilities District shall not exceed one percent (1%) of the expected assessed value of the parcel upon completion of the improvements thereto, determined as of the date of formation of the Community Facilities District. That portion of the maximum annual special tax exceeding 0.75% of the expected assessed value shall be allocated only to finance Parking and/or Transportation Demand Management. In addition, the Aggregate Tax Burden shall not exceed two percent (2%) of the expected assessed value of the parcel upon completion of the improvements thereto.
Special Taxes Levied to Finance Renewable Energy Facilities or Energy Efficiency Improvements To or Serving Residential or Nonresidential Properties. Subject to the following conditions, the maximum annual special tax and Aggregate Tax Burden limits set forth above may be exceeded for specific residential or nonresidential properties in order to finance the construction or installation of renewable energy facilities and/or energy efficiency improvements intended to serve such properties:
The owner of any property subject to the levy of such a special tax shall have voted in favor of the levy of such special tax; and The City shall have determined as to any property proposed to be subject to a special tax to finance renewable energy facilities and/or energy efficiency improvements to serve such property that the projected energy cost savings resulting from the installation and use of such renewable energy facilities and/or energy efficiency improvements to serve such property will exceed the maximum special tax or portion of the special tax necessary to finance the construction or installation of such renewable energy facilities and/or energy efficiency improvements.
Rate and Method of Apportionment of Special Taxes.
The rate and method of apportionment of the special tax for any Community Facilities District (each, a "Rate and Method") shall adhere to the following requirements:
A. The Rate and Method must be structured so as to produce special tax revenues sufficient to (a) pay scheduled debt service on all Bonds issued for the Community Facilities District, (b) pay the annual cost of authorized Services, if applicable, (c) pay an amount equal to any anticipated shortfall in special tax revenues due to delinquencies or projected delinquencies in the payment of special taxes, (d) fund any amounts required to establish or replenish any reserve fund established for such Bonds, and (e) pay reasonable and necessary annual administrative expenses of the Community Facilities District. Additionally, the Rate and Method may be structured so as to produce amounts sufficient to fund (a) amounts to pay directly the costs of Facilities eligible to be financed by the Community Facilities District, (b) the accumulation of funds reasonably required for the payment of future debt service on Bonds, (c) remarketing, credit enhancement or liquidity fees, and (d) any other costs or payments permitted by law. The special tax revenues necessary to fund all required expenses or deposits for a Community Facilities District may be referred to as the “Special Tax Requirement.” B. In any case, the Rate and Method must be structured such that the projected maximum special tax that could be levied in any Fiscal Year would produce special tax revenues at least equal to (a) 110% of projected annual debt service on all Bonds for the calendar year commencing in such Fiscal Year, plus (b) projected administrative expenses of the Community Facilities District for the calendar year commencing in such Fiscal Year.
C. The Rate and Method shall provide that in the event of the downsizing of the development in a Development Related CFD at the request of the applicant or the applicant's successor-in-interest, as applicable, resulting in the inability of the levy of special taxes to generate sufficient special tax revenue to satisfy the requirements of paragraph B. above, the special tax obligation for such Community Facilities District shall be prepaid, as may be necessary in the determination of the City, to ensure that following such downsizing adequate special tax revenues may be generated to satisfy the requirements of paragraph B. with respect to any outstanding Bonds. The City Council may, in its sole discretion, additionally or alternatively require the Rate and Method to provide for the levy of a backup special tax to protect against such changes in density.
D. An option to permit the prepayment, in whole or in part, of the special tax obligation for an individual parcel for any special tax authorized to finance Facilities shall be included in any Rate and Method where the proceeds of the special tax is authorized to finance Facilities. If the special tax is authorized to be levied to finance Facilities, such prepayment shall be permitted only if (a) the payment of all special taxes for such a parcel is current and (b) following such prepayment, the projected maximum special taxes that could be levied in any Fiscal Year on all remaining taxable property within the Community Facilities District will produce the special tax revenues required in paragraph B above. However, neither the City nor the District shall be obligated to pay for the cost of determining the prepayment amount, which is to be paid by the applicant. The prepayment, in whole or in part, of the special tax obligation for any special tax authorized to be levied to finance Services shall not be permitted.
E. The maximum special tax to pay for Facilities shall be levied against any Developed Residential Parcel in the first Fiscal Year following the Fiscal Year in which the building permit for the construction of a residential dwelling unit on such parcel is issued. The maximum special tax authorized to be levied on any parcel within a Development Related CFD to finance Facilities shall not escalate. The maximum special tax authorized to be levied on any residential parcel to finance Facilities in any Community Facilities District the formation of which is initiated by the City may be subject to escalation if the Facilities to be financed from such special taxes or the proceeds of Bonds to be secured by such special taxes are to be constructed or acquired over a period of years and the estimated costs of the construction or acquisition of such Facilities cannot reasonably be determined at the time of formation at the applicable Community Facilities District. Such escalation shall be determined by the application of that index determined by the City to most accurately reflect the projected increase in the cost of the construction or acquisition of the Facilities. The City will permit annual escalation of the maximum special tax authorized to be levied on parcels within a Community Facilities District established for the purpose of financing Services. Such escalation shall be determined by the application of that index determined by the City to most accurately reflect the projected increase in the cost of financing such Services.
F. The Rate and Method of a special tax authorized to finance Facilities shall specify a Fiscal Year beyond which the special tax may not be levied on any Developed Residential Parcel. In most cases, the final Fiscal Year in which special taxes shall be authorized to be levied by a Community Facilities District on Developed Residential Parcels to finance Facilities will be ten (10) years after the stated maturity of any Bonds issued for such Community Facilities District. Such a special tax will cease to be levied when all Bonds issued for the applicable Community Facilities District and the City’s administrative costs have been paid. A special tax authorized to be levied by a Community Facilities District to pay for Services shall have no termination date unless established by the City Council. Payment for the acquisition and replacement of equipment necessary and integral to the provision of Services authorized to be financed by a Community Facilities District shall be considered to be payment for such Services and not the financing of Facilities unless such equipment is expressly designated as "Facilities" in the resolution of formation of such Community Facilities District.
CREDIT QUALITY REQUIREMENTS FOR SPECIAL TAX BONDS
Terms and Conditions of Special Tax Bonds.
All terms and conditions of any 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 Bond issue shall be structured to adequately protect Bond owners and to avoid negatively impacting the City’s access to the municipal bond market. Unless otherwise approved by the City Council, the following shall serve as minimum Bond requirements:
A. 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 such Bonds or such lesser amount as may be required by federal tax law.
B. 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 longer term to be established in the sole discretion of the City Council on a case-by-case basis, not to exceed an aggregate of 18 months, taking into consideration the value-to-debt ratio for such Bonds, the expected timing of initial occupancies of residential dwelling units or nonresidential structures within the applicable Community Facilities District, expected absorption and buildout of the property within the applicable Community Facilities District, the expected construction and completion schedule for the Facilities to be funded from the proceeds of the Bonds, 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. Irrespective of the term or amount of capitalized interest included in any Bonds issued for a Community Facilities District, the maximum special tax shall be levied against any Developed Residential Parcel in the first Fiscal Year following the Fiscal Year in which such parcel became a Developed Residential Parcel.
C. In instances where multiple series of Bonds are to be issued for a Community Facilities District, the City shall determine what Facilities shall be financed from the proceeds of each series of such Bonds.
D. The term of any Bond issue shall not exceed 30 years.
E. The City shall not be required or expected to make any payment of the Bonds out of its general funds or other available funds. The sole source of revenue for the payment of the Bonds issued for any Community Facilities District shall be the special taxes authorized to be levied within such Community Facilities District, including prepayments of such special taxes, capitalized interest, if any, moneys on deposit in the reserve fund established for such Bonds, investment earnings on the proceeds of such Bonds and such other funds as may be pledged to the payment of such Bonds pursuant to the fiscal agent agreement or other document providing for the issuance of such Bonds as approved by the City Council.
F. The amount of Bond proceeds to be eligible to be used for the payment of the costs of acquiring or constructing Facilities (the "Facilities Proceeds") shall be net funded, i.e., shall be net of projected interest earnings on the investment of the Facilities Proceeds during the anticipated period of the draw down of such funds to pay such costs. Interest earnings on the investment of the Facilities Proceeds during the first three years from and after the date of issuance of Bonds shall, to the extent authorized under federal tax law, be eligible to be used for the payment of the costs of acquiring or constructing Facilities. Interest earnings on the investment of Facilities Proceeds from and after the third anniversary of the issuance of Bonds shall be utilized to pay debt service on the Bonds or to redeem such Bonds prior to their maturity.
Credit Enhancement.
Where a substantial amount of the property within a Community Facilities District that would be subject to the levy of a special tax to pay debt service on the Bonds issued for such Community Facilities District is undeveloped at the time of issuance of such Bonds, the City may, in its discretion, require credit enhancement to increase the security of the Bonds, particularly where the Minimum Value-to-Debt Ratio of a significant portion of such property in such Community Facilities District is less than 4:1, or in such other situations where the City determines such an increase in credit quality to be necessary, appropriate or prudent. Such credit enhancement will usually be in the form of an irrevocable standby letter of credit, will be required to be in an amount not less than 200% of the share of debt service allocable to the applicable developer owned parcels for which such credit enhancement is required and will be required to remain in effect until the share of debt service allocable to such developer owned parcels is less than 20% of the annual debt service on all outstanding Bonds issued for such Community Facilities District. The credit enhancement will generally be required to be issued or guaranteed by an entity, the long term unsecured obligations of which are rated at least “A” by Moody’s Investor Services or Standard & Poor’s Ratings Services.
REQUIRED-VALUE-TO-DEBT RATIO
It is the policy of the City that the Minimum Value-to-Debt Ratio for any proposed issue of Bonds for a Community Facilities District must be at least 4:1. A proposed Bond issue with a Minimum 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 Minimum 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, a surety bond or the escrow of bond proceeds to offset a deficiency in the required Minimum Value-to-Debt Ratio for a Bond issue as it applies to the taxable property within the applicable Community Facilities District in the aggregate or with respect to any development area.
The Minimum Value-to-Debt Ratio shall be determined based upon the full cash value of the properties within the applicable Community Facilities District that are subject to the levy of the special tax as shown on the ad valorem tax roll or upon an appraisal of such properties. The City Manager shall require that the Minimum Value-to-Debt Ratio be determined by an appraisal if, in his or her judgment, the assessed values of the properties that are subject to the special tax to pay debt service on the proposed Bonds do not reflect 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 Professions Code Section 11340. The appraiser shall be selected and retained by the City. The costs associated with the preparation of the appraisal report shall be paid by the applicant for the Community Facilities District, but 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 the definitions, standards and assumptions contained in the following section.
APPRAISALS
The definitions, standards and assumptions to be used in appraisals required in connection with the City's use of the Act for community facilities districts are as set forth in the Appraisal Standards for Land Secured Financings published by the California Debt Advisory Commission and originally dated May 1994 and modified July 2004 (the "CDIAC Guidelines").
Notwithstanding the foregoing, if there is a conflict between the definitions, standards or assumptions in the CDIAC Guidelines and the corresponding definitions, standards or assumptions in the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation ("USPAP"), USPAP shall govern.
ABSORPTION STUDY
An independent absorption study shall be required for the formation of any proposed residential development project within a proposed Development Related CFD, and in such other cases as the City, in its sole discretion, may deem to be appropriate. The independent absorption study shall be used (1) as a basis to verify proposed base pricing of the finished products (lots or completed buildings or dwelling units) subject to the levy of the special tax, (2) to determine the projected market absorption of such finished products and (3) as a basis for verification that sufficient special tax revenues can be generated to fund the Special Tax Requirement for the Community Facilities District. The City may require an independent absorption study of any proposed industrial or commercial development within a proposed Community Facilities District. Additionally, the projected absorption rates will be provided to the appraiser for use in the appraisal.
DISCLOSURE REQUIREMENTS
Disclosure Requirement for Developers. The applicant will be required to demonstrate to the satisfaction of the City that there will be full disclosure of the special taxes proposed to be levied by the Development Related CFD and any other special tax and/or assessment levied or authorized to be levied within the Development Related CFD to existing and future property owners, and to prospective purchasers of property including interim purchasers and sales to merchant builders (Section 53349.5 of the Government Code). In addition to all requirements of law, the City shall require the applicant to provide disclosure of such information as the City deems appropriate to the prospective purchasers of property within the Development Related CFD, with respect to the existence of the Development Related CFD, maximum and/or backup special taxes to be levied within the Development Related CFD, Facilities to be constructed and/or Services to be provided, the judicial foreclosure process and the terms and conditions of the Bonds issued or authorized to be issued on behalf of the Development Related CFD. Such disclosure shall include homebuyer notifications requiring the signature of such homebuyers prior to entering a purchase contract for the applicable property, as well as methods to notify subsequent home purchasers.
The developer must keep an executed copy of each disclosure document and is required to provide a copy of all applicable executed disclosure documents to the City Clerk.
Compliance With Federal Securities Laws. The City and any owner of property within a Development Related CFD that has not reached its entitled development build out and that will be responsible for the payment of special taxes representing such portion (as determined by the City on a case by case basis) of annual debt service on an issue of Bonds that would cause such person or entity to be an "obligated person" under federal securities law (each, an "Obligated Person") 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.
Initial Disclosure. Each Obligated Person will be required to provide for inclusion in the official statement or other offering materials distributed in connection with the offering and sale of such Bonds such information as may be required to satisfy any requirements of, or avoid any liability under, any applicable federal or state securities laws.
Continuing Disclosure. Each Obligated Person will be required to enter into an undertaking pursuant to which such Obligated Person shall agree to provide such information, on an ongoing basis, as may be required for the underwriter of such Bonds to satisfy the requirements imposed on such Obligated Person pursuant to Rule 15c2 12 promulgated under the Securities Exchange Act of 1934.
Failure of an applicant for the formation of a Development Related CFD to comply with such applicant's initial or continuing disclosure requirements pertaining to bonds previously issued for any other community facilities district shall be grounds for denial of the application by such applicant for the formation of such a Development Related CFD.
CITY COST DEPOSITS AND REIMBURSEMENTS
Except for those applications for Community Facilities Districts where the City is the applicant, all City Costs will be paid by the applicant for such Community Facilities District by advance deposit made to 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 or the Director of Finance to be adequate to fund the applicable City Costs. The City Manager or the Director of Finance 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 City Costs shall be incurred by the City in excess of the amount then on deposit for such purposes. If additional funds are required to pay City Costs, the City Manager or the Director of Finance may make written demand upon the applicant for such additional funds and the applicant shall deposit such additional funds with the City within seven (7) 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 or the Director of Finance may demand.
The deposits shall be used by the City to pay City Costs applicable to the Community Facilities District for which such deposits have been made.
The City shall refund any unexpended and unencumbered portion of the deposits upon the occurrence of one of the following events:
A. A majority protest is filed against the levy of special taxes within a Community Facilities District and/or the issuance of the Bonds for such Community Facilities District; B. The authorization for the levy of special taxes and/or the issuance of Bonds for a Community Facilities District is not approved by the qualified electors of such Community Facilities District; C. The formation of the Community Facilities District or the authorization for the issuance of Bonds for a Community Facilities District is disapproved by the City Council; D. The proceedings for the formation of the Community Facilities District and the issuance of Bonds are abandoned at the written request of the applicant; or E. It is determined by the City that the Bonds may not be issued and sold for some other reason.
Except as otherwise provided herein, the applicant shall be entitled to reimbursement of all amounts deposited with the City to pay for City Costs upon the formation of the applicable Community Facilities District and the successful issuance and sale of such Bonds for such Community Facilities District. Any such reimbursement shall be payable solely from the proceeds of the Bonds. The City shall not reimburse the applicant for any costs incurred by or for the applicant, including but not limited to, costs of consultants or attorneys retained by or for the applicant to assist the applicant in the preparation of the application for the Community Facilities District, the evaluation of the application, the proceedings to form the Community Facilities District and the issuance of Bonds for the Community Facilities District.
The City shall not pay interest on any moneys deposited with the City.
The City Manager or the Director of Finance may require the applicant to enter into an agreement to memorialize the obligations of the applicant to make such deposits and the conditions under which the applicant may be reimbursed for such deposits.
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 Bonds therefor, including, but not limited to, special tax consultant, bond counsel, disclosure counsel, financial advisor, underwriter, appraiser, and market absorption analyst after consultation with the applicant.
ANNEXATION THRESHOLDS
Prior to any approval being granted by the City property, must be annexed into applicable and active CFDs, or have paid applicable in-lieu fee, to offset impacts caused by that development. Properties not annexed into a Community Facilities District prior to formation of any district may be exempt from annexation should the following criteria be met:
The project is not a new development or redevelopment; AND, Approval granted by the City will not result in an improvement (construction, rehabilitation, addition, or enhancement) of structures that would have a total cost of which is equal to or in excess of 50% of the market value of the structures on a site ;AND, Approval will not result in a modification or change of use to 50% or more of the structure area on a site; AND, Approval will not result in an independently habitable residence; AND, Approval granted is ministerial or represents a minor discretionary approval where no additional impact to City services is anticipated as determined by the City Manager or their designee.
Additionally, a project may be deemed exempt from annexation if subject to welfare exemption under subdivision (g) of the Revenue and Taxation Code Section 214.
Nothing in this section shall be deemed to supersede any other regulation of law or other requirement established by the City with regard to any specific CFD.
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, be necessary to enable the City to adequately evaluate the Community Facilities District including the properties to be included and the Facilities and/or Services proposed to be financed. The City will issue Bonds secured by the levy of special taxes within a Development Related CFD only when (i) the properties included within such Community Facilities District have received those applicable discretionary land use approvals which would permit the development of such properties consistent with the assumptions utilized in the development of the Rate and Method ("Rate and Method Development Assumptions") for such Community Facilities District and (ii) all applicable environmental review has been completed. The final Rate and Method approved at the time of the adoption of the resolution of formation of a Community Facilities District will be based upon the final subdivision map of the property within the Community Facilities District or such other land use entitlements as would authorize the development of the property within the Community Facilities District consistent with the Rate and Method Development Assumptions. Bond proceeds will only be released to the extent that such Bonds are secured by the levy of special taxes on properties that require no further discretionary land use approvals or regulatory permits the denial of which could prohibit or delay the development of such property, including but not limited to, rough or finish grading, construction of both in tract and offsite public improvements, construction of all private improvements and/or the issuance of building permits for such property.
It is the policy of the City Council in granting approval for development entitlements such as zoning, specific plan or subdivision approval ("Development Entitlements") to grant such approval as a part of the City's ongoing planning and land use approval process. In granting such approval, the City reserves such rights as may be permitted by law to modify such approvals in the future as the City Council determines the public health, safety, welfare and interest may require. Approval of Development Entitlements when granted is subject to a condition that the construction of any part of the development subject to such Development Entitlements does not, standing alone, grant any rights to complete the development of the remainder of such development. The acquisition or construction of Facilities financed through a Community Facilities District to serve property within such Community Facilities District shall not vest any rights to the then existing Development Entitlements for the property assessed for such improvements or to any particular level, type or intensity of development or use. Applicants for a Development Related CFD must include an express acknowledgment of this policy and shall expressly waive on their behalf and on behalf of their successors and assigns any cause of action at law or in equity including, but not limited to, taking or damaging of property, for reassessment of property or denial of any right protected by USC Section 1983 which might be applicable to the properties within such Community Facilities District.
INDEMNIFICATION AND HOLD HARMLESS
REQUIREMENTS APPLICABLE TO DEVELOPMENT RELATED CFDS
The applicant for the formation of any Development Related CFD shall be required to assume the defense of, indemnify and save harmless the City, its officers, directors, employees and agents (the "Indemnified Parties") and each of them, from and against all actions, damages, claims, losses or expenses of every type and description to which they may be subjected or put by reason of, or resulting from a legal challenge to the formation, administration or modification of such Development Related CFD. In addition the City may require such applicant to pay, prior to the issuance of any Bonds for such Development Related CFD, a legal defense administrative charge in an amount to be established by the City. The proceeds of such charge shall be utilized to secure the payment by an applicant of any costs of defending, indemnifying and/or saving harmless any Indemnified Party as provided for in this paragraph. No legal defense administrative charge may be funded from the proceeds of Bonds issued for the applicable Development Related CFD or special taxes authorized to be levied within such Development Related CFD.
EXHIBIT A
LIST OF ELIGIBLE FACILITIES
The Facilities eligible to be financed by a Community Facilities District include, but are not limited to, the following:
Streets, including emergency access roads and gates, highways and bridges; Traffic signals, signal interconnect system equipment and safety lighting; Parks and trails;
Governmental facilities;
Sanitary sewer facilities;
Potable and reclaimed water facilities, including but not limited to, water conservation improvements; Facilities necessary or convenient for the implementation of Parking and/or Transportation Demand Management strategies and measures as described in Exhibit B hereto which facilities may include intra City transportation facilities and facilities for other local transit serving initiatives; the initial purchase of intra City public transportation equipment and equipment for other local transit serving initiatives, including rolling stock, necessary or convenient to the implementation or expansion of intra City public transportation service or service provided pursuant to another local transit serving initiative; facilities necessary or convenient to the implementation or expansion of other Parking and/or Transportation Demand Management measures; and the initial purchase of equipment necessary or convenient to the implementation or expansion of other Parking and/or Transportation Demand Management measures; Flood control, storm drain, storm water conveyance and discharge and storm water best management practices facilities, improvements and equipment; Libraries;
Cultural facilities;
Public utilities;
Police, fire protection, paramedic and emergency preparedness facilities; Recreation facilities, including golf courses;
Biological mitigation measures involving land acquisition or dedication and revegetation; Acquisition of open space land;
Street lighting, pedestrian lighting, safety lighting and lighting fixtures and equipment to serve other City facilities and properties; Landscaping and hardscape within public rights of way and easements; Public parking facilities and equipment necessary to maintain and operate such facilities; Facilities and equipment to enhance security of persons or property within a Community Facilities District or any City building, structure, facility, park or property; Fences, gates, retaining walls and accessory structures which are appurtenant to any other Facilities; “Digital city” infrastructure, including but not limited to, wi-fi, fiber optic or other infrastructure to serve residents, business owners and/or property owners within a District; Renewable energy facilities serving and energy efficiency improvements in publicly owned buildings, structures, property or any combination thereof; Renewable energy facilities serving and energy efficiency improvements located in privately owned buildings, structures, property or any combination thereof if the owner of any property which will be served by such facilities or improvements and against which the special tax to finance such facilities or improvements will be levied shall have voted in favor of the levy of such special tax.
In-tract improvements will not be eligible for financing as part of a Development Related CFD initiated by petition of the developer of property within such Community Facilities District.
EXHIBIT B
LIST OF ELIGIBLE SERVICES
Public services eligible to be financed by a District include, but are not limited to, the following:
Police protection services;
Fire protection and suppression services, and ambulance and paramedic services; The maintenance, operation and management of public or private property required by the City to be maintained as open space, for biological mitigation or for habitat preservation or any combination thereof; The "maintenance" and/or "servicing" of any "improvements" as such terms are defined in the Landscaping and Lighting Act of 1972; The maintenance and lighting of parks, recreation facilities, including gymnasiums, community centers, parkways, trails, sidewalks, streets, roads, emergency access roads, bridges, and other property granted, dedicated, conveyed or otherwise transferred to the City; Street and sidewalk cleaning;
The maintenance, lighting and operation of public parking lots and parking facilities; Enforcement of local parking regulations;
Graffiti removal and vandalism repair;
Parking and/or transportation demand management which may include measures and strategies for controlling parking, reducing traffic congestion, and vehicle miles traveled as well as providing alternative modes of travel and access (“Parking and/or Transportation Demand Management”). These measures may include, but are not limited to:
(i) implementation of “park once” strategies, i.e., the creation of an environment that encourages visitors and/or residents to park their vehicle once upon arrival in the City and then walk (or use some other form of public transit, trolley system, or bicycle) to access various parts of the City, (ii) intra City public transportation services and/or other local transit serving initiatives such as intra-city shuttle service(s), maintenance of interconnecting bicycle and pedestrian paths, provision of public transit passes, and instituting a ridesharing and/or car sharing program, (iii) the replacement of intra City public transportation equipment and equipment for other local transit serving initiatives and/or for Parking and/or Transportation Demand Management measures, including rolling stock, (iv) the maintenance, operation, and management of intra City public transportation facilities and equipment and facilities and equipment for other local transit serving initiatives and/or Parking and/or Transportation Demand Management measures, (v) the purchase and/or replacement of public parking and/or Parking and/or Transportation Demand Management equipment, (vi) maintenance, lighting and/or operation of public parking lots and parking facilities, and (vii) enforcement of local parking regulations;
The provision of security services supplemental to those normally provided by the Sheriff’s department; The maintenance of security facilities or equipment;
Maintenance and operation of storm water conveyance and discharge facilities; stormwater management, including but not limited to, maintenance and operation of stormwater treatment facilities, implementation of best management practices and stormwater permit reporting; Maintenance of fiber optic systems, traffic signals, traffic synchronization facilities and traffic management centers; and Maintenance and operation of levees and other drainage and flood control facilities.
Maintenance and operation of public childcare facilities.
Acquisition (through direct purchase, lease, installment sale or otherwise), maintenance, repair and replacement of equipment necessary and integral to the provision of any Service shall be considered to be a part of such Service and such equipment shall not be considered to be "Facilities" unless expressly provided for in the resolution of formation of the Community Facilities District authorized to finance such Service.