RES-8884 Policy Guidelines of Public Financing MechanismsRESOLUTION NO. 8884
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF ORANGE ESTABLISHING POLICY GUIDELINES
REGULATING THE USE OF PUBLIC FINANCING
MECHANISMS TO FINANCE PUBLIC FACILITIES.
WHEREAS, the City Council of the City of Orange has previously approved
requirements for financing public improvements by the use of the Improvement Bond Act
of 1915, with the adoption of Resolution No, 6376 on July 9,1985; and
WHEREAS, Government Code Section 53312.7 requires that any local agency
desiring to initiate proceedings to establish a Cornmunity Facilities District ("CFD")
under the Mello-Roos Community Facilities Act of 1982 (the "Act") must first adopt
a local policy concerning the use of the Act, setting forth a statement of priority of
the kinds of public facilities to be funded through CFDs; requirements for credit
quality required for bonds issued by CFDs; procedures and steps to ensure proper notice
to property owners of any CFD special tax obligation; criteria for determining the
maximum amount of special tax; and standards and assumptions for real property appraisals;
and WHEREAS, the City Council desires to adopt the Policy Guidelines
Regulating the Use of Public Financing Mechanisms to Finance Public Facilities (the "
Policy Guidelines") in the form attached hereto as Exhibit "A" to serve as the City's
general guide for evaluating the merits of assisting in the financing of public facilities within
the jurisdiction of the City of
Orange.WHEREAS, the Policy Guidelines are intended to meet the requirements
of Government Code Section 53312,7;
and WHEREAS, the Public Financing District Review Committee, chaired by
the City Manager, has recommended the approval of the Policy
Guidelines.NOW, THEREFORE, BE IT RESOLVED by the City Council of the City
of Orange, as
follows:1. The existing requirements for Council approval of financing of
public improvements under the Improvement Bond Act of 1915, as established
by Resolution No, 6376, are hereby
repealed.2. The Policy Guidelines in the form attached hereto as Exhibit "A" are
hereby adopted to serve as the City's general guide for evaluating the merits of
assisting in the financing of public facilities within the jurisdiction the City of
ADOPTED this ....24.thday of Februarv, 1998.
ATTEST:
M"'AAAA~J f!car/AA-;;(-Cassandra
J, Cathc , City Clerk of the of Orange I
hereby certify that the foregoing Resolution was duly and regularly adopted by the
City Council of the City of Orange at a regular meeting thereof held on the 24Th day
of February , 1998, by the following vote:AYES:
COUNCIL MEMBERS: MURPHY. SLATER, COONTZ. SPURGEON,ALVAREZ
NOES:
COUNCIL MEMBERS: NONE ABSENT:
COUNCIL MEMBERS: NONE ABSTAIN:
COUNCIL MEMBERS: NONE C/.
l/.lAAA~d flM/Ad Cassandra
1. Cath , City Clerk of the City of Orange Filename:
02248#2b RESO
NO, 8884 2 DPWE-dr
EXHIBIT "A'
CITY OF ORANGE
POLICY GUIDELINES REGULATING THE USE OF PUBLIC FINANCING
MECHANISMS TO FINANCE PUBLIC FACILITIES
Municipal Improvement Act of 1913 and Improvement Bond Act of 1915
Landscaping and Lighting Act of 1972
Mello Roos Community Facilities Act of 1982
Benefit Assessment Act of 1982
February, 1998
TABLE OF CONTENTS
SECTION PAGE
I.Purpose 3
II.Definitions 4
III.Public Financing Mechanisms, Eligible, Public Facilities
and Priorities
5
IV. General Policies 8
V. Fee and Charge Schedule I3
VI. Procedures 14
V:L Application Process 15
VIII. Criteria for Appraisals 16
IX. Requirements for Tax Allocation Fonnulas 17
X. Policy on Joint Financing Districts 19
2
CITY OF ORANGE
POLICY GUIDELINES REGULATING THE USE OF PUBLIC FINANCING
MECHANISMS TO FINANCE PUBLIC IMPROVEMENTS
I, PURPOSE
This policy document is intended to serve as the City's general guide for
evaluating the merits of assisting in the financing of project-related
public facilities in ~.a si~ificant ~ benefit has ~ established. These
project-related public facilities may be developer or City
initiated.The public financing mechanisms subject to this policy document include the:
I)Mello Roos Community Facilities Act of 1982, 2) Benefit Assessment Act
of 1982,3) Municipal Improvement Act of 1913 and the Improvement Bond Act
of 1915, and 4) Landscaping and Lighting Act of
1972.The City will exercise a fiscally conservative approach to the use of
public financing assistance in order to maintain the City's good financial
standing,minimize any financing risk to the City and to ensure public benefit.
The individual and cumulative financial impact of project-related
public financing assistance upon the City's credit and any contingent liability will
be carefully evaluated. The City's fundamental reason for assisting the financing
of project-related public facilities is to ensure that: I) growth within the City occurs
in a comprehensive, organized way consistent with the City's General Plan,
and 2)that existing City residents don't have to pay for new growth which
does not directly benefit them. The purpose of public financing is not intended
to provide the development industry with the opportunity to achieve excessive profits
at the expense of
future residents.It is the City's desire to make these Policy Guidelines available to
the community at large so that: I) the City's policies are clearly communicated, 2)
the developer can make reasonable and realistic business decisions based
upon their understanding of the City's willingness to assist in a public
financing program,and 3) the public benefit responsibility is
clearly identified.The City shall make the determination as to which public financing
mechanism, if any, shall be used to assist in the construction of a public facility. The
City may confer with the applicant to learn of any unique district requirements,
such as facilities serving the regional area or long term development phasing,
prior
making any final determination. The City prefers to form an Assessment District
over a Community Facilities District whenever possible,
Where the City forms any district (i.e" Community Facilities District, Assessment
District or Landscape & Lighting District), the full cost of the district shall be
established and set in place at the time the district is formed,
II. DEFINITIONS
Unless the context otherwise requires, the terms employed III the following
policies shall have the meanings specified below:
Bonds" means bonds authorized and issued under any of the public financing
mechanisms described herein.
City" means the City of Orange.
District" means a community facilities district formed under the Mello-
Roos Community Facilities Act of 1982 (CFD) or an assessment district formed
under theImprover.1ent Bond Act of 1915, the Municipal Improvement Act of
1913 A.D.), the Benefit Assessment Act of 1982 or the Landscape and Lighting Act
of 1972 (
LMD).Public Facilities" means improvements authorized to be constructed or
acquired under any of the public financing mechanisms described
herein.Value" or "Fair Market Value" means the amount of cash or its equivalent
which property would bring if exposed for sale in the open market under conditions
in which neither buyer nor seller could take advantage of a difficulty or the other
and both have knowledge of all of the uses and purposes to which the property
is adapted and for which it is capable of being used and of the
enforceable restrictions upon uses and
purposes,Act" means Mello-Roos Community Facilities Act of 1982
or Improvement Bond Act of 1915 or Municipal Improvement Act of 1913 or
the Benefit Assessment Act of 1982 or the Landscape and Lighting Act
of
HI. PUBLIC FINANCING MECHANISMS AND ELIGffiLE PUBLIC F ACTLlTIES
AND PRTORITIES*
The public financing mechanisms subject to this policy document include the:
1) Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915
2) Landscaping and Lighting Act of 1972, as described and regulated by the State
of California.
3) Mello Roos Community Facilities Act of 1982
4) Benefit Assessment Act of 1982
The general types of facilities currently eligible to be financed are listed as
follows for each public financing mechanism:
A. Municipal Improvement Act of 1913 and Improvement Bond Act of 1915
I. Arterial Streets
2. Trunk Sewer Mains
3, Master Area Storm Drains
4. Water Transmission Mains
5. Water, Sewer or Drainage Pumping Plants
6. Non-Tract related Street
Lighting 7. Traffic Signals and Safety
Lighting 8. Grading necessary to accommodate "Backbone"
Infrastructure;including Retaining Walls, Drainage Facilities and
Stabilization of
Land 9. Government Facilities of specific benefit to the
district 10.
Parks II. Omamental Vegetation
Installation B. Landscaping and Lighting Act of
1972 I. The installation or planting of
landscaping.2. The installation or construction of statuary, fountains, and
other omamental structures and
facilities,3, The installation or construction of public lighting
facilities,including, but not limited to, traffic
signals.4. The installation or construction of any facilities which
are appurtenant to any of the foregoing or which are necessary
or convenient for the maintenance or servicing thereof, including,
but not limited to, grading, clearing, removal of debris, the
installation or construction of curbs, gutters, walls, sidewalks, or paving,
or water, irrigation, drainage, or electrical
facilities.The types of public facilities eligible to be fm.nced shall be governed by the applicable state
law,The City will make the fmal determination as to any facility's eligibility for
fmancing,
5. The installation of park or recreational improvements, including,
but not limited to, all of the following:
a. Land preparation, such as grading, leveling, cutting and
filling, sod, landscaping, irrigation systems, sidewalks,
and drainage.
b. Lights, playground equipment, play courts, and public
restrooms.
6. The maintenance or servicing, or both, of any of the foregoing.
7. The acquisition of land for park, recreational, or open-
space
purposes.C. Mello Roos Community Facilities Act of
1982 I. Local park, recreation, parkway open-
space facilities 2. Elementary and Secondary School sites
and structures
3. Libraries 4. Child
Care Facilities 5. Utilities (Public Utilities, including flood and
storm drainage)6.
Cultural Facilities 7. Police and Fire
Protection Services 8. Services with respect to removal or remedial action
of
hazardous substances.9. In combination with one or more of the foregoing, any
of the facilities listed under
A. above.10. Statutory development fees can n2t
be funded.D. Benefit Assessment Act
of 1982 Provides for the financing of ongoing maintenance and operation
costs of:
1. Drainage 2.
Flood Control 3.
Street Lighting 4.
Street
Improvements PRIORITIES It is the City's view that a comprehensive policy toward mitigating the service
impacts of growth is the best way to foster cooperation in allocating available
debt capacity.Therefore, it is the City's intent to work closely with local school districts (and
any other agency with District creating authority) to ensure that the maximum tax rate "
cap" (see section IV. B.) is not exceeded and home
owners
In order to ensure that public financing is used in a comprehensive, organized way
consistent with the City's General Plan and the Policies outlined in Section IV, the
aforementioned eligible public facilities are prioritized below. It is important to note that
tne City will not use public financing for normal ''tract'' improvements typically
built/installed by the developer, i.e., local streets, sidewalks, etc. Also, the City will not
use public financing to fund public services. Accordingly the following types of public
facilities shall be given priority:
1" Priority- Facilities needed to serve a community plan area that is currently deficient
in off-site infrastructure needed to develop the area as planned; that
is:backbone" infrastructure to support already approved community
plan
areas.2nd Priority- Other public facilities for which there is a clearly demonstrated
public
benefit.3'd Priority- Other public facilities permitted by the
Acts.Reserving the right to make exceptions when circumstances warrant, the City
establishes these priorities for use of the Acts in the context of new development (the City is
consciously establishing no priority for the use of the Acts in tile case of populated areas and
registered-voter
elections).
IV. GENERAL POLICIES
A. The City may allow the financing of public improvements under the
provisions of tIlis policy where the public facilities represent, in the City's
opinion, a si~ificant ~ benefit not only to the prospective residents of
the development, but incidentally to tile entire community.
B. The projected ad valorem property taxes, special taxes, and other direct and
overlapping debt for tile proposed development project (including projected
benefit assessments, levies for authorized but unissued debt and any other
anticipated municipal charges which may be included on a property owner's
annual tax bill), including the proposed maximum special tax or annual
assessment, may not exceed a maximum tax rate of two percent (2.0%) of the
anticipated assessed value of ~ach improved parcel ("final use") upon
completion of the private and public improvements. Property will be
considered in its final use when a final map for single family residential use
has been recorded or a final map or parcel map for commercial, industrial,
multi-family use has been recorded. The City retains the right to
withhold public financing if it determines that such financing is detrimental to
its credit rating or to the issuance of other City-planned,
land-secured debt.Exceptions may be granted for commercial, industrial
and mixed
use development projects.NOTE: The total maximum tax rate applies only to
public financing debt actually passed along to the "
final use" parcel.C. The City will issue assessment and/or community
facilities district bonds only if it is assured that the proposed financing is solidly
structured and has strong marketability. The value of the property which would
be subject to the special tax or assessment lien to pay debt service on tile
bonds, after the installation of the improvements to be financed, must exceed by
at least three times, the principal amount of bonds to be sold. The value
of the real property shall be determined by an M.A.I. appraisal,
performed by an appraiser selected by or approved
by the City.D. The proposed development project must be consistent with the
City's General Plan. Projects shall be at the stage where all criteria of this
policy can be adequately assessed. Developments proposed for inclusion in
a district shall have already received environmental review and shall
have already received legislative approvals such as zoning, master plans or
specific plans, tentative maps and development agreements, whichever applies.
The City Council may approve a district that includes some lands
without legislative approvals if the improvement to be constructed is consistent with the general
plan and if the City Council finds the improvement is required in
the
E. Facilities which are, upon completion, owned, operated or maintained by
public agencies shall be considered public facilities. Limited exceptions will
be made for certain facilities to be owned, operated or maintained by a public
utility company.
F. The City shall select and solely direct the work of the bond counsel,
underwriter, appraiser, assessment engineer, financial advisor and such other
professionals and consultants it deems necessary and appropriate in
accordance with City policy. All consultants shall comply with tile
regulations of the Fair Political Practices Commission and Section 87100 of
the California Government Code.
G. Improvements shall be constructed and/or acquired, and bonds shall be
issued, in strict accordance with the district enabling legislation.
H. The City will consider the apportionment of assessments or special taxes to
those properties found to receive special benefits by the assessment engineer
or special tax consultant and with limited input from the proponent of the
development project.
I. The proponents of the district must demonstrate to the satisfaction of the City
Council that interim financing or otller means is available to meet all
assessment or special tax obligations between the time the district is formed
and the payoff of the bonds or their assumption by the purchasers of the
final use" parcels within the proposed development. As part of tIlis review,
the City Council may also consider any indebtedness presently existing
against the properties to be assessed. The district proponents must bring all
property tax bills current and agree to keep them current prior to
confirmation of the district.
1. A fiscal feasibility report shall be required if forty percent (40%) or more of
the land witllin a district is substantially undeveloped. The report shall be
prepared by or at the direction of the City. All costs for preparing this report
shall be borne by the applicant/developer. An estimate of the report cost will
be made prior to initiating the study and the applicant/developer shall deposit
the full estimated cost prior to starting the report and shall pay any additional
costs as and when required.
K. All statements and materials related to the sale of Special Assessment or
Community Facilities District Bonds shall emphasize and state tIlat neither
the faith, credit nor tile taxing power of the City is pledged to security or
repayment of tile Bonds. The sole source of revenues to repay such bonds
shall be tile special taxes, annual assessments or funds derived from
foreclosure proceedings.
1. As a part of the structuring of the financing for the district, an adequate
reserve fund shall be funded from the proceeds of each series of bonds to
cover any potential defaults. The amount of the reserve fund shall be
determined by the City with the advice of the financial advisor and shall
9
equal the lesser of ten percent (10%) of the original principal amount of the
bonds, maximum annual debt service or one hundred twenty-five
percent 125%) ofaverage annual debt
service.M. Additional credit enhancement in the form of a Letter of Credit will
be required on projects if anyone property owner will be responsible
for payment of 20% or more of tile total annual special tax or special
assessment to be levied. The Letter of Credit is to have a term of one year, subject
to annual renewal and to be in the amount equivalent to the gross debt
service on tile bonds allocable to the person's property for tile current fiscal year
and the succeeding fiscal year. The amount of tile letter of credit will
be proportionally reduced as the property owner sells portions of his or
her property and will terminate when tIleir property holding has an annual
special tax or special assessment liability below 20%. New property
owners responsible for 20% or more of the total annual special tax or assessment
will be required to provide a substitute Letter of Credit under the same terms
and conditions as described
herein.N. It is the policy of the City Council in approving basic
legislative authorization for developments such as master plans for
planned communities, to give such approvals as a part odhe City's on-
going planning processes. That is, tile City reserves the right to modify the approvals
in the future as they determine the public interest may require.
Such approvals when given are subject to a condition that the construction of any part
of a development does not vest any rights to complete other portions
of the development. Construction of public improvements pursuant
to a Community Facilities District or assessment district on
undeveloped land shall not vest any rights to future legislative approvals for the property
to be assessed or to any particular level, type or intensity of use. Proponents
of a district shall include an acknowledgment of this policy as a part
of their petition and shall expressly waive on their behalf and on behalf
of their successors and assigns any cause of action based on the case of
Furv v.County of Sacramento which might be applicable to the properties
to be taxed
or assessed.O. The principal purpose for the City Council's approval of district
financing in regard to Arterial Highway construction is to extend or complete the
City's circulation systems. The City Council in that regard will not
favor a proposed district which contemplates tile construction of a portion
of an arterial street without extending it in a logical way to connect to the City'
s or an adjacent jurisdiction's existing circulation system. The City
may require tIlat proponents of a district presenting a petition expand the area
to be included within a proposed district as may be necessary to
complete such
circulation links.P. (I) District proponents shall be responsible for compliance
with all applicable federal and state statutory disclosure requirements
in transactions with purchasers of properties within the district. District
proponents shall provide full disclosure to all prospective, and actual, buyers
of
witllin the District) of the District's assessment/special tax levy. The
District proponent shall submit a full disclosure program for the City's
approval prior to the sale of the project's first lot. In advertising the price of
the housing tile advertised amount shall include a statement tIlat the property
is subject to assessments and/or special tax levies.
NOTE: Regarding Mello-Roos Districts, the City Council may
require proponents of tile district to discharge the district bonds
applicable to tIleir property prior to tile sale of individual lots, or the
City Council may approve a pass through of the bond obligation to
a prospective purchaser. The City Council will make
tIlis determination at tIleir sole discretion based upon public
benefit.2) District proponents shall also assist the City in complying with
Rule l5c2-l2 promulgated by the Securities and Exchange
Commission by cooperation in initial and continuing disclosure
as appropriate.Q. The City Council adopts the requirements of Section 53345.8 of
the Mello-Roos Community Facilities Act of 1982 as sufficient minimum
standards for the credit quality of any bonds issued pursuant to
that Act.R. The City in its discretion may require, and may employ a consultant
for the purpose of conducting a market absorption study. The study,
if required,shall include an estimate of the total number of units, land uses and
rate of absorption, and will be used as a basis for verification that
sufficient revenues can be generated, and to determine if the financing of the
infrastructure and public facilities is appropriate given tile projected level and
pace of development. In tile case of a phased development, land
value appraisal should include the developed land value assuming the infrastructure
to be included in the current financing is completed. However, land
values for remaining future phases of the development should not
assume future infrastructure is completed. The study will also be provided to
tile appraiser for use in the
appraisal process.S. All costs incurred by the City prior to formation of the district,
including but not limited to consultant costs (e.g., legal counsel, engineer
firms, appraisers,special tax consultants, market absorption consultants,
financial advisors),City staff and administrative costs and related expenses, cost
of providing notices, printing and publication costs, and all expenses directly
or indirectly relating to these items, shall be reimbursed to the City
by the applicant/developer prior to formation. Reimbursement shall
be facilitated by advance deposit increments in accordance with a required
funding and reimbursement agreement between the City and the applicant/
developer. The deposit must be in place before any work is initiated by consultants
on
City staff.In the event that the district is not formed due to City disapproval or
due to applicant/developer abandonment, or the district is formed and bonds
are not issued for any reason, the City will refund to applicant/
developer
remaining unexpended and unobligated portion of advance deposits posted
with tile City, subject to City's prior and full reimbursement of all its direct
and indirect costs. The City shall be entitled to pay any refund to the
applicant/developer listed on the application form, irrespective of any
changes in tile ownership or composition of applicant/developer.
T. The City, in conjunction with its financial advisors, shall determine whether
the aggregate cost of public improvements and permitted indirect costs,
allowable under statute, shall equal an amount which renders formation of a
district, both economically cost-effective and efficient. The size of the
bond issue, as determined by the City and its consultants, shall meet
industry standards with respect to marketability. The minimum size of a
Community Facilities District bond issue shall be approximately $3.0 - $3.5 M.
12
V. FEE SCHEDULE
The district proponent shall be subject to the following fee as applied in the
following manner:
DISTRICT APPLICATION FEE
In addition to the deposit required pursuant to Section IV Paragrath R, with the filing of
the application to form a district the proponent shall pay a District Application m in an
amount determined as follows:
Jotal District Bond Amount District Application Fee
Less than $10,000,000
Greater than $10,000,000
5,000.00
10,000.00
13
VI. PROCEDURES
A. It is the intention of the City Council that proponents of a district have an
early opportunity to have the proposal reviewed by City staff for
compliance with this policy. To facilitate staff review, each proposal shall
be reviewed by the ~ Financinl1 District Review Committee. The
Committee shall consist of members appointed by the City Manager. The
City Attorney will act as legal counsel and the City Manager shall "chair"
the Committee or their designees.
The Committee shall meet with proponents of a district to review a
proposed district to determine whether or not the requirements of this
policy have been satisfied. Committee review shall take place prior to the
submittal ofROI to City Council and after the deposit and application fee
have been submitted. Whenever any such project is presented to the
Council it shall be accompanied by a report containing the findings and
recommendation ofthe Committee made in regard to such project.
B. Upon review of the proposed district and after considering the report of the
Committee, the City Council shall determine whether or not to approve
proceeding with the formation of the district. It is the policy of the City
Council to limit projects to the criteria set forth in this policy. The City
Council reserves to itself the authority to approve or disapprove any
proposed improvement district based upon the evidence received at
hearings held by the City Council. Any exceptions to the criteria of this
policy will be approved only upon an express finding by the City Council
that the project is so affected with a public interest that the City should
assist in providing financing for the improvement in order to satisfy a
public need. If the City Council approves proceeding with the formation
of the district, City staff and the proponents shall proceed to do that in
accordance with state law and the requirements of this policy.
C. Where there are multiple proponents of a proposed district they shall
designate a spokesman authorized to act for the proponents in their dealing
with the City. The spokesman shall be responsible for collecting any fees
for deposit with the City, providing any necessary information to the City,
and for communicating as necessary back to the proponents.
14
VII. APPLICATION PROCESS
Early communication with the City is encouraged to assist applicants in
evaluating the feasibility of available financing programs and to discuss program
procedures:
A. PREAPPLICATION CONFERENCE: Applicant meets with City staff to
discuss the proposed project and application procedures.
B. APPLICATION SUBMISSION: Applicant submits an initial application
for review by City staff. Applicant pays the District Application Fee (See
Section V, Fee and Charge Schedule)
C. PROJECT REVIEW: Public Financing District Review Committee shall
meet to discuss initial application, including any issues raised and further
information that might be required. If necessary, applicant submits
revised application.
D. APPLICATION PROCESSING: Upon City determination that
application is complete, staff prepares a staff report which forwards the
request for district formation and project financing and staff
recommendation to the City Council.
E. CITY COUNCIL CONSIDERATION: The City Council makes any
necessary findings and grants or denies the application, selects consultants
if approval is granted) and either approves contracts or directs staff to
negotiate contracts.
F. PROJECT INITIATION: Staff submits consultant contracts,
reimbursement agreements and other similar items for City Council
consideration.
G. PROJECT IMPLEMENTATION: Applicant, staff and consultants meet
to determine preliminary project schedule and begin work necessary to
initiate district formation.
15
VIII. CRITERIA FOR APPRAISALS
The Appraisal Standards for Land Secured Financing published by the California
Debt Advisory Commission and dated May, 1994, are adopted as the appraisal
standards for the City of Orange with the following modifications:
1. The independent review appraiser is an option, and not a requirement if the
District has a lien to value ratio of 4: 1 or greater or if the bond amount is under
10,000,000.
2. The Comparable Sales method may be used whenever there is sufficient data
available.
3. The appraiser should assume the presence of the public infrastructure to be
financed with the bonds.
4. The special tax lien need not be computed as the present value of the future tax
payments if there is a pre-payment mechanism or other more appropriate
measure.5. In the Discounted Cash flow analysis, the appraiser is to take care that
the inclusion of "developer profit" as a cost, and the setting of the discount rate
to include a "risk premium" for equity investors, does not amount to a "
double-counting" for the
developer.
IX. REQUIREMENTS FOR TAX ALLOCATION FORMlJLAS
The proposed amount and apportionment of the special tax shall comply with the
following criteria:
1. The special tax formula shall be structured to produce sufficient annual
special tax revenue to pay: a) Annual debt service, and b) Reasonable
annual administrative expenses and the cost of any services and "pay as
you go" programs funded by the CFD special tax.
2. A backup special tax to protect against changes in densities or product
type will be required.
3. The rate and method of apportionment should not provide for an annual
increase in the maximum special tax for residential properties to exceed
two percent (2%) annually.
4. The total projected annual special tax revenues, less estimated annual
administrative expenses, must exceed the projected annual gross debt
service on the bonds by at least ten percent (10%).
5. All property within the CFD to be benefited shall bear its appropriate
share of the special tax liability. The special tax formula shall be
structured to closely link the tax paid by a property owner with the actual
benefit that the property owner receives from the improvement. The
formula shall not create an unequal tax allocation that would result in the
early home buyers in a development project paying a disproportionate
share of the infrastructure costs of the project in relation to the benefit that
they receive - indirectly subsidizing the developers. Also, the special tax formula
shall not allow early low payments and later increased substantially.
6.
The special tax shall be allocated and apportioned on the basis of reasonableness
to all categories and classes of property receiving specific benefit
within the CFD.7.
A method to prepay or completely payoff the special tax after District formation
shall be required absent demonstrated impracticality.8.
The projected ad valorem property tax and other direct and overlapping debt
for the proposed CFD (including estimated CFD charges, projected benefit
assessments, levies for authorized but unissued debt and any other anticipated
municipal charges which may be included on a property owner'
s annual tax bill), including the proposed maximum special tax,shall
not exceed two percent (2%) of the anticipated sales price to the ultimate
home buyer. Any deviations from the foregoing will not be permitted
unless specifically approved by the Council.17
9. The special tax formula shall be such that once the total tax need is known,
and the status of all properties within the financing district relative to that
formula are known, the special tax on each parcel is determined purely by
the application of the formula.
18
X. POLICY ON JOINT FINANCING DISTRICTS
The City may enter into a Joint Powers Authority or may enter into a joint
financing agreement or a utility agreement (pursuant to Section 10110 of the
Street & Highways Code) with regard to proposed districts, if the district is in
substantial compliance with the City's public financing policies as contained
herein. After staff review, all such requests shall be brought before the City
Council and will be reviewed in a similar manner as are City initiated districts.
The City recognizes that the Mello-Roos Community Facilities Act of 1982
may be the only method available to school districts to mitigate the impact of
new development, new school facilities may be given first priority in any joint-
use of the Mello-Roos Act by the City and any school district. In
appropriate cases, the City may defer to any school district in the use of the Mello-Roos
Act, but only to the extent of mitigating the impact of new development (
as distinct form solving current school district problems), and only to the extent
such mitigation is not provided by statutory developer
fees andstate funds.
N :