TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Ivan Holler, Assistant City Manager
PREPARED BY: Javier Carcamo, Finance Director
SUBJECT: Amended and Restated Community Facilities District Goals and
Policies
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RECOMMENDATION
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Adopt Resolution No. 23-4717 entitled: A Resolution of the City Council of the City of Murrieta, California, Adopting an Amended and Restated Community Facilities District Goals and Policies.
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PRIOR ACTION/VOTE
On January 21, 2003, the City Council adopted the Land Secured Financing Policy for Special Assessment and Mello-Roos Community Facilities District Financing (Vote: 5-0).
On April 5, 2016, the City Council adopted Resolution No. 16-3536, amending the Land Secured Financing Policy (Vote: 5-0).
On October 3, 2023, the City Council considered an Amendment to the Community Facilities District Goals and Policies and directed staff to present the recommendations in a workshop (Vote 3-2).
On December 5, 2023, City staff provided a Community Facilities District Workshop to present recommendations (Non-Action item).
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
BACKGROUND
The purpose of the Community Facilities District (CFD) Goals and Policies is to establish a set of guidelines for the formation, including the sale of CFD bonds to finance the acquisition or construction of public infrastructure required to support new development, the provision of authorized public services, and the subsequent administration of CFD’s. The primary objective of a CFD is to ensure that new development fully funds the cost it generates for the City and funds improvements promptly to accommodate the expected growth. The City’s goal is to support development projects that address a public need and benefit the City and its residents. Proposed development projects requesting CFD debt financing will be evaluated individually to determine if such financing is financially viable and in the City’s and its residents’ best interest.
On January 21, 2003, the City Council adopted the City’s local goals and policies for CFDs (Land Secured Financing Policy) under the provisions of the Mello-Roos Community Facilities Act of 1982 (Mello-Roos Act). The policy has not been updated since April 5, 2016. To ensure the policy complies with the Mello-Roos Act and California Government Code Section 53312.7, City staff is recommending that the City Council amend and restate the Community Facilities District goals and policies to include clarification and update key components of the policy with the most significant changes as follows:
• Expand the purpose section of the policy and identify the various Acts and Government Code sections governing the formation of CFDs;
• Expand criteria for staff to make the final determination on whether a proposed District shall proceed under the provisions of the “Improvement Acts” (various California Code sections pertaining to the formation of different types of financing districts) or the Mello-Roos Act;
• Include a list of eligible facilities that can be financed with CFD bonds;
• Include Development Impact Fees as an eligible cost to be financed by a District;
• Increase the required deposit from $10,000 to at least $50,000 to cover City costs associated with the CFD formation;
• Special taxes for services may escalate in any manner determined by the City as necessary to cover annual estimated increases in the costs of providing such services;
• Establish a maximum assessment to two percent (2%) of the greater of the assessed value or appraised value of such property, which is increased from 1.8% in prior policy [to incentivize developers and accommodate increased services costs and potential service CFDs and assessment districts];
• Allow annual escalators of the special tax by 2% per year for facilities, as determined by the City;
• Remove the requirement that 50% of the development be constructed prior to the issuance of the bonds; however, the City will retain the discretion on when to issue;
• Include proceedings format for the special assessment district and Mello-Roos Community Facilities District and include an application; and
• To limit bond issues to 30 years.
To ensure the development and financing of public infrastructure and services within the City are managed using sound fiscal policy for the benefit of residents, it is recommended that the City Council adopt the amended and restated Community Facilities District Goals and Policies (Attachment 1) to replace the prior CFD policy (Attachment 2).
FISCAL IMPACT
There is no fiscal impact associated with this item.
ATTACHMENTS
1. Resolution No. 23-4717
2. Land Secured Financing Policy 2016