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APPROVE RESOLUTION INTERPRETING RATE AND METHOD OF APPORTIONMENT TO AUTHORIZE ALTERNATE FORM OF PREPAYMENT OF SPECIAL TAX OBLIGATION FOR CERTAIN PARCELS WITHIN COMMUNITY FACILITIES DISTRICT NO. 2006-2 (WESTLAKE VILLAGES)
recommended action
RECOMMENDATION
It is recommended that the City Council approve a resolution to Interpret Rate and Method of Apportionment of Special Taxes to Authorize Alternate Form of Prepayment of Special Tax Obligation for Certain Parcels Within Community Facilities District No. 2006-2 (Westlake Villages).
It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of the resolution.
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Summary
Approval of the recommended resolution will provide a financing mechanism for both infrastructure and services necessary to complete the Westlake Villages development. The Westlake Villages development began in 2005 and approximately 300 parcels were developed. Development of the approximately 2,100 remaining parcels was interrupted by the Great Recession. To support the development, the City formed Community Facilities District No. 2006-2 (Westlake Villages) (the “Original CFD”) in 2006 as the development requires the construction of certain public improvements that cannot be readily funded solely by property tax proceeds, impact fees or other traditional government funding mechanisms.
Spanos Companies (the “Developer”) requested the City split off the undeveloped portion of the Original CFD to form a new CFD that will enable the remainder of the development to progress. The new CFD will include portions that will cover the continued financing of infrastructure, while also providing funding to pay for ongoing services and maintenance. Bonds will be used to provide the primary funding for authorized facilities.
The proposed resolution will interpret the prepayment provisions of the rate and method of apportionment of the special tax for the Original CFD to provide that the formation of the new CFD over the undeveloped parcels will constitute prepayment of the special tax obligation of the undeveloped parcels in the Original CFD.
DISCUSSION
Background
The Mello-Roos Community Facilities Act of 1982, as amended (Government Code Sections 53311 et seq.), was enacted by the California Legislature to provide an alternate method of financing certain essential public capital facilities and services, especially in the developing areas of the State of California. Once duly established by a city, county, or other local agency, a CFD is a legally-formed governmental entity with defined boundaries, with the governing board or legislative body of the local agency acting on its behalf. Subject to approval by a two-thirds vote of qualified electors in compliance with the provisions of the Act, a legislative body of a local agency may issue bonds for a CFD and may levy and collect a special tax within a CFD to repay such indebtedness.
The City formed the Original CFD at the request of the then-land owners, who had proposed to develop the Westlake Villages residential community. Development proceeded after formation of the Original CFD; however, due to unanticipated changing real estate market conditions beginning in 2008, only a small portion of the land in the Original CFD was developed with residences and sold to homeowners. A substantial portion of the land in the Original CFD remains undeveloped.
The rate and method of apportionment of the special tax for the Original District (the “RMA”) provides the special tax may be prepaid at any time by any parcel owner upon tendering a cash payment to the City calculated in accordance with the RMA. Section 8 of the RMA provides that interpretations of the RMA may be made by Resolution of the City Council to clarify any vagueness or ambiguity as it relates to the special tax rate, the method of apportionment, the classification of properties, or any definition applicable to the Original CFD.
The RMA did not envision that the development would be interrupted for over ten years and lacks a methodology for undeveloped parcels to prepay the special tax by incurring a special tax obligation in another CFD for the same purpose and financing the same facilities as in the Original CFD. Development plan changes should provide fairness and consistency of special tax rates with existing land uses within the Original CFD, while facilitating the remaining new development of the undeveloped land within the Original CFD. As of this date, the special tax has not been levied on any parcels in the Original CFD. Because the undeveloped parcels are proposed to be put into a new CFD (see item 18-4523), the existing homes will be assessed to finance needed stormwater and wastewater capital improvements.
Present Situation
As a result of the unanticipated delay in the originally contemplated development of the Original CFD and revised development plans, the Developer requested that the special tax obligation of the undeveloped land be deemed prepaid upon participation in a new CFD. The request also includes that the City establish a new CFD to finance the public facilities that were originally contemplated to be financed by the Original CFD.
Certain public facilities are planned to be financed by the levy of special taxes of the new CFD which is being presented as a separate item (item 18-4523) to Council at this meeting. The proposed district will include two parts, one that will fund the necessary capital improvements, and another part that will include a services and maintenance tax to offset the City’s ongoing costs to serve the development.
The special tax levied in the Original CFD applicable to the undeveloped parcels will be considered prepaid upon including such land in a new CFD and:
• Will facilitate the best interests and purposes of the Original CFD by separating the two areas and having each pay for those facilities that will be used by them. Existing homeowners will be assessed to upgrade temporary stormwater and wastewater facilities that were planned to be replaced as the development progressed.
• Only affects the undeveloped parcels and is not applicable to any other property in the Original CFD and will not affect the authorized maximum special tax on any existing homes.
• Will serve the purpose of creating a fair distribution of the special tax on future development of the undeveloped parcels at a rate which is consistent and equitable with the special tax rate on developed property in the Original CFD by placing the remaining improvements that will benefit this new area in a new CFD.
• Has been requested by and consented to by the owners of 100% of the undeveloped parcels.
This improvement is recommended by the attached resolution to interpret rate and method of apportionment of special taxes and to authorize alternate form of prepayment of special tax obligation for certain parcels within Community Facilities District No. 2006-2 (Westlake Villages).
FINANCIAL SUMMARY
There is no financial impact to the City in connection with the proposed interpretation of the RMA for the Original CFD. The Developer has provided funding for the legal and administrative costs related to the formation of the new CFD, including internal staff time.