title
APPROVE THREE RESOLUTIONS AND ADOPT AN ORDINANCE IN CONNECTION WITH FORMATION OF COMMUNITY FACILITIES DISTRICT 2018-3 (CITYWIDE SERVICES AND MAINTENANCE)
recommended action
RECOMMENDATION
At the conclusion of the public hearing, if a protest does not exist, it is recommended that the City Council take the following actions:
1. Approve three resolutions, including:
a) A resolution of formation establishing Community Facilities District No. 2018-3 (Citywide Services and Maintenance), authorizing the levy of a special tax within said District, and preliminarily establishing an appropriations limit for the District.
b) A resolution calling for an election for the purpose of submitting the levy of the special tax and the establishment of the appropriations limit to the qualified electors of the District.
c) A resolution canvassing (review and examine) the results of the April 2, 2019 election held within the initial annexation area of Community Facilities District No. 2018-3 (Citywide Services and Maintenance) authorizing the levy of a Special Tax within said district, establishing an appropriations limit for said district, and calling an election for the purpose of submitting the proposition to the qualified electors of the district.
2. Adopt an ordinance authorizing the levy of a special tax within Community Facilities District No. 2018-3 (Citywide Services and Maintenance).
It is also recommended that the resolutions authorize the City Manager, Chief Financial Officer, and other City officers to take appropriate and necessary actions to carry out the purpose and intent of the resolutions.
body
Summary
Approval of the recommended resolutions will complete the implementation of Title 5, Chapter 5.05 of the Council Policy Manual. Council adopted this policy in July 2018 to require new residential development, as defined, to provide adequate resources for the provision of services and maintenance of facilities impacted by the development. Previously, staff analyzed the financial impact of potential residential development and determined that it would add net General Fund costs not included in the Long-Range Financial Plan. The adopted Council policy allows for the formation of a new services and maintenance Community Facilities District (CFD) to offset the cost of new residential development. Approval of the recommended resolutions completes the creation of the new services and maintenance CFD (“CFD 2018-3”) and provides the mechanism to collect the necessary taxes to provide services and ongoing maintenance of facilities required to meet the demands of new development in the City.
Council approved the resolution necessary to begin the process of forming CFD 2018-3 on February 5, 2019, and also set a public hearing date of April 2, 2019. The recommended resolutions that finalize formation call for the landowner election (which can be held immediately because the City has procured waivers of the time otherwise required), canvass election results, and authorize placement of special taxes are attached to this item. The City Attorney’s office approved these resolutions as to form.
DISCUSSION
Background
On February 5, 2019, the City Council adopted Resolution 2019-02-05-1402 declaring its intention to establish a CFD and levy of a special tax to finance public services. The City took this step after having adopted Title 5, Chapter 5.05 of the Council Policy Manual in July 2018 to require new residential development, as defined, to provide adequate resources for the provision of services and maintenance of facilities impacted by the development. Previously, staff analyzed the financial impact of potential residential development and determined that it would add net General Fund costs not included in the Long-Range Financial Plan. The adopted Council policy allows for the formation of a new services and maintenance CFD to offset the cost of new residential development.
Approval of the proposed resolutions is the final step in the creation of the new services and maintenance CFD (“CFD 2018-3”). The CFD authorizes the placement of an annual property tax assessment on each parcel in the district to provide ongoing revenue to pay for services and maintenance in the district and to pay for annual CFD administration costs.
Adoption of the Resolution on February 5, 2019, set a public hearing date of April 2, 2019. At the public hearing, the City can hear testimony concerning the proposed CFD, the extent of the proposed CFD or the furnishing of the particular types of public facilities and services and also consider protests from registered voters residing within the proposed CFD and persons owning real property within the proposed CFD. At the end of the public hearing, the City Clerk will conduct the landowner election and announce the results.
On May 15, 2018, Council approved the Calaveras Estates #4 development via Resolution 2018-05-15-1503. As part of the approval, the developer agreed to include the development in CFD 2018-3 when formed, so the Calaveras Estates #4 project is included within the initial boundary of CFD 2018-3. The boundary map also includes a “future annexation area” for all subsequent new residential developments. New residential development and existing development seeking substantive changes to its development agreement will annex into CFD 2018-3. Existing developed property in the City is not subject to the tax. For existing development that the City has already approved and mapped, but has not issued building permits, inclusion in CFD 2018-3 is voluntary.
In June 2018, the City formed CFD 2018-2 Westlake Villages II as the first district to require special taxes for City services and maintenance costs. That district includes two special taxes, one for capital financing of facilities and another for services and maintenance. Once bonds are paid off, a portion of the capital facilities tax will transition to a special tax for ongoing maintenance of facilities within the district. The level of taxation in CFD 2018-3 to pay for City services and maintenance costs mirrors the terms enacted in the Westlake II CFD.
Consistent with Council policy, Council may waive or reduce the special tax (by 50 percent) on new residential development located in infill areas as defined in Municipal Code 16.52, or state-designated disadvantaged areas.
Present Situation
The City completed all legal matters needing to take place before the public hearing concerning the formation of the proposed District, including recording a Boundary Map showing the initial area and future annexation boundaries with the San Joaquin County Recorder on February 14, 2019, and publishing a Notice of Public Hearing in The Stockton Record on May 24, 2018. Certificates certifying both actions regarding notification are on file with the City Clerk.
The law requires that a CFD can only be formed, and the tax approved, by a two-thirds vote of the eligible registered voters who reside within the proposed CFD. The initial boundaries proposed to be set include the Calaveras Estates #4 subdivision. The law provides that if there are fewer than 12 registered voters residing within the boundaries of the proposed CFD (as is the case here), then the eligible registered voters are the landowners with one vote for each acre of land owned. The sole landowner in the proposed CFD has filed the necessary waiver and consent documents with the City Clerk shortening the time periods and waiving various requirements for conducting a mailed ballot election.
Formation of the District
The adoption of the recommended Resolutions and Ordinance will establish the City of Stockton Community Facilities District No. 2018-3 (Citywide Services and Maintenance). If the CFD is formed, it will establish both the base and supplemental taxes and their respective inflator rates. There will be no debt issued in the district.
Services and Maintenance to be funded
The types of services and maintenance proposed to be funded by the special tax include services for or related to police and criminal justice, fire, ambulance and paramedic, parks, parkways, roads, streets, open space, and maintenance and operation of any city real property or other tangible property with an estimated useful life of five or more years, including incidental expenses related to any authorized service, and may also finance charges for administration of the CFD and reimbursement of costs related to the formation of the CFD.
In addition, certain incidental expenses authorized by the Mello-Roos Community Facilities Act of 1982 can be financed, including but not limited to, the cost of planning, engineering, and designing the facilities; costs associated with the creation of the proposed CFD, issuance of bonds, and determination of the amount of taxes and the collection and payment thereof.
The Rate and Method of Apportionment
Parcels within CFD 2018-3 will pay a maximum annual special tax based on the rate and method of apportionment, and manner of collection of special tax commonly referred to as the Special Tax Formula. For areas not financing capital improvements through a CFD, having separate zones will enable each area to have the second tax to be governed by its own separate Special Tax Formula that will start thirty (30) years after the developments’ annexation into the district and will provide funds to finance maintenance and/or replacement of the capital improvements put in place as a condition of approval for the development.
As required by Section 53339.3(d) of the Act, the special tax proposed to pay for services to be supplied within the future annexation area will be equal to any special tax levied to pay for the same services in the existing boundaries of CFD 2018-3, except that a higher or lower tax may be levied within the future annexation area to the extent that the actual cost of providing the services there is higher or lower than the cost of providing those services in the existing CFD 2018-3. However, the City is not limited in its ability to levy a special tax within the future annexation area to provide new or additional services beyond those supplied within the existing CFD 2018-3. Additionally, the Special Tax Formula provides that a lesser special tax (half of the full amount) can be charged in areas designated as a disadvantaged community area pursuant to California Senate Bill 535 or in infill areas as defined in section 16.52 of the Stockton Municipal Code. Council can also choose to waive the tax in these areas. These options are consistent with Title 5, Chapter 5.05 of the Council Policy Manual.
Each year, the City will approve the annual costs for CFD 2018-3. The annual costs will include: •
• Annual services costs for parcels in the district •
• Annual maintenance costs for those parcels subject to the secondary tax
• Administrative expenses
The services portion of the annual costs funded by the levy of the special tax will be determined by calculating the annual cost of $500 per year single-family residential unit or $330 per year for multifamily residential from the base year of 2018/19 and will grow at a rate of 4% per year in perpetuity.
The area-specific tax, for those areas not subject to a transition tax through a separate CFD formed to finance capital infrastructure, will be calculated in a manner that mimics how transition events occur in capital districts. In these districts, residents pay an annual tax that begins with the initial bond financing and continues until all bonds are retired or approximately thirty (30) years beyond the final issuance. At that time, the final year tax transitions to a 20% maintenance/replacement tax. For those areas subject to this separate tax in this district, the tax will be calculated as follows:
$1,800 base year rate (what would be the typical capital financing tax in capital CFDs) inflated at a rate of 2% annually for 30 years which becomes $3,260 in year 31. This amount would transition to the 20% maintenance/replacement tax at a rate of $3,260 X .20= $652 and then grow at a rate of 2% per year in perpetuity. By beginning the tax at $360 and inflating it at 2% and applying it in year 31, the tax implemented is the same as if it had had the capital tax and it fell to 20% at the payoff of the capital bonds in the transition year.
The Act allows for the annual administrative costs of the district to be included in the annual tax levy.
FINANCIAL SUMMARY
The City is paying the costs to form CFD 2018-03. Those costs include legal fees of $20,000 and formation district consultant fees of $24,000 and are budgeted to be paid out of 201-2001-510.20-65.
The rate of development that would pay these special taxes is unknown and projecting estimates of these revenues is not possible. A hypothetical residential development of 1,000 units (800 single family/200 multifamily) would generate $466,000 per year from the services tax assuming all units were built at the same time. After ten years, that development would generate approximately $663,000, and after 20 years, approximately $982,000, and after 30 years $1.3 million.