HomeMy WebLinkAbout1990-01-23 - AGENDA REPORTS - INFRASTRUCTURE FINANCE POLICY (2)NEW BUSINESS
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SUBJECT:
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BACKGROUND
AGENDA REPORT
City Manager Approval
Item to be presented
January 23, 1990
Policy for Infrastructure Financing
Finance
Andrea Daroca
The attached policy for infrastructure financing was originally received by the
City Council at the December 8 work study session to review. The policy was
then presented at the City Council Study Session on January 3, 1990.
As was discussed, infrastructure development within the City of Santa Clarita,
the State of California, and throughout the United States as a whole is a
paramount issue at this time and will continue to be in the near future. This
policy, if adopted, would provide the City with a guideline in financing public
facilities and services. Comments made by the City Attorney at the Study
Session of January 3 have been incorporated into the policy.
This policy can be used as a basis for structuring future financings initiated
by the City as well as financing infrastructure for development projects
initiated by private landowners. As needed, these guidelines allow that
cost/benefit analysis, public benefit and fiscal impact analysis of projects be
performed prior to any debt financing structure. It also requires that, prior
to the financing, the facilities being financed comply with the General Plan
guidelines and that the financing meet all state required debt repayment limits.
The policy requires an application procedure for projects initiated by
applicants or landowners, thereby placing the burden of upfront costs on the
applicant requesting City cooperation in financing and allows the City to guide
and lead any and all financings.
It is imperative that a City
facilities. Recognizing that
presently has an opportunity
flexibility in financing such
public facilities.
RECOMMENDATION
have structured guidelines to be used to finance
Santa Clarita is newly incorporated, the City
to put in place guidelines that will allow
needed facilities as roads, drainage or other
Staff's recommendation is to adopt the Policy for Infrastructure Financing.
ATTACHMENT
Policy for Infrastructure Financing
'PR��ED
A9 Item:192
THE CITY OF SANTA CLARITA
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POLICY GUIDELINES FOR USE OF PUBLIC FINANCING FOR PROVISION OF
PUBLIC FACILITIES IN PROPOSED DEVELOPMENT PROJECTS
As a result of the expanded usage by California public agencies of public finance to fund
public infrastructure facilities, the City of Santa CLarita (the "City") has adopted the following
Policy Guidelines for the provision of public facilities financed with City tax exempt
financings. There are three kinds of. projects; one homeowner initiated, City initiated, and
mostly developer initiated to meet conditions of project approval. It is the City's desire to
make these Policy Guidelines available to developers to permit them to create realistic plans,
make reasonable advance business decisions, determine feasibility of their development projects,
and reduce uncertainty regarding the City's willingness to participate in such developer initiated
programs.
1. The Citv encourages the development of commercial and industrial property. The
City Council will consider the use of community facilities districts (hereinafter
"CFD's"), provided in accordance with procedures of the Community Facilities Act
of 1982, or special benefit assessments districts (hereinafter "AD's") provided in
accordance with the Municipal Improvement Acts of 1911, 1913 or 1915, as well as
other funding sources and financing methods to assist these types of development.
Where, in the City Council's opinion, the public facilities or other amenities of a
residential dc%,eiopment represents a significant public benefit, these types of
public financing will also be considered.
While recognizing that public facilities proposed to be financed must meet a public
need and must bcnefit.propertics within the proposed development project, public
benefit implies that a significant benefit will also result to the -community at large.
An example of significant public benefit is a public facility having regional
impact such as the construction of master planned facilities for streets, storm
drain, sewer, water and regional facilities for water. treatment, wastewater
treatment, flood control, freeway overpasses, bridges, schools, fire stations and
parks. Other projects which may be of public benefit are those which would
increase net revenues to the City, provide for adequate residential housing,
integrate with existing capital projects, coordinate infrastructure construction,
renovate or complete existing infrastructure, and increase employment that
provides for a net increase in jobs for City residents. Regional improvements or
facilities of benefit to the surrounding community will be considered to be of
public benefit.
Public financing will be permitted for real property public improvements that will
benefit the ultimate property owner and whose useful life will be equal to or
greater than the term of the bonds.
2. The proposed development project must be consistent with the City's General Plan
and have secured appropriate land use approvals from the City to allow.for all
proposed development of the project area. An application to utilize land -secured.
financing will be accepted and processed through the Finance Department only
after the development project has been submitted to the Community Development
Department for tentative map approval.
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3. Public financing may be used only for public: facilities which are, upon
completion, owned, operated, or maintained by public agencies. Limited exceptions
may be made for certain .facilities to be owned, operated or maintained by private
utilities and, to the extent permitted by law, for the .payment of fees normally
incurred by the developer, such as building fees, water fees, traffic impact fees,
-park fees, and school fees, but will be at the sole discretion of the City. Rights of
way or lands which are usually dedicated. by a developer and facilities regulated
by a public utility will usually not be eligible for financing. _
4. An appraisal of the property subject to any lien required to secure any public
-.financing shall be required if the property is subject to any lien or tax required to
secure any public financing. A minimum residential property value to lien/debt,
ratio of 3.5:1 and a minimum commercial/industrial property value . to lien/debt
ratio of 3:1 (all ratios to be calculated assuming the public facilities being financed
are completed and including any overlapping AD's or CFD's) must be present
pursuant to Premise 3 entitled "Bulk Land Value" as set forth in Attachment A as
determined by an M.A.I. appraisal. The appraisal shall be reviewed by the City
and shall be prepared as set forth in Attachment A, hereto. In those instances
where the residential ratio is less than. 3.5:1 and in those instances where the
commercial/industrial ratio is less than 3:1, credit enhancements must be provided
to the satisfaction of the City. These enhancements may include, but are not
limited to, letters of credit and/or appropriate insurance.
5. Unless waived by the City, a separate absorption study of the proposed
development project shall be required for land secured financings. Among other
things, the absorption study should include an estimate of total number of units
(EDU's), land use(s), and rate of absorption. The absorption study shall be used as
a basis for verification that sufficient revenues can be produced and to determine
if the financing of the public facilities is appropriate given the timing of
development. Additionally, the projected absorption rates will be provided to the
appraiser for use in the appraisal required in Section 4 above.
6. With regard to CFD's, the proposed rate and method of apportionment of the
special tax shall be established by the City and will comply with the following
criteria:
a. The rate and method of apportionment shall not provide for an annually
increasing maximum special tax for any classification used to levy the tax,
However, under limited circumstances (such as low-income housing) an
increase in the maximum special tax will be permitted, not to exceed two
percent (2%) annually.
b. 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%).
C. The projected annual special tax revenues shall include reasonable annual
administrative expenses and other direct costs to the CFD.
d. All property not otherwise statutorily exempted or owned (or to be owned)
by a public entity shall bear its appropriate share of the special tax
liability.
C. The special tax shall be equitably apportioned to all categories and classes
of property within the CFD.
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f. Prepayment of the special tax may be permitted according to a formula to
be set by the City.
7. Prior to approving any development project; the City will review its overlapping
debt and its projections of future debt .to make sure that the City will not exceed
its land -secured debt repayment limit of two percent (2%) of the fair market value
.of the property. The projected ad valorem property tax,. special taxes, and other
direct and overlapping debt for the 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, may not exceed two
percent (2%) of the anticipated assessed value of each 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 (approved/recorded) or a final map or a parcel map for commercial,
industrial, or multi -family use has been (approved/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.
8. The City will determine how the spread of assessments or special taxes are made to
those properties found to be benefited through the assessment engineer or special
tax consultant and with input from the proponent of the development project..
9. Each bond issue shall be structured to. adequately protect bondowncrs and to
protect the .bonding capacity or credit rating of the City. The stru;:ture may
include some combination of credit enhancement, foreclosure covenants, special
reserve fund or deposits and/or a contractual commitment by the proponents of the
district and their successors to pay the special taxes or assessments during at least
the initial term of the bonds. A credit enhancement may be required. If the
required credit enhancement takes the form of a letter of credit, credit
enhancement shall be provided as set forth in a form to be established by the City.
A foreclosure covenant will be required.
10.. The City shall require bond issues to be structured with approximately level debt
service. To the extent that bonds are issued in series, individual series of bonds
may have uneven debt service if the intent is to create level debt service at such
time as all series of bonds are issued and to minimize the potential of a fluctuating
annual special tax or assessment. Deviations from the foregoing policy will only
be permitted under limited circumstances.
11. With respect to the CFD's and other land -secured financing districts, the special
tax or assessment lien shall be fully disclosed in compliance with applicable
statutory requirements. For development projects, the developer will prepare and
obtain approval from the City of a statement and report notifying any prospective
property owners of existing or proposed special taxes and/or assessments on the
property. This disclosure statement shall be issued to and signed by the
Prospective buyer prior to any commitment by the buyer to purchase the property.
The City, in its sole judgment, may require additional property owner notification
if the City deems that such notification will help make subsequent property owners
aware of liens or future tax obligations.
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12. The City Staff will perform an independent review of the proposed public
financing and may make recommendations to the City Council regarding the
financing's public benefits, financial risk, impact on the City's .bonding capacity,
economic feasibility and related issues. The proponents of the district may be
required to provide current and two prior years' financial statements, preferably
audited, and other materials to assist the City Staff in its fiscal review. The City
may, in its sole discretion, employ a financial consultant to assist the City in its
fiscal review, with all costs for such consulting services borne by the proponent.
The City shall prepare procedures for the, administration of this policy.
13. The City shall select the assessment engineer, appraiser; special tax consultant,
bond counsel, underwriter, financial advisor and other professionals and
consultants as it deems appropriate. No petition to initiate the formation of a land
secured financing will be considered valid without a reasonable deposit from the
proponent to compensate the City for all costs incurred to perform its analysis of
the proposal, to pay for the costs of .conducting the proceedings and to pay the
costs of any professional consultants required to process an application.
14. An application for land -secured financing must be completed in full before the
City will take any action to process the application. The form of the application
and the procedure for review shall be prepared by the City.
15. All statements and materials related to the sale of special tax bonds (CFD's) and
improvement bonds (AD's) shall emphasize and state that neither the faith, credit
nor the taxing power of the City is pledged to the repayment of the bonds, nor is
the City obligated to replenish the reserve fund from revenue sources other than
special taxes, annual assessments or proceeds from foreclosure proceedings.
16. All contracts for public improvements to be owned, operated, or maintained by the
City shall be solicited, let and administered by the City unless the Community
Development Department agrees in advance to acquire improvements in accordance
with applicable statutes. CFD's and AD's may finance the purchase of facilities
when construction has been completed prior to the adoption of the resolution of
formation to establish the CFD, or the resolution of intention to establish an AD.
The City shall not purchase completed facilities unless the City Council has
declared its, intention to purchase prior to the commencement of construction.
17. All of the City's administrative costs, before, during, and after the debt is issued,
shall be recovered. Costs chargeable to the district may be assessed annually or
included in the debt issue. Expenses not chargeable to the district will be paid by
the developer.
18. 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
Streets & Highways Code) with regard to a CFD or AD, if there is substantial.
compliance with the City's public financing policies. After staff review, all such
requests shall be brought before the City Council and will be reviewed in a similar
manner as arc City initiated CFD's and AD's.
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19. The City's Community Development Department works with interested parties to develop CFD's or
AD's and the City's Finance Department coordinates financial structuring and manages the
issuance of bonds using the CFD or AD financing mechanisms. For CFD or AD bonds, the City's
Finance Department has the responsibility for administering aLL bond issues including
authorizing and controlling aLL disbursements of bond proceeds. A preliminary and final
official statement and complete transcript for aLL CFD and AD financings shall be filed with
the City Clerk.
20. ALL proposed refunding or refinancing issues will be submitted to the City for review and
complete disclosure of the benefits and costs of the proposed refinancing.' After review, the
proposed refunding with a written staff recommendation will be presented to City Council for
its consideration.
21. The City Council has the right to waive or modify any of. the policies included herein if, in
its judgment, the ultimate property owners, the CFD, the AD, or the City would benefit from
such repeal, waiver or modification. When there is a City or homeowner initiated project, the
City Financing Team wiLL determine which guidelines apply.
This policy will be administered and interpreted by the City Financing Team with final
approval of all financing coming from the City CounciL.
ATTACHMENT A
Q
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CRITERIA FOR APPRAISALS
(A) Definition of Appraisal. An appraisal is a .written statement independently and
impartially prepared by a qualified appraiser setting forth an opinion of -defined
value of. an adequately described property as of a specific date, supported by 'the
presentation and analysis of relevant market information.
(B) Standards of Appraisal. The format and level of documentation for an appraisal
depend on the complexity of the appraisal problem. A detailed appraisal shall be
prepared for complex appraisal problems. A detailed appraisal shall reflect
nationally recognized appraisal standards, including, to the extent appropriate, the
Uniform Appraisal Standards for Federal Land Acquisition. An appraisal must
contain sufficient documentation, including valuation data and the appraiser's
analysis of the data, to support his or her opinion of value. At a minimum, the
appraisal shall contain the following items:
(1) The purpose and/or the function of the appraisal, a definition of the estate
being appraised, and a statement of the assumptions and limiting conditions
affecting the appraisal.
(2) An adequate description of the physical characteristics of the property
being appraised, location, zoning, present use, an analysis of highest and
best use.
(3) All relevant and reliable approaches to value consistent with commonly
accepted professional appraisal practices. If a discounted cash flow analysis
is used, it should be supported with at least one other valuation method
such as a market approach using sales that are at the same stage of land
development. If more than one approach is utilized, there shall be an
analysis and reconciliation of approaches to value that are sufficient to
support the appraiser's opinion of value.
(4) A description of comparable sales, including a description of all relevant
physical, legal and economic factors such as parties to the transaction,
source and method of financing, and verification by a party involved in the
transaction.
(5) A statement of the value of the real property.
(6) The effective date of valuation, date of appraisal, signature and
certification of the appraiser.
(C) Conflict of Interest. No appraiser or review appraiser shall have any interest
direct or indirect in the real property being appraised for the City that would in
any way conflict with the preparation or review of the appraisal. Compensation
for making an appraisal shall not be based on the amount of the valuation.
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(D) Community Facilities District or Assessment District Appraisal Premises. The
valuation of proposed CFD's or Ab's should. be based on three premises:
(1) Raw Land Value. (Premise #1). The total land within the project is valued
"as is".
(a) With any existing infrastructure.
(b) Without proposed infrastructure being financed.
(c) With existing parcel configuration.
(d) Considering planned densities allowed by the specific plan of the
project.
This is a typical type of land valuation..
(2) Proiect Buildout Value. (Premise #2). The total land within the project is
valued under projected conditions.
(a) With proposed infrastructure being financed completed.
(b) At the planned densities allowed by the specific plan.
(c) Land development is at the stage of being marketed to merchant
builders or tentative tract maps ready to be filed.
This is a projected value based on project plans predicated on market conditions
continuing as projected.
(3) Bulk Land Value. (Premise #3). The total land within the project is valued
.under projected conditions:
(a) With proposed infrastructure being financed completed.
(b) With existing parcel configuration.
(c) Considering planned densities allowed by the specific plan of the
project.
This premise should consider a discounted or "quick sale" valuation considering
time, costs and the possibility of a per unit value based on the total size of the
project.
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