HomeMy WebLinkAbout1990-01-03 - AGENDA REPORTS - INFRASTRUCTURE PLANNING POLICY (2)NEW BUSINESS
DATE:
SUBJECT:
DEPARTMENT:
BACKGROUND
AGENDA REPORT
City Manager Approval
Item to be presente
Andrea Daroca
January 3, 1990
Policy for Infrastructure Financing
Finance #
Attached is a policy on infrastructure financing. 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
vehicle to aid in funding public facilities and services.
It is imperative that a City have structured guidelines to be used to finance
facilities. Recognizing that Santa Clarita is newly incorporated, the City
presently has an opportunity to put in place guidelines that will allow
flexibility in financing such needed facilities as roads, land or civic center
facilities.
The policy requires an application procedure, 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.
The attached guidelines were originally received by the City Council at the
December 8 work study session to review. 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 facility comply with the General Plan guidelines and that
the financing meet all state required debt repayment limits.
RECOMMENDATION
Staff's recommendation is to adopt the Policy for Infrastructure Financing.
Attachment
Agenda 11em:- �
THE CITY OF SANTA CLARITA
POLICY GUiDELi1ES FOR USE OF PUBLIC FINANCING FOR PROVISION OF
PUBLIC FACILITIES IN PROPOSED DEVELOPMENT PROJECTS
As a result of the expanded usage by Califor,:ia public agencies of public finance to
fund public infrastructure facilities and seri•ices, the City of Santa Clarita (the "City"), has
adopted the following Policy Guidelines for the provision of public facilities and services in
proposed development projects. It is the City's desire to make these Policy Guidelines
ai•ailable to developers to permit then: 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 ni such dereloper 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 deveiopment 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 benefit properties within the proposed development project, public
bcnef it 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.
Z. 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 'devclopmcnt 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 gi%cn the timing of
development. Additionally, the projected absorption rates .kill 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 m,\ed
use development projects.
S. The City will determine how the spread of assessments or special ta\cs are made to
those properties found to be benefited through the assessment cnginccr or special
tax consultant and with input from the proponent of the development project.
9. Each bond issue shall be structured to adequately protect bondo«,nc:rs and to
protect the bonding capacity or credit rating of the Cit\. The stru::ture may
include some combination of credit enhancement, foreclosure covenants, special
reserve fund or deposits and/or a contractual commitment b} 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 ma\ 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 Citv 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 pav 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. creat
nor the taxing power of the City is pledged to the repayment of the bonds, nor is
the City obligated to replenish the rescrNe 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 Communit}
Development Department agrees in advance to acquire impro%,cmcnts 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
aianner 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 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 with 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 it 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.
k:scpolicy
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(D) Community Facilities District or Assessment District Aoaraisal Premises. The
valuation of proposed CFD's or AD'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 w2). 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 conaitions
continuing as projected.
(3) Bulk Land Value. (Premise r3). The total land within the projcct is , alucd
under projected conditions:
(a) With proposed infrastructure being finan,:cd complctcd.
(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" %aluation considering
time, costs and the possibility of a per unit value based on the total size of the
project.
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(D) Community Facilities District or Assessment District Aoaraisal Premises. The
valuation of proposed CFD's or AD'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 w2). 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 conaitions
continuing as projected.
(3) Bulk Land Value. (Premise r3). The total land within the projcct is , alucd
under projected conditions:
(a) With proposed infrastructure being finan,:cd complctcd.
(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" %aluation considering
time, costs and the possibility of a per unit value based on the total size of the
project.
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