HomeMy WebLinkAbout2005-10-11 - AGENDA REPORTS - PUBLIC FIN MECHANISM CFD (2)Agenda Item:
CITY OF SANTA CLARITA
AGENDA REPORT
CONSENT CALENDAR City Manager Approval:
Item to be presented by: Darren Hernandez
DATE: October 11, 2005
SUBJECT: POLICY GUIDELINES REGULATING THE USE OF PUBLIC
FINANCING MECHANISMS TO FINANCE PUBLIC FACILITIES
DEPARTMENT: Administrative Services
RECOMMENDED ACTION
City Council adopt a resolution revising and approving the adoption of policy guidelines
regulating the use of public financing mechanisms to finance public facilities.
BACKGROUND
The Mello Roos Community Facilities Act of 1982 requires that a public agency initiating
proceedings to form a Community Facilities District ("CFD's') must first consider and adopt
local goals and policies. The Policy Guidelines address the City's use of CFD's established
pursuant to Section 53312.7 of the Act and special assessment districts established pursuant to
the Improvement Act of 1911, the Municipal Improvement Act of 1913, and the Improvement
Bond Act of 1915. The proposed policy guidelines have been revised to include the following:
eligible and ineligible facilities for public financing, revised priorities, detailed application and
deposit process, and general policies.
This policy provides the City guidelines for evaluating the merits of assisting in financing
project -related public facilities in which a significant public benefit has been established. 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.
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Other projects which may be of significant 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
improvement or facilities of benefit to the surrounding community will be considered to be of
significant public benefit. 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.
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.
It is the City's desire to make this Policy available so that: 1) the City's policies are clearly
communicated, 2) the developer/proponent can make reasonable and realistic business decisions
based upon an understanding of the City's willingness to assist in a public financing program,
and 3) the significant public benefit requirement for eligibility of public financing is clearly
identified. The City emphasizes that the public financing through CFDs and/or Assessment
Districts is not a right but a privilege for a developer. The City shall make the determination as
to which public financing mechanism, if any, shall be used to assist in the construction of a
public facility or funding of a service.
ALTERNATIVE ACTIONS
Other action as determined by Council.
FISCAL IlVIPACT
Neither the faith, credit, nor the taxing power or contingent liability has been pledged to the
repayment of any future bonds associated with the adoption of these goals and policies.
ATTACHMENTS
Resolution
Policy Guidelines
ATTACHMENTS
Resolution
THE CITY OF SANTA CLARITA
POLICY GUIDELINES REGULATING THE USE OF PUBLIC FINANCING
MECHANISMS TO FINANCE PUBLIC FACILITIES
PURPOSE
This policy provides the City guidelines for evaluating the merits of assisting in financing
project -related public facilities in which a significant public benefit has been established. The
City of Santa Clarita has adopted the following Policy Guidelines to address the City's use of
Community Facilities Districts established pursuant to the Mello Roos Community Facilities
Act of 1982, and special assessment districts established pursuant to the Improvement Act of
1911, the Municipal Improvement Act of 1913, and the Improvement Bond Act of 1915.
It is the City's desire to make this Policy available so that: 1) the City's policies are clearly
communicated, 2) the developer/proponent can make reasonable and realistic business
decisions based upon an understanding of the City's willingness to assist in a public financing
program, and 3) the significant public benefit requirement for eligibility of public financing is
clearly identified. The City emphasizes that the public financing through CFDs and/or
Assessment Districts is not a right but a privilege for a developer. The City shall make the
determination as to which public financing mechanism, if any, shall be used to assist in the
construction of a public facility or funding of a service.
PUBLIC FINANCING MECHANISMS AND ELIGIBLE PUBLIC FACILITIES,
INELIGIBLE COSTS, AND PRIORITIES
The public financing mechanisms subject to these policies include the Improvement Act of
1911, Municipal Improvement Act of 1913, and the Improvement Bond Act of 1915, and the
Mello Roos Community Facilities Act of 1982.
The general types of facilities and/or services currently eligible to be financed are listed as
follows for each public financing mechanism:
A. IMPROVEMENT ACT OF 19119 MUNICIPAL IMPROVEMENT ACT OF 1913,
AND IMPROVEMENT BOND ACT OF 1915
1. Arterial Streets
2. Trunk Sewer Mains
3. Master Area Storm Drains
4. Water Transmission Mains
5. Water, Sewer or Drainage Pumping Plants
6. Non -Tract related Street Lighting
7. Traffic Signals and Safety Lighting
8. Grading necessary to accommodate "Backbone" Infrastructure; including
Retaining Walls, Drainage Facilities, and Stabilization of Land
9. Government Facilities of specific benefit to the district
10. Parks
11. Ornamental Vegetation Installation
12. Other Facilities and/or services as provided by law and permitted by the
City.
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B. MELLO ROOS COMMUNITY FACILITIES ACT OF 1982
1. Local park, recreation, parkway open -space facilities
2. Child Care Facilities — publicly owned and operated
3. Utilities (Public Utilities, including electric, gas, flood and storm drainage)
— not to exceed 5% of the net value of the Improvement Fund proceeds
4. Cultural Facilities
5. Police and Fire Protection Services (Services CFD)
6. Services with respect to removal or remedial action of hazardous
substances
7. Development Impact Fees
8. District costs associated with acquisition of facilities and processing
payment requests
9. In combination with one or more of the foregoing, any of the facilities
listed under A above
10. Other facilities and/or services as provided by law and permitted by the
City.
C. INELIGIBLE COSTS
Costs considered ineligible to be financed from the proceeds of Special District bonds or
the assessments, special taxes, or taxes levied within a Special District include, but are
not limited to, the following:
a) Statutory development and building fees.
b) Financial consultant or legal fees incurred by an applicant for the formation
of a District. This limitation does not apply to amounts advanced by the
applicant to the City pursuant to the provisions of this policy to pay for
formation costs incurred by the City.
C) Fees collected by the City on behalf of other public entities.
d) Land -use planning and subdivision costs and environmental review costs
related to such land use planning and subdivision
e) Environmental impact studies, unless directly related to the project and
done separately for the project
f) Endowments for mitigation land
g) Cost incurred prior to the City Council's acceptance of a request to begin
work on the formation of a District, a reimbursement, or acquisition
agreement, or the adoption of a resolution of intention to form the District,
whichever comes first
h) Subdivision financial analysis
i) Attorney's fees incurred by the property owners or their agents, except as
recommended by the City Attorney related to condemnation proceedings
j) On-site right-of-way and easements
k) Other overhead expenses incurred by the applicant
PRIORITIES
The City reserves the right to make exceptions to these priorities when circumstances warrant
(the City is establishing no priority for the use of the Acts in the case of populated areas and
registered -voter elections).
1. The public infrastructure and public facilities proposed to be financed must, in the
opinion of the City, provide a significant public benefit.
2. The public infrastructure and public facilities proposed must be owned and maintained
by the City. Public facilities and infrastructure owned and maintained by other public
agencies, such as water districts and school districts will have a lower priority.
3. In tract improvements such as public streets, sidewalks, and other infrastructure may
not be considered unless a significant public benefit finding can be made.
4. Development impact fees used for public facilities may be considered on a case-by-
case basis.
5. As a condition of development, the City may require a developer to form a "Services
District" or "Maintenance District' for the project area to pay for eligible services,
including but not limited to public safety, park and/or street maintenance, flood
control maintenance, and any other services authorized by CFDs, Assessment
Districts, or other benefit assessment districts.
6. Private improvements cannot be financed.
SIGNIFICANT PUBLIC BENEFIT
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 significant 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 improvement or facilities of
benefit to the surrounding community will be considered to be of significant public benefit.
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. 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.
APPLICATION & DEPOSIT PROCESS
The application form for a proposed CFD or Assessment District can be obtained from the
Department of Administrative Services of the City. All completed documents must be
forwarded to the City Manager, or his designee, the Mello Roos and Assessment District Task
Force (the "Task Force") for review.
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"Task Force" means the Mello Roos and Assessment District Task Force which includes
members of the City's Department of Administrative Services, Department of Community
Development, Department of Public Works, and the City's bond counsel and financial
advisor. The Task Force reviews the application for conformance with City policy and is
responsible for making a recommendation through the City Manager to the City Council
regarding the proposed facilities and proposed financing.
Early communication with the City is encouraged to assist applicants in reviewing these City
Policy Guidelines, allowing the City to evaluate the feasibility of available financing
programs and to discuss program procedures.
PRELIMINARY CONFERENCE: Applicant meets with the Task Force to discuss the
proposed project, review City's policies regarding public financing mechanisms, and
provide an overview of the formation process.
FORMAL REQUEST TO CITY: Applicant submits a completed Application for
Participation in City Assessment District Finance Program with a written letter requesting
that the City formally consider the formation of a district. Prior to any formation actions,
an Applicant is required to pay a non-refundable District Application Fee, subject to the
terms of the executed Deposit and Reimbursement Agreement. The Application Fee and
any payments required under the Deposit and Reimbursement Agreement will pay for all
costs incurred by the City, its legal and financial advisors, appraisers, and other
consultants (e.g., engineer firms, special tax consultants) prior to formation of a CFD or
Assessment District including City staff and administrative costs and related expenses,
costs of printing notices, printing and publication costs, and all expenses directly or
indirectly relating to these items. Reimbursement shall be facilitated by advance deposit
increments in accordance with the agreements required by this policy document. All City
administrative and consultant costs related to administration of the district and incurred
after the later formation and bond issuance shall be included within the assessment or
special tax formula in accordance with applicable provisions of law.
PROJECT REVIEW: Applicant and the Task Force meet to discuss the preliminary
project schedule and determine what further information is required to move forward with
the formation of a new district. If necessary, applicant submits additional information
required by the City.
APPLICATION PROCESSING: Upon the Task Force's determination that the
application package is complete, the application and project financing will be forwarded
to the City Council for further action. At this time, the City Manager will request the City
Council approve a preliminary feasibility study on the project. This study may be done
internally or externally, as the circumstances of the project dictate.
CITY COUNCIL CONSIDERATION: City staff submits consultant contracts,
reimbursement agreements, Resolution of Intention, and other similar items for City
Council consideration. The City Council makes any necessary finding and grants or
denies the request to proceed with formation. If approval is granted, the Council directs
the City Manager to engage additional consultants, negotiate necessary contracts, and
collect additional developer deposits, as necessary.
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PROJECT INITIATION: Applicant and Task Force meet to determine district formation
schedule and begin work necessary to initiate District formation and financing.
PROJECT IMPLEMENTATION: Applicant and Task Force negotiate a Funding and
Acquisition Agreement. Such an Agreement will require that the City acquire only
facilities that are complete. The City shall not purchase completed facilities unless the
City Council has declared its intention to purchase prior to the commencement of
construction. An approved Funding and Acquisition Agreement must be in place prior to
any purchase for improvements. Under limited circumstances, the City may agree to
construct the improvements and such, as Agreement may not be required.
For facilities under the purview of the Department of Public Works, this determination is
evidenced by a "Notice of Completion" or other documentation and/or certification
acceptable to the Director of Public Works. An appraisal of the completed improvements
will also be undertaken by the Department of Public Works or otherwise qualified
engineer or consultant to assure that any acquired improvements are acquired at a
reasonable price and that all such improvements are up to City Standards.
APPLICANT REIMBURSEMENT FROM BOND
After formation of a CFD or Assessment District and sale of bonds, an applicant can be
reimbursed from bond proceeds for paid City consultant costs and other expenses which
would otherwise be normally incurred in the formation of the District and sale of
municipal bond, but reimbursement shall be limited to those district -related costs and
consultant costs approved by the City. Such reimbursement does not include costs of the
developer's counsel and other consultants or other costs of the developer. Reimbursement
shall be facilitated by advance deposit increments in accordance with the agreements
required by this policy document.
As required by State Law, a Joint Financing Agreement shall be entered into in a timely
manner for any facility which will be owned and operated by any entity other that the
City, such as water, flood control, or school improvements.
Where District is Formed and Bonds are Issued:
The applicant shall not be entitled to reimbursement from bond proceeds for any of the
following:
1. Administrative or overhead expenses, financial consultant or legal fees incurred by
an applicant for the formation of a Special District. (This limitation does not apply
to amounts advanced by the applicant to the City.)
2. Land -use planning and subdivision costs and environmental review costs related to
such land use planning and subdivision.
3. Construction loan interest.
4. Costs, including but not limited to, land acquisition costs incurred prior to entering
into a reimbursement or acquisition agreement or the adoption of a resolution of
intention to form the special district.
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5. Attorney's fees related to the land use entitlement or subdivision process unless
off-site and directly related to the project.
6. Other overhead expenses incurred by the applicant.
Where District is Not Formed, or Where District is Formed and Bonds are Not Issued:
In the event that the district is not formed due to City disapproval or abandonment, or due
to applicant abandonment, or the district is formed and bonds are not issued for any
reason, the City will refund to applicant/developer any remaining unexpended and
unobligated portion of advance deposits posted with the City, subject to the City's prior
and full reimbursement of all its direct and indirect costs associated with the special
district in accordance with policies herein. If the applicant's advance deposit to the City is
not sufficient to reimburse the City for all of its direct and indirect costs, the City will
require an additional deposit by the applicant for the difference. The City shall be entitled
to pay any refund to the applicant listed on the application form without interest,
irrespective of any changes in the ownership or composition of the applicant/developer.
Surplus Funds
In the event that there are surplus funds generated through the creation of the Special
District and the sale of bonds, these surplus funds shall be used as follows:
1. The Council may direct staff to use a portion of this surplus to offset the annual
levy of assessments or special taxes to property owners in following years in a
manner consistent with the statutes. Under this policy, an amount of up to 5% of
the total bond issue size not to exceed $1 million may be used to offset the annual
levy without further Council action.
2. Any amount in excess of that used to offset the annual levy described above will
be used to call bonds at an appropriate bond call date, as determined by staff and
the City's financial advisor.
GENERAL POLICIES
ELIGIBLE SUBDIVISION PROJECTS AND LAND USE ENTITLEMENTS
It is the strong preference of the City that subdivision and other development projects have
progressed to the approved tentative map stage. In extraordinary circumstances, formation of
a CFD or Assessment District can be considered prior to this. In no event will bonds be
issued prior to approved tentative maps being obtained for the entire project providing
security for the CFD or Assessment District.
LAND USE APPROVALS
All proposed projects within the proposed district, together with the infrastructure and public
facilities, must be consistent with the City's adopted General Plan and zoning classifications.
All property within the proposed district must possess land use determinations or zoning
classifications of sufficient certainty and facility requirements of sufficient specialty that each
parcel can be adequately assessed.
AGREEMENTS REQUIRED
The applicant will be required to enter into all necessary agreements incident to district
proceedings in a form provided by the City and consistent with these policies. These
agreements may include, but not be limited to:
• Deposit and Reimbursement Agreement
• Funding and Acquisition Agreement
• Development and Disposition Agreement
• Land Dedication Agreement (where required)
• Agreement to use the City as sole issuer of bonds in the District. No other
governmental entity may be used to issue any additional bonds in the future.
• Other Agreements (as required).
As a condition to the issuance and sale of the bonds, all of the agreements required by the City
shall be duly approved and executed by applicant/developer. Prior to execution of any
agreements, documents will be reviewed by bond counsel, City Attorney, and other
consultants as needed.
USE OF CONSULTANTS AND BOND UNDERWRITERS
The City shall select and employ consultants and attorneys necessary for the review,
formation, and sale of bonds for a proposed CFD or Assessment District. Such consultants
can include underwriters, financial advisors, bond counsel, market absorption analysis, special
tax advisors, appraisers and engineering firms, which consultants shall be solely managed,
coordinated and directed by the City.
An applicant may retain its own consultants for its own benefit and at its own expense, but
such consultants will work through the City and the consultants hired by the City.
CREDIT EVALUATIONS
The applicant must demonstrate, to the satisfaction of the City, the financial ability and
existing resources of the applicant to complete the proposed development project and to make
all the special tax or assessment payments during the time the facilities and improvements are
being constructed and so long as the applicant is responsible for the payment of such special
taxes and assessments. The applicant must make available all necessary audited and
unaudited financial statements, bank and business references and documents, and other
financial information as requested in order for a determination to be made regarding financial
risk to bondholders and the City. As part of this review, the City may consider interim
financing, third -party credit enhancements, capitalized interest and/or other means available
for the development project to meet its financial obligations. The applicant must bring all
project -related property tax bills current.
LAND APPRAISAL REQUIREMENT
The Appraiser shall be selected and approved by the City. The appraisal shall be reviewed by
the City and shall be prepared as set forth in Criteria for Appraisals A minimum residential
property value to lien/debt ratio of 4:1 and a minimum commercial/industrial property value
to lien/debt ratio of 3.5:1 (all ratios to be calculated on a fee simple basis but including the
proposed special tax and assessments and any overlapping direct public debt) as set forth in
the Criteria for Appraisals section as determined by an MAI Appraisal. In those instances
where the residential ratio is less than 4:1 and where the commercial/industrial ratio is less
than 3.5:1, 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
guarantees or deposits. Value to lien/debt ratio shall not be less than 3 to 1 on any individual
parcels representing more than 10% of the project value, and in the aggregate all parcels with
value to lien ratios of less the 2.5 to 1 cannot represent more than 25% of the Project Value.
FISCAL FEASIBILITY REPORT
Prior to the formation of a financing district, a fiscal feasibility report may be required if fifty
percent (50%) or more of the land within a district is substantially undeveloped. The report
shall be prepared by or at the direction of the City. All costs for preparing this report shall be
bome by the applicant/developer. An estimate of the report cost will be made prior to
initiating the study and the applicant/developer shall deposit one hundred percent (100%) of
the cost prior to starting the report.
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
depends 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 functions 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, and an analysis of highest and best use.
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(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 and not be contingent upon
the sale of bonds.
(D) Community Facilities and District Assessment District Appraisal premises. The
valuation of proposed CFDs or ADs should be based on three premises:
(1) 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.
(2) Project Build Out Value (Premise #2). The total land within the project is valued
under projected conditions.
(a) With proposed infrastructure being financed completely.
(b) At the planned densities allowed by the specific plan.
(c) Land development at date of appraisal is at the stage of being
marketed to merchant builders or tentative tract maps ready to
be filed.
(d) Land is valued on a fee simple basis, assuming debt is treated as
tax lien.
This is a projected value based on project plans predicated on market conditions
continuing as projected.
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(3) Bulk Land Value. (Premise #3). The total land within the project is valued
under projected conditions:
(a) With proposed infrastructure being financed completely.
(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.
ABSORPTION STUDY REQUIREMENTS
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 (EDUs), 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 required land appraisal. The absorption consultant
shall be selected and approved by the City.
CFD RATE AND METHOD OF TAX APPORTIONMENT
With regard to CFDs, 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 of special taxes will be structured in
such a manner as to result in a fair and reasonable taxing structure. The City
and its special tax consultant will consider input from the developer, but the
City will make the final determination.
b. 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 and
"enhanced services") an increase in the maximum special tax will be
permitted.
c. 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%).
d. The projected annual special tax revenues shall include reasonable annual
administrative expenses and other direct costs to the CFD.
e. The special tax shall be equitably apportioned to all categories and classes of
property within the CFD including undeveloped land.
f. A backup special tax will be required, unless the tax formula is structured in
such a manner to avoid special tax revenue loss from changes in densities or
product type.
g. Prepayment of the special tax may be permitted according to a formula to be
set by the City.
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h. When available, interest earnings will benefit all tax payers proportionally.
i. 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.
DEBT STRUCTURE GUIDELINES
Bond issues shall be structured to adequately protect bond owners and the bonding capacity,
reputation, and if applicable, the credit rating of the City. The approved bond structure may
require credit enhancement, foreclosure covenants, special reserve funds or deposits, and/or a
contractual commitment by the proponents of the district and their successors to pay the
special taxes or assessments during term of the bonds. Required credit enhancement may take
the form of a letter of credit, bond insurance, deposits, reimbursement agreement, or other
contractual assurances. Appropriate foreclosure covenants will also be required.
The City, in conjunction with its financial advisor, shall determine whether the aggregate cost
of public improvements and permitted indirect costs allowable under statute, shall equal an
amount that renders formation of a district economically both cost-effective and efficient.
The size of the bond issue, as determined by the City and its consultants, shall meet industry
standards with respect to marketability.
The term of the bonds will not exceed the useful life of the improvements being financed and
otherwise not exceed 30 years. The bonds will be subject to optional redemption prior to
maturity, and call protection will not exceed ten years unless specifically approved by the City
Council.
The City will select and retain National Recognized Bond Counsel Firms active in
Assessment and CFD financing to provide all necessary documentation and legal opinions.
Escrow structures will only be considered under special circumstances and only where a clear
benefit to the City is determined
Capitalized interest will be limited to no more than 24 months and be the lesser of the time it
takes to construct the financed facilities or the time it takes to levy and collect the Special
Taxes or Assessments.
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Variable interest rate structures will only be considered if the principal and interest is backed
by Bank Letters of Credit or Bond Insurance and the transaction is rate A2/A+ or better by
Moody's Investor Service and Standard and Poors Corporation.
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.
TERMS AND CONDITIONS OF THE BONDS
All terms and conditions of the bonds shall be established by the City. The City will control,
manage and invest all district issued bond proceeds. Bonds issued under this policy may be
sold through competitive or negotiated.
DISCLOSURE TO PROPERTY OWNERS AND BONDHOLDERS
With respect to the CFDs 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.
The City will require that property owners agree to cooperate and provide, as needed,
whatever information is annually required under any required Continuing Disclosure
Agreements. When a property owner represents more than 15% of the CFD taxes or
Assessment levies, the City may require that the property owner be responsible for
Continuing Disclosure. The City will also be named and obtain a 10(b)(5) Opinion regarding
the adequacy of bond disclosure on all bond issues by a Bond Counsel firm with a National
Reputation as a Bond Disclosure Counsel. All property owners who provide information to
the City for use in a Bond Official Statement will be required to certify as the accuracy of the
information provided.
MISCELLANEOUS PROVISIONS
All statements and materials related to the sale of special tax bonds (CFDs) and improvement
bonds (ADs) 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.
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The City's Administrative Services 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.
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 financing. After review, the
proposed refunding with a written staff recommendation will be presented to City Council for
its consideration. Refunding and refinancing must meet minimum savings thresholds as
determined from time to time by the City.
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
Task Force will determine which guidelines apply.
CITY LIABILITY
All statements and material related to the sale of special tax bonds (Community Facilities
Districts) and improvement bonds (Assessment Districts) shall emphasize and state that
neither the faith, credit, nor the taxing power of the City of Santa Clarita is pledged to the
repayment of the bonds, nor that there is an obligation of the City to replenish the reserve
fund from, revenue sources other than special taxes, annual assessments, or proceeds from
foreclosure proceedings. The City has no contingent liability for the debt service.
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GLOSSARY
"Act" — The Mello -Roos Community Facilities Act of 1982, the Improvement Act of 1911,
the Municipal Improvement Act of 1913, the Improvement Bond Act of 1915, the
Landscaping and Lighting Act of 1972, or the Benefit Assessment Act of 1982.
"Assessment" — Any levy or charge by the City upon real property that is based upon the
special benefit conferred upon the real property.
"Assessment District" or "ADs" — A special district formed by the City that includes property
that will receive direct benefit from the construction of new public improvements or the
provision of services. The most common type of public improvements financed include
roads, sidewalks, and drainage. "Assessment Districts" or "ADs" also means an assessment
district formed under the Improvement Act of 1911, the Municipal Improvement Act of 1913,
the Improvement Bond Act of 1915, the Landscaping and Lighting Act of 1972, and/or the
Benefit Assessment Act of 1982.
"Bonds" — The bonds authorized and issued under any of the public financing mechanisms
described herein.
"Bond Counsel" - Special counsel retained by the City to assure compliance with applicable
federal and state tax and other laws and regulations relating to public financing.
"City" - The City of Santa Clarita.
"Community Facilities Districts" or "CFD's" — A special district formed under the Mello
Roos Community Facilities Act of 1982
"Improvement Act of 1911" — California Streets and Highways Code 8500 et. seq. lets cities,
counties, and special districts levy benefit assessments for the construction and maintenance
of public facilities including streets, sidewalks, sewer systems, drains, lighting, etc.
Authorizes cities, counties, and public districts which use other assessment acts to issue
bonds.
"Improvement Bond Act of 1915" — California Streets and Hghways Code 8500 et. seq.
authorizes cities, counties, and public districts which use other assessment acts to issue bonds.
"Mello -Roos — Community Facilities Act of 1982" - California Government Code 53311 et.
seq. authorizes local governments to create CFDs for the purpose of financing facilities and
certain services and issuing bonds to fund public improvements. Property owners within a
CFD pay a "special tax" to repay the bonds. In 1982, Senator Henry Mello and Assemblyman
Mike Roos affected the passage of the Community Facilities District Act of 1982.
"Municipal Improvement Act of 1913" — California Streets and Highways Code 10000 et.
seq. lets cities, counties, and special districts levy benefit assessments for the construction and
maintenance of public facilities including streets, sidewalks, sewer systems, drains, lighting,
etc.
"Policy" or "Policy Guidelines" - The Policy Guidelines of the City of Santa Clarita.
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"Public Facilities"- The improvements authorized to be constructed or acquired under any of
the public financing mechanisms described herein.
"Special District" — Within this policy, the term Special District refers to Assessment
Districts and Community Facilities Districts together.
"Special Tax" — Requires approval by two-thirds of the qualified voters in the district and
provides for a landowner election if less than 12 registered voters in the district.
"Task Force" - The Mello Roos and Assessment District Task Force which includes
members of the City's Department of Administrative Services, Department of Community
Development, Department of Public Works, the City's bond counsel and financial advisor.
The Task Force reviews the application for conformance with City policy and is responsible
for making a recommendation through the City Manager to the City Council regarding the
proposed facilities and proposed financing.
"Value to Lien Ratio" — The value of the taxable or assessed property, including the public
improvements proposed to be financed, relative to the amount of the assessment or special tax
debt.
"Value" or "Fair Market Value" - The amount of cash or its equivalent which property
would bring if exposed for sale in the open market under conditions in which neither buyer
nor seller could take advantage of a difficulty or the other and both have knowledge of all of
the uses and purposes to which the property is adapted and for which it is capable of being
used and of the enforceable restrictions upon uses and purposes.
COu MCFDcnyeouky
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