HomeMy WebLinkAboutCouncil Policy No. 300-14 -Policies of the use of the Mello -Roos Community Facilities Act of 1982CITY OF LAKE ELSINORE, CALIFORNIA
COUNCIL POLICY MANUAL
SUBJECT: Policies for the Use of the Mello-Roos Policy No. 300-14
Community Facilities Act of 1982 Page No. 1 of 7
BACKGROUND
The City of Lake Elsinore has developed the following Goals and Policies on debt financing as
guidelines to assist concerned parties in following the City’s approach to Community Facilities
District debt financing. It is the City’s goal to support projects which address a public need and
provide a public benefit. Proposed projects requesting Community Facility District debt financing
will be evaluated to determine if such financing is financially viable and in the best interest of the
City and current and future City and project residents. These Goals and Policies are designed to
comply with Section 53312.7 of the Government Code.
PURPOSE
To establish goals and policies designed to comply with Section 53312.7 of the Government Code.
POLICY
The City will consider applications requesting the formation of community facilities districts and
the issuance of bonds to finance eligible public facilities pursuant to the Mello-Roos Community
Facilities Act of 1982, as amended. The City reserves the right to request any additional reports,
information or studies reasonably necessary in evaluating these applications.
All City and any consultant costs incurred in evaluating applications requesting the establishment of
Districts will be paid by the applicant(s) by advance deposit increments or as otherwise agreed in
writing by the City. The City shall not incur any non-reimbursable expense for processing such
applications. Expenses not chargeable to the district shall be borne by the applicant.
Definitions
“Bonds” means bonds authorized and issued under the Mello-Roos Community Facilities Act of
1982.
“City” means the City of Lake Elsinore.
“District” means a Community Facilities District formed under the Mello-Roos Community
Facilities Act of 1982, as amended.
CITY OF LAKE ELSINORE, CALIFORNIA
COUNCIL POLICY MANUAL
SUBJECT: Policies for the Use of the Mello-Roos Policy No. 300-14
Community Facilities Act of 1982 Page No. 2 of 7
“Public Facilities” means improvements authorized to be constructed or acquired under the Mello-
Roos Act including, but not limited to, fees for capital facilities imposed by public agencies as a
condition to approval of the development encompassed by the district or as a condition to service
the district.
“Value” or “Fair Market Value” means 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 of 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.
Eligible Public Facilities and Priorities
The improvements eligible to be financed must be owned by a public agency or public utility, and
must have a useful life of at least five (5) years. In any event, no bonds shall be issued with a
maturity date greater than the useful life of the facilities or improvements being financed. The
development proposed within the district must be consistent with the City’s general plan, if any, and
must have received any required zoning or specific plan approvals.
The list of public facilities eligible to be financed by a district include, but are not limited to, the
following:
·Streets, highways and bridges
·Street lighting
·Traffic signals and safety lighting
·Parks
·Governmental facilities
·Sanitary sewer facilities
·Storm drain facilities
·Potable and reclaimed water facilities
·Flood control facilities
·Libraries
·Public utilities
·Police and fire protection facilities
·Recreation facilities, including golf courses
·Biological mitigation measures involving land
acquisition, dedicating and revegetation
CITY OF LAKE ELSINORE, CALIFORNIA
COUNCIL POLICY MANUAL
SUBJECT: Policies for the Use of the Mello-Roos Policy No. 300-14
Community Facilities Act of 1982 Page No. 3 of 7
Facilities marked may be given priority over facilities marked. However, the City has final
determination as to any facility’s eligibility for financing, as well as the prioritization of
facilities to be included within a financing district. The City may also require applicants to
commit significant equity to projects for which public financing assistance is requested.
Credit Quality Required of Bond Issues
In evaluating a proposed Bond issuance, the City will require that the City’s Independent
Financing Consultant has reviewed and approved the proposed issuance of the Bonds.
Disclosure Requirements
Disclosure Requirement for Developers. The applicant will be required to demonstrate, to
the satisfaction of the City, that there will be full disclosure of the Mello-Roos special taxes
and any other special tax, assessment, overlapping special taxes or assessment of other
districts, or other liens on individual parcels to existing and future property owners, and to
prospective purchasers of property including interim purchasers and sales to merchant
builders (Section 53341.5 of the Government Code). In addition to all requirements of law,
the City shall require the applicant to provide disclosure of such information as the City
deems appropriate to the purchasers of property within the District, with respect to the
existence of the District, maximum and/or backup special taxes to be levied within the
District, facilities to be constructed, the foreclosure process and the terms and conditions of
Bond issues on behalf of the District. Such disclosure shall include home buyer
notifications requiring signature prior to home purchases, as well as methods to notify
subsequent home purchasers. The City may require that Developers offer residential buyers
the option of having all special taxes prepaid upon close of escrow, with a corresponding
increase in the purchase price of the residence.
Compliance with Federal Securities Laws. The City shall use all reasonable means to
ensure compliance with applicable federal securities laws in connection with the issuance of
debt and the provision of annual information regarding any District established by the City
with respect to which Bonds have been issued, including requiring any developer in a
District who is material to the Bond issue to transmit appropriate information to the City or
its designee for disclosure to Bond investors.
CITY OF LAKE ELSINORE, CALIFORNIA
COUNCIL POLICY MANUAL
SUBJECT: Policies for the Use of the Mello-Roos Policy No. 300-14
Community Facilities Act of 1982 Page No. 4 of 7
Equity of Tax Allocation Formulas
The rate and method of apportionment of the special tax must be both reasonable and
equitable in apportioning the costs of the public facilities to be financed to each of the
parcels within the boundaries of the proposed District. The City prefers that this
apportionment of costs be based on the benefit that each parcel is to receive from the public
facilities.
The rate and method of apportionment of the special tax is to provide for the administrative
expenses of the proposed District, including, but not limited to, those expenses necessary for
the enrollment and collection of the special tax and Bond administration.
All property not otherwise exempted by the Mello-Roos Act from taxation shall be subject
to the special tax. The rate and method of apportionment may provide for exemptions to be
extended to parcels that are to be dedicated at a future date to public entities, held by a home
owner’s association, or designated open space.
The annual special tax levy on each residential parcel developed to its final land use shall be
approximately equal each year, except that a variation for administrative expenses and
delinquencies will be allowed. The City may allow an annual escalation factor applied to
the maximum special tax on parcels within a District, but only under extraordinary
circumstances and subject to council approval. The objective of the City is to limit such
annual escalations in maximum special taxes to one percent (1%) per year.
The maximum annual special tax, together with ad valorem property taxes, special
assessments or taxes for an overlapping financing district, or any other charges, taxes, or
fees payable from and secured by the property, including potential charges, taxes, or fees
relating to authorized but unissued debt of public entities other than the City, in relation to
the expected assessed value of each parcel upon completion of the private improvements to
the parcel is of great importance to the City in evaluating the proposed financing.
The objective of the City is to limit the “overlapping” debt burden on any parcel to two
percent (2%) of the expected assessed value of the parcel upon completion of the
improvements. In evaluating whether this objective can be met, the City will consider the
aggregate public service needs for the proposed project. It will consider what public
improvements the applicant is proposing to be financed in relation to these aggregate needs
and decide what is an appropriate amount to extend in public financing to the identified
public improvements.
CITY OF LAKE ELSINORE, CALIFORNIA
COUNCIL POLICY MANUAL
SUBJECT: Policies for the Use of the Mello-Roos Policy No. 300-14
Community Facilities Act of 1982 Page No. 5 of 7
This evaluation will be based on information obtained from other affected taxing entities
that have jurisdiction to impose a levy on the proposed project.
The total maximum annual special taxes that can be collected from taxable property in a
District, taking into account any potential changes in land use or development density or
rate, and less all projected administrative expenses, must be equal to at least one hundred ten
percent (110%) of the gross annual debt service on any Bonds issued by or on behalf of the
District in each year that said Bonds will remain outstanding.
The rate and method of apportionment of the special tax shall include a provision or a
backup tax to protect against any changes in development that would result in insufficient
special tax revenues to meet the debt service requirements of the district. Such backup tax
shall be structured in such a manner that it shall not violate any provisions of the Mello
Roos Act regarding cross-collateralization limitations for residential properties.
A formula to provide for the prepayment of the special tax may be provided; however,
neither the City nor the Community Facilities District shall be obligated to pay for the cost
of determining the prepayment amount which is to be paid by the applicant.
Appraisals
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.
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:
(a) 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.
CITY OF LAKE ELSINORE, CALIFORNIA
COUNCIL POLICY MANUAL
SUBJECT: Policies for the Use of the Mello-Roos Policy No. 300-14
Community Facilities Act of 1982 Page No. 6 of 7
(b) An adequate description of the physical characteristics of the property being
appraised, location, zoning, present use, an analysis of the highest and best
use.
(c) 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.
(d) 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.
(e) A statement of the value of the real property.
(f) The effective date of valuation, date of appraisal, signature, and certification
of the appraiser.
Conflict of Interest. No appraiser or review appraiser shall have any interest direct or
indirect in the real property being appraised for the Agency 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.
Community Facilities District Appraisal Premises. The valuation of proposed community
facilities districts should be based on three premises:
(a) Raw Land Value (Premise No. 1). The total land within the project is valued
“as is”
(i) With any existing infrastructure.
(ii) Without proposed infrastructure being financed.
(iii) With existing parcel configuration.
CITY OF LAKE ELSINORE, CALIFORNIA
COUNCIL POLICY MANUAL
SUBJECT: Policies for the Use of the Mello-Roos Policy No. 300-14
Community Facilities Act of 1982 Page No. 7 of 7
(iv) Considering planned densities allowed by the specific plan of the
project.
This is a typical type of land valuation.
(b) Project Build Out Value (Premise No. 2). The total land within the project is
valued under projected conditions:
(i) With proposed infrastructure being financed completely.
(ii) At the planned densities allowed by the specific plan.
(iii) 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.
(c) Bulk Land Value (Premise No. 3). The total land within the project is valued
under projected conditions:
(i) With proposed infrastructure being financed completely.
(ii) With existing parcel configuration.
(iii) 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.
Exceptions to These Policies
The City may find in limited and exceptional instances that a waiver to any of the above
stated policies is reasonable given identified special City benefits to be derived from such
waiver. Such waivers are granted only by action of the City Council based upon specific
public purpose and/or health and safety findings.