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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.