City of Placerville MEMORANDUM
DATE:
February 27, 2007
TO:
City Council
FROM:
John Driscoll, City Manager/City Attorney
SUBJECT:
ADOPTION OF GOALS AND POLICIES CONCERNING THE USE OF MELLO-ROOS COMMUNITY FACILITIES ACT OF 1982 ______________________________________________________________________________ RECOMMENDATION That the City Council adopt a Resolution establishing Goals and Policies concerning the use of the Mello-Roos Community Facilities Act of 1982. BACKGROUND The Mello-Roos Community Facilities Act of 1982 (the Act) provides for the establishment of a Community Facilities District (CFD) for the purpose of financing the purchase, construction, expansion, improvement or rehabilitation of any facilities or services authorized under the Act. Generally, such facilities are public facilities such as roads, water, sewer, storm drains and other public improvements and public utilities, and may include facilities identified in the City's Development Fee program. Lakemont has filed with the City an application and petition for the financing of its required public improvements for the Lakemont-Eskaton (Lakemont) Development Project on the former Weatherstone site through the establishment of a CFD under the Act. However, prior to initiating proceedings to create a CFD under the Act, the City must have in place established Goals and Policies pursuant to Government Code Section 53312.7(a). The proposed Goals and Policies are intended to satisfy that requirement.
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ANALYSIS The proposed Goals and Policies set forth certain procedures and parameters as a prerequisite to forming a CFD under the Act. The following is intended to be a brief summary of the pertinent parts of the proposed Goals and Policies. In order to ensure the creation of a successful CFD, the City must be provided with enough information in order to determine whether to proceed with the formation of a CFD, and certain minimum standards must be met. The proposed Goals and Policies provide for such safeguards. Specifically, initial applications for the formation of a CFD would be subject to the review of the City Manager, with input and consultation from the City's consultants with respect to bond matters. The City Manager is then required to provide the City Council with recommendations regarding the proposal and review process, and an analysis of the proposal's compliance with the established Goals and Policies. Included in the information to be provided to the City under the proposed Goals and Policies are the following: • • • • • • • •
Legal structure of the title-holding entity and legal structure of the developer or the partners thereof. Financial statements of the developer. A list of bank, credit or investment references that the City may contact. A list of other public agencies with which the developer or its parent or affiliate company has participated in forming CFDs or other special assessment districts. A comprehensive property development financial pro forma detailing development costs and funding sources. With respect to the developer, any delinquencies or defaults in the payment of taxes or assessments, any defaults on any debt obligations, any bankruptcies, receiverships or similar occurrences. Developer's failure to comply with any prior continuing disclosure requirements in connection with bond issues. Information deemed by the City and its financing team to be needed or desirable in order for the City and the underwriter to comply with applicable federal and state securities, and common laws, including continuing disclosure requirements.
In addition to requiring a developer to supply certain information to the City, the proposed Goals and Policies also include certain safeguards with respect to the formation of a CFD under the Act. Of particular importance is Section 3 of the proposed goals and polices dealing with minimum credit quality requirements. This portion of the Goals and Policies sets forth a preferred value-to-lien ratio of 4-to-1 or higher, with a minimum 3-to-1 value-to-lien ratio in the strongest proposed transactions. Section 3A of the proposed Goals and Policies, which includes the aforementioned value-to-lien ratios, also sets forth relevant factors to be considered in determining the appropriate value-to-lien ratio to be required in forming a CFD.
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The proposed Goals and Policies also include and address such significant points as credit enhancement, reserve fund, capitalized interest, foreclosure covenants, absorption studies and land-use entitlements. Another important section of the proposed Goals and Policies relates to the special tax formula. One of the important portions of that section is the provision that the total projected initial property tax level for any residential parcel within a CFD not exceed 2.0% of the projected initial sales price of a fully developed parcel, and in most instances not exceed 1.8% of the projected initial sales price of a fully developed parcel. These provisions are important so as to ensure that the taxes on a parcel of property, including the special assessments, not overburden the property to the extent that payment could become problematic. Also included within the Goals and Policies are provisions relating to the appraisal of the property to ensure that it is objective and represents an accurate opinion as to the fair market value of the property. Finally, the Goals and Policies provide that the costs associated with forming a CFD be paid for by the requesting developer. To this extent, the developer can be required to deposit funds with the City for the purpose of not only funding the formation of the CFD, but also the requisite studies necessary to determine whether to proceed with the formation of the CFD. These provisions further allow the City to charge a minimum of 1.1% of the total project cost for City staff administration. FISCAL IMPACT There is no fiscal impact with respect to the adoption of the Goals and Policies. Obviously, the formation of any CFD will involve a fiscal impact on the City, but that impact is offset by the requirements that the developer pay for all costs associated with the formation of the CFD, as well as the 1.1% administration fee provided for in the Goals and Policies. Respectfully submitted,
Reviewed for fiscal impact:
_________________________________ John Driscoll City Manager/City Attorney
__________________________________ David Warren Finance Director
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