Title
RESOLUTION 2017-249 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 17-I (WESTERN CHULA VISTA DIF FINANCING PROGRAM), DECLARING THE RESULTS OF A SPECIAL ELECTION IN THAT TERRITORY DESIGNATED AS COMMUNITY FACILITIES DISTRICT NO. 17-I (WESTERN CHULA VISTA DIF FINANCING PROGRAM), ANNEXATION NO. 2017-01 (URBANA), AND ADDING SUCH TERRITORY TO THE DISTRICT
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolution.
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SUMMARY
In March 2016, the City Council formed the Western Chula Vista Communities Facilities District (CFD 17-I). CFD 17-I was established for the purpose of financing the payment of certain development impact fee obligations for multi-family, commercial or industrial properties generally located between Interstate 5 and Interstate 805, and including the Auto Park located east of Interstate 805. The District included Future Annexation areas which allow additional properties to annex into the District. This is the first request since the adoption of the district by a property owner to annex into the District.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
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Environmental Determination
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the activity consists of a governmental established fee program activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required. Although environmental review is not required at this time, once the scope of potential individual projects has been defined, environmental review will be required for each project and the appropriate environmental determination will be made.
BOARD/COMMISSION RECOMMENDATION
Not Applicable
DISCUSSION
Investment in Western Chula Vista presents a financing challenge for potential investors and developers. Financing challenges derive primarily from the lending industry’s increased equity requirements imposed upon infill development projects in Western Chula Vista. To help address the additional equity burden being placed on infill development in this area, the City Council formed the Western Chula Vista Communities Facilities District (CFD). The CFD allows the deferral of impact fees to incentivize future investment in this area.
The deferral of the payment of impact fees reduces the additional equity burden by an amount equal to the fees. The CFD enables the developer to shift the impact fee burden from the construction/development cost side of their ledger to the operating side of the development. The CFD is unique in that is not utilized as a mechanism to issue debt but rather as a way to finance impact fees over time.
When the CFD was formed in March 2016, only one property was included in the CFD. However, the CFD included a Future Annexation area, which includes multi-family, commercial or industrial properties generally located between Interstate 5 and Interstate 805, and including the Auto Park area. Property Owners can voluntarily annex into the district through an election process. An owner of commercial or industrial property located within the Future Annexation Area may apply to have such property annexed to the CFD. Such owner may waive the public hearing otherwise required for annexations and may waive the time limit for conducting the election to authorize the levy of special taxes within the property proposed to be annexed to the CFD.
The project seeking to annex into the CFD is the Urbana Apartments, a 160-unit multi-family development located at 371, 385, and 395 H Street. The project has recently broken ground, and is expected to be completed in the fourth quarter of 2018. The property owner, as the qualified elector for the election to authorize the levy of the special tax within the property proposed to be annexed to the CFD, has waived the public hearing and the time limit for conducting such election. Ballot documents were transmitted to the property owner and completed and returned by the property owner to the City Clerk. The City Clerk canvased the ballot and determined that the property owner had cast the ballot in favor of authorizing the levy of the special tax on the property proposed to be annexed to the District. By adoption of the attached resolution the City Council will be determining the results of the election and determining and declaring that such property is added to and become a part of the CFD.
The CFD program is available for five years. When the CFD was adopted, the City Council places a cap of 200 residential units per year. This is the first project to annex into the district with 135 units. The City has retained the services of Best, Best and Krieger, LLP as special counsel to provide assistance during the annexation proceedings, including the review of this report and associated resolution.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council members and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property-related financial conflict of interest under California Code of Regulations Title 2, section 18702.2(a)(11), for purposes of the Political Reform Act (Cal. Gov’t Code §87100,et seq.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The deferral of impact fees furthers the Economic Vitality initiative 2.1.2 to “foster opportunities for investment in Western Chula Vista” by removing impediments for development projects in the subject area, accelerating the completion of planned and future developments.
CURRENT YEAR FISCAL IMPACT
Development impact fees are typically paid by the developer at Certificate of Occupancy stage of development. For this project, Certificate of Occupancy is approximately 12 to 18 months away. Additionally, the developer is required to advance funds to the City to cover the costs incurred by the City in undertaking the annexation proceedings. Therefore, there is no Current Year Fiscal Impact as a result of this action.
ONGOING FISCAL IMPACT
The Western Chula Vista Financing Program will defer payment of three development impact fees - the Public Facilities Development Impact Fee (PFDIF), the Parkland Acquisition and Development Fee (PAD) and approximately 40% of the Western Transportation Development Impact Fee (WTDIF) for a period of thirty years incurring two percent interest, per annum, upon receipt of occupancy. There would be no obligation to make a payment on the deferment in years 1 through 10 however; the deferred fees are required to be repaid in years 11 through 30. If a property is sold or subdivided, the obligation to repay the fees runs with the land. The non-payment period aligns with standard commercial lending practices. It is anticipated that some projects will repay the deferred fees in year ten when the project is refinanced.
New developments are assessed development impact fees for the incremental impacts resulting from said development. Impact fees do not pay for or resolve the deficiencies of facilities that may exist today. As stated above, all new development will continue to mitigate for on-site impacts resulting from each respective project.
Should the CFD program be successful it is anticipated to generate new development which, would translate into an increase in assessed valuation and have a positive impact on the neighboring property values while also providing new residents and employees to help support the surrounding businesses located along the retail corridors.
Fees to be deferred for the Urbana project as a result of this action are currently estimated to total $2,487,115, including $1,295,050 in deferred PFDIF, $1,056,375 in deferred PAD, and $135,690 in deferred WTDIF.
The Urbana project represents an approximately $30 million investment in western Chula Vista.
ATTACHMENTS
1. Rate and Method of Apportionment
Staff Contact: Eric Crockett, Director of Economic Development.