Title
CONSIDERATION OF AUTHORIZING THE ANNEXATION IN THE FUTURE OF CERTAIN TERRITORY TO CFD NO. 17-I (THE “FUTURE ANNEXATION AUTHORIZATION PROCEEDINGS”)
RESOLUTION NO. 2016-051 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), AUTHORIZING THE ANNEXATION OF TERRITORY IN THE FUTURE TO SUCH COMMUNITY FACILITIES DISTRICT
Body
RECOMMENDED ACTION
Recommended Action
Council conduct the public hearing and adopt the resolution.
Body
SUMMARY
In April 2015, the City Council adopted an amendment to the municipal code that allowed the City Council to defer development impact fees for projects within Western Chula Vista. The deferral of impact fees can be accomplished by agreement or by projects annexing into a Community Facilities District. At that time, staff indicated that it would return at a later date with the current action to establish such a Community Facilities District that would be available to projects located in industrial, commercial and high density residential zones located throughout Western Chula Vista and the Chula Vista Auto Park area. On February 9, 2016, the Council adopted Resolutions that declared its intent to consider the proposed Boundary of Future Annexation Areas and intent to authorize the annexation of such territory into the CFD in the future.
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.
Body
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 fee deferral agreement program and/or annexation 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 continues to present 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 the subject area, the City Council adopted an Ordinance in April 2015 that allows the deferral of impact fees to incentivize future investment in this area. Accordingly, staff enlisted the legal services of Best Best & Krieger, and financial services firm Willdan Financial Services, to assist staff in preparing and bringing forward this item to initiate formation of the CFD.
The deferral of the payment of impact fees will reduce the additional equity burden by an amount equal to the fees. The CFD will also enable 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 will not be utilized as a mechanism to issue debt but rather as a way to finance impact fees over time. The CFD will be available for a five year window in which property owners can elect to annex into the CFD, unless the term of the CFD is extended by the City Council. It is anticipated that this limitation will provide enough time for projects currently in process and those previously approved to be constructed, sold and/or leased out. These projects will provide the comparables necessary to reduce the risk to the lending industry. Once lending standards are in accordance with other markets, the CFD financing mechanism will no longer be necessary.
The CFD will defer the payment of three Development Impact Fees (DIFs) - the Public Facilities (PFDIF), the Parkland Acquisition and Development Fee (PAD Fee) and a portion of the Western Transportation DIF (WTDIF). New development projects will continue to mitigate for on-site impacts. Through the Regional Transportation Congestion Improvement Program (RTCIP), an element of the TransNet Extension Ordinance, the 18 cities and the County of San Diego are required to collect an exaction from the private sector for each new housing unit constructed in their jurisdiction. Thus, for the WTDIF Program, the City agrees to collect a minimum amount of fees required for the regional arterial roadway system. The City’s WTDIF fee is approximately 40% greater the minimum amount required. Therefore, the City will collect approximately 60% of the WTDIF for each high density residential unit for the WTDIF. Additionally, items such as sewer capacity fees and traffic signal are not eligible for deferral under the CFD program and will continue to be paid as part of any new development.
On February 9, 2016, the Council adopted two resolutions regarding future annexation areas of the CFD. At that meeting, the council approved a resolution that adopted a boundary map of those areas within Western Chula Vista that may be annexed to the CFD. A second resolution approved by the City Council to approve Future Annexation Areas to allow additional property owners to voluntarily elect to annex individual project sites within such Future Annexation Areas into the CFD at a future date.
For the attached resolution, a public hearing will be held relating to the Future Annexation Areas. The hearing will allow for testimony regarding the boundaries of the Future Annexation Areas, the description of the development impact fees for the CFD, the levy of special taxes, and the accountability measures pertaining to the levy by the District of the special taxes. Future qualified projects will be allowed to annex into the district, without the necessity of a public hearing, provided the applicant enters into the standard agreement for Deferral of Development Impact Fees approved at the February 9, 2016 City Council meeting. The City Council will be required to approve each such annexation.
Subsequent to Council approving the resolution of intent, staff received feedback that single family neighborhoods in western Chula Vista would be well served by an incentive program to encourage property owners to invest in home remodels/expansions. Staff will look into bringing back a program that is focused on the single family neighborhoods surrounding the CFD boundaries. This program would focus on incentivizing homeowners to reinvest in their property. This program will look at mechanisms that will assist homeowners improve their primary residence. These mechanisms could include expansion of the primary residence, replacement of windows, the use of drought tolerant plants in landscape, removal of lead based paint, incorporation of energy efficient appliances, weather proofing the home and installation of a photo-voltaic system. These improvements would be targeted to improve the overall efficiency of the home while reducing the homes carbon footprint. Potential funding sources could include, CDBG, SDG&E partnership funds, grants or property tax rebates.
DECISION-MAKER CONFLICT
When this item was first heard on February 9, 2016, Staff had reviewed the property holdings of the City Council members and found that Mayor Salas, and City Council members Bensoussan and McCann have real property holdings within 500 feet of the boundaries of the property which is the subject of this action. Consequently, pursuant to California Code of Regulations Title 2, sections 18700 and 18702.2(a)(11), this item presents a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.) for the above-identified members.
In addition to the above, staff has determined that a potential conflict of interest may exist for Councilmember Miesen because it may be reasonably foreseeable that a financial effect on a business entity in which Councilmember Miesen has a financial interest may be material.
With four councilmembers having a conflict of interest, Councilmembers Bensoussan and McCann were randomly selected to hear this item. Pursuant to FPPC Regulation 18705, a randomly selected official is selected “for the duration of the proceedings in all related matters until his or her participation is no longer legally required.” Since the CFD formation is a two-step process, the two actions would be considered related matters. Thus, Councilmembers McCann and Bensoussan will be the members to participate in the second step.
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
All consultants and staff time related to this action are being funded by existing appropriations in the Economic Development Department’s fiscal year 2015-16 budget.
ONGOING FISCAL IMPACT
The Western Chula Vista Financing Program will defer payment of three development impact fees - the PFDIF, PAD and approximately 40% of the 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 the 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. Further, all new development will pay fees such as sewer and school fees.
|
Development Impact Fees |
Deferred |
Collected |
|
Traffic Development Impact Fee (TDIF) |
$140,000 |
$240,000 |
|
Western Parkland Acquisition and Dev. (WPAD) |
$1.0 m |
$0 |
|
Public Facilities Development Impact Fee (PFDIF) |
$1.0 m |
$0 |
The above mentioned table was created to illustrate the estimated amount of impact fees that would be deferred as a result of the CFD program on a 100 unit residential project. A residential project was used because it is the only land use that is charged all three development impact fee programs. All other land uses (commercial, retail and hotels) are exempt from paying into the WPAD fund. It is important to note that the City will still collect the fee, with interest, and as noted in the Engineer’s Report (Attachment A), there will be adequate funding collected over the life of the CFD to ensure that all anticipated improvements are completed. In addition, staff has reviewed the various fee programs and the timing of facilities and has concluded that the CFD program would not result in the delay of building any new public facilities.
In conclusion, 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.
ATTACHMENTS
1. Hearing Report
2. Boundary Map
Staff Contact: Craig Ruiz, Principal Economic Development Specialist