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CONSIDERATION OF ESTABLISHING COMMUNITY FACILITIES DISTRICT NO. 17-I, DECLARING THE RESULTS OF THE SPECIAL ELECTION WITHIN CFD 17-I AND AUTHORIZING THE LEVY OF SPECIAL TAXES WITHIN CFD 17-I (THE “FORMATION PROCEEDINGS”)
A. RESOLUTION NO. 2016-049 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA FORMING AND ESTABLISHING COMMUNITY FACILITIES DISTRICT NO. 17-I (WESTERN CHULA VISTA DIF FINANCING PROGRAM) AND AUTHORIZING SUBMITTAL OF THE LEVY OF SPECIAL TAXES WITHIN SUCH COMMUNITY FACILITIES DISTRICT TO THE QUALIFIED ELECTORS THEREOF
B. RESOLUTION NO. 2016-050 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 SUCH COMMUNITY FACILITIES DISTRICT
C. ORDINANCE OF THE CITY OF CHULA VISTA ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 17-I (WESTERN CHULA VISTA DIF FINANCING PROGRAM) AUTHORIZING THE LEVY OF A SPECIAL TAX IN SUCH COMMUNITY FACILITIES DISTRICT (FIRST READING)
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RECOMMENDED ACTION
Recommended Action
Council conduct the public hearing, adopt resolution A, direct the City Clerk to conduct the special election; if levy of taxes is approved by voters, adopt resolution B and place the ordinance on first reading.
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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 impacts fees can be accomplished by agreement or by projects annexing into a Community Facilities District (CFD). At that time, staff indicated that it would return at a later date with the current action to establish a CFD 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 declaring its intent to form CFD 17-I and adopting a boundary map for the CFD. This item will include a public hearing, the adoption of a resolution establishing such CFD, a vote on the levy of special taxes within the CFD, the adoption of a resolution determining the results of such election and an ordinance to authorize the levy of a special tax within the CFD.
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 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 District, unless the term of the CFD is extended by the City Council. Staff estimates, based on projects that have been approved or are in the pipeline, approximately 800 residential units and 300,000 square feet of commercial development will have the opportunity to participate in the program prior to its expiration. These projects are anticipated to provide the comparables necessary to reduce the risk to the lending industry.
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 also continue to be required to mitigate for on-site “direct” 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. The City has previously agreed to collect a minimum amount of the WTDIF required for the regional arterial roadway system. In order to meet this obligation the city will continue to collect approximately 60% of the WTDIF and defer approximately 40%. Projects will continue to mitigate for on-site “direct” impacts (i.e. turn pocket, traffic signal, road widening) and pay fees for items such as sewer capacity, school and water fees, which 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 to initiate proceedings to consider the formation of the CFD. At that meeting, the Council approved a resolution that adopted a boundary map of the “Core” property to be initially included in the CFD. The Core property is located at 980-986 Broadway, and will include 80 condominium units and approximately 2,100 square feet of retail space. A second resolution approved by the City Council expressed the Council’s intent to form CFD 17-I. In a separate but corresponding action, the Council adopted resolutions declaring their intent to authorize the annexation Future Annexation Areas to allow additional property owners to voluntarily elect to annex individual project sites into the CFD at a future date.
There are several actions to be taken in the formation of CFD 17-I. First, a public hearing will be held relating to the establishment of the District, the extent of the District, the financing of the payment of certain development impact fee obligations described above and all related matters to the CFD formation. If it is determined that a majority protest to the formation of the CFD has not been filed by the owners of more than one half of acreage of the property proposed to be initially included in the CFD, the City Council may consider a resolution forming and establishing the CFD. By the adoption of such resolution, the City Council will, among other actions, make certain determinations pertaining to the CFD; confirm the initial boundaries of the CFD, confirm the development impact fees the payment of which are authorized to be financed by the payment of special taxes levied within the CFD, authorize, subject to the approval of the qualified elector of the CFD, the levy of special taxes within the CFD and call a special election to be held immediately following the adoption of such resolution. Next, an election will be held with the owner of the Core property. The election will be to authorize the levy of special taxes and to establish the maximum annual amount of the amended levy (the “Gann Limit”).
The second resolution will be to approve the results of the election and enter the results of the election into the minutes. If the election passes, the final action will be the first reading of an ordinance authorizing the levy and collection of the special taxes. If the election fails, no further action is required.
DECISION-MAKER CONFLICT
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.
In addition to the above, Staff has reviewed the property holdings of all of the City Council members and has found no real property holdings within 500 feet of the boundaries of the real 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.).
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.
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Development Impact Fees |
Deferred |
Collected |
|
Western Transportation Development Impact Fee (WTDIF) |
$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 table illustrates the estimated amount of impact fees that would be deferred as a result of the CFD program on a 100 unit multi-family 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 (i.e. commercial, retail and hotels) are exempt from paying into the WPAD fund and are exempt from certain portions of the PFDIF. It is important to note that the City will still collect the fees due, 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
Staff Contact: Craig Ruiz, Principal Economic Development Specialist