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CONSIDERATION OF ESTABLISHMENT OF COMMUNITY FACILITIES DISTRICT CFD NO. 17-I, WESTERN CHULA VISTA DEVELOPMENT IMPACT FEE (DIF) FINANCING PROGRAM (THE “FORMATION PROCEEDINGS”)
A) RESOLUTION NO. 2016-017 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ADOPTING A MAP SHOWING THE BOUNDARIES OF THE TERRITORY PROPOSED TO BE INCLUDED IN COMMUNITY FACILITIES DISTRICT NO. 17-I (WESTERN CHULA VISTA DIF FINANCING PROGRAM)
B) RESOLUTION NO. 2016-018 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA DECLARING ITS INTENTION TO ESTABLISH COMMUNITY FACILITIES DISTRICT NO. 17-I (WESTERN CHULA VISTA DIF FINANCING PROGRAM) AND TO AUTHORIZE THE LEVY OF A SPECIAL TAX THEREIN TO FINANCE THE PAYMENT OF CERTAIN DEVELOPMENT IMPACT FEE OBLIGATIONS, ORDERING AND DIRECTING THE PREPARATION OF A REPORT FOR SUCH PROPOSED COMMUNITY FACILITIES DISTRICT, AND SETTING THE PUBLIC HEARING TO CONSIDER ESTABLISHMENT OF SUCH DISTRICT
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolutions.
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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 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 Main Street Auto Park. This is the first of several actions required by the City Council to consider the formation of the Community Facilities District which is proposed to be designated as Community Facilities District No. 17-I (Western Chula Vista DIF Financing Program) (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 Warren Diven, 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 certain impact fees will reduce the additional equity burden by an amount equal to such fees. The CFD will also enable the developer to shift such 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 the payment of 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 availability 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 resolutions proposed with this report are the first of several actions to be taken by the City Council in the consideration of the formation of the CFD. In general, these Formation Proceedings will consider the adoption of the boundaries of the CFD to encompass the proposed “Core” property upon its formation and declare the City Council’s intent to form the CFD.
More specifically, Resolution A (Boundaries of Community Facilities District No 17-I) is a map of the subject property to be included in the CFD boundary. . The subject property is located at 980 - 986 Broadway, at the northwest corner of Broadway and Moss Street. All other multi-family, commercial and industrial land between Interstate 5 and 805, as well as the Auto Park and adjacent industrial land east of Interstate 805 will be within the proposed Future Annexation Area of the CFD. Future separate City Council actions as part of Agenda Item 16-0019 will require the adoption of the boundary of the Future Annexation Area.
Resolution B describes the fees that will be deferred as well as the Rate and Method of Apportionment of the special taxes that will be levied against the core property to pay the deferred impact fees (Exhibit A of Resolution B). The proposed terms for projects that annex into the CFD would allow for the deferral of the Public Facilities Development Impact Fee, Parkland Acquisition and Development Fee and the eligible portion of the Transportation Development Impact Fee. There will be no special tax payments due for 10 years from the time the project receives a certificate of occupancy, but will accrue interest at two percent (2%) per annum from the date of issuance of the certificate of occupancy. Special tax payments toward the deferred impact fees will be due following the tenth (10th) anniversary of the date of the certificate of occupancy and will continue until the fees have been paid in full by the 30th year. The balance of the deferred fee and the accrued interest will bear 2% current interest during the 20 year term of the levy of the special tax. Prepayment of the deferred impact fees applicable to a parcel is available at any time by prepaying the special tax obligation for such parcel.
Resolution B also sets a public hearing on March 15, 2015 to allow the public the opportunity to testify regarding the consideration of the establishment of the proposed CFD, the rate and method of apportionment of the special tax proposed to be levied within the CFD, and all other matters as set forth in the resolution of intention. Lastly, the resolution directs the Director of Public Works to prepare or cause to be prepared the Community Facilities District Report to be presented to the City Council, generally setting forth and containing the DIF Obligations, Cost Estimate and the rates and methods of apportionment of the special taxes proposed to be levied within the CFD.
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.).
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
All consultants and staff time related to this action are being funded by the Economic Development Department’s General Fund Budget.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact as a result of this action. As stated above, the Director of Public Works will prepare or cause to be prepared the Community Facilities District Report to be presented to the City Council, generally setting forth and containing the DIF Obligations, Cost Estimate and the rates and methods of apportionment of the special taxes proposed to be levied within the CFD. This report will address the impacts of the future fee deferrals.
ATTACHMENTS
None
Staff Contact: Craig Ruiz, Principal Economic Development Specialist