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HomeMy WebLinkAbout01/21/2004 CFD Study Session MinutesMINUTES OF CFD STUDY SESSION `MARACA TOWN HALL J A'V UAIZY 21, 2004 PLACE AND DATE Marana Town Hall, January 21, 2004 I. CALL TO ORDER By Mayor Sutton at 6:04 p.m. The study session was held informally and no official roll call was given. All Council members were present and seated at the dais. Senior staff and Town consultants in attendance included Mike Reuwsaat, Jaret Barr, Jim DeGrood, Jocelyn Bronson, Frank Cassidy, Roy Cuaron, Mark Reader, and Michael Cafiso. A list of public attendees is attached. II. GENERAL ORDER OF BUSINESS 1. Study Session on Gladden Farms Community Facilities District (Mike Reuwsaat) Mr. Reuwsaat began the study session by explaining that, in order to better inform the Council, specific issues and considerations relating to the Gladden mm Farms project would be discussed as well as financial and development-related aspects of CFDs in general. Mr. Cuaron addressed the Counil and gave a brief history of the Arizona Community Facilities Act, A.R.S. §48-701, passed in September 1988. He said that CFDs provided a mechanism for cities, towns, and property owners to finance and construct public infrastructure, improvements and amenities. He pointed out that the Council's consent was required before a CFD could be formed and that CFDs were governed by a board of directors. He indicated that CFD debt was independent and separate from the sponsoring municipality and that statutory debt limitations of cities and towns were unaffected. by the district's debt. He listed the three types of CFD debt instruments including general obligation bonds, special assessment bonds, or revenue bonds. Mr. Cuaron added that the CFD statute allowed the board to impose a 304 per $100 assessed valuation levy for operations and maintenance (O&M) expenses of the district. Mr. Cuaron continued by focusing specifically on the proposed Gladden Farms CFD. He said that the applicants wanted to issue approximately $23M for public infrastructure consisting of on-site/off-site water and sewer facilities as well as roadway improvements. He confirmed that Town staff was recommending the Council serve as the CFD board for several reasons. He said i MTNUTESOFCFD STUDYSESSION MARANA TOWN H1~LL JANL!.A.RY 21, 200 that the Town planned to propose a general obligation (G.O.) bond authorization and, with the Council sitting as the CFD board, the Council would be able to control the tax rate and provide equity throughout the district as well as any other district formed in the future. He indicated that the total G.O. authorization was expected to be $69M with $23M reserved for Gladden Forest and $46M reserved for the district. He disclosed that the aniticipated tax rate for the repayment of the bonds should not exceed $2.50 per $100 of assessed valuation, in addition to the 30~ O&M. He pointed out that the Town expected Gladden Forest to subsidize district expenses until assessed valuation provided sufficient revenues, not to exceed $100,000 per year. Mayor Sutton asked for further explanation of the differences between general obligation bonds and the special assessment bonds in terms of their continuing capacities and the ability of future councils to utilize the funding, even after a development project's completion. The Mayor explained that one of the reasons he asked this question was because the Council was looking at this funding mechanism as a means to provide future councils the bonding capacity to move forward and take on different projects within the district. Mr. Cuaron replied that G.O. bonds offered the district more flexibility for the future than special assessment bonds, particularly with the way the Council was recommending that the district be formed and authorized, by financing $69M even though the applicant and developer had identified only $23M in needs. He explained that authorizing three times the requested amount gave the district board the capacity to issue additional bonds to finance future infrastructure. Mr. Reuwsaat added that the $2.50 per $100 assessed valuation tax rate would provide equity over time and an equal playing field for the future development community. He said that it would provide a consistent level of expectation for those paying for the improvements to the tax levy for something they could expect instead of increased taxation. Mr. Cassidy pointed out that the Council action authorized $69M worth of bond sales total throughout the history of the district. He said that, at any given time, the amount of bonds that the $2.50 per $100 in assessed valuation would be able to support was significantly less than the proposed $69M. He added that, based on the projected build-out and the projected values, it was thought that it would take Marana 20 years to be able to generate enough assessed value to sell $23M in bonds. He explained that the other remaining $46M would be sold further down the road as the first $23M bond debt was paid down and that the $2.50 assessment stayed flat. He added that this is one 2 MINtTTES"OF CFD STUDY SESSION MAR,aI~A TOWN HALL Jr~NUARV 21, 200 of the things that distinguishes G.O. bonds from special assessment bonds: as the project develops, the capacity to sell more G.O. bonds increases because the assessed value increases. Mr. Cuaron said that the $2.50 tax rate was somewhat of an arbitrary number and could change at the direction of the district board. Mayor Sutton emphasized that the Town needed to be careful not to break its commitment to the residents not to impose a property tax. He added that he would not support a tax rate increase once a rate had been agreed upon at the initial formation of the CFD. Mr. Reuwsaat said that one of the benefits of forming a CFD is the Towri s ability to provide residents with a consistent expense over time. He said that this Council is setting a precedent and that Town staff recommends the $2.50 rate as something that fits within an equitable rate and tax burden region-wide and town-wide that could stand the test of time. Council Member Honea said that he did not have a problem with the formation of CFDs in order to finance infrastructure up front. However, he expressed concern about putting the $46M in reserve. He stated that he believed the Town was essentially imposing a $2.80 property tax forever on any home buyer in the Gladden Farms development. He reminded everyone that he was one of the Council members who had vowed never to support a property tax but that he believed supporting the $23M was an acceptable method of financing the much needed infrastructure improvements in the Gladden Farms area. Council Member Honea continued by saying that he believed the development would build out within ten years, as well as other projects in the area such as Continental Reserve and that supporting the additional $46M was dooming the home owners within these developments to a property tax for perpetuity. He pointed out that other homeowners living in already established developments in Marana would not be paying any property taxes but would be enjoying the benefits provided from the improved infrastructure paid for at the expense of a few. He said that he understood the philosophy of paying for a portion of a community library with CFD funding but that he had made a commitment to oppose a property tax. He voiced his concern that bureaucrats and elected officials would use the additional bonding capacity for frivolous projects in the future. He said that he believed that the proposed CFD would assure that some of the Marana residents would be 3 MINUTES OF C"FD STUDY SESSION I~~IAIZANA TOWN MALL .IANUARY 21, 20U~ an IDA must be appointed by the Mayor and Council. She pointed out that the two primary functions of an IDA were issuing bonds to qualified projects and funding community loans with fees from the bond project. She described the Town's role in the bond projects and said that, while there was no financial or legal liability for the Town, the Town would review and approve the proceedings of the IDA. Ms. Morales said that an IDA would benefit Marana by promoting economic development and housing development as well as neighborhood and community development. She continued her presentation by noting some of the IDA qualified bond projects such as housing, manufacturing facilities, health care facilities, educational facilities, redevelopment projects. She indicated that IDA bond projects would be funded by private lender with no public money and said that the projects would be a private investment for a public purpose. Ms. Morales continued by describing the features of the community investment loans and said that the loans would be to businesses and ,,~, corporations within the Marana community with the purposes and parameters to be established by the IDA in cooperation with the Town. She listed the costs associated with an IDA and explained the funding sources for the costs. She went on to explain the Marana Resource Corporation (MRC), a 501(c)(3) non-profit corporation acting as an extension of the IDA. She said the MRC would be formed to lessen the burdens of the IDA and the Town. She explained that the MRC would engage in projects or activities that the IDA was not empowered to such as ownership of affordable housing projects, the administration of IDA programs, and to apply for various state and federal loan programs. She pointed out that the MRC could perform all functions or purposes of an Arizona non-profit corporation and must be controlled, either directly or indirectly, by the IDA and/or Town of Marana. She said that the costs of the MRC would be funded through loans, grants, bond proceeds, tax credit proceeds and income generated from activities and/ or projects. The next topic covered was the Marana Housing Authority (MHA) which is a 501 (c)(3) non-profit community housing development organization (CHDO). The presenter said that the parameters for a CHDO were established by the U.S. Department of Housing and Urban Development (HUD) and that the CHDO must serve a clearly defined geographical area. She noted that a CHDO 4 MINUTES OF CFD STUDY SESSION ~~ ~~ MARANA'I'O~'4'N HALL IANU.~~2Y 21, 200=1 could not be controlled by the IDA or the Town of Marana and that it would provide housing for low-to-moderate income families. She said that MHA costs were funded through HUD, federal, and State grants and loans, bond proceeds, tax credit proceeds, and income producing projects and activities. Ms. Morales described the MHA Board of Directors composition requirements such as one third having to be low-income community representatives and no more that one third may be representatives of the public sector Council Member Blake stated that this program seemed to be linked through the federal government with lots of paperwork. He recommended that staff study what comes before Council very carefully before committing to any project. XII ADJOURNMENT The Mayor adjourned the meeting. The time was 5:30 p.m. CERTIFICATION I hereby certify that the foregoing are the true and correct minutes of the IDA/CHDO Study Session held on January 21, 2004. I further certify that a quorum was present. celyn onson, Town Clerk ~~~~~~OF~'I~~®®,I ~~ ~'C ~t~,'~ a m-rrer~~~~ ~~a ~~~~rf'v= ... _ .. ®. ~~f~ ~~L:I~ s 0 ~/ ias aa.aoe`` ® '~~'ereaWo°°° y® 5 II. PLACE AND DATE Marana Town Hall, January 21, 2004 CALL TO ORDER By Mayor Sutton at 6:04 p.m. The study session was held informally and no official roll call was given. All Council members were present and seated at the dais. Senior staff and Town consultants in attendance included Mike Reuwsaat, Jaret Bart, Jim DeGrood, Jocelyn Bronson, Frank Cassidy, Roy Cuaron, Mark Reader, and Michael Cafiso. A list of public attendees is attached. GENERAL ORDER OF BUSINESS 1. Study Session on Gladden Farms Community Facilities District (Mike Reuwsaat) Mr. Reuwsaat began the study session by explaining that, in order to better inform the Council, specific issues and considerations relating to the Gladden Farms project would be discussed as well as financial and development-related aspects of CFDs in general. Mr. Cuaron addressed the Council and gave a brief history of the Arizona Commuvity Facilities Act, A.R.S. §48-701, passed in September 1988. He said that CFDs provided a mechanism for cities, towns, and property owners to finance and construct public infrastructure, improvements and amenities. He pointed out that the Council's consent was required before a CFD could be formed and that CFDs were governed by a board of directors. He indicated that CFD debt was independent and separate from the sponsoring municipality and that statutory debt limitations of cities and towns were unaffected by the district's debt. He listed the three types of CFD debt instruments including general obligation bonds, special assessment bonds, or revenue bonds. Mr. Cuaron added that the CFD statute allowed the board to impose a 30¢ per $100 assessed valuation levy for operations and maintenance (O&M) expenses of the district. Mr. Cuaron continued by focusing specifically on the proposed Gladden Farms CFD. He said that the applicants wanted to issue approximately $23M for public infrastructure consisting of on-site/off-site water and sewer facilities as well as roadway improvements. He confirmed that Town staff was recommending the Council serve as the CFD board for several reasons. He said that the Town planned to propose a general obligation (G.O.) bond authorization and, with the Council sitting as the CFD board, the Council would be able to control the tax rate and provide equity throughout the district as well as any other district formed in the future. He indicated that the total G.O. authorization was expected to be $69M with $23M reserved for. Gladden Forest and $46M reserved for the district. He disclosed that the anticipated tax rate for the repayment of the bonds should not exceed $2.50 per $100 of assessed valuation, in addition to the 30¢ O&M. He pointed out that the Town expected Gladden Forest to subsidize district expenses until assessed valuation provided sufficient revenues, not to exceed $100,000 per year. Mayor Sutton asked for further explanation of the differences between general obligation bonds and the special assessment bonds in terms of their continuing capacities and the ability of future councils to utilize the funding, even after a development project's completion. The Mayor explained that one of the reasons he asked this question was because the Council was looking at this funding mechanism as a means to provide future councils the bonding capacity to move forward and take on different projects within the district. Mr. Cuaron replied that G.O. bonds offered the district more flexibility for the future than special assessment bonds, particularly with the way the Council was recommending that the district be formed and authorized, by financing $69M even though the applicant and developer had identified only $23M in needs. He explained that authorizing three times the requested amount gave the district board the capacity to issue additional bonds to finance future infrastructure. Mr. Reuwsaat added that the $2.50 per $100 assessed valuation tax rate would provide equity over time and an equal playing field for the future development community. He said that it would provide a consistent level of expectation for those paying for the improvements to the tax levy for something they could expect instead of increased taxation. Mr. Cassidy pointed out that the Council action authorized $69M worth of bond sales total throughout the history of the district. He said that, at any given time, the amount of bonds that the $2.50 per $100 in assessed valuation would be able to support was significantly less than the proposed $69M. He added that, based on the projected build-out and the projected values, it was thought that it would take Marana 20 years to be able to generate enough assessed value to sell $23M in bonds. He explained that the other remaining 2 $46M would be sold further down the road as the first $23M bond debt was paid down and that the $2.50 assessment stayed flat. He added that this is one of the things that distinguishes G.O. bonds from special assessment bonds: as the project develops, the capacity to sell more G.O. bonds increases because the assessed value increases. Mr. Cuaron said that the $2.50 tax rate was somewhat of an arbitrary number and could change at the direction of the district board. Mayor Sutton emphasized that the Town needed to be careful not to break its commitment to the residents not to impose a property tax. He added that he would not support a tax rate increase once a rate had been agreed upon at the initial formation of the CFD. Mr. Reuwsaat said that one of the benefits of forming a CFD is the Town's ability of the Town to provide residents with a consistent expense over time. He said that this Council is setting a precedent and that Town staff recommends the $2.50 rate as something that fits within an equitable rate and tax burden region-wide and town-wide that could stand the test of time. Council Member Honea said that he did not have a problem with the formation of CFDs in order to finance infrastructure up front. However, he expressed concern about putting the $46M in reserve. He stated that he believed the Town was essentially imposing a $2.80 property tax forever on any home buyer in the Gladden Farms development. He reminded everyone that he was one of the Council members who had vowed never to support a property tax but that he believed supporting the $23M was an acceptable method of financing the much needed infrastructure improvements in the Gladden Farms area. Council Member Honea continued by saying that he believed the development would build out within ten years, as well as other projects in the area such as Continental Reserve and that supporting the additional $46M was dooming the home owners within these developments to a property tax for perpetuity. He pointed out that other homeowners living in already established developments in Marana would not be paying any property taxes but would be enjoying the benefits provided from the improved infrastructure paid for at the expense of a few. He said that he understood the philosophy of paying for a portion of a community library with CFD funding but that he had made a commitment to oppose a property tax. He voiced his concern that bureaucrats and elected officials would use the additional bonding capacity for frivolous projects in the future. He said that he believed that the proposed CFD would assure that some of the Marana residents would be paying an undue burden compared to their neighbors in Continental Ranch, Continental Reserve, Dove Mountain, or old Marana. He voiced his feeling that funding more than was needed in the community facilities district was deceiving and that he had a real problem with including the additional $46M bonding capacity in the CFD package. He questioned whether this was a CFD to fund infrastructure or simply a "shill" to collect a property tax forever. Mr. Barr commented that he and Council Member Honea had discussed this issue many times and that he agreed with the Council Member on many points the Council member had just made. He said he would like to clarify that the district does not tax in perpetuity but taxed only as long as it had outstanding debt. He said that, at any time the district did not have debt, it could choose to fold itself. He pointed out that the additional bonding capacity gave the CFD board the flexibility of having funding to use but also imposed no obligation to use it. Vice Mayor Kal entered into the discussion and said that he thought if the Council saw some future need for more roadway improvements then they would authorize another level of funding. He said that the additional bonding capacity gave the CFD board another tool to fund future infrastructure. He asked if impact fees for adjoining property owners would level the playing field with the Gladden Farms residents. Mr. Reuwsaat replied that it would and said that impact fees were a point of discussion at the Council retreat in August 2003. He explained that Town staff was in the process of reviewing transportation impact fees, as well as impact fees for parks, drainage, and water facilities. He pointed out that a drawback associated with impact fees was that once an impact fee was set then it could not be changed or raised even though the monies funded were not sufficient for covering the infrastructure costs. He added that the formation of a community facilities district gave the Town sufficient capacity even if it was never used. The Vice Mayor mentioned that the Town of Oro Vallay had recently experienced a bad financial situation regarding much needed infrastructure funding and their Council had been forced to impose a property tax. He said that the Marana Council was only taxing certain new developments with the proposed CFD and that he believed there would be a great deal of resistance if the Council attempted to tax older areas within the Town. 4 Council Member Honea voiced his opposition to supporting a property tax on any resident of Marana. He stated that he believed the Council was not just setting up a funding mechanism for infrastructure improvements but that they were setting up a property tax for the residents in the district forever. He noted that the Saguaro Springs development would probably form a CFD as well but that the vast majority of Marana residents would not be paying a property tax. He said that specific groups of residents unfortunate enough to be in an area where a CFD of the type proposed was formed would be taxed twice if a half- cent transportation tax was approved by the voters in the future in order to assist in the funding of transportation improvements such as the Linda Vista Interchange. He noted that every other Marana resident would pay only once for the infrastructure improvements. Council Member Comerford pointed out that home owners within the proposed CFD area had the opportunity to come before the Council and voice their opinions to the proposed action. She said that, as a resident of Continental Ranch, she would have favored the formation of a CFD if she had been informed about the benefits when she purchased her home. She commented that she would have gladly contributed monies to help in building the Linda Vista/Twin Peaks Interchange. Mayor Sutton emphasized that CFD monies must be spent within the district or to benefit the district. He stated that funds from the Gladden Farms CFD could not be utilized for roadway improvements on Ina Road. Council Member Comerford said that denying the additional $46M bonding capacity would create a limit to what the district residents could have to say even if they wanted more roadway improvements. She said that there was no other viable funding method available for future interchanges or other major infrastructure improvements. Mr. Reuwsaat agreed with the Council member and said that the flexibility of having the additional funding capacity gave the residents from Gladden Farms an option for funding park improvements or landscaping upgrades in the future should the need arise. He noted that this type of funding would directly benefit the Gladden Farms residents without burdening the rest of the sales tax or revenue sharing received from the remainder of the community. Council Member Blake said that if the Gladden Farms residents thought that what they were paying was enough and that they did not want additional bonding then they had the opportunity to appear before Council to voice that opinion. Council Member Comerford said that the builders would certainly pass on the CFD costs to the home owner. Mayor Sutton commented that it had been discovered by Town staff that some of the impact fees already in place were too low but that there was no way at this point to go back and charge more to those who already paid. He said that his concern was the Town could not expect the upward development cycle experienced for the past eight years to continue at the current pace. He said that eventually another town would be the fastest growing town and that Marana would be fully developed. He warned that if the Town didn't begin setting up CFDs to pay for development in perpetuity then he believed that, with the current state of the budget and with the budget projections going forward, some future Council would have to vote on a municipality-wide property tax in order to cover costs. He said that he did not believe that the Town received enough for the services provided to the community and that the Town continued to adapt and add more to provide better service. He said that Marana was robust because residential and commercial development was going extremely well but that those cycles would change. He acknowledged that he saw the additional $46M bonding capacity as a rainy day fund for the future of Marana. He stated that everybody paid for the whole community growing and that the proposed CFD was a way to protect the promises already made to the residents. He urged the Council to weigh the benefit of approving the CFD over the next 20 to 30 years. Vice Mayor Kal encouraged the staff to look into impact fees for adjoining property owners to the proposed district. He maintained that an impact fee would level the playing field for the acquired amenities brought into the community by the CFD. Mr. Reuwsaat agreed with the Vice Mayor and said that this process was underway. He said that the Town staff was confident that the recommendations being provided were good and conservative. Mayor Sutton spoke about the initial $23M for the public infrastructure. He asked what the guidelines for disbursal to the developer would be and wondered whether the monies would be disbursed in one lump sum or doled out as needed. Mr. Cassidy replied that the developer paid for the infrastructure improvements up front and was then reimbursed through the CFD bond funding process. He said that the amount of bonds that could be funded with the $2.50 per $100 assessed valuation was obviously low in the beginning and that assessed valuation needed to be built up for repayment. He pointed out that the developer never received 100% reimbursement for all infrastructures. Mayor Sutton asked what would happen if the proposed CFD was not formed. Mr. Barr replied that the developer would still build the infrastructure but that the costs would be passed on to the homebuyer in the price of the home. Mr. Cassidy illustrated a normal scenario and said that the developer would build the infrastructure then charge back the homebuyer in the house price. He said that after completion of the infrastructure, the developer would be released by the Town from any assurance agreements and the Town would assume the infrastructure maintenance without the benefit of any O&M tax. He expressed that in a CFD scenario, at least the town received the O&M tax to cover maintenance expenses. Mr. Barr added that another benefit to districting was that the bonding capacity allowed the Town to acquire better infrastructure than would normally be available. Mr. Reuwsaat commented on the short term benefits of forming a community facilities district. He said that the first benefit was that the $75,000 application fee was general fund revenue. He continued by saying that the second benefit was that, if the proposed CFD was formed before the end of 2004, the developer would accelerate the construction of Gladden Farms Road down to Tangerine Farms Road. He noted that the developer was committing to build an extra length of road down to the Heritage Park building and to build a road that they were not otherwise committed to build from that location within Heritage Park over to the ball fields and other park facilities. Mr. Reuwsaat said that the developers had already invested $3M to bring in the sewer system which would also serve Honea Heights. Council Member Comerford said that the developers knew what to expect when they decided to build in Marana. She said that they knew they were purchasing property without sewer, with no infrastructure, and that the Town needed to work with them. She maintained that the developers needed to understand that the land did not have existing amenities and that the Town could not upgrade the properties for them. She said that by the developers proposing the CFD formation, they were showing the responsibility that was theirs already and not imposing a burden on the Town or the residents. Council Member Blake said that, barring any unforeseen circumstances, the developers were going to profit and that, without the CFD, they would have to charge a homeowner an additional $20,000 to $30,000 to cover the infrastructure costs. He conveyed that this would change the level of homebuyer who had the ability to buy a home in Gladden Farms and that it would slow the project's pace down considerably. The Councilman asserted that the homeowner would then carry the added amount within the price of the home throughout the life of a 30-year mortgage. Mr. Reuwsaat drew the Council's attention to the attendance of Michael Cafiso and Mark Reader, bond counsel and financial advisor respectively, two of the best people in Arizona for protecting the Town's interests in the CFD. He stressed that forming a community facilities district was not treading new ground and that the Town of Goodyear had five or six CFDs set up similarly to the proposed Gladden Farms CFD. He noted that the CFDs had been very productive for Goodyear in terms of growth and the quality of life they had been able to establish as a new community. The Town Manager reiterated his complete confidence in Mr. Cafiso and Mr. Reader's recommendations. Mark Reader addressed the Council. He explained the reasoning for the general obligation bond structure recommendation versus the assessment bond structure. He said that one of the reasons was that the Council did not want the homeowners to have to write a check every six months and that the G.O. bond was recouped from the annual secondary tax levy paid twice a year. He said that in relation to the amount of debt to be issued, there was a cap on the district at $2.50 per $100 assessed valuation. He confirmed that, as the assessed valuation grew, the Town or the district had the flexibility to issue additional debt in the future as they deemed appropriate or as the residents within that area deemed appropriate. Mr. Reader briefly discussed the question of how much bond capacity to authorize. He observed that the developer would recoup expenses either by accepting reduced profits or by increased home prices. He noted that CFDs were not an issue across the State in other communities and that the associated fees were disclosed to the potential homebuyer prior to any sales. He said that developers would attest to the fact that the CFD taxes had not had a significant impact on the sale of property or home sales. Mr. Reader continued by pointing out a positive aspect of forming a district. He said that the developer could sell homes at a lower price thus stimulating area development. He admitted that a property tax was indeed established for the district and would be collected from the homeowners indefinitely. He affirmed that the nature of the property tax depended on how the community shaped in the future and that Goodyear had been experiencing problems as the project's development completed. He said that this had evolved over a ten year period but that residents had become more aware of the tax rate and that it was becoming more of an issue. He explained that the Town's budget would be put under some pressure but that he thought the Town was in a good position to absorb the pressure considering the current general fund balance. He explained that this was a way, especially with the 30¢ O&M tax that could be levied on an annual basis, for the Town to provide funding for a growing demand for services. He advised the Council to be careful with respect to the nexus of the bond issuance because anything beyond the $23M within the Gladden Farms district had to directly benefit the district otherwise legal and equity issues would come into play. He maintained that the proposed CFD formation was ideal for providing future flexibility should the need arise. He noted that the projections showed that the bonds were going to be issued over a 25-year period and that they were using conservative assessed valuation growth assumption. Mr. Reader said that the CFD model being used over the next year had a number of credit and enhancement features to ensure that the Town was well protected. He vowed that he and Mr. Cafiso would continue to be actively involved as the Town negotiated the final development agreement. Mr. Cafiso spoke before the Council and gave a brief background of his association with the community facilities district issue. He related that he had been dealing with these types of special land districts since the early 1980s and, in Arizona, since the inception of the statute. He confirmed that CFDs were created to assist the developers. He said that there were pros and cons associated with the formulation of the districts and he complimented the senior staff and Council for their knowledge of the process. He said that the process, relatively new to Arizona, was very time consuming in terms of Town staff. He noted that the developers were going to sell lots at certain prices and, with the CFD, the developer was able to construct their infrastructure off their balance sheets. He explained that the developer would shift that tax burden to homeowners as soon as possible. He confirmed that the cost of the infrastructure paid into the CFD by the taxpayers would have been something that the developers would have incorporated into lot prices if a district was not available. He assured the Council that the lot costs were going to be what the market would bear. He disclosed that a competitive situation had begun to occur in Arizona and developers were leaving communities who were not willing to create CFDs because the developer was able to make more profit 9 with CFDs. Mr. Cafiso stated that districts were a necessary evil and were here to stay. He assured the Council that he and Mr. Reader would ensure the least amount of risk for the Town. Mayor Sutton asked Mr. Caflso to comment on the formation of a CFD as a flexible tool for future Councils to use as a rainy day tool. Mr. Cafiso replied that CFDs were a flexible tool only while you have a flexible developer and that there were always unforeseen problems. He said that residents might not allow future Councils to issue additional bonds in the Gladden Farms CFD. He said there were risks on both sides in that respect. He commented that homeowners were fairly tax rate insensitive because taxes are typically paid out of their mortgage escrow account. He said that most people don't even care until someone brings it to their attention. He suggested that the Town get the tax rate in place as quickly as possible and get people used to seeing it on their tax bill. He said that a CFD tax was no different from a school district, a fire district, or a water district. He stated his belief that the developers were at a much larger risk than the Town. Mayor Sutton asked if the 30¢ O&M would cover the staff and costs associated with the district. Mr. Cafiso replied yes. Council Member Honea thanked Mr. Cafiso for making his point much more eloquently than he could himself. He said that he intended to vote for approval of the CFD because he thought that the $23M up front for the Gladden Farms infrastructure was very important for north Marana. He went on to say that the other $46M was a really, raw deal. He pointed out that Mr. Cafiso had made a good point when he said that it may backfire on the Town at some point in the future. He voiced his opinion that if the Town ran the CFD in perpetuity at $2.80, it would cause major problems in the long run. He said that he believed the Town should issue the $23M or $25M for safety purposes but he was vehemently against using a district as a taxing mechanism for perpetuity. Mayor Sutton said that he believed the $46M was what the financial advisors were calling the Council's flexibility. He said that the full capacity never had to be used. Mr. Cafiso replied that the Mayor was correct. He said that the way it had been discussed provided a lot of flexibility for the Council and the developer to go forward. He assured the Council members that checks and balances would always be in place. 10 Mayor Sutton asked if the developers wanted to speak on the topic. He commented that this was a huge decision for the Council and he hoped that everyone would be open and voice any concerns. Dean Wingert, representing the Forest City Land Group and as the managing partner of the Gladden Farms development, addressed the Council. He thanked the Council for the special study session and said that this had been a painful process since the initial application over a year ago. He reported that diligent work had been applied to produce different versions and lifecycles of the proposed community facilities district. He observed that the comments and impressions of the Council were insightful and it was obvious that the Council had given this issue plenty of thought. He said that the infrastructure was going in as the development called for it and that it was being funded by the developer. He mentioned that the CFD bonding mechanism moved very slowly and reimbursement was made over a very long and extended period of time. He challenged the statement that the initial $23M was all for the developer with nothing for the Town. He stated his belief that Town staff had listed additions to the development agreement for Gladden Farms specifically for the formation of the CFD in terms of additional roadways, utility extensions, expedited construction of other items, a solution to the off-site Tangerine Farms Road extension, and a significant cash upfront payment. He contended that all of those items were clearly for the Town's benefit. He concluded by stating that he looked forward to working with the Town to develop a quality product in the Gladden Farms project. He said that it was time for a go or no-go decision because the builders were ready to begin the home sales process. Vice Mayor Kai said that he understood Mr. Wingert's point. He expressed his belief that the CFD would be good for everyone involved. Mayor Sutton commented that the Gladden Farms group had pioneered the CFD process in Marana and that the next developer approaching the Town would have an easier, quicker process. He noted that the Council wanted to be sure that the Town was protected and that their promise of not imposing an overall property tax was kept. He pointed out that decisions such as those made relating to the formation of a communities facilities district would put the Town in an economic situation in the future to keep those types of promises to their constituents. He asked that the senior staff present the Council with a report outlining the CFD impact on the Town when the population was at 75,000. 11 Mr. Barr said that he was prepared to provide the Council with figures indicating what the O&M costs would be in the district versus what would come from the general fund if there was no CFD in place. He said that he could compile assumptions based on a per household cost of service. The Mayor continued by saying that the Town had to play devil's advocate and look at the worst scenario that might occur. He said the planning of the CFD was rainy day insurance for the health and safety of the future Marana residents. He noted that this would go down in history as this Council's legacy and he gave his sincere gratitude to the staff for their hard work. Upon motion by Council Member Honea, seconded by Council Member Blake, authorization to direct staff to bring forward to Council documents necessary to establish the Gladden Farms CFD and an amended Gladden Farms development agreement was unanimously approved. XII. ADJOURNMENT The Mayor adjourned the meeting. The time was 7:32 p.m. CERTIFICATION I hereby certify that the foregoing are the true and correct minutes of the CFD Study Session held on January 21, 2004. I further certify that a quorum was present. Jocelyn Bronson, Town Clerk 12