HomeMy WebLinkAboutCouncil Presentation 01-08-2019 CFD Policy ConsiderationsCOMMUNITY FACILITIES DISTRICT (CFD) POLICY CHANGESSTUDY SESSIONJanuary 8, 20191
DISCUSSION ITEMS• Brief recap of prior study sessions and direction previously provided• Required amendments to CFD policy (SB 1480)• Optional policy amendments for Council consideration• Next steps2
BRIEF RECAP OF PREVIOUS STUDY SESSIONS• Described a CFD• Reasons why a CFD might be created• Discussed the importance of a sound CFD policy• Council directed that the CFD Board comprise Council plus two3
SOME AMENDMENTS REQUIRED BY SB1480• Process: Public hearing required within 60 days of receiving a signed petition for CFD formation• Application: Format will change significantly. Must include petition signed by at least 25% of landowners; include a description of process for two additional board members; application fees are limited to actual formation costs and shall not exceed $15,000• Enhancement Limitation: Council may not increase the infrastructure elements, debt limit or duration beyond those in the petition• Website and Searchable Database: The CFD shall establish and maintain an official website that is searchable and includes contracts, public notices, meeting minutes, resolutions and accounts showing all monies received and disbursed• Infrastructure Acceptance: Infrastructure must be accepted ownership and maintenance within 30 days of receipt of final, engineer’s certification4
COMMON TYPES OF CFD DEBTGeneral Obligation (GO) Special Assessment (SA)Security Ad valorem tax on property within districtFirst lien on property benefitedCurrent limitation Amount issued – Bond election;Tax rate – Unlimited (current target $2.50/$100)Value to lien ratio(current 6:1)Measures to protect home ownerStandby contribution agreements made with the developer; conservative valuation projectionsValue to lien ratioPaid by home owner throughSecondary property taxes through County TreasurerSpecial assessment billing through County Treasurer¹ ora separate billNote 1 – A.R.S §48-721 allows for CFD to enter into agreement with the County Treasurer for the purpose of special assessment billing and collection.5
OPTIONAL POLICY AMENDMENTS• Financing Considerations– Maintain a GO emphasis with current target tax rate?– Allow SA’s under certain circumstances?– Allow both GO’s and SA’s?– Establish a tiered structure?– Does it matter what type of debt is issued so long as we limit overall financial impact to homeowner?6
IMPACT OF GENERAL OBLIGATION BONDS• Target tax rates in current policy– Debt portion for debt service• $2.50/$100 of assessed valuation• Protections placed to maintain target• There is no legal maximum rate– Operations and Maintenance (O&M) portion for maintenance of CFD infrastructure • $0.30/$100 of assessed valuation• May not legally exceed $0.30/$100• Supplemental resources may be required to maintain CFD infrastructure acquired by the CFD and accepted by the Town7General Obligation (GO)Estimated Fair Value$ 250,000 Limited Value @70%$ 175,000 LAV @10% (class 03)$ 17,500 LAV/$100$ 175 Tax Rate (Debt+O&M)$ 2.80 490 $ 3.30 578 $ 3.80 665 $ 4.30 753 $ 4.55 796
IMPACT OF GENERAL OBLIGATION AND SPECIAL ASSESSMENT BONDS8General Obligation (GO)Special Assessment (SA)Total Annual ObligationEffective Tax Rate (GO+SA)Estimated Fair Value$ 250,000 Limited Value @70%$ 175,000 LAV @10% (class 03)$ 17,500 LAV/$100$ 175 Special Assessment$ 3,000Tax Rate (Debt+O&M)$ 2.80 $ 490 $ 225 $ 715 $ 4.09 $ 3.30 578 225 803 4.59 $ 3.80 665 225 890 5.09 $ 4.30 753 225 978 5.59 $ 4.55 796 225 1,021 5.83 • Special Assessments– Fixed assessment on the property– Flat annual payments– Effective tax rate varies based upon value of property
OPTIONAL POLICY AMENDMENTS – EXAMPLES1. Maintain GO emphasis; maintain $2.50/$100 target tax rate;2. Maintain GO emphasis; maintain $2.50/$100 target tax rate; allow SA’s under certain circumstances; limit overall financial impact to homeowner3. Maintain GO emphasis; modify target tax rate; allow SA’s under certain circumstances; limit overall financial impact to homeowner4. Allow either GO’s and/or SA’s; modify target tax rate; limit overall financial impact to homeowner5. Something else?9
DIRECTION REGARDING POLICY CHANGESCurrent Common Ranges Ideas for discussionGO Target Tax Rate for Debt Service – Special Circumstances$2.50 per $100 of valuationPer $100 of valuation: $2.00 to $3.50Tier 1 - $2.50/$100Tier 2 - $_.__/$100SpecialAssessment Bonds• No cap other than Value to Lien (see below)• Obligation cannot pass to ultimate home owner$2,000 to $3,500 per lot for routine infrastructure;Passes to home ownerLesser of:─ $_,___ per lot or─ Value to Lien (see below)Obligation may be passed to ultimate home ownerValue to Lien Ratio (Special Assessment Bonds)• 6:1 Public• 4:1 Private Placement• Excludes value of improvements4:1 Public3:1 Private PlacementIncludes value of improvements• _:1 Public• _:1 Private Placement• ________ value of improvementsGO Authorization7 yearsThe earlier of 15 years or 75% of development10
NEXT STEPS• Council direction and changes will be incorporated into an amended CFD policy• Staff will bring amended CFD policy to Council at a future meeting11
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