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Home My WebLink About07/01/2003 CFD Study Session Minutesf .: NIINUTES OF CFD STUDY SESSION MEETING... I~IARANA TOWN HALL JULY 1, 2Q03 PLACE AND DATE Marana Town Hall, July 1, 2003 I. CALL TO ORDER Mayor Sutton began the meeting at 5:35 p.m. The study session was conducted informally and no roll call was taken. Council Members Escobedo and McGorray were excused but both Council members arrived at 5:50 p.m. II. GENERAL ORDER OF BUSINESS A. COUNCIL ACTION 1. General discussion regarding Community Facilities Districts (CFDs) (Roy Cuaron) Roy Cuaron spoke before the Council regarding this item. He introduced Mark Reader, financial counselor, and Michael Cafiso, bond counselor, who were both on hand to answer questions regarding community facilities districts (CFDs). Mr. Cuaron distributed a CFD informational ~~° sheet which has been made a permanent part of this record. He explained the history of the State's legislation which provides jurisdictions and property owners a financing mechanism to construct public facilities and infrastructure through the issuance of tax-exempt bonds. He outlined the formation requirements and governance policies and gave a brief outline of how the formal creation and operation process worked. He noted that the most common forms of CFD debt instruments were general obligation bonds and assessment bonds. Mr. Cuaron informed the Council that the three CFDs currently residing within the Town were all operating under assessment bonds. He recommended the exclusive use of general obligation (GO) bonds for any future CFD financing because GO bonds afforded more flexibility and served as a tool for future Councils to finance necessary district infrastructure. Council Member Honea inquired about maximum debt ratios allov~~ed in relation to property values. Mr. Cuaron replied that the Toti~n had previously set up a 3-to-1 ratio structure but that no statutory requirement existed regulating this aspect of the CFD financing. Council Member Honea asked if the debt ratio could rise above the value of the property. Mr. Cuaron replied that, with any CFD coming forward using a .~. combination of GO and assessment bonds, the Town would be looking at the total tax burden on the property in relation to the value of the property. He explained that certain CFD mechanisms called stand-bv MINUTES OF CFD STUDY SESSION MEETING MARANA TO`VN HALL JULY 1, 2003 "~" contribution agreements and payment agreements provided for the developer to put monies up front when the bonds were issued. He added that the Town set those assessment figures at whatever number they felt comfortable with which was why the developer's financial capacity was being examined as well. He commented that the impact of that assessment in relation to the total value of the property was going to be examined closely with any new CFD having both GO and assessment bonds. Council Member Honea said that the biggest problem he had with GO bonds was that they went on for perpetuity and that this was nothing but a property tax in disguise. He was adamant invoicing his concerns with even forming CFDs and said that he believed they were possibly harmful to the community. He stated that the situation created by allowing GO bonds on properties without a definite payoff date would be that neighboring communities would have vastly different costs scenarios for maintaining their roadways and public improvements. He said that some communities would have a homeowners' association to maintain private issues while other communities would be paying property tax forever to maintain their streets and public infrastructures. He expressed his preference for the assessment bond financing structure where the CFD is dissolved when the developer sells the property and the debt is paid. Vice Mayor Kai agreed with Council Member Honea that the assessment bonds were the safest from the Town s perspective in terms of liability. Mr. Hein maintained that there was no difference in the risk level of either financing mechanism. He explained that a general obligation bond ramped up based on the property's assessed value. He said that the debt level was not infinite but based on the contribution agreements and on the assessed value and rates established at the time of the CFD creation. He pointed out that GO bond financing was a tool designed for the building of the infrastructure and not for infrastructure maintenance. He noted that the methodology the Town staff was recommending for structuring the GO bonds afforded future generations and Councils the opportunity to use excess capacity or future authorization based on the initial developer agreements and the election that took place with the property owners. He added that this was a ~~ay for master developers to finance public infrastructure, to do master planned communities with basically less expensive money than a bank note or their own internal rate of return financing because it was public infrastructure and would be eventually v. owned by the public. MINUTES OF CFD STUDY-SESSION MEETING- hIARANA TOWN HALL .. - ~:.~„ ~ '_ -.JULY 1 2003 Mayor Sutton inquired about certain scenarios involving CFDs such as that of Continental Ranch residents paying for the construction of the future Linda Vista/I-10 interchange. Mr. Hein replied that this scenario was a policy decision. He said that staff would never recommend that the Council, as the CFD Board, vote to increase the million levy or the tax rate of a CFD. He pointed out that there would be full disclosure and residents would be aware of what they were responsible for in terms of paying for the infrastructure. Mayor Sutton commented that a community facilities district was a type of self-imposed property tax. Mr. Cuaron said that the Council could consider any CFD but that GO bonds were considered the most flexible. He commented that the financial stability of the developers would be investigated and that stand-by contribution agreements would be made. He said that there was a variety of variables involved in the CFD process. Mayor Sutton reiterated that this process was self-imposed and that the property owner wanted it. He said that the tax payer is made aware that the tax cannot be increased and the CFD funds have to be spent within the district or to directly benefit the district. Mr. Cuaron pointed that the tax rate could increase at the discretion of the CFD Board and that the tax rate was set annually at budget adoption. Mr. Hein said again that those were policy decisions and what staff was recommending was a more steady even kind of approach. He said that the private market was also a factor as the bonds needed to be saleable. He mentioned that the developer would sell to a builder and the builder needed to understand the terms of the CFD bonds and be able to sell that to the homeowners. He emphasized that the market played an important element in all of these districts. Council Member Escobedo asked about the GO bonding process and if it required voter approval from that district. He also asked where in the process the Council would come into play. MINUTES UF~CFD STUDY SESSION ?YIEETING - h1~R~NA TOWN 1L~LL - JULY 1; 2003 .._ Michael Cafiso spoke briefly before the Council regarding regulations and policies associated with CFD financing. He said that the Arizona Community Facilities District Act, A.R.S. 48-701, authorized a CFD to borrow money in order to build or acquire public infrastructure outside of its boundaries as long as the infrastructure was located on land owned by another political subdivision and would provide some benefit to the district. He explained that it was common to see roadways built in this manner if the road benefited the residents within the district's boundaries. He said that setting the tax rate of the CFD was a policy decision and was made very carefully by the Board so as not to burden the property owners and initial residential homeowners with higher taxes than expected. There was no further discussion at this time. III. ADJOURNMENT Mayor Sutton adjourned the study session. The time was 6:35 p.m. CERTIFICATION I hereby certify that the foregoing are the true and correct minutes of the Marana Town Council study session held on July 1, 2003. I further certify that a quorum was present. celyn Br son, Town Clerk ~' ~ -, ~~ e ~~~ r~~~ ,, ... . ~ ~~ 4