The specific plan contains a number of public amenities such
as landscaping and lighting on streets, emergency access gateways,
and a linear park, that require initial funding and a vehicle to assure
ongoing maintenance. The following are a range of approaches and options
that could provide the funding necessary.
(Ord. 1944 §§ 1,
2 (Exh. A), 2011)
A. Common
Interest Development (CID) (Commonly an HOA). A homeowner's association
(HOA) is a form of CID, a certain type of real estate and form of
home ownership. CIDs allow individual owners the use of common property
and facilities and provide for a system of self-governance through
an association of the homeowners within the CID. The most common type
of association of homeowners is the nonprofit mutual benefit corporation.
This is a corporation in which the members of the corporation vote
for a board of directors that runs the affairs of the corporation.
B. Some
of the statutory basis for the operation of CIDs can be found in:
1. Civil
Code 1350, et seq. (The Davis-Stirling Act);
2. Corporations
Code 7110-7160 (Nonprofit Mutual Benefit Corporations Formations and
Powers);
3. Corporations
Code 7210-7215 (Corporate Duties and Responsibilities);
4. Corporations
Code 7220-7225 (Selection, Removal and Resignation of Directors).
(Ord. 1944 §§ 1,
2 (Exh. A) , 2011)
A. Assessment
Districts.
1. Background.
In 1978 Californians enacted Proposition 13, which limited the ability
of local public agencies to increase property taxes based on a property's
assessed value. Since that time, assessment districts, which have
been in existence since the early 1900s, have been used on a widespread
basis as an alternative method for financing public improvements.
Currently, about one in three properties in California is part of
an assessment district.
2. Authorizing
Legislation for Assessment Districts. There are two primary acts which
authorize the establishment of assessment districts:
a. The Improvement Act of 1911 (
Streets & Highways Code § 5000
et seq.), which can be used by cities, counties and other municipal
governments to fund a wide range of public infrastructure projects.
The 1911 Act can also fund maintenance of improvements.
b. The Municipal Improvement Act of 1913 (
Streets & Highways Code
§ 10000 et seq.), which can be used by cities, counties,
joint powers authorities and other special districts to fund water,
electrical, gas and lighting infrastructure, public transit facilities,
as well as other basic infrastructure needs.
c. The Improvement Bond Act of 1915 (
Streets & Highways Code § 8500
et seq.) is normally used in combination with one of these acts to
issue bonds to finance the improvements. The vast majority of assessment
district projects are paid for with 1915 Act Improvement Bonds.
3. Assessment
District Purpose. An assessment district is created to finance improvements
when no other source of money is available. Assessment districts are
often formed in undeveloped areas and are used to build roads and
install water and sewer systems so that new homes or commercial space
can be built. Assessment districts may also be used in older areas
to finance new public improvements or other additions to the community.
4. Assessment
District Formation. An assessment district is created by a sponsoring
local government agency, such as a city or county. The procedure for
forming a district begins with a petition signed by owners of the
property who want the public improvement. The proposed district will
include all properties that will directly benefit from the improvements
to be constructed. A public hearing is held, at which time property
owners have the opportunity to protest the assessment district.
5. Once
approved, property owners have the opportunity to prepay the assessment
prior to bond issuance. After this cash payment period is over, a
special assessment lien is recorded against each property with an
unpaid assessment. Then, these parcels will pay their total assessment
through annual installments on the county property tax bill. The property
owners will have the right to prepay the remaining balance of the
assessment at any time, including applicable prepayment fees.
B. Mello-Roos.
1. Mello-Roos
Bonds. The Mello-Roos (named for its legislative sponsors) Community
Facilities District Act of 1982 established another method whereby
almost every municipal subdivision of the state may form a special,
separate district to finance a long list of public facilities by the
sale of bonds and finance certain public services on a pay-as-you-go
basis. These community facilities districts are formed and bond issues
authorized by a two-thirds vote of the property owners in the district.
Typically the only voters in a district are one or more real estate
developers who own or have an option on all of the land in the district.
These land-based financings were nicknamed "dirt bonds" by the bond
advisor years ago. Bonds are sold to finance facilities that can include
schools, parks, libraries, public utilities and other forms of infrastructure.
The districts may provide public services that include police and
fire protection, recreation programs, area maintenance, library services,
and flood and storm drainage. Bonded debt service and/or the public
services are paid for by special taxes levied on the real property
within the district. As the developer subdivides and sells off the
land the new property owner assumes the tax burden. Tax delinquencies
can lead to fines and penalties and ultimately foreclosure and sale.
The ultimate security for Mello-Roos bonds is the value of the real
property being taxed, consequently a provision in the law requires
the appraised value of the land be three times the bonded debt. Recent
foreclosure sales have cast doubts on the skills of the appraisers,
and underscore the risk of some of this debt when a severe real estate
slump hits developers.
2. Background.
In 1978 Californians enacted Proposition 13, which limited the ability
of local public agencies to increase property taxes based on a property's
assessed value. In 1982, the Mello-Roos Community Facilities Act of
1982 (
Government Code § 53311-53368.3) was created to provide
an alternate method of financing needed improvements and services.
3. The
Mello-Roos Community Facilities Act of 1982. The Act allows any county,
city, special district, school district or joint powers authority
to establish a Mello-Roos Community Facilities District (a "CFD")
which allows for financing of public improvements and services. The
services and improvements that Mello-Roos CFDs can finance include
streets, sewer systems and other basic infrastructure, police protection,
fire protection, ambulance services, schools, parks, libraries, museums
and other cultural facilities. By law, the CFD is also entitled to
recover expenses needed to form the CFD and administer the annual
special taxes and bonded debt.
4. Mello-Roos
CFD Purpose. A CFD is created to finance public improvements and services
when no other source of money is available. CFDs are normally formed
in undeveloped areas and are used to build roads and install water
and sewer systems so that new homes or commercial space can be built.
CFDs are also used in older areas to finance new schools or other
additions to the community.
5. Mello-Roos
CFD Formation. A CFD is created by a sponsoring local government agency.
The proposed district will include all properties that will benefit
from the improvements to be constructed or the services to be provided.
A CFD cannot be formed without a two-thirds majority vote of residents
living within the proposed boundaries. Or, if there are fewer than
12 residents, the vote is instead conducted of current landowners.
In many cases, that may be a single owner or developer. Once approved,
a special tax lien is placed against each property in the CFD. Property
owners then pay a special tax each year. If the project cost is high,
municipal bonds will be sold by the CFD to provide the large amount
of money initially needed to build the improvements or fund the services.
C. Landscaping
and Lighting Act District.
1. Background.
A 1972 Landscaping and Lighting Act allows for the creation of a district
used by local government agencies to pay for landscaping, lighting
and other improvements and services in public areas. As a form of
benefit assessment, it is based on the concept of assessing only those
properties that benefit from improvements financed, either directly,
or indirectly through increased property values. Because it is considered
a benefit assessment, a 1972 Act assessment is not subject to Proposition
13 limitations.
2. The
Landscaping and Lighting Act of 1972. This legislation (Streets &
Highways § 22500) allows local governmental agencies to
form Landscape & Lighting Maintenance Districts for the purpose
of financing the costs and expenses of landscaping and lighting public
areas. This act can be used by any local agency including cities,
counties, and special districts such as school districts or water
districts. The many approved uses include installation and maintenance
of landscaping, statues, fountains, general lighting, traffic lights,
recreational and playground courts and equipment, and public restrooms.
Additionally, the Act allows acquisition of land for parks and open
spaces, plus the construction of community centers, municipal auditoriums
or halls to be financed. Notes or bonds can be issued to finance larger
improvements under the Act.
3. Landscape
Lighting District Formation. The sponsoring agency conducts a specific
plan, prepares an engineer's report and proposes the formation of
a district and the levy of assessments. Affected property owners are
then notified and a public hearing is held. In order to approve the
district, a majority vote of affected property owners through an assessment
balloting procedure is required. Once approved, assessments will be
placed on property tax bills each year to pay for the improvements
and services.
4. Annual
Charge. By law (Prop. 13), benefit assessments cannot be based on
the value of property. Instead, each district establishes a benefit
formula and each parcel in the service area is assessed according
to the benefit it receives from the services and improvements.
(Ord. 1944 §§ 1,
2 (Exh. A), 2011)
Government Code Section 65583(a) requires "An analysis of potential
and actual governmental constraints upon the maintenance, improvement,
or development of housing for all income levels…including…fees
and other exactions required of developers, and local processing and
permit procedures…"
A. Types
of Fees and Exactions.
1. Housing
development is typically subject to two types of fees or exactions:
permit processing fees for planning and zoning; and impact fees or
exactions, imposed to defray all or a portion of the public costs
related to the development project.
2. These
fees and exactions can impact the cost, and feasibility of housing
development and its affordability, and involve issues of private property
rights. High planning and site development fees can impact property
owners' ability to make improvements or repairs, especially for lower-income
households. Development projects are subject to fees and exactions
from a growing number of public entities, ranging from special districts
to regional agencies. It is important to estimate the cumulative amount
of fees housing development will be subject to for development of
viable proposals; information about the city or county's fees and
exactions is among the most critical. For both processing fees and
impact fees, State law specifies procedural and nexus requirements:
a. Government Code Section 66020 requires that planning and permit processing
fees do not exceed the reasonable cost of providing the service, unless
approved by the voters; agencies collecting fees must provide project
applicants with a statement of amounts and purposes of all fees at
the time of fee imposition or project approval.
b. Government Code Section 66000 et seq. (Mitigation Fee Act) sets forth
procedural requirements for adopting, and collecting capital facilities
fees and exactions, and requires they be supported by a report establishing
the relationship between the amount of any capital facilities fee
and the use for which it is collected.
B. Requisite
Analysis.
1. Identify
and analyze permit processing and planning fees, and development and
impact fees and exactions and how they have been established relative
to the above statutory requirements, including any in-lieu fees.
2. Identify
exactions such as land dedication requirements (e.g., streets, public
utility and other rights-of-way, easements, parks, open space, etc.)
and other exactions imposed on development.
3. Include
information on how fees are collected, i.e., at the beginning of the
approval process, at the time of building permit issuance, or deferred
until the project receives certificate of occupancy.
4. Identify
any policies or efforts to moderate high fee impacts for housing for
lower-income households, such as fee waivers, fee deferrals, streamlined
fee processing, and consolidated fee schedules.
C. Nexus
Requirements.
1. State
law requires establishment of a nexus between the projected development
impacts and the public facilities for which impact fees are imposed.
Government Code Section 66001(a) of the Mitigation Fee (Act) (Section
66000-66025) requires that any city or county which establishes, imposes,
or increases a fee as a condition of development approval do all of
the following: (a) identify the purpose of the fee; (b) identify the
use to which the fee is to be put; (c) determine how there is a reasonable
relationship between the fee's use and the type of development project
on which the fee is imposed; and (d) determine how there is a reasonable
relationship between the need for the public facility and the type
of development project upon which the fee is imposed.
2. Government
Code Section 66001(b) further requires the locality to determine whether
there is a reasonable relationship between the specific amount the
fee imposed and the costs of building, expanding, or upgrading public
facilities. Such determinations, also known as nexus studies, are
made in written form and must be updated whenever new fees are imposed
or existing fees are increased.
3. The
Act also requires jurisdictions to segregate fee revenues from other
municipal funds and to refund them if they are not spent within 5
years. Any person may request an audit to determine whether any fee
or charge levied by the city or county exceeds the amount reasonably
necessary to cover the cost of the service provided (
Government Code
Section 66006(d)). Under
Government Code Section 66014, fees charged
for zoning changes, use permits, building permits, and similar processing
fees are subject to the same nexus requirements as development fees.
Lastly, under
Government Code Section 66020, agencies collecting fees
must provide project applicants with a statement of the amounts and
purposes of all fees at the time of fee imposition or project approval.
(Ord. 1944 §§ 1,
2 (Exh. A), 2011)
A. General
Obligation Bonds.
1. Definition.
"General obligation bonds" are a form of long-term borrowing in which
the state issues municipal securities and pledges its full faith and
credit to their repayment. Bonds are repaid over many years through
semiannual debt service payments. The California Constitution requires
that GO bonds be approved by a majority vote of the public and sets
repayment of GO debt before all other obligations of the state except
those for K-14 education.
2. Key
Statutory Authorities.
a. Article XVI, Section 1, of the California Constitution prohibits
the Legislature from creating debt or liability which exceeds $300,000
without a majority vote by the people, except in case of war.
b. Government Code, Title
2, Division 4, Part 3 (Section 16650 et seq.) sets out the statutory framework for GO bonds. Statutory authorization for individual GO bond measures is placed programmatically in the codes (e.g., prison authorizations are located in the
Penal Code).
B. Certificates
of Participation (COPs). A form of lease revenue bond that permits
the investor to participate in a stream of lease payments, installment
payments or loan payments relating to the acquisition or construction
of specific equipment, land or facilities. In theory the certificate
holder could foreclose on the equipment or facility financed in the
event of default, but so far no investor has ended up owning a piece
of a school house or a storm drainage system. A very popular financing
device in California since Proposition 13 because COP issuance does
not require voter approval. COPs are not viewed legally as "debt"
because payment is tied to an annual appropriation by the government
body. As a result, COPs are seen by investors as providing weaker
security and often carry ratings that are a notch or two below an
agency's general obligation rating.
(Ord. 1944 §§ 1,
2 (Exh. A), 2011)