Last week, the Vanguard reported that the Cannery developers, New Homes, were seeking to potentially create a Community Facilities District (CFD, or Mello-Roos district, as the 1982 law is more commonly known) for services or to finance infrastructure.
Under the law, “Developers and City may form a Community Facilities District… for the purpose of financing the construction and/or acquisition of public infrastructure and facilities within the Project area or for the provision of services.”
According to City of Davis Community Development and Planning Director Mike Webb, “We anticipate that the developer will be submitting a request for the City to consider creating a CFD for the project for financing of certain infrastructure components. As of now we do not have a formal request submitted for consideration. If one is submitted staff would evaluate the request and schedule the matter for City Council consideration and direction.”
The Vanguard learned last night at the city’s workshop on CFDs that Cannery has now officially petitioned the city, requesting “that the Council institute proceedings pursuant to the Act to establish a CFD over the Land to be designated as ‘City of Davis Community Facilities District No. 2014-01.'”
The Cannery developers are seeking that a special election be held which would authorize the issuance of the bonds, establishing that appropriations limited to the CFD “be consolidated into single elections and that the elections be conducted by the city and its officials…”
According to the presentation last night, the election requires a two-thirds vote.
“Generally, project infrastructure proposed for CFD financing includes backbone infrastructure in compliance with City Goals and Policies, including, but not limited to, public roadways, storm drainage, sanitary sewer, water, parks and open space, and electrical/lighting,” the petition reads. “The bond authorization for the Community Facilities District should be established in the amount of $17,000,000, however, this figure is a not-to-exceed maximum developed for legal purposes. It is expected that the CFD, via one (1), or perhaps two (2) bond issuances in 2015 and beyond, will likely not generate more than $15,000,000 in gross proceeds.”
“The types of facilities proposed to be financed by CFD No. 2014-01 are street improvements, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, sewers, storm drains, monuments, utilities, public parks, greenbelts and recreation facilities, detention pond, soft costs, rights-of-way and easements necessary for any of such facilities,” the petitioners note. They propose the following:
Offsite Infrastructure: J Street Intersection Improvements; L Street Traffic Signal; Covell Boulevard Frontage Improvements; Offsite Bike Trail; Oak Tree Plaza Improvements
Infrastructure Phase 1: EVA Road; Detention Basin; Storm Drain Pump Station; Agricultural Well; Market Avenue; Cannery Avenue; Cannery Loop; Roundabout
Infrastructure Phase 2: Cannery Loop
Landscaping: Parks; Greenbelts
Urban Farm: Barn; Farmhouse; Landscaping
MPFP (Major Projects Financing Plan) had been intended to fund long-term capital needs for the city. It did not fund specific improvements required for new development. Five different CFDs were formed because the MPFP allocated capital costs differently among different parts of the city.
The city’s Financial Advisor Mark Northcross, in his presentation, noted that there were taxpayer concerns that led to changes in 1999 as to how the city handles CFDs. At that time, $44 million in bonds were originally authorized, but only $16.855 million of that were actually issued.
Council would terminate the remaining authorized bonds with the 1999 bond issue infrastructure funding, and they also terminated the two percent inflator.
“$44 million in bonds were originally authorized for the MPFP CFD Program back in 1990, only $17 million were actually issued, the remaining authorization was terminated,” Mr. Northcross stated. “That was done because of taxpayer concerns. That was the factor behind that, it was all people coming to the podium talking about their taxes.”
A typical Mello-Roos district has an inflator that allows assessment to go up by two percent a year, and “that piece was eliminated in 1999 by previous council in response to taxpayers and homeowners.”
The result is that the actual percent of taxes being levied is a fraction of what was authorized “and that was by intent.” Mr. Northcross continued, “Not the original plan, we were supposed to be levying $44 million in improvements in Davis, we didn’t do that. We instead did things to lower the taxes on homeowners.”
Mr. Northcross posed two critical policy questions that council should consider for a Cannery CFD – should the council wish to proceed with a CFD. First, should the taxes in the Cannery be at the same level as other CFD taxes in Davis? Second, should there be a two percent inflator for taxes at the Cannery?
Mark Northcross noted that at Mace Ranch the CFD was about $700 per house. In the Cannery, “my guess is, it’s going to be a minimum $1500 per house, that’s twice as high as any other tax in Davis. By any standards of other cities in California that’s very reasonable, BUT, it’s going to be a lot more than any other house in Davis that’s paying a CFD.”
“If we’re going to cross that bridge, we need to be conscious that we’re doing it,” he stated.
Later Mr. Northcross noted that the other fairness question “came down to why are we who bought homes in the newer parts of Davis going to be paying for $44 million in public improvements and not the rest of the community. Why is it landing on us?”
“The MPFP had reasons for that, but the reasons did not carry weight on the fairness question with the residents of all the new CFD areas,” he added. The past council, he said, “split the baby” by reducing the amount to $17 million and eliminating the inflator, thus finding other ways to finance improvements.
Harriet Steiner noted that originally the CFDs were to finance new infrastructure – for example the Mace overpass, as well as the fire station (that was never built). She said, “I think after those improvements there was a fair amount of disgruntlement on the part of the (residents)… because this is all new development.”
Harriet Steiner would add that, when the council approved the Cannery project, the developers wanted this financing mechanism and would make the request. She added, “It was probably equally clear that it wasn’t something that the staff… was necessarily in favor of.”
The workshop’s purpose was only to inform the council of how CFDs work and the history of CFDs in the city of Davis. They will have to ultimately decide whether they should put the matter before the voters at a later point in time.
—David M. Greenwald reporting