City Council
MEETING DATE: 3/25/2015
TITLE:
Title
Resolution Authorizing the City to Join the Statewide Community Infrastructure Program
End
FROM:
Tami E. Scott, Administrative Services Director
RECOMMENDATION:
Recommendation
Staff recommends that the City Council adopt a resolution authorizing the City to join the Statewide Community Infrastructure Program ("SCIP")
Body
BACKGROUND:
Consistent with City Council established goal of identifying ways to establish assessment district(s) to provide necessary infrastructure in the North City and Extended North City planning areas, the Council is being asked to consider the potential adoption of a resolution to participate the Statewide Community Infrastructure Program ("SCIP"), which is a program of the California Statewide Communities Development Authority (the "CSCDA"). CSCDA is a joint powers authority sponsored by the League of California Cities (the "League of Cities") and the California State Association of Counties ("CSAC"). Membership in CSCDA is open to every California City, County and local agency, and most are already members. Currently, the member agencies of CSCDA include approximately 372 cities and 56 counties, including the City of Cathedral City (the "City"). The program was discussed by Council during study session on March 11, 2015.
SCIP financing is available for development projects ("Projects") situated within cities or counties which have elected to become SCIP participants (each, a "Local Agency"). Eligibility to become a Local Agency requires only (a) membership in the Authority, and (b) adoption of a resolution making the election (the "SCIP Resolution").
DISCUSSION:
Participation in SCIP entails the submission of an application (an "Application") by the property owner (the "Applicant") of a Project for which development entitlements either have been obtained or are being obtained from a Local Agency. For Projects determined to be qualified, SCIP provides non-recourse financing of either (a) eligible development impact fees payable to the Local Agency (the "Fees") or (b) eligible public capital improvements (the "Improvements") or both. Under certain circumstances, to be determined on a case by case basis, development impact fees payable to local agencies other than the Local Agency can be financed.
Applicants benefit from SCIP because it allows them to obtain low-cost, long-term financing of Fees and Improvements, which can otherwise entail substantial cash outlays. The Local Agencies benefit from SCIP because it encourages developers to pay Fees sooner and in larger blocks than they otherwise would. The availability of low-cost, long-term financing also softens the burden of rising Fee amounts and Improvement costs, benefiting both the Applicants and the Local Agencies.
SCIP was instituted by CSCDA to allow owners of property in participating cities and counties to finance the development impact fees that would be payable by property owners upon receiving development entitlements or building permits. The program has since been expanded to include financing of public capital improvements directly. If a property owner chooses to participate, the selected public capital improvements and the development impact fees owed to the City will be financed by the issuance of tax-exempt bonds by CSCDA. CSCDA will impose a special assessment on the owner's property to repay the portion of the bonds issued to finance the fees paid with respect to the property. With respect to impact fees, the property owner will either pay the impact fees at the time of permit issuance, and will be reimbursed from the SCIP bond proceeds when the SCIP bonds are issued; or the fees will be funded directly from the proceeds of the SCIP bonds. In the former case, the City is required to pay the fees over to SCIP, and in the latter case, SCIP holds the bond proceeds representing the fees. In both cases the fees are subject to requisition by the City at any time to make authorized fee expenditures. But by holding and investing the money until it is spent, SCIP is able to monitor the investment earnings (which come to the City) for federal tax law arbitrage purposes. SCIP encourages the City to spend those amounts before any other fee revenues of the City. If the fees are paid by the property owner and bonds are never issued, the fees are returned to the City by SCIP. In this way, the City is never at risk for the receipt of the impact fees.
The benefits to the property owner include:
Only property owners who choose to participate in the program will have assessments imposed on their property.
Instead of paying cash for public capital improvements and/or development impact fees, the property owner receives low-cost, long-term tax-exempt financing of those fees, freeing up capital for other purposes.
The property owner can choose to pay off the special assessments at any time.
For home buyers, paying for the costs of public infrastructure through a special assessment is sometimes better to having those costs "rolled" into the cost of the home. Although the tax bill is higher, the amount of the mortgage is smaller, making it sometimes easier to qualify. Moreover, because the special assessment financing is at tax-exempt rates, it typically comes at lower cost than mortgage rates.
Owners of smaller projects, both residential and commercial, can have access to tax-exempt financing of infrastructure. Before the inception of SCIP, only projects large enough to justify the formation of an assessment or community facilities district had access to tax-exempt financing.
The benefits to the City include:
As in conventional assessment financing, the City is not liable to repay the bonds issued by CSCDA or the assessments imposed on the participating properties.
CSCDA handles all district formation, district administration, bond issuance and bond administration functions. A participating city can provide tax-exempt financing to property owners through SCIP while committing virtually no staff time to administer the program.
Providing tax-exempt financing helps participating cities and counties cushion the impact of rising public capital improvements costs and development impact fees on property owners.
The availability of financing will encourage developers to pull permits and pay fees in larger blocks, giving the participating city immediate access to revenues for public infrastructure, rather than receiving a trickle of revenues stretched out over time. As part of the entitlement negotiation process, the possibility of tax-exempt financing of fees can be used to encourage a developer to pay fees up front.
In some cases, the special assessments on successful projects can be refinanced through refunding bonds. Savings achieved through refinancing will be directed back to the participating city for use on public infrastructure, subject to applicable federal tax limitations.
Adopting a resolution for the City to participate in the SCIP program allows CSCDA to accept applications from owners of property within our planning jurisdiction to apply for tax-exempt financing of public capital improvements and development impact fees through SCIP. It also authorizes CSCDA to form assessment districts within our City's boundaries, conduct assessment proceedings and levy assessments against the property of participating owners.
FISCAL IMPACT:
Other than staff time, no cost to the City
ATTACHMENTS:
Resolution
SCIP Landowner/Developer Application
SCIP Manual