Supervisors authorize SCIP financing for CFDs

Joe Naiman

Village News Reporter

A May 24 San Diego County Board of Supervisors action will now allow the Statewide Community Infrastructure Program to fund community facilities districts.

The supervisors’ 3-0 vote, with Terra Lawson-Remer not present and one vacant seat, adopted a resolution authorizing the county to participate in the expanded SCIP program. The Board of Supervisors members are also the board members of the San Diego County Flood Control District, and a 3-0 flood control district board vote authorized that district to participate in the expanded program.

The California Statewide Communities Development Authority was created to provide local governments, nonprofit public benefit corporations, and private entities with access to low-cost, tax-exempt financing for projects which create jobs, help communities prosper, and improve the quality of life for local residents.

The CSCDA is a joint powers authority whose members consist of more than 540 cities, counties, and special districts. The County of San Diego joined the CSCDA in August 1991.

The CSCDA has the statutory authority to issue bonds, notes, or other financing documents in order to promote economic development, including the provision and maintenance of multi-family housing. Since its inception in 1988, the CSCDA has issued more than $70 billion of tax-exempt bonds.

The Statewide Community Infrastructure Program was created by the CSCDA to help finance development projects. The tax-exempt bond financing program pools the sale of bonds from different jurisdictions into a single issuance. The bonds can finance impact fees and public improvements through the establishment of assessment districts which levy a tax on property owners within the area.

In September 2019, the Board of Supervisors adopted a resolution authorizing the county to join the SCIP and authorizing the CSCDA to accept applications from property owners and to conduct special election proceedings and levy assessments.

The use of CSCDA resources to issue the bonds and administer the assessment districts reduces the staff time requirements of the local agency, which must approve the project and the financing in order for the CSCDA to issue the financing mechanism.

The local jurisdiction's approval of the bonds does not make the jurisdiction liable for any financial obligations. The CSCDA rather than the jurisdiction will issue the bonds, and the project developer is responsible for their repayment. The county will still have staff time to review the applications and manage payment requests, although developers are required to reimburse the county for the staff time costs.

The 2019 resolution authorized use of the SCIP for assessment districts which can provide for public infrastructure such as streets, sidewalks, lighting infrastructure, and water and sewer lines but are limited to county facilities which can also include parks and libraries.

The CSCDA updated the SCIP scope to include the formation of community facilities districts in 2020, so the county’s 2019 resolution did not authorize SCIP financing for CFDs. A CFD may include the same types of public improvements as an assessment district but may also include public improvements involving other local agencies such as public schools or fire and police stations.

A community facilities district includes a special tax (sometimes known as Mello-Roos taxes due to the state legislators who authored the option for services on new development to be funded by an annual assessment) to fund the services and/or infrastructure.

A Joint Communities Facilities Agreement stipulates the collection and distribution process for the taxes. If the 1% property tax is not sufficient to pay for maintenance, fire protection, and other services, a CFD may be formed for those services and that CFD would be perpetual.

A CFD may also pay for infrastructure including capacity fees which are charged to developers to cover the new development's share of existing infrastructure, and that assessment ends when the bonds are paid off. The CFD may also pay for the reimbursement to government agencies for their staff time and other expenses to form the CFD, the cost to issue bonds, and the annual costs to administer the CFD.

An assessment must be approved by a majority of property owners, although a developer who owns a property before it is subdivided may cast the sole vote in favor of a CFD which will be binding upon subsequent property owners.

In 2007, the county supervisors adopted Board Policy I-136 which outlines how potential Community Facilities District projects will be evaluated, ensures that the CFDs are created for the public good, and stipulates disclosure requirements which notify prospective property owners of the assessment.

Policy I-136 also defines credit requirements to protect bondholders from default for CFDs which issue bonds for reimbursement of constructed infrastructure. Policy I-136 also limits the tax rate for a CFD to 1.86% of the estimated sales price of the residential homes.

The resolutions approved May 23 are formally amended and restated resolutions, so the authorization for the CSCDA to form assessment districts was also included and those districts can still be formed. The resolution does not prevent developers from requesting that the county rather than the CSCDA form CFDs and levy special taxes.

The San Diego County Fire Protection District, which also utilizes the Board of Supervisors for board members, also has plans to participate in the SCIP program for CFDs and will bring forward its resolution for board consideration in the future.