For City Council Meeting [June 9, 2020]
TO: Honorable City Council
APPROVAL: Rod Foster, City Manager
FROM: Matt Schneider, Community Development Director
Title
Request City Council consider Adoption of (1) Resolution No. 7631 Declaring Its Intention to Annex Territory (Bella Villagio and Santiago) to Community Facilities District No. 2016-1 (Public Services) and includes a Boundary Map showing the proposed territory, the Rate and Method of Apportionment and sets a Public Hearing for July 14, 2020.
(ACTION)
Body
BACKGROUND
The Mello-Roos Community Facilities Act of 1982 (“Act”) being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California was created to provide an alternate method of financing for needed improvements and services. The Act allows the City Council to establish a Community Facilities District (CFD) that allows for financing public improvements and services.
On September 27, 2016, the City Council approved Resolution No. 7003, a Resolution of Intention to Establish Community Facilities District 2016-1 (“CFD 2016-1”). On November 22, 2016 by Resolution 7031, the City Council established CFD 2016-1, a Mello Roos Community Facilities District with the intention that future development within the City of Rialto (“City”) would annex into this district when there is no CFD needed for public improvements. The City conditions new development to annex into CFD 2016-1 to fund increases in police protection services, fire protection and suppression services, ambulance and paramedic services, park maintenance and other public services within the City.
Since the formation of the CFD 2016-1 three residential projects have been annexed: Serrano Place by RC Hobbs, Adams Grove by Crestwood Communities (Annexation No. 1), and most recently Etiwanda Homes by 642 N. Linden LLC (Annexation No. 2).
ANALYSIS/DISCUSSION
The Properties
There are two residential developments that are proposed to be part of proposed Annexation No. 3 to CFD 2016-01.
Site A - A residential development, commonly referred to as Bella Villagio, is located north of Base Line Road, on the east side of Cactus Avenue. The subdivision consists of 29 single family residential lots on approximately 4.5 acres and is being developed by Mr. Shareef Awad.
Site B - A residential development, commonly referred to as Santiago, is located at the northeast corner of Acacia Avenue and Randall Avenue. The subdivision consists of 49 single family residential lots on approximately 6.8 acres and is being developed by R.C. Hobbs.
In accordance with City policy, a condition of approval for both projects required the preparation of a Fiscal Impact Analysis (FIA) which are attached as Exhibit’s A and B. The FIA’s calculated the estimated revenues that would be generated at build-out from each development and the projected estimate of costs for public services generated by each development at build-out. The attached FIA’s indicated a gap of $310 per unit per year, for both projects, between each development’s annual project based revenues compared to the City service costs on an annual basis at build out. However, the Citywide CFD 2016-1 tax rate is planned to be increased to $311.68/unit in July 2020 in compliance with the CFD formation documents. In order to mitigate the impact to City services created by each development, the tax rate for the developments to be annexed should also be increased as part of the annexation process. If the annexation is successful, the annual special tax of $311.68 will be added to the property tax rolls for payment by each future homeowner after the homes have been occupied. Both developers have agreed to this annual tax rate for their developments.
Resolution of Intention to Annex
The attached Resolution of Intention (Exhibit C) is the first step in the process of annexing new development into CFD 2016-1. This will be the third annexation into CFD 2016-1. The Resolution of Intention also sets July 14, 2020 as the Public Hearing date for final consideration of the annexation of the property into CFD 2016-1. The Notice for the proposed public hearing is attached as Exhibit D.
Once the annexation is complete, the owners of the homes that are to be built will be required to pay the annual special tax, in perpetuity, for CFD 2016-1. The annual special tax will appear on the property tax bill in accordance with the rate set forth in the Rate and Method of Apportionment (RMA) of the Special Tax which is an attachment to the Resolution of Intention. Since the formation of CFD 2016-1 the annual rate has been increased by the lesser of three percent (3.00%) or the Consumer Price Index (CPI). For July 2020 the estimated annual rate will be $311.68 per single family unit. The annual rate will continue to be increased by the lesser of three percent (3%) or the Consumer Price Index (CPI), to accommodate future cost increases in providing City services.
Summary of Process
After adoption of the attached Resolution, the public hearing will occur on July 14, 2020. Prior to the public hearing meeting ballots will be mailed to the authorized property owner or designated property representative for both developments that are part of Annexation No. 3. At the public hearing on July 14th, Council will be asked to open the hearing to receive public comment related to proposed Annexation No. 3. Once the public hearing is closed, Council may then call for the CFD special election and simultaneously hold the special election. The ballots that have been received will be tabulated and recorded by the City Clerk. If the election is successful, the Council may then adopt the Resolution Certifying the Results of the Election.
It is important to note that several of the homes in the Bella Villagio development (Site A) have been sold and are now occupied. At the time some of the homes were ready for occupancy and close of escrow the developer realized they had not requested the City initiate annexation of the development into CFD 2016-1 as required by the conditions of approval for the project. The developer approached the City and requested the homes be allowed to be sold even though annexation to CFD 2016-1 had not yet occurred. The City agreed to allow the homes to be sold provided the future homeowners delegated authorization to the developer to vote on the annexation. This delegation of authority from the homeowners to the developer was accomplished through recording an Amendment to the Conditions, Covenants and Restrictions (CC&R’s) for the development (Exhibit E).
Current homeowners of the Bella Villagio development were made aware of the proposed annexation to CFD 2016-1, the levy of the special tax each year, and the delegation to the developer to be the authorized voting representative for their parcel as part of the home purchase process. If Annexation No. 3 is successful, future homebuyers for both Bella Villagio and Santiago will be made aware of the proposed annual CFD 2016-1 special tax levy at the time they purchase a home.
ENVIRONMENTAL IMPACT
Not a “Project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(a), a “Project” means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. According to Section 15378(b), a Project does not include: (5) Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.
GENERAL PLAN CONSISTENCY
This action is consistent with Guiding Principle 3A in the General Plan:
Our City government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.
LEGAL REVIEW
The City Attorney has reviewed and supports this staff report and Resolution of Intention.
FINANCIAL IMPACT
Operating Budget Impact
The proposed CFD special tax of $311.68 per developed single family residential lot will be added to the property tax rolls for payment by each future homeowner. The City will deposit the annual levies into the General Fund, and the City Council may then budget public services enhancements. The Police Department and Fire Department will receive their pro-rata share budgetarily of 39.6% and 26.4%, respectively as funds are received. The developers of both projects fund the cost to create and process Annexation No. 3 to CFD 2016-01.
Capital Improvement Budget Impact
The annexation to CFD 2016-01 has no impact to the capital improvement budget.
Licensing
There is no business license required because of this action.
RECOMMENDATION
Staff recommends that the City Council Adopt a Resolution Declaring the Intention to Annex Territory (Bella Villagio and Santiago) to Community Facilities District No. 2016-1 (Public Services) which includes the proposed Boundary Map, the Rate and Method of Apportionment and sets the public hearing for July 14, 2020.