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HomeMy WebLinkAboutAGENDA REPORT 2018 0404 CCSA REG ITEM 10D CITY OF MOORPARK, CALIFORNIA City of Moorpark April 4, 2018 of Item: 10.D. ACTION Approved staff recommendation, as amended and adopted Reso No. 2018-3694 By M SPnsrn MOORPARK CITY COUNCIL AGENDA REPORT TO: Honorable City Council FROM: Troy Brown, City Manager DATE: March 28, 2018 (CC Meeting of 4/4/2018) SUBJECT: Consider Resolution Declaring City Council Intent to Limit Amount of Services Component of Special Tax Levy for Police Services in Moorpark Highlands Community Facilities District No. 2004-1 BACKGROUND Over the past year a group of residents from the Moorpark Highlands development have provided written comments, testified during the annual public hearings for levying annual assessments for landscape maintenance districts, and made comments during the public comment portion of Council meetings regarding their concerns with Landscape Maintenance District 22 (LMD-22) and Moorpark Highlands Community Facilities District 2004-1 (CFD 2004-1) The group also met individually with the Mayor and Councilmembers, as well as with Captain Reilly and City Staff to discuss their concerns about CFD 2004-1 special tax for police services and various items about LMD-22, including the concept of special benefit and general benefit The representatives requested to continue the discussion about LMD-22 finances and CFD special taxes LMD-22 is also referred to as Moorpark Highlands LMD on the Ventura County Secured Tax Statement On October 18, 2017 a City Council Ad Hoc Committee consisting of Mayor Parvin and Councilmember Mikos were appointed to meet with the representatives and report back to the City Council The Ad Hoc Committee and individual members of the City Council met with residents of the Moorpark Highlands community many times to listen and understand the issues associated with the public safety services component of CFD 2004-1 At the March 21 , 2018 City Council meeting, the Ad Hoc Committee presented a wind- down approach that essentially winds down the services component of the special parcel tax to zero dollars ($0) over a three-year period The City Council unanimously voted to approve the approach and directed staff to return at a subsequent meeting to 26 implement the proposal put forth by the Moorpark Highlands residents and the Ad Hoc Committee. DISCUSSION Moorpark, like many communities faces financial challenges in meeting the service delivery needs for residents. State takeaways of local funds, restrictions on revenue generation, rising expenditures associated with municipal service delivery, and antiquated California tax laws stymies cities in generating local revenues for service provision. Recognizing this, in early 2000 the City formed two community facilities districts with a special tax component designed to offset the cost of public safety (police) services within newly developed areas. One CFD is Moorpark Vistas, which has been authorized but not implemented, and the other encompassed the Moorpark Highlands Community. Moorpark Highlands representatives requested elimination of the special tax for police services and suggested various alternatives to reduce the tax over a few years until it reaches zero. The special tax rate amount is $586.14 in Fiscal Year 2017/18 for each residential property. Note that the 35 deed restricted affordable units in the Moorpark Highlands project do not pay this special tax. During the discussion about the special tax for police services, it was explained to the representatives that the City Council is restricted by law from committing on budgetary matters for more than one year including actions on setting the special tax rate amount. With that understanding, the Ad Hoc Committee recommended, and the City Council endorsed the following approach to reduce the amount of the special tax. For Fiscal Year 2018/19 the special tax rate will be set at $450. In spring 2019 the City Council would be presented with a recommendation to set the special tax rate at $350 and in spring 2020 to set the special tax rate at $250 consistent with previously approved City Council direction. Once fully implemented, the special tax rate would be set at $0 in spring 2021 and future City Councils could act to keep the special tax at that rate for each year thereafter. Fiscal Year Projected Tax Rate Proposed Tax Rate Annual General Fund Reduced Revenue CUMULATIVE General Fund Reduced Revenue 2018-19 $ 604.14 $ 450.00 $ 98,804 $ 98,804 2019-20 $ 622.26 $ 350.00 $ 174,519 $ 273,323 2020-21 $ 640.93 $ 250.00 $ 250,586 $ 523,909 2021-22 $ 660.16 $ 0.00 $ 423,163 $ 947,072 Thereafter 3% annual increase $ 0.00 27 Residents of Moorpark Highlands are in support of the approach although prefer to have the services component of the special tax for CFD 2004-1 be entirely eliminated from the CFD structure. Even though the rate for services will be reduced to $0 over a period of time, the services component cannot be eliminated due to the structure of the CFD. As previously mentioned, the special tax for CFD 2004-1 has two components within it, a capital component which funded certain infrastructure improvements, and a services component to fund police services. Shortly following formation of the CFD, bonds were sold to provide proceeds for construction of certain public facilities. To make the bonds marketable, certain securities are pledged for debt service to ensure capacity and security to repay the bonds through a special tax. The special tax inextricably tied the “facilities” and “services” aspects of the CFD together. The Official Statement for the bonds codifies this and states, “Each year, the City will determine the Special Tax Requirement for Facilities and the Special Tax Requirement for Services (collectively, the "Special Tax Requirement") for the District for the upcoming fiscal year. The Special Tax Requirement for Facilities includes the following items: (i) debt service or the periodic costs on all outstanding bonds issued for the District; (ii) administrative expenses of the City; (iii) the costs associated with the release of funds from an escrow account, if applicable; (iv) any amounts needed to establish or replenish bond reserve funds; and (v) the collection of funds in any Fiscal Year to pay directly for the acquisition or construction of eligible facilities or for the payment of City Police Services authorized by the District provided that the inclusion of such amount does not cause an increase in the levy of the Special Tax on Final Map Property or Undeveloped Property.” Put another way, the special tax for both capital and police services are one ad valorem tax and is not divided into a capital and services component on tax rolls for the purposes of meeting debt service; the special tax as a whole is eligible to fund the aforementioned activities. The services component of the special tax has been secured as a source of repayment for the capital bonds should the need arise. This structure provided the bond market with greater surety that debt service payments will be made, thus lowering overall costs of the bonds and making them more attractive to market. The City Council has the authority to set the rate for the services component. However, should a scenario arise where there is insufficient funding from developed and undeveloped properties to meet debt service requirements, the City will be required to direct revenues from the services component toward debt service. Because of this legal requirement, until the bonds are defeased the services component of the CFD cannot be eliminated. Once the bonds have matured in 2038, a future City Council could, at its discretion eliminate the services portion of the ad valorem tax. 28 FISCAL IMPACT There will be no impact on the LMD matters, since the costs are funded by assessments and not the City’s General Fund. There would be a 3-year cumulative reduction of approximately $523,909. The reduction amount for Fiscal Year 2021/22 would be $423,163 and would increase by 3% annually thereafter. If the City retains the same level of police services, the reduction amount would need to be offset from an increase to the General Fund operating revenue, or by reducing other General Fund expenditures or from the General Fund reserve. The cumulative General Fund reduction in revenue is approximately $947,072 over the next four years. STAFF RECOMMENDATION That the City Council adopt Resolution No. 2018-____ declaring its intent to limit the amount of the services component of special tax levy in Community Facilities District 2004-1 (Moorpark Highlands). Attachments: 1. Moorpark Highlands White Paper 2018 2. Draft Resolution No. 2018-___ 29 Moorpark Highlands Community Facilities District 2004-1 – Public Safety Services White Paper – 2018 The Moorpark Highlands Community Facilities District (CFD) was formed in 2004 and refunded (refinanced) in 2014. At the request of the property owner, the Moorpark City Council through its legislative authority authorized a levy of a special ad valorem tax to provide a revenue source to repay debt service on bonds, the proceeds of which were used to fund certain facilities to serve the Moorpark Highlands community. A mutual agreement was reached with the property owner to also dedicate a portion of the special tax to fund police services to serve the newly developed area. In 2017, the Moorpark Highland Community voiced several concerns regarding the special tax for police service and made comments during the public comment portion of Council meetings regarding their concerns with Landscape District 22 (LMD – 22) and Moorpark Highlands Community Facilities District 2004-1 (CFD 2004-1). A City Council Ad Hoc Committee, and individual members of the City Council met with residents of the Moorpark Highlands many times to listen and understand the issues associated with the police services component of CFD 2004-1. By mutual agreement of the City Council and residents, in March 2018 the City Council authorized the wind down of the services component of CFD 2004-1 and to set the tax rate for services to $0. This wind down did not affect the amount of the special taxes designated for debt service payments on the bonds. The agreed process to wind down the services special tax is as follows: For Fiscal Year (FY) 2018/19 the special tax rate for services will be set at $450. In spring 2019 the City Council would be presented with a recommendation to set the special tax rate for services at $350 for FY 2019/20 and in spring 2020 to set the special tax rate for services at $250 for FY 2020/21. Once fully implemented, the special tax rate for services would be set at $0 in spring 2021 for FY 2021/22 and future City Councils could act to keep the special tax for services at that rate for each year thereafter. Fiscal Year Projected Tax Rate Proposed Tax Rate Annual General Fund Reduced Revenue CUMULATIVE General Fund Reduced Revenue 2018-19 $ 604.14 $ 450.00 $ 98,804 $ 98,804 2019-20 $ 622.26 $ 350.00 $ 174,519 $ 273,323 2020-21 $ 640.93 $ 250.00 $ 250,586 $ 523,909 2021-22 $ 660.16 $ 0.00 $ 423,163 $ 947,072 Thereafter 3% annual increase $ 0.00 30 It is the intent of the City Council of the City of Moorpark to set the tax rate for the services component at $0, unless the following conditions exist: 1) Insufficient revenues are generated from the special tax on developed and undeveloped properties to meet debt service demands; or, 2) The City Council, in its sole discretion, deems the City’s financial situation is insufficient to meet vital public safety needs. Upon maturation of the bonds, September 2038, it will be possible for the City to eliminate the special tax for police services as this component of the special tax will no longer be necessary for security of bonded indebtedness. The City Council voted in April 2018 to implement the aforementioned approach and will consider the viewpoints expressed in this whitepaper when setting tax rates for CFD 2004-1 in future years. 31 RESOLUTION NO. 2018-____ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MOORPARK DECLARING INTENTION TO LIMIT AMOUNT OF SERVICES COMPONENT OF SPECIAL TAX LEVY IN COMMUNITY FACILITIES DISTRICT NO. 2004-1 (MOORPARK HIGHLANDS) WHEREAS, the Council has conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 of Part 1 of Division 2 of Title 5, commencing at Section 53311, of the California Government Code, to form the City of Moorpark Community Facilities District No. 2004-1 (Moorpark Highlands) (the "CFD"), to authorize the levy of a special tax (the “Special Tax”) upon land within the CFD in an amount sufficient to pay for certain public facilities and services authorized to be financed by the CFD, which Special Tax is comprised of a component for the purpose of providing moneys for costs of the construction and acquisition of certain public facilities (the “Facilities”) and the cost of certain services of benefit to property within the CFD (the “Services”), all according to a Rate and Method of Apportionment adopted in connection with the formation of the CFD (as amended, the “Rate and Method”), and to issue bonds secured by said special taxes (the “Bonds”) for the purpose of providing for financing the construction and acquisition of Facilities; and WHEREAS, under the Rate and Method, this Council, as the legislative body for the CFD, is empowered with the authority to annually levy the Special Tax, and has to date been levying the Special Tax, in an amount sufficient to pay for the Facilities and Services, which Special Tax is comprised of a Special Tax for Facilities, as defined in the Rate and Method (the “Special Tax for Facilities”) and a Special Tax for Services, as defined in the Rate and Method (the “Special Tax for Services”); and WHEREAS, notwithstanding the amount of the Special Tax for Services authorized to be annually levied under the Rate and Method, this Council desires to limit the amount of the Special Tax for Services beginning with the levy of the Special Tax for Services for fiscal year 2018-19, and for each year thereafter, provided that all or any part of the Special Tax for Services in any year is not needed for payment on any Bonds issued for the CFD; and WHEREAS, the Council desires to set forth in this Resolution a declaration of its intent, and to direct staff of the City, to cause the levy of the Special Tax for Services to be hereafter levied in accordance herewith. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MOORPARK DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The Council hereby finds and determines that the CFD has been validly formed and the City is authorized to levy, on behalf of the CFD, the Special Tax for Services in an amount which does not exceed the maximum set forth in the Rate and Method. 32 SECTION 2. Notwithstanding the maximum amount of the Special Tax for Services authorized by the Rate and Method, except as provided in Section 3 below, the levy of the Special Tax for Services beginning in fiscal year 2018-19 and each year thereafter shall be as follows: Fiscal Year Special Tax for Services 2018-19 $450.00 2019-20 $350.00 2020-21 $250.00 2021-22 and thereafter $0.00 SECTION 3. The Council acknowledges that the Special Tax for Services is a portion of the security for Bonds of the CFD. Accordingly, notwithstanding the Special Tax for Services amounts set forth in Section 2 and the intention to reduce the levy of such tax as stated herein, the Special Tax for Services shall be levied in the full amount authorized by the Rate and Method in any year that all or any part of the Special Tax for Services is needed to pay debt service on Bonds of the CFD or is needed at any time to replenish any reserve fund established to pay debt service on Bonds of the CFD. In connection therewith, the authorized maximum amount of the Special Tax for Services shall be unchanged and shall continue to be computed as subject to adjustment on each July 1 as set forth in the Rate and Method as if no reduction set forth in Section 2 hereof had been applicable. SECTION 4. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the book of original resolutions. PASSED AND ADOPTED this 4th day of April, 2018. Janice S. Parvin, Mayor ATTEST: Maureen Benson, City Clerk 33