HomeMy WebLinkAbout08-16-2016 Item 13 Public Infrastructure Financing Framework and Draft Policies Meeting Date: 8/16/2016
FROM: Michael Codron, Community Development Director
Prepared By: Xzandrea Fowler, Community Development Deputy Director
SUBJECT: PUBLIC INFRASTRUCTURE FINANCING FRAMEWORK AND DRAFT
POLICIES: STUDY SESSION
RECOMMENDATION
Participate in a study session on public infrastructure financing and receive and file the
background memorandum and reports (Attachments A, B, and C).
DISCUSSION
Background
The Economic Development Strategic Plan (EDSP) set forth several strategies for addressing
barriers to job creation, including key strategies that begin to address the challenges associated
with infrastructure costs, fees, standards and financing strategies. Financing infrastructure in
California is increasingly becoming more complex and several tools have been developed to
assist local governments finance infrastructure associated with new development. Many
jurisdictions throughout the state routinely utilize those tools, but they have rarely or infrequently
been used in the City of San Luis Obispo.
Implementation of these strategies must be considered in the context of State law governing how
development impact fees and other tools may be imposed. Another consideration is the
requirement for nexus studies and reports to support the calculation and imposition of such fees
on new development to defray infrastructure costs. The governing statutes are commonly
referred to as “AB 1600” or the “Mitigation Fee Act”. Following this study session staff will be
requesting City Council authorization for the issuance of a RFP for consultant services to prepare
the required nexus studies.
In April 2013 the City Council authorized staff to hire a consultant to undertake an infrastructure
financing analysis that included a series of study sessions with the Council. The intent of the
study sessions was to educate the Council and the community. Those study sessions covered the
following topics:
Study Session #1: Introduction and Background – current trends in municipal
infrastructure financing, an overview of development impact fees and a review of the
City’s existing fee programs.
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Study Session #2: Economic and Policy Implications of Development Impact Fees –
tools available to the City and the policy implications and trade-offs associated with the
various options.
Study Session #3: Direction for updating the City’s Development Impact Fees – next
steps and Council direction to staff based on the previous sessions.
During those study sessions, staff informed the Council that following the adoption of the Land
Use and Circulation Elements of the General Plan, an updated AB 1600 nexus study would be
prepared in order to identify the portion of infrastructure that should be paid for by new
development to support the physical build out of the General Plan based on adopted levels of
services, quality of life and economic policy goals.
In preparation for the updated AB 1600 nexus study, staff retained consultant services from EPS,
who prepared the infrastructure financing analysis that was part of the EDSP Implementation.
EPS assisted staff with the development of a Public Infrastructure Financing Framework
(Framework) which describes a comprehensive approach to funding the City’s public facilities
and infrastructure improvements, and recommendations regarding draft policies for Council
consideration. On August 16, 2016 Council will hold study session to discuss the proposed
Framework and draft policies.
OVERVIEW OF ATTACHMENTS
1. Public Infrastructure Financing Framework and Draft Policies (EPS #161001): This
memorandum, dated July 18, 2016, describes a framework for a comprehensive approach
to funding the City’s public facilities and infrastructure improvements and recommends
draft policies for the City’s consideration. The Framework provides a systematic way of
considering funding and financing options so that the City is able to construct needed
public facilities and infrastructure in a manner that funds facilities and infrastructure
needed to maintain and enhance the City’s quality of life for current and future residents,
employees and visitors, makes efficient use of available funding sources and financing
mechanisms, implements General Plan policy, is fair and equitable with respect to
incidence of burden (who pays), and is consistent with economic development objectives.
2. Infrastructure Financing Background, Components and Strategy (EPS #131044):
This memorandum, dated April 10, 2014, summarizes and transmits the technical
documents and presentations prepared by EPS as part of the Infrastructure Financing
Analysis and City Council Study Sessions. The Analysis reviewed the City’s current
infrastructure financing programs, including its development impact fees, in response to
recommendations in the adopted EDSP.
CONCURRENCES
Community Development, Public Works, Finance and Administration all concur this session will
provide the basis for decisions critical to the LUCE Implementation and FEE Program update.
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ENVIRONMENTAL REVIEW
This activity will not result in direct or indirect physical changes in the environment, and
therefore is not a “Project” pursuant to as State CEQA Guidelines Section 15378(b) (5) and
would not be subject to further environmental review pursuant to Section 15060(c) (3) of the
State CEQA Guidelines.
FISCAL IMPACT
The Public Facilities Impact Fee Program is identified in the 2015-17 Financial Plan, under
Significant Operating Program Change (SOPC) - LUCE Implementation and Fee Update, and
$125,000 has been earmarked and allocated for this effort in the FY 2015/16 budget. A carryover
request has been approved for the FY 2016/17 budget. The consultant services associated with
the drafting of the Public Infrastructure Financing Framework are covered under that allocation.
NEXT STEPS
Staff will request City Council authorization for the issuance of a Request for Proposal (RFP) for
the preparation of a Public/Capital Facilities Impact Fee Program Nexus Study. The preparation
of a Nexus Study was identified in the 2015-17 Financial Plan as an objective that supports
Major City Goals in Housing, Multi-Modal Transportation, as well as supports the other
important objective of Downtown. It also continues implementation of the EDSP strategy to
reduce barriers to job creation, which was part of the Major City Goal in Economic Development
in the 2011-13 Financial Plan.
Attachments:
a - Public Infrastructure Financing Framework and Draft Policies
b - SOPC LUCE Implementation and Fee Update
c - Council Reading File: Compendium of Final Infrastructure Financing Analysis
Documents
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D RAFT M EMORANDUM
To: Michael Codron, City of San Luis Obispo
From: Walter Kieser and Ashleigh Kanat
Subject: Public Infrastructure Financing Framework and Draft Policies;
EPS #161001
Date: July 20, 2016
This Public Infrastructure Financing Framework (Framework) describes a
comprehensive approach to funding the City’s public facilities and
infrastructure improvements and recommends draft policies for the
City’s consideration. The Framework provides a systematic way of
considering funding and financing options so that the City is able to
construct needed public facilities and infrastructure in a manner that
funds facilities and infrastructure needed to maintain and enhance the
City’s quality of life for current and future residents, employees, and
visitors; makes efficient use of available funding sources and financing
mechanisms; implements General Plan policy; is fair and equitable with
respect to incidence of burden (who pays); and is consistent with
economic development objectives.
This Framework has been prepared through a collaborative effort
engaging senior City staff by way of a series of independent efforts and
working meetings. The work also reflects the results of the
infrastructure financing analysis led by EPS in 2014 as part of the
Economic Development Strategic Plan implementation.
Framework Background and Context
The public facility and infrastructure improvements, including those
already identified in the City’s Capital Improvement Program (CIP), the
General Plan Land Use and Circulation Element, and the Specific Plans,
are key components of the City’s efforts to sustain and improve the
quality of life for current (and future) residents and, simultaneously,
enhance the City’s economic development potential. These public
facilities and infrastructure improvements include water and sewer
utilities, transportation infrastructure, streetscape improvements, parks
and recreation facilities, and other civic facilities that collectively have
been shown to induce private investment, facilitate real estate
development, increase economic activity, and expand the City’s tax base
when coupled with sufficient market demand and wise land use policies.
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However, these public facilities and infrastructure improvements, taken as a whole, are costly
and thus will require a broad range and strategic application of existing and new funding sources
and financing mechanisms. New development in the City, particularly in the City’s primary
growth areas, will generate substantial real estate value that serves as a basis for funding
infrastructure improvements. Land- and development-based funding sources based upon this
new real estate value include development impact fees and “land secured” financing sources
(e.g., Mello-Roos Community Facilities District special taxes), which have not previously been
used by the City. While development impact fees paid by new development are used exclusively
for capital improvements serving new development, special taxes and assessments may be used
for capital improvements or ongoing maintenance and operations costs.
The overall cost burden placed on new development affects development feasibility, particularly
when all development costs are considered. The cumulative effect of fees, exactions, and
requirements will need to be carefully considered to avoid discouraging desired economic
development. It is likely that facility and infrastructure improvements will need to be prioritized
and phased to match the City’s funding capacity and to improve feasibility of new development.
Infrastructure improvements that relieve existing service deficiencies or fund improvements
otherwise benefiting existing as well as new development in the City can tap a range of existing
and new sources and financing mechanisms. Potential sources available to fund existing
deficiencies may include a countywide sales tax increase (a transportation “self-help” measure),
Citywide special taxes, grants, the City’s Infrastructure Investment Capital Fund, utility revenues
and related revenue bonds, among others. Some of these mechanisms require voter approval
while others simply require appropriation of existing or future City revenue.
Sources of Funds and Types of Improvements
There is a general correlation between types of improvements and categories of funding.
Whether a particular funding source is appropriate for a given improvement will depend on a
number of factors, such as the type of improvement, the geographic area of benefit, whether the
improvement is needed to address existing deficiencies or serve new development, how the
combined burden of fees and/or assessments and taxes affect development feasibility, and the
timing of funding sources versus the need for improvements. If the City is considering City-
based funding sources, additional factors become important, such as whether the improvement
is a catalytic, economic development improvement and what the long-term fiscal implications of
the improvement may be.
Key questions influencing the ideal mix of infrastructure funding include:
1. Who benefits from the improvement? Will it serve existing or new development or both?
2. What is the geographic area of benefit? Is it regional, citywide, or area-specific?
3. Is the improvement a catalytic, economic development improvement that is worth City
investment?
4. What are the long-term, annual fiscal implications?
5. Is there an established policy framework, such as a service standard? Or is the improvement
in an adopted plan (e.g., General Plan, Master Plans, Specific Plans, CIP, and LUCE)?
6. What is the cost incidence of the financing mechanism (i.e., who pays) and is that
appropriate?
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7. Is there other funding in-place or otherwise available (e.g., regional, state, federal funding or
grant funding)?
Certain types of improvements may fall into more than one improvement category. For example,
the City’s proposed police headquarters building will contribute to the Department’s ability to
serve new development while ensuring that current high service standards can be maintained, or
possibly improved, for existing residents.
Table 1 shows the general relationship between key public facilities and infrastructure
improvement categories and funding sources. This array illustrates the need for a range of
infrastructure funding and financing mechanisms as part of the larger strategy.
Improvement Categories and Project Examples
A key aspect of the present effort is to assure that the funding sources and financing
mechanisms available to the City are used in a manner that maximizes public benefits while at
the same time supporting ongoing economic development.
1. Project-Specific Improvements
Project specific improvements include in-tract and frontage improvements that are related to a
specific project or a specific site (e.g., sidewalks and some streetscape improvements).
Developers are expected to fund improvements required by typical development standards or
other entitlement exactions. In some cases, reimbursement agreements for oversizing may fall
into this category.
SLO examples:
1a. Specific Plan Area-frontage improvements (typically street improvements and related in-
street utilities)
1b. Infrastructure oversizing (if subject to a reimbursement agreement)
2. Improvements that Increase Capacity for New Development
New infrastructure or improvements that expand the capacity of an existing facility can serve
both existing and/or new development, but whether the improvement serves existing or new
development (or both) has implications for how the improvement should be funded.
Improvements that support new development only (or if a new improvement serves both new
and existing development, that portion which serves new development) are typically funded
through development impact fees but could also be funded with a Community Facilities District
(CFD) special tax. Impact fees cannot be used for routine maintenance, although periodic and
comprehensive rehabilitation or reconstruction projects (i.e., major maintenance) may be an
appropriate use of these fees.1
1 California Gov’t Code Sec. 66001(g) states: “A fee… may include the costs attributable to the
increased demand for public facilities reasonably related to the development project in order to (1)
refurbish existing facilities to maintain the existing level of service…” The code includes streets as a
public facility.
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SLO examples:
2a. New development’s share of the following:
— Specific Plan area parks
— Fire Station #5
— Prado Road2
— Tank Farm Road3
3. Improvements that Address Existing Infrastructure Deficiencies or Improve
Overall Levels of Service
Improvements that alleviate existing infrastructure deficiencies and/or help existing development
comply with new service standards cannot be funded through impact fee programs and may
require the use of city-based funding sources, such as an Enhanced Infrastructure Financing
District (EIFD), grants, Certificates of Participation (COP), the Infrastructure Investment Capital
Fund, or general City funding.
Those projects with regional benefit (in addition to capacity improvements needed to serve new
development), such as street and highway improvements are often so costly that their inclusion
in an impact fee program may result in development feasibility issues. In these circumstances an
EIFD would be effective or a regional special tax measure could be appropriate.
SLO examples:
3a. Mission Plaza Master Plan Project
3b. Portion of the following improvements that cannot be allocated to new development:
— Police Headquarters (share that is not attributable to new development)
— Fire Station #2 (share that is not attributable to new development)
4. New Infrastructure or Community Benefits, beyond Nexus
New infrastructure, facilities or other community benefits that exceed nexus based-cost
allocation to new development cannot be funded through development impact fee programs.
Rather, such improvements typically require city-based funding sources, such as the
Infrastructure Investment Capital Fund. For larger projects, assessment districts can be
established, and the revenues can be used to leverage other funding sources.
SLO examples:
4a. Portion of the following improvements that improves service for existing development and/or
goes beyond current service standards:
— Prado Road Interchange
— Police Headquarters
— Fire Station #2
— Broad Street Bicycle Boulevard
2 Currently 100% of the costs of Prado Road and Tank Farm Road are attributable to new
development and are in area-specific fee programs. The Development Impact Fee Nexus Study will
evaluate the appropriate allocation.
3 See Note #2.
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5. Public Facility Operations and Maintenance
Infrastructure and facility improvements typically will have annual maintenance costs associated
with them. There are few funding sources available to fund maintenance activities, as most
funding sources are intended to fund the one-time construction of the improvements or facilities.
As such, maintenance costs typically are funded through City General Fund expenditures and
utility rates and charges. The City may require a CFD special tax to fund ongoing operations in
circumstances where a fiscal impact has been identified.
SLO examples:
5a. Street and roadway maintenance
5b. Landscape and lighting maintenance
5c. Public safety operations (e.g., Avila Ranch – CFD for ongoing cost of fire services)
Proposed Infrastructure Financing Framework and
Policies
The guidelines and policies below offer a strategic framework for funding investments in the
City’s public facilities and infrastructure. In addition to such general guidelines it is common for
jurisdictions to also adopt financing policies for specific debt and land-secured financing
mechanisms (e.g., Mello Roos Community Facilities Bonds).
1. General Financing Guidelines and Policies
Financing guidelines and policies provide a systematic way of selecting, implementing, and
assembling the funding (and/or financing the money) needed to construct needed public
facilities and infrastructure in a manner that is effective, efficient and equitable. Such
guidelines could be adopted by resolution, and updated regularly, as may be appropriate.
The categories and types of public facilities and infrastructure improvements contemplated in
this Framework included water and sewer utilities, transportation infrastructure, streetscape
improvements, parks and recreation facilities, and other public safety and civic facilities.
Collectively, these public facilities and improvements induce private investment, facilitate real
estate development, increase economic activity, and expand the City’s tax base when
coupled with sufficient market demand and wise land use policies.
1a. New development should generally be expected to “pay its own way,” (i.e., provide
funding through one mechanism or another that funds its “proportional share” of public
improvement and infrastructure costs and ongoing operations and maintenance costs).
1b. The City will consider the use of city-based funding sources to fund public facility and
infrastructure improvements that provide for the health, safety and welfare of existing
and future residents and/or provide measurable economic development and fiscal
benefits. In evaluating whether the City will use city-based funding sources, the following
evaluation criteria should be considered:4
1. Significant public benefit, demonstrated by compliance with and furtherance of
General Plan goals, policies, and programs
4 From Resolution No. 10603 (2015 Series) establishing the Infrastructure Investment Capital Fund.
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2. Alignment with the Major City Goals and other important objectives in place at the
time of the application
3. Head of Household Job Creation
4. Housing Creation
5. Circulation/Connectivity Improvements
6. Net General Fund fiscal impact
1c. The City generally will not fund or offer public financing for infrastructure improvements
that confer only private benefit to individual property owners or development projects.5
1d. The City shall seek continuity (or improvements to) existing levels of municipal service by
assuring adequate funding for the City’s operation, maintenance and infrastructure
replacement costs.
2. Debt Financing
Debt financing involves the creation of multi-year financial obligations (debt service) through
the issuance of municipal bonds (or similar instruments). Such multi-year obligations
generally require voter approval, with exceptions existing for enterprise revenue bonds, and
special taxes applied to new development areas approved by landowners/developers.
2a. The City is required to keep cumulative outstanding debt within the limits prescribed by
the State of California statutes and at levels consistent with creditworthiness objectives
(the City is currently far below these limits).
2b. Debt financing for public facilities and capital improvement projects should be sought
only when the project’s useful life will exceed the term of the financing and only when the
pledged or available supporting revenues or funding sources will be sufficient to service
the long-term debt.
3. Development Impact Fees Guidelines and Policies
Development impact fees are one-time fees levied on new development, typically levied at
the time building permits are issued, to fund a range of the City’s public facilities and
infrastructure. Such fees are levied both on a citywide basis as well as for specific areas
(e.g., the Specific Plan Areas). The levy of development impact fees is regulated by the
State’s Mitigation Fee Act (Government Code Section 66000 et seq.).
3a. Development impact fees should be set, consistent with the statutory “nexus” analysis
and findings, to fund new development’s proportional share of public facility and
infrastructure costs.
3b. Improvements funded by development impact fees should be referenced generally in the
appropriate planning documents (e.g., General Plan, Specific Plans, etc.) and reflected in
the City’s Capital Improvement Program.
5 An exception to this policy may be created by a development agreement between the City and a
private developer. In this case public investments are offset by measurable public benefits.
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3c. The City’s development impact fees can be “leveraged” through the use of fee credit and
reimbursement agreements with developers and landowners.
3d. The City’s aggregate fee levels should not render new development that is otherwise
consistent with City plans and regulations economically infeasible. Aggregate fee levels
should be evaluated in terms of a reasonable standard, but not a strict limit (e.g.,
aggregate fee levels should not exceed an average of approximately 10 to 12 percent of
the market value of the new development, either on a per-unit or per-square foot basis).
3e. The City may consider reductions or waivers of its development impact fees in cases
where a development project meets specific City planning or economic development
policies such as affordable housing projects. In such cases the amount of funding
foregone must be replaced with other funding sources available to the City.
4. Community Facilities District or Assessment District Guidelines and Policies
Community Facilities Districts or Assessment Districts offer a way to fund infrastructure,
maintenance, or municipal services through special taxes or assessments levied on property
owners benefiting from the thus-funded improvements or services. It can be used for both
capital improvements and ongoing facility maintenance or services.
4a. The City will consider the formation of financing districts using the State’s assessment
law or the Mello-Roos Community Facilities Act for its newly developing areas on a case-
by-case basis, consistent with technical analysis and City priorities (i.e., capital or
ongoing funding).
4b. The City will consider the effect of the special tax on the City’s ability to issue General
Obligation bonds or other property-based tax measures.
4c. Such districts should fund infrastructure or services serving or otherwise providing benefit
to the area subject to the assessment or special tax.
4d. Such districts can fund public facilities or infrastructure otherwise funded with the City’s
development impact fees or project-specific exactions. In such cases the area’s
development impact fee obligations will be adjusted proportionately.
4e. Within any such districts, property value-to-lien ratio should, consistent with typical
underwriting standards, be at least 4.0:1 after calculating the value of the financed public
improvements to be installed and considering any prior or pending special taxes or
improvement liens.
4f. Consistent with underwriting standards and market considerations, and as a matter of
policy, the City will limit the maximum amount of special taxes to be levied on any parcel
of property within a Community Facilities District, in any given fiscal year, together with
the general property taxes, general obligation bonds, and other special taxes and
assessments levied on such parcel, shall not exceed an amount equal to one and eight-
tenths percent (1.8 percent) of the projected assessed value of the parcel (and
improvements if applicable). How the special tax capacity is allocated between capital
and ongoing expenditures will depend upon the City’s priorities.
4g. The City shall have discretion to allow a special tax in excess of the established limits for
any lands within the CFD which are designated for commercial or industrial uses.
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Draft Memorandum Page 8
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4h. As a part of such district formations, the City will retain a special tax consultant to
prepare a report which recommends a special tax rate and method for the proposed CFD
and evaluates the special tax proposed to determine its ability to adequately fund
identified public facilities, City administrative costs, services (if applicable) and other
related expenditures.
5. Enhanced Infrastructure Financing District Guidelines and Policies
The Enhanced Infrastructure Financing District (EIFD), established through SB 628 in 2014,
offers a new form of “tax increment” financing in the wake of the loss of local redevelopment
agency powers in California. Through the EIFD the City can pledge a portion of its
“incremental” property tax proceeds (and other future revenues) to fund a wide range of
public facilities and infrastructure and affordable housing.
5a. EIFD financing should be considered for public facilities or infrastructure improvements
that confer Citywide and/or regional benefits. This may include the “City share” of
infrastructure included in the City’s development impact fees.
5b. Unless there is a Development Agreement in place that provides otherwise, EIFDs should
not be used to fund real estate projects’ proportional share of infrastructure costs
otherwise included in the City’s development impact fees or charged as project-specific
exactions (e.g., subdivision improvements).
5c. EIFDs produce maximum benefit when more than one local government jurisdiction is
participating; there are opportunities to collaborate with the County of San Luis Obispo to
improve infrastructure benefiting the region.
5d. The term of the EIFD may not be longer than 30 years, per SB 628.
5e. The establishment of an EIFD represents an opportunity cost to the City’s General Fund.
As such, at the time of formation of the EIFD (or if changes to the EIFD are
contemplated), the City should require a fiscal impact analysis to determine if an EIFD is
fiscally prudent.
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APPENDIX A:
Definition of
Funding Sources and Financing Mechanisms
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APPENDIX A: FUNDING SOURCES AND FINANCING MECHANISMS
There are a range of funding sources and financing mechanisms that can fund the City’s public
facility and infrastructure improvements and facility improvements. The City already makes use
of some of these, while others represent options for future consideration. Following is a
description of potential funding sources, organized by general categories of funding:
Development-Based Funding, Land-Secured Revenue and Financing, and City Funding and
Financing.
Development-Based Funding
Private Developer Financing, Agreements and Partnerships
Developers commonly fund infrastructure requirements privately, for example virtually all “in-
tract” improvements (infrastructure improvements within a subdivision) are privately financed.
In some cases area-serving infrastructure (not fully the responsibility of a particular developer)
can be privately financed. These cooperative arrangements are typically structured in
development agreements or reimbursement agreements. This upfront infrastructure
development may be fully or partially refunded, using subsequently collected development
impact fees, special tax bond proceeds, or other city funding sources. These arrangements tend
to be available during times of strong market performance. In weaker markets or locales it may
be difficult to obtain such private financing.
Project-Specific Conditions and Exactions
Before the advent of ordinance-based development impact fees, it was common for
infrastructure to be funded by the developer through project-specific exactions imposed by the
local jurisdiction, including direct payments for or construction of infrastructure required as a
condition of subdivision or project approval. While development impact fees have reduced the
use of exactions, exactions remain an important part of development-based infrastructure
financing as there are often infrastructure requirements of a new project that are not included in
the applicable fee programs. Determination of the need for such additional infrastructure is
based on “rough proportionality” (i.e., nexus) with the development itself and is often derived
from CEQA-based mitigation measures.
Development Agreements
A development agreement (DA) is a legally binding agreement between a local government and
developer authorized by State statute (Government Code Section 65864 et seq.). A DA is a
means for a developer to secure a development entitlement for a particular development project
for an agreed upon period (often long-term approvals) in exchange for special considerations by
the city (or county), generally including infrastructure improvements, amenities, or other
community benefits that cannot be obtained through the normal conditions applicable to the
project. DAs are entirely discretionary on the part of local government (there is no nexus
requirement) and must be individually adopted by local ordinance. Development agreements
vary widely and cities often establish their own policies and procedures for considering
development agreements.
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Incentive Zoning
Land use regulations can be configured in a manner that can provide incentives for additional
private investments in local infrastructure and community benefits beyond that obtainable
through the normal regulatory procedures. Community Benefit Incentive Zoning (CBIZ)
programs are founded on the concept of “value capture.” Public entities commonly create value
with investments in public facilities and services (e.g., transit and utilities upgrades) as well as
through changes to zoning code that increase the value of land. Typically, when the public sector
creates value in these ways, landowners enjoy a financial gain. Value capture occurs when the
public sector reclaims some of the value created by its activities. The State of California’s
Affordable Housing Density Bonus Law is an example of a CBIZ value capture program. Under
this law, developers are granted additional density (i.e., the right to build additional market rate
units) in return for their development of affordable housing units. A key limitation of CBIZ is the
requirement for a strong real estate market in which developers are seeking to take advantage
and pay for the incentives offered.
Development Impact Fees
(authorized by Section 66000 et. seq. of the Government Code)
Development impact fees are charged to new private development in the City of San Luis Obispo
to fund a range of public infrastructure improvements. A development impact fee is an
ordinance-based, one-time charge on new development designed to cover a “proportional-share”
of the total capital cost of necessary public infrastructure and facilities. The creation and
collection of impact fees are allowed under AB-1600 as codified in California Government Code
Section 66000, known as the Mitigation Fee Act. This law allows a levy of one-time fees to be
charged on new development to cover the cost of constructing the infrastructure needed to serve
the demands created by the new development. To the extent that required improvements are
needed to address both “existing deficiencies” as well as the projected impacts from growth, only
the portion of costs attributable to new development can be included in the fee. Consequently,
impact fees commonly are only one of many sources used to finance a city’s needed
infrastructure improvements. Fees can be charged on a jurisdiction-wide basis or for a particular
sub-area of the jurisdiction (such as a specific plan area).
Establishment
Development impact fees can be imposed through adoption of a local enabling ordinance
supported by a technical analysis showing the “nexus” between the fee and the infrastructure
demands generated by new development. Fees may be charged for a particular improvement
(e.g., transportation improvement) or include multiple infrastructure improvement categories in
a comprehensive program. Impact fee programs must be reviewed annually and updated
periodically to assure adequate funding and proper allocation of fee revenues to the
infrastructure for which the fees are collected.
Cost Burden
The burden incidence of development impact fees is upon the project developers and builders
who pay the fees. Fees are a cost of development and are “internalized” into project costs in the
same manner as all other development- and construction-related costs. There is no direct effect
of fees on development pricing, because the markets set pricing independent of costs. However,
when costs are too high for the market to bear, development may be deterred until such time as
prices justify costs. All costs will influence land value, so it is often the case that landowners bear
a portion of the cost of fees through lower land values (prices paid by developers or builders). So
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long as total development costs fall within a reasonable level, potential negative effects on
development feasibility effects are manageable.
Economic Considerations
There are a number of specific economic considerations of development impact fees including:
The effects of fees on the financial feasibility of new development and potential to deter
otherwise desirable development (due to excessive costs); and
The competitiveness effects of higher development costs (compared to neighboring
jurisdictions) leading to dislocation of desired development.
A benefit of impact fees is that they provide a comprehensive and programmatic framework for
identifying and allocating infrastructure costs to new development based on a demonstrated
nexus between the new development and infrastructure need. In addition, there is no discretion
on the part of developers subject to the fees nor is voter approval required.
The key limitation of development impact fees (in addition to the nexus requirement) is the
timing of funding. Infrastructure often is needed “up-front” while fees are paid over time as
development occurs. This means that other funding or financing methods are needed to close the
timing gap. Fees also are irregular, as they depend on development activity that varies with
economic conditions. During the 2008-09 recession, when development around the State and in
the Bay Area slowed dramatically and prices fell precipitously in many locations, fee program
revenues fell proportionately. Fees also require ongoing management including annual review,
fund accounting, and updating to assure the efficacy and transparency of the fee program.
Related to the economic concerns discussed above, it is important to recognize that there are
methods for moderating or deferring fees. Though individual development impact fee ordinances
must be consistently applied and coordinated, they may contain features that can reduce
potential negative economic effects and to avoid unnecessarily inhibiting otherwise desirable
development. Also, there can be features of development impact fees that address economic
concerns generally or on a case-by-case basis.
Fee Deferrals: While the statute allows a levy of fees at issuance of building permit, many
development impact fee ordinances allow a deferral until the “certificate of occupancy” is
issued.
Fee Waivers: Fee waivers provide the local government the ability to waive the fee for a
particular project when it is determined that without such reduced costs a project that has
substantial public benefit may otherwise not occur. Lacking such community benefits,
waivers may be regarded as a “gift of public funds.” Examples of such partial or total waivers
include projects with the potential to generate substantial municipal revenue or community
amenities, affordable housing projects, and employment-generating uses. Fee waivers reduce
funding in a fee program proportional to the aggregate amount of waivers or exemptions
granted. Such revenue reductions must be “made up” by the city from other funding sources,
or risk falling short on funding for infrastructure in the fee program.
Credits and Reimbursements: Credits and reimbursements are mechanisms that allow
developers subject to an impact fee to build infrastructure in-lieu of paying the fee. Credits
provide proportional fee forgiveness for the value of that construction against the fee
obligation. Reimbursements occur in the case where construction value exceeds the
particular developer’s fee obligation.
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Short-Term Fee Financing (interest bearing installment payments): Ordinances can provide
for a developer to pay fee obligations over a period of time subject to an interest bearing and
secured note.
Parkland (Quimby) Fees
In addition to park impact fees, park and recreation improvements are funded through the
Quimby Act requirements (for parkland acquisition) through the residential subdivision process.
Utility Fees and Connection Charges
Utility connection charges from new development can fund utility infrastructure improvements.
Revenue bonds may be issued secured by a utility rate charge base (water and sewer) and may
be used for expansion to serve future development, or for reimbursement to the Developer for
initial funding of utility facilities. The City currently charges water and wastewater connection
fees from new development.
Land-Secured Revenue and Financing
There is a long history in California and elsewhere in the United States of using land-secured
financing methods to fund local infrastructure or provide services that benefit a particular area
(ranging from an entire jurisdiction to sub-areas of all sizes). Traditionally, special assessment
bonds as authorized by the Improvement Bond Act of 1915 and other related legislation were
issued and funded by annual property tax assessments from benefitting properties. Increased
voting requirements created by Proposition 218 largely eliminated the use of Special Benefit
Districts in the mid-1990s. However, since the mid-1980s the Mello-Roos Community Facilities
District (CFD) has been a well-used infrastructure finance tool, though it is not well suited for
most infill applications due to voting requirements.
Special Benefit Assessment Districts
Special benefit assessment districts are a way of creating a property-based assessment upon
properties that benefit from a specific public improvement. The formation of assessment districts
requires majority approval of the affected property owners. Benefit assessments can fund a wide
range of infrastructure improvements so long as a direct and measurable benefit can be
identified for the benefitting properties. There are numerous forms of special benefit
assessments in the California statutes, including the Municipal Improvement Act of 1913,
Lighting and Landscape Maintenance Districts, and others. However, in 1996, Proposition 218
effectively curtailed the use of Assessment Districts in California by limiting the methods by
which local governments may exact revenue from taxpayers without their consent. In addition,
recent court rulings (Silicon Valley Taxpayers’ Assn., Inc. v. Santa Clara County Open Space
Authority, 44 Cal. 4th 431 (Cal. 2008)) have further tightened the requirements for
demonstration of “special benefit” thus further reducing the flexibility and utility of assessment
districts.
Community Facilities District Act
The Mello-Roos Community Facilities Act of 1982 (authorized by Section 53311 et. seq. of the
Government Code) enables the formation of a CFD by local agencies, with two-thirds voter
approval (or landowner approval when there are fewer than 12 registered voters in the proposed
district), for the purpose of imposing special taxes on property owners. The resulting special tax
revenue can be used to fund capital costs or operations and maintenance expenses directly, or
they may be used to secure a bond issuance, the proceeds of which are used to fund capital
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costs. Because the levy is a tax rather than an assessment, the standard for demonstrating the
benefit received is lower, thus creating more flexibility. Despite limited use in populated infill
areas, CFDs have become the most common form of land-secured financing in California.
Establishment
California’s land-secured funding districts can fund a wide range of infrastructure improvements
that generate direct and measurable benefits to specific properties. The districts require
(resident) voter or landowner approval. In the case of assessment districts, majority landowner
approval is typically required. In the case of a CFD, a two-thirds voter approval is needed in
areas that have more than 12 residents (landowners can approve special taxes in areas with 12
or fewer residents).
Cost Burden
The owners or users of real estate pay assessments or special taxes. By adding to the cost of
ownership, the assessment or tax may affect the price a buyer is willing to pay for a home or
commercial property, in which case the cost incidence is shared with the builder, land developer,
or landowner. Experience suggests that less than 100 percent of the financing burden is
recognized by buyers.
Economic Considerations
Land-secured financing provides a well-established method of securing relatively low-cost tax
exempt, long-term, fixed rate, fully-assumable debt financing. However, there can be challenges
associated with establishing measurable and specific benefits to particular properties. In addition,
land-secured financing adds financing costs (e.g., cost of issuance and program administration).
Further, the financing capacity of a district may be limited in early phases of development and it
may be necessary to rely on other sources of infrastructure funding during initial years. Finally,
while land-secured financing has been widely used in greenfield development where landowner
approval is the norm, achieving a two-thirds voter approval in infill areas typically is a barrier to
use of the tool.
City Funding and Financing
Cities have a number of ways in which they can raise money for capital projects and/or finance
capital improvements, including seeking voter approval of general obligation bonds or special tax
bonds, use of enterprise revenues (i.e., revenue-generating services) for enterprise investments
(e.g., water and sewer utilities), and through “capitalizing leases” funded with General Fund
revenue sources.
Cities also have discretion over the use of various State and federal grant program funds that
continue to be available and can avail itself of State financing programs (e.g., IBank and SCIP).
The City of San Luis Obispo also established an Infrastructure Investment Capital Fund and
deposited funds that can be used to leverage grant funding, as loans or for direct City
participation in infrastructure projects that will enhance quality of life and improve economic
development.
Grants
Grants provide external funding from regional, state, and federal sources but reflect local
priorities. Many grants require local matches. Apart from local match requirements, there are
significant staff costs associated with grant funding, including staff time during the application
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process and during the project. Grant funding is often limited to capital improvements with
maintenance responsibilities falling to the local jurisdiction.
Regional, State, Federal Transportation Funding
The San Luis Obispo Council of Governments (SLOCOG) administers transportation funding from
a variety of sources that includes federal, state and local assistance. Current federal programs
include the Surface Transportation Program (STP), the Congestion Mitigation and Air Quality
(CMAQ) Program, and the Transportation Alternatives Program (TAP). State programs include
the Active Transportation Program (ATP) administered by Caltrans, and the State and Regional
Transportation Improvement programs (STIP and RTIP), While it depends on the program, it
may be possible to fund portions of certain regional-serving transportation facilities and
improvements (e.g., the Los Osos Valley Road interchange or the Prado Road interchange). The
availability of transportation-related grant funding has been declining in the past decade, making
the funds more competitive and therefore more challenging to secure.
Infrastructure Investment Capital Fund
(authorized by SLO Resolution No. 10603, 2015 Series)
The Infrastructure Investment Capital Fund was created to help the City realize the benefits of
growth that is well-planned, and that would not occur in a timely manner without City
participation in the financing of supporting infrastructure. The funds can be used to leverage
additional grant funding, as loans or for direct City participation in priority infrastructure that will
enhance the quality of life and improve economic development. The resolution language includes
guidelines for the use of the funds and stipulates evaluation criteria.
Guidelines
1. The use of City funds shall not offset any cost that would be legally required to be paid to
meet the fair share obligation of the developer requesting City investment in an
infrastructure project.
2. The use of City funds shall not offset a private project’s specific mitigation cost identified
through the environmental review process or under existing regulations or policies.
3. The use of City funds shall support a project that would not otherwise be feasible in a
timely manner due to the economic environment, the timing of the project, or other
constraints outside the control of the project proponents or the City.
4. The project proponents shall demonstrate a significant public benefit associated with
construction of the project that merits City participation.
5. Approved projects will have a measurable outcome that will be monitored and reported to
the Council and the public.
Evaluation Criteria
1. Significant public benefit, demonstrated by compliance with and furtherance of General
Plan goals, policies, and programs; and
2. Alignment with the Major City Goals and other important objectives in place at the time of
the application; and
3. Head of Household Job Creation; and
4. Housing Creation; and
5. Circulation/Connectivity Improvements; and
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6. Net General Fund fiscal impact.
Enhanced Infrastructure Financing Districts
(authorized by the Infrastructure Financing District Act, Government Code §53395, et seq.;
expanded by SB 628.)
Infrastructure Financing Districts (IFDs) and Enhanced Infrastructure Financing Districts (EIFDs)
are forms of Tax Increment Financing (TIF) that currently are available to local public entities in
California. Local agencies may establish an IFD or EIFD for a given project or geographic area in
order to capture incremental increases in property tax revenue from future development. In the
absence of the IFD or EIFD, this revenue would accrue to the city’s General Fund (or other
property-taxing entity revenue fund). EIFD funds can be used for project-related infrastructure,
including roads and utilities, as well as parks and housing. Unlike prior TIF/Redevelopment law in
California, IFDs and EIFDs do not provide access to property tax revenue beyond the local
jurisdiction’s share (AB-8 tax allocation).
Largely because IFDs can be difficult to enact, Senate Bill 628 created a similar but more flexible
tool, the EIFD. The EIFD bill expands the scope of eligible projects considerably, and lowers the
voter/landowner threshold to pass a bond from two-thirds to 55 percent. In addition, EIFDs can
be formed and gain access to unlevered (debt free) revenue without a vote.
SB 628, the new EIFD legislation, allows for the following:6
Reduce vote requirements: While current law requires a two-thirds vote to form an
Infrastructure Financing District, the new EIFDs could be formed—and could use a range of
existing financial tools—without going to voters. Only issuing tax increment bonds would require
a vote, with a vote threshold of 55 percent.
Expand financing authority: The new EIFDs would allow local leaders to support infrastructure
projects through multiple funding streams, including a full complement of existing public
mechanisms (tax increment authority, benefit assessments, and fees), as well as private
investment and procurement.
Increase investment in different types of infrastructure: The enhanced districts would be
able to build every type of infrastructure: transportation, water, flood control and storm water
quality management, transportation, energy, public facilities, energy, and environmental
mitigation—so long as a direct connection can be established between the needed infrastructure
and its users.
Allow more flexible institutional collaborations: SB 628 also gives communities more
flexibility to accommodate regional growth by making infrastructure investments across
jurisdictions through Joint Power Authorities.
Unlike former redevelopment tax increment funding, IFD’s can only utilize the City’s share of
property tax increment (and any other agencies who agree to forego their share of tax
increment). While any tax increment, no matter how small, could benefit a marginally financially
feasible project, it is important that in most cases the local property tax available is very limited
(California cities typically get between $0.10 and $0.20 of a property tax dollar). Moreover, the
use of local property tax to support infrastructure financing has fiscal implications for California
6 www.caeconomy.org (“How New EIFDs Can Improve Local Infrastructure Development”).
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cities. Dedicating tax revenue to infrastructure limits funding for new public services costs
associated with development.
Establishment
The establishment of an IFD or EIFD requires approval by every local taxing entity that will
contribute its property tax increment. The IFD also requires two-thirds voter approval (within the
specific geographic area) to form the IFD. EIFDs only require a vote when debt issuance is
sought.
Cost Burden
The incidence of burden of an infrastructure financing district is local taxing jurisdiction that
foregoes property tax revenue for services and dedicates these funds to infrastructure or other
eligible investments.
Economic Considerations
IFDs and EIFDs, a form of TIF, redirect property taxes otherwise accruing to the city General
Fund. The value created by the project is captured and invested in a manner that helps realize
the project. However, only specific types of public investments of community-wide significance
may be financed through IFDs and EIFDs. IFDs and EIFDs cannot be used to finance operations
and maintenance expenses. Unlike former Redevelopment TIF, IFDs only can utilize local
government’s share of property tax (along with other agencies who agree to forego their share of
tax increment).
State Financing Programs
State Infrastructure Bank (IBank)
(authorized by Section 63000 et. seq. of the Government Code)
The IBank was created in 1994 to finance public infrastructure and private development that
promote a healthy climate for jobs, contribute to a strong economy and improve the quality of
life in California communities. The IBank operates pursuant to the Bergeson-Peace Infrastructure
and Economic Development Bank Act (Government Code Sections 63000 et seq.). The IBank is
administered by the Governor's Office of Business and Economic Development and is governed
by a five-member Board of Directors. Since its inception, the IBank has financed more than
$37 billion in infrastructure and economic development projects around the State.
The IBank has broad authority to issue tax-exempt and taxable revenue bonds, provide financing
to public agencies, provide credit enhancements, acquire or lease facilities, and leverage state
and federal funds. The IBank's current programs include the Infrastructure State Revolving Fund
(ISRF) Program, 501(c)(3) Revenue Bond Program, Industrial Development Revenue Bond
Program, Exempt Facility Revenue Bond Program and Governmental Bond Program.
The ISRF Program provides very low-interest rate loans up to $25 million (per applicant) to
municipal governments for a wide variety of municipal infrastructure, including infrastructure
needed to serve new development. An application is required for these loans, and loans require a
stable and reliable source of repayment. If approved, loan repayment can be funded through a
commitment of city general fund revenues or a pledge of a particular revenue source, including a
citywide tax, land secured assessment, or special tax levied on a particular area.
Common criticisms of the IBank ISRF Program have included its cumbersome program
application process, its strict credit standards and related risk aversion, and limited financial
incentive to participate. However, recent changes to the program may increase IBank lending to
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cities without other credit options. Pursuing further opportunities to modify or expand the
Program, or to create an entirely new program, could make State-sponsored lending a useful
tool for assisting and incentivizing infill development.7
Statewide Community Infrastructure Program (SCIP)
The Statewide Community Infrastructure Program (SCIP) is a program of the California
Statewide Communities Development Authority (CSCDA) that makes use of a local government’s
ability to create land-secured financing districts. The Program “pools” debt obligations to gain a
comparatively lower interest rate and issuance costs (particularly if the issue is less than
$5 million). SCIP can benefit developers because it provides low-cost, long-term financing of fees
and improvements, which can otherwise entail substantial upfront cash outlays. Local agencies
benefit from SCIP when fee funds are made available upfront or infrastructure is financed with
attractive terms. Typically, most public improvements required as conditions of project approval
are eligible, including roads, street lights, landscaping, storm drains, water and sewer facilities,
and parks. Further, the availability of low-cost, long-term financing also can soften the burden of
rising fees and improvement costs, which benefits developers and local agencies. According to
CSCDA, the SCIP program has assisted communities and developers throughout California to
finance over $150.2 million in impact fees since 2003.
CSCDA is a Joint Powers Authority sponsored by the League of California Cities and the California
State Association of Counties. Membership in the Authority is open to every California city and
county, and most are members. SCIP financing is available for development projects situated
within cities or counties (local agencies) which have elected to become SCIP participants.
Eligibility to become a local agency requires only (a) membership in the League of Cities or
California State Association of Counties, (b) membership in the Authority, and (c) adoption of a
resolution making the election (the “SCIP Resolution”).
Participation in SCIP entails the submission of an application by the property owner of the 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-recourse8 financing of either
(a) eligible development impact fees payable to the local agency or (b) eligible public capital
improvements (or both). Under certain circumstances, determined on a case-by-case basis,
development impact fees payable to local agencies also may be used as repayment for upfront
SCIP funding.
SCIP funding awards are aggregated for inclusion in a round of financing authorization.
Periodically, as warranted by the accumulation of approved funding applications, the California
Statewide Communities Development Authority issues tax-exempt revenue bonds. For projects
involving a sufficient amount of financing (generally $5 million or more), a special series of
bonds may be issued to fund the project separately if the timing of issuance of a pooled financing
does not suit the project. Revenues to pay debt service on the SCIP bonds are derived from
special assessments pursuant to the Municipal Improvement Act or through the levy of special
taxes by establishing a CFD pursuant to the Mello-Roos Community Facilities Act.
7 Find more information concerning California Infrastructure and Economic Development Bank
programs available here: http://www.ibank.ca.gov/programs_overview.htm.
8 Non-recourse financing is a loan structure in which the lending bank is only entitled to repayment
from the proceeds of the project, not from other assets of the borrower.
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Other City Funding and Financing
Increases in Local Taxes
Subject to a vote, cities and counties can use a variety existing or new funding sources to fund
infrastructure directly or provide interim financing for development-based obligations. For
example, local sales tax increases, transient occupancy taxes, utility user taxes, development
taxes, and (local option) real estate transfer taxes (charter cities only) all can be created or
increased for this purpose. By enhancing General Fund revenues, the City gains the ability to
divert some funds to infrastructure projects. A commitment to fund specific types of projects can
be made in the ordinances that create new taxes or can be made as a matter of city policy. City
funding can be used to fund infrastructure using a “pay-as-you-go” approach, as a source of
reimbursement, or to support a municipal bond issue (e.g., to fill an initial funding gap
associated with development impact fee programs or land secured financing programs).
Establishment
Creation of new general or special taxes and any related issuance of bonds supported by such
revenues are limited by State constitutional requirements and statutes that require voter
approval of greater than 50 percent for general taxes and two-thirds approval for special taxes
(i.e., those earmarked for particular uses).
Cost Burden
The incidence of burden falls to those paying the taxes or rates. For example, sales taxes are
paid by residents, businesses, employees, and visitors, while transient occupancy taxes are paid
by visitors. The rationale for this payer burden is that these residents, businesses, employees,
and visitors will benefit from the investments made in infrastructure and development.
Economic Considerations
Use of various general fund sources to support infrastructure investments including repair and
replacement of existing infrastructure, as well infrastructure that serves new development,
requires little additional administrative effort and is typically secure given the broad range of
revenue sources pledged to the financing. However, the use of existing General Fund revenue is
limited by current demands to support municipal operations.
Certificates of Participation
Capitalizing leases, most commonly Certificates of Participation (COPs), are typically used by
government agencies for construction or improvement of public facilities. Through the use of a
lease-type repayment structure, the monies needed to fund these building projects do not (by
California State law) constitute public debt and do not require voter approval. Usually, a public
entity enters into a tax-exempt lease-purchase with a lessor and the lessor provides the agreed-
upon the public facility. In this way, government agencies may use their leasing powers to
provide more expedient access to the capital markets than the more restricted powers to incur
debt. Agencies typically use tax-exempt leases to finance non-enterprise projects, such as
schools, courthouses, jails, and administration buildings.9
Establishment
The COP is a lease obligation of the City and thus does not require voter approval. There is a
prescribed process for creating and administering COPs that the City must follow.
9 California Debt Advisory Commission 1993.
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Cost Burden
Lease payments for COPs are generally derived from appropriations of the City’s General Fund;
they are secured with a pledge of specific City assets and underwritten by the full faith and credit
of the City
Economic Considerations
COPs typically have very competitive financing rates and thus are commonly used for financing
municipal facilities and infrastructure where Citywide benefit is conferred.
General Obligation Bonds
A general obligation bond is a type of municipal bond that is secured by a state or local
government's pledge to use legally available resources, most typically including property tax
revenues, to repay bond holders. General obligation bonds are restricted to defined capital
improvements. Credit rating agencies often consider a general obligation pledge to have very
strong credit quality and frequently assign them investment grade ratings. In California, cities
must secure a two-thirds voter approval to issue general obligation bonds.
Establishment
Creation of general obligation bonds requires two-thirds voter approval if the issuance is for non-
educational purposes.
Cost Burden
The incidence of burden of general obligation bonds is upon all property owners in the issuing
jurisdiction proportional to the value of their property. It is this very broad base of funding that
provides excellent security for general obligation bonds, thus typically garnering the lowest
interest rate of any municipal debt instrument.
Economic Considerations
General obligation bonds allow public entities to finance at a low fixed rate over the useful life of
the asset. However, general obligation bonds are limited to capital improvement expenditures
and also are limited in their use to the precise purposes outlined in the authorizing ballot
measure. General obligation bonds are commonly restricted to particular capital uses (e.g.,
street improvements, drainage improvements, parks and recreation).
Enterprise Revenues and Revenue Bond Financing
Cities and other local governments typically issue revenue bonds when they have access to a
stable source of revenue such as municipal utility rates. Commonly, revenue bonds fund
improvements to water and sewer facilities. Utility rates that fund revenue bonds can vary within
a given jurisdiction if there are substantial differences in the costs of providing services. There
also can be rate surcharges if unique improvements are needed to serve the area.
Establishment
Revenue bonds are issued by the municipal enterprise and require no voter approval. Revenue
bonds may provide improvements for an entire jurisdiction or a sub-area.
Cost Burden
The incidence of burden of revenue bonds is upon rate payers.
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Public Infrastructure Financing Framework 7/20/2016
Draft Memorandum Appendix A Page A-12
P:\161000s\161001SLO_PubFinAdvisory Services\Financing Framework\161001_Financing Framework_2016_07_20.docx
Economic Considerations
Revenue bonds typically have a good risk profile and therefore garner comparatively low interest
rates. Because they are secured exclusively by enterprise revenue, they are not general
obligations of the city and do not require ballot approval. The ability to adjust rates to cover debt
service costs and the ability to charge such rates differentially (given differing costs and benefits
in service sub-areas) creates flexibility and appropriate cost allocation.
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SIGNIFICANT OPERATING PROGRAM CHANGE
(COMMUNITY DEVELOPMENT)
LUCE IMPLEMENTATION AND FEE UPDATE
SUMMARY OF CHANGE: Implementing the update to Land Use and Circulation Elements (LUCE) to ensure
internal consistency of the City’s implementing ordinances and fees will cost approximately $410,000 in FY
2015-16 and $325,000 in FY 2016-17 for consultant and contract services.
FISCAL IMPACT: One time cost of $410,000 in FY 2015-16 and $325,000 in FY 2016-17.
SERVICE LEVEL IMPACT: The objective of this request is to complete the LUCE update by implementing
key strategies that were developed as part of the update process. This effort is necessary to maintain internal
consistency of the General Plan and its implementing documents. This effort will involve form-based
codes/updated guidelines for the downtown that will provide an updated graphic Downtown Concept Plan (as
called for in the Land Use Element) along with other changes to the Zoning Code; and a nexus study and impact
fee program update to address changed infrastructure needs and evaluate facilities and service needs not
previously captured, in order to update the City’s impact fee program.
KEY OBJECTIVES
1. Leverages initial fiscal analysis conducted as part of the LUCE update.
2. Provides internal consistency between the General Plan and implementing ordinances as required by
Government Code.
3. Develops fee and impact information needed for Economic Development Strategic Plan implementation.
4. Implements recommendations of the Community Development Organizational Assessment where Zoning
Code changes may impact process changes.
5. Conducts the required AB1600 evaluation of the fee program and fair share cost allocation resulting from
changes to public infrastructure and service needs defined in the LUCE update.
6. Complies with State law requirement to complete routine updates to fee programs.
EXISTING SITUATION: FACTORS DRIVING THE NEED FOR CHANGE
Due to an $880,000 grant from the Strategic Growth Council (SGC) the City was able to initiate an update to the
Land Use and Circulation Elements (LUCE) during the 2011-13 Financial Plan period. The Council added
$367,500 to this budget in order to complete the environmental review of the project (which was not covered by
the grant). The draft LUCE was submitted to the Strategic Growth Council by the grant deadline of September
26, 2014 and hearings and review of the Environmental Impact Report proceeded through the fall with final
approval by the Council on December 9, 2014. Subsequent work efforts are now needed to implement the
updated General Plan. Changes to the Zoning Code and other implementing documents are called for as part of
the LUCE update. The updated General Plan will benefit from implementing ordinances and standards that are
more graphical in nature and more easily understood by the public. This request includes a desire to see updated
graphics and re-organization of the Zoning Code and other implementing codes.
Also, infrastructure changes identified and endorsed by the City Council through the LUCE update and associated
EIR require a more detailed evaluation to determine how the infrastructure will be funded and how the current
impact fee programs will need to be adjusted. While the LUCE update process involved a financial analysis, it
did not provide the level of detail required to develop infrastructure costs and distribution through appropriate
mechanisms, such as impact fees. This evaluation (also referred to as an AB 1600 study) must be done to
establish the nexus between the infrastructure desired and the development that will pay the impact fees. AB
1600 sets the legal and procedural parameters for the charging of development impact fees.
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SIGNIFICANT OPERATING PROGRAM CHANGE
(COMMUNITY DEVELOPMENT)
LUCE IMPLEMENTATION AND FEE UPDATE
The City’s traffic impact fee program was originally established in 1995 and last updated in 2006. The purpose of
the fee is to fund the transportation improvements required to accommodate new development in the City. Since
the last update, new transportation improvements have been identified that are not currently included in the traffic
impact fee program and a multi-modal approach has been endorsed. Additionally, the equity of some specific
plan area fees has been questioned. These circumstances are best to be addressed as part of a multi-modal
circulation impact fee update now that the General Plan has been updated. Augmenting contract services for
transportation consultant assistance is essential for providing services to internal City customers such as
the Police & Fire Departments. Other stakeholders, such as Cal Poly, Cal Trans, SLO County, San Luis
Obispo Council of Governments are affected by this resource. Previously traffic impact updates have been
completed by the Finance and IT Department. Given the department’s current resources, staff recommends
consultant services be utilized to accomplish this task.
GOAL AND POLICY CRITERIA
This request meets all of the SOPC criteria as follows:
1. Supports Major City Goals: This request supports Major City Goals, including Housing and Multi-Modal
Transportation as well as supports an other important objective of Downtown. It also continues
implementation of goals from the 2013-15 Financial Plan of Infrastructure and Fiscal Health, Bike and
Pedestrian Paths, and implementing the Economic Development Strategic Plan (EDSP) by updating the fee
program to achieve community objectives of affordable housing and circulation infrastructure.
2. Needed to address health, safety or legal concern: Updating the Zoning Code will provide internal
consistency between the recently-adopted General Plan and implementing ordinances as required by
Government Code. Providing a nexus study and update to the fee program is required to reflect new and
changed infrastructure identified in the LUCE update. This includes conducting the required AB1600
evaluation of the fee program and fair share cost allocation for affordable housing, public art, open space,
parks, and changes to public infrastructure and service needs defined in the LUCE update.
3. Needed to provide a priority level of service: Updating the impact fees to fairly distribute responsibility and
cost of needed infrastructure is a priority for the development community. In addition, updating the Zoning
Code and implementing bike paths and affordable housing projects is a broader community priority.
4. Supports revenue generation and/or cost savings: Both efforts may indirectly result in either revenue
generation or cost savings. Updating the impact fees will more accurately represent the cost of infrastructure
needs in the community and will distribute the costs to pay for those needs. The resulting infrastructure will
support new development which will generate revenue. Updating the Zoning Code will provide more clarity
and reflect a range of uses that were not envisioned in 1994 – the last time the Land Use Element was
significantly updated.
5. Represents reorganization within or across Departments: Implements recommendations of the Community
Development Organizational Assessment where Zoning Code changes may impact process changes.
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SIGNIFICANT OPERATING PROGRAM CHANGE
(COMMUNITY DEVELOPMENT)
LUCE IMPLEMENTATION AND FEE UPDATE
6. Reallocation of Existing Resources: The staff resources previously assigned to the LUCE update will be
available to coordinate this effort, but consultant services will still be required. Updating the Downtown
Concept Plan will leverage the resources allocated for the Mission Plaza CIP project and visioning/outreach
efforts can be coordinated for efficiency. In addition, the Public Art Master Plan effort will be completed by
September 2015 and will inform the Downtown Concept Plan update effort.
STAKEHOLDERS
Implementation of the updated General Plan will engage many of the same community members who were
interested and involved in the LUCE update itself: Residents for Quality Neighborhoods; Home Builders
Association; Chamber of Commerce; Downtown Association; SLO Property and Business Owners’ Association;
city residents, and owners of properties and businesses.
IMPLEMENTATION
Implementation is envisioned as follows:
Task Date
1. Develop RFP for Downtown Concept Plan update Aug 2015
2. Interviews and consultant selection process Sept 2015
3. Visioning, interviews, charrette(s), review of Mission Plaza Assessment
from CIP
Oct-Dec 2015
4. Develop Draft Concept Plan Dec-Jan 2016
5. Advisory Body review (ARC, CHC, PC) and early Council feedback Feb-May 2016
6. Council review and approval July 2016
7. RFP for Infrastructure Fee Update Feb 2016
8. Consultant Selection for Infrastructure fee update April 2016
9. Work effort for Infrastructure update (costs, nexus, financing options, right-
sizing)
April – July 2016
10. Public outreach – infrastructure update Aug-Sept 2016
11. RFP for Zoning Code update August 2016
12. Consultant Selection for Zoning Code update September 2016
13. Commission and Council consideration of Infrastructure options Oct-Nov 2016
14. Consultant work on Zoning Code update Oct –Dec 2016
15. Council adoption of Public Facilities Fee program Dec 2016
16. Draft Zoning Code and CEQA evaluation Jan – Mar 2017
17. Referral of Draft Zoning Code and CEQA to ALUC April 2017
18. Planning Commission and Council review of draft Zoning Code update April – May 2017
19. Council approval of Zoning Code update June 2017
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SIGNIFICANT OPERATING PROGRAM CHANGE
(COMMUNITY DEVELOPMENT)
LUCE IMPLEMENTATION AND FEE UPDATE
PROGRAM MANAGER AND TEAM SUPPORT
Program Manager:
The program manager for the Affordable Housing Nexus study and for LUCE implementation (Zoning
code/Downtown Concept Plan) will be the Community Development Deputy Director. The Public Works Deputy
Director and Transportation Operations Manager will take the lead on circulation element implementation and
traffic impact fee update.
Project Team:
The project team will include a Transportation Planner, Community Development Senior and Associate Planners,
the Finance and Information Technology Director, and support staff. Representatives from City Police, Fire,
Utilities, Public Works, Finance and IT, and Parks and Recreation departments will be involved.
ALTERNATIVES:
1. Continue the Status Quo. Once the Land Use and Circulation Elements are adopted, the City will need to
ensure that implementing documents, information and processes are updated as well. Continuing the status
quo implies that no changes will be required in response to the update. Regardless the traffic impact fee
program will need to be updated to comply with State law and add facilities to support LUCE land uses and
policies. If no other changes are needed, staff will recommend any identified funds be returned to the General
Fund. This is an unlikely scenario. Infrastructure improvements and impact fees must be updated if the
community will be able to achieve improvements identified in the updated General Plan. Other changes
identified in the update will need to be implemented otherwise the policies and programs cease to provide
direction for decision-makers and inconsistencies would exist between policies and implementation
mechanisms.
2. Defer or Re-Phase the Request. The request could be phased to address the infrastructure financing or the
implementing zoning code and standards to be changed in response to the update. This approach could result
in the General Plan having no way to implement desired improvements or could result in a General Plan that
has inconsistent standards if funding is not approved in the 2015-17 Financial Plan. Neither of these
outcomes is desirable. The City’s traffic impact fee program needs to be updated whether or not there are
changes to the General Plan.
3. Change the Scope of Request. The request could be re-scoped to include consultant assistance for the nexus
study, traffic impact fee update and infrastructure fee development only. Existing staff would be required to
complete the implementation of other changes resulting from the LUCE Update. Due to existing workload
and resource commitments, this could mean that other work desired by the Council does not occur. Items that
could lose momentum or be deferred include completion of the Housing Element update, implementation of
Climate Action Plan strategies, and other initiatives assigned to the Community Development Department.
4. Implementation in a Different Way. City staff seeks grants to accomplish Council-directed work efforts and
will continue to look for funding opportunities, funding partners, and any funding efficiencies possible to
leverage City resources. Transportation Impact Fund fees (TIF) are not available for this update. There are
limited TIF funds available for AB 1600 work or updates to this source which only covers City-wide
infrastructure (Specific Plans are handled separately). A program amendment would be required to enable
funds to be used for this purpose and would still only address city-wide fees. If grant funds are not available,
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(COMMUNITY DEVELOPMENT)
LUCE IMPLEMENTATION AND FEE UPDATE
General Fund support will be required to accomplish this effort unless staff in the Finance and IT Department
complete the consultant services components of this work effort. Given the current staffing resources in that
department, this alternative is not recommended.
5. Existing Program Evaluation. The LUCE update will involve an evaluation of the City’s existing land use
and circulation element policies and programs, their status and on-going fit with community values. This
process will be completed with the adoption of the LUCE update (projected to occur by November 2014).
OPERATING PROGRAM
Long Range Planning
Transportation Planning
COST SUMMARY
Completion of the updated Land Use and Circulation Elements (LUCE) to ensure internal consistency of the
City’s implementing ordinances and fees will cost approximately $735,000 in Financial Plan 2015-17.
Line Item Description Account No.2015-162016-17
Staffing 00
Contract Services410,000325,000
Engineering Firm to design and cost infrastructure 50500-7227 50,000
Traffic modeling and Nexus study 50500-7227 50,000
Financial Firm to develop PFFP 40400-7227 75,000
Financial Firm to update TIF program 50500-7227 50,000
Affordable Housing Nexus Study 40400-7227 35,000
Changes to EnerGov to accommodate updated fees 40400-7227 50,000
Downtown Concept Plan update 40400-7227 100,000
Update of Zoning Code 40400-7227 150,000
CEQA analysis and ALUC referral 40400-7227 75,000
Transportation Consultant 50500-7227 50,000 50,000
Total Operating Costs 410,000 325,000
TIF Funds (70,000)
Affordable Housing Funds (35,000)
Net Operating Costs 305,000 325,000
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Oakland Sacramento Denver Los Angeles
August 16, 2016
Proposed Infrastructure Financing
Framework
presented to
City of San Luis Obispo
presented by
Walter Kieser, Senior Principal
Economic & Planning Systems, Inc.
1Financing Framework and Policies
Agenda
•Recommendation
•Introduction/Background/Definitions (Key Terms)
•Recap Development Impact Fee Review Study Sessions,
Findings, and Council Direction
•Identify Current Infrastructure Financing Efforts
•Study Session Objectives
•Presentation of Proposed Financing Framework
–Financing Criteria
–Infrastructure Types
–Infrastructure Benefit Categories and Project Examples
•Proposed Financing Guidelines and Policies
•Council Direction
•Next Steps
2Financing Framework and Policies
RECOMMENDATION
3Financing Framework and Policies
Recommendation
•Participate in a study session on public infrastructure
financing and receive and file the background memorandum
and reports.
•Authorize Request for Proposal for Capital Facilities Impact
Fee Program Nexus Study.
4Financing Framework and Policies
INTRODUCTION
5Financing Framework and Policies
Background
•The Economic Development Strategic Plan (2014) identified
the need to update the City’s development impact fees and
assure that fees, in aggregate, do not create a deterrent to
desired economic development.
•At the same time the General Plan LUCE, facility master
plans, and the Specific Plans identify the need for
substantial infrastructure improvements in the City.
•These improvements are needed to meet demands created
by new development, improve level of service standards,
and to cure existing service deficiencies.
•The Development Impact Fee Review provided an
assessment of the City’s current impact fees and
documented infrastructure funding and financing options.
6Financing Framework and Policies
Definition of Key Financing Terms
•General Tax A General Tax can be used for any general
purpose (i.e., property tax used for General Fund
expenditures); 50 percent voter approval, various statutory
authorizations.
•Special Tax A Special Tax is levied for a defined purpose
(e.g., sales tax override, utility users tax); two-thirds voter
approval, various statutory authorizations.
•Mello-Roos Community Facilities District (CFD)Tax A
CFD Tax is a special property-related tax applicable to a
defined geographic area (Citywide or subarea) to fund
services or infrastructure; requires 2/3 voter approval or
landowner approval in uninhabited areas, enacted as Mello
Roos Community Facilities Act in 1982.
7Financing Framework and Policies
Definition of Key Terms, continued
•Special Benefit Assessment A charge (assessment)
paying for services or improvements that provide “special
benefit” to the specific geographic area; requires landowner
approval, Special Benefit Assessment Districts were codified
in State Law by the 1913-1915 Act. CFDs have largely
supplanted Assessment Districts.
•Development Impact Fees:One-time fees charged to
new development; adopted by ordinance requiring “nexus”
findings, regulated by the Mitigation Fee Act, Government
Code 66000 et seq. (sometimes referred to as AB 1600).
•Fair Share Allocation:A concept described in the
Mitigation Fee Act and applicable to Assessment Districts
too, wherein technical analysis is used to allocate fees or
charges based on benefit proportionality (i.e., between
existing and new development).
8Financing Framework and Policies
Development Impact Fee Review Study
Sessions
•Study Session #1: Current trends in municipal
infrastructure financing; Review of development impact
fees; and Review of the City’s existing fee programs.
•Study Session #2: Funding sources and financing
mechanisms available to the City and the policy implications
and trade-offs associated with the various funding options.
•Study Session #3: Council direction for updating the City’s
Development Impact Fees setting infrastructure priorities
and financing policies.
9Financing Framework and Policies
Development Impact Fee Review Findings
1.Incremental evolution in the City’s existing development
impact fee programs have resulted in a complex system of
base fees, sub area fees, and geographic fee variation.
2.Geographic “overlaps” in the City’s fees cause a significant
difference in fee levels in various parts of the City.
3.Citywide, aggregate fee levels are consistent with fees
levied by other cities, though some specific area fees
appear to be high by industry standards.
–In particular, aggregate fees in the MASP may deter certain
types of new development.
9
10Financing Framework and Policies
Development Impact Review Findings,
continued
4.There is a lack of consistency between land use categories
used to compute fees between fee programs (e.g.,
business park).
5.Fees do not contain a cost component for administration
and updating.
6.Fees are increased by CPI rather than CCI, or other more
appropriate indices.
7.The City does not charge fees for all municipal
infrastructure categories, such as general government or
public safety.
8.Fee-funded infrastructure items not integrated into City’s
CIP.
10
11Financing Framework and Policies
Council Direction (March 2014)
At the conclusion of the three Study Sessions the Council
provided the following direction:
•Proceed with the update of the City’s development impact
fees
•Develop infrastructure prioritization framework
–Establishment of the Infrastructure Investment Capital Fund
and accompanying prioritization white paper.
•Explore new infrastructure funding strategies to support the
objectives of the EDSP. Three different funding priorities
were discussed:
–Funding infrastructure of broad community benefit
–Funding infrastructure that is likely to have an economic
development outcome that justifies the public investment
–Using land secured financing to fund infrastructure required to
serve new development
12Financing Framework and Policies
Current Infrastructure Financing Efforts
•Update of the Airport Area Specific Plan Financing Plan and
Impact Fee is underway.
•Ongoing discussions with San Luis Obispo County regarding
use of Enhanced Infrastructure Financing District (EIFD) to
fund key “regional” transportation improvements
•Processing applications and conducting fiscal analysis for
the proposed Avila Ranch and San Luis Ranch Specific Plans
to identify potential revenue generation and cost to provide
services
•Update of the Traffic Model is underway
•Prioritization efforts for CIPs consistent with white paper
identifying the prioritization evaluation criteria
13Financing Framework and Policies
STUDY SESSION OBJECTIVES
14Financing Framework and Policies
Objectives
1.Review and respond to questions related to Development
Impact Fee Review (2014).
2.Update Council regarding ongoing infrastructure financing
efforts.
3.Establish a new framework for infrastructure financing that
responds to previous and current Council direction.
4.Identify linkages to the pending update of the City’s
Development Impact Fee Program.
5.Initiate implementing actions for desired infrastructure
financing mechanisms.
15Financing Framework and Policies
FINANCING FRAMEWORK
16Financing Framework and Policies
Components of Financing Framework
1.Criteria for Financing Framework
2.Types Infrastructure Improvements
3.Benefit Categories for Infrastructure Improvement and
Project Examples
4.Guiding Policies for Establishing Financing Mechanisms
17Financing Framework and Policies
Financing Framework Criteria
The Infrastructure Financing Framework should fund needed
public facility and infrastructure improvements in a manner
that is:
1.Effective (needed facilities/infrastructure are developed)
2.Fair (from one project to the next)
3.Equitable (i.e., between existing and new development)
4.Efficient (aligns improvements with the most appropriate
source of funding)
5.Consistent (with economic development and other city
objectives)
18Financing Framework and Policies
Types of Facility and Infrastructure
Improvements
•Public facility and infrastructure improvements can induce
private investment, increase economic activity and expand
the City’s tax base –when paired with wise land use
policies.
1.Civic facilities (e.g., fire stations, police headquarters)
2.Transportation infrastructure
3.Streetscape improvements
4.Parks and recreation facilities
5.Water and sewer utility improvements
19Financing Framework and Policies
Improvement Benefit Categories
•Improvement benefit categories identify “who benefits”
from an infrastructure improvement, a key consideration in
selecting the appropriate funding and financing.
•Improvement benefit categories include:
1.Project-specific improvements
2.Improvements that increase capacity for new development
3.Improvements that address existing infrastructure
deficiencies or improve overall levels of service
4.New infrastructure or community benefits
5.Public facility operations and maintenance
20Financing Framework and Policies
1. Project-Specific Improvements
•SLO examples:
a. Specific Plan Area-frontage improvements (typically street
improvements and related in-street utilities)
b. Infrastructure oversizing (if subject to a reimbursement
agreement)
•Funding/financing strategy:
a.Developer-based funding
Typical subdivision conditions of approval, entitlement-related
exactions, or reimbursement agreements (for oversizing)
b.CFD or Assessment District
21Financing Framework and Policies
2. Improvements that Increase Capacity for
New Development
•SLO examples:
a. New development’s share of the following:
Specific Plan area parks
Fire Station #5
Prado Road
Tank Farm Road
•Funding/financing strategy:
a. Developer-based funding
Typical subdivision conditions of approval, entitlement-related
exactions, or reimbursement agreements (for oversizing)
Development impact fees and connection charges
b. CFD or Assessment District
c. Grant funding
22Financing Framework and Policies
3. Improvements that Address Existing
Deficiencies
•SLO examples:
a. Portion of the following improvements that cannot be allocated
to new development:
Police Headquarters (share that is not attributable to new
development)
•Funding/financing strategy:
a. CFD or Assessment District
b. Grant funding
c. Enhanced Infrastructure Financing District
d.Other City funding (water/sewer enterprise revenue, General
Fund, voter-approved special taxes)
23Financing Framework and Policies
4. New Infrastructure or Community
Benefits
•SLO examples:
a. Portion of the following improvements that improves service
for existing development and/or meets existing General Plan
policies/goals for service standards:
Prado Road Interchange/Overpass
Police Headquarters
Broad Street Bicycle Boulevard
Mission Plaza Master Plan Project
•Funding/financing strategy:
a. Developer-based funding (Development Agreement)
b.CFD or Assessment District
c. Grant funding
d. Enhanced Infrastructure Financing District
e.Other City funding (water/sewer enterprise revenue, General
Fund, voter-approved special taxes)
24Financing Framework and Policies
5. Public Facility Operations and Maintenance
•SLO examples:
a. Street and roadway maintenance
b. Landscape and lighting maintenance
c. Public safety operations (e.g., Avila Ranch –CFD for ongoing
cost of fire services)
•Funding/financing strategy:
a. CFD or Assessment District
b. Enhanced Infrastructure Financing District
c. Other City funding (water/sewer enterprise revenue, General
Fund, voter-approved special taxes)
25Financing Framework and Policies
PROPOSED GUIDING
POLICIES
26Financing Framework and Policies
Proposed Financing Policy Topics
1.General Financing
2.Debt Financing
3.Development Impact Fees
4.Community Facilities District or Assessment Districts
5.Enhanced Infrastructure Financing Districts
27Financing Framework and Policies
Guidelines and Policies
1.General Financing Guidelines and Policies
a.New development should generally be expected to “pay its
own way”.
b.City-based funding sources for public facility and
infrastructure improvements that provide for the health,
safety and welfare and provide measurable economic
development and fiscal benefits.
c.No City-based funding or public financing for infrastructure
improvements that confer only private benefit to individual
property owners or development projects.
d.Seek continuity with (or improvements to) existing municipal
service levels by assuring adequate funding for the City’s
operation, maintenance and infrastructure replacement costs.
28Financing Framework and Policies
Guidelines and Policies
2.Municipal Debt Financing
a.Stay well below cumulative debt limit established by the
State of California.
b.Debt financing should be sought only when the project’s
useful life will exceed the term of the pledged or available
supporting revenues or term of debt service.
29Financing Framework and Policies
Guidelines and Policies
3.Development Impact Fees Guidelines and Policies
a.Development impact fees should be set, consistent with the
statutory “nexus” analysis and findings, to fund proportional
share of public facility and infrastructure costs.
b.Improvements funded by development impact fees should be
referenced generally in the appropriate planning documents.
c.City’s development impact fees can be “leveraged” through
the use of fee credit and reimbursement agreements with
developers and landowners.
d.City’s aggregate fee levels should not render new
development that is otherwise consistent with City plans and
regulations economically infeasible.
e.Consider reductions or waivers of its development impact
fees in cases where a development project meets specific
City planning or economic development policies such as
affordable housing projects.
30Financing Framework and Policies
Guidelines and Policies
4.Community Facilities District or Assessment District
Guidelines and Policies
a.City will consider the formation of financing districts for newly
developing areas on a case-by-case basis, consistent with
technical analysis and City infrastructure priorities.
b.The City will consider the effect of the special tax on the City’s
ability to issue General Obligation bonds or other property-
based tax measures.
c.Such districts should fund infrastructure or services serving or
otherwise providing benefit to the area subject to the
assessment or special tax.
d.Within any such districts, property value-to-lien ratio should,
consistent with typical underwriting standards, be at least 4:1
(25 percent).
31Financing Framework and Policies
Guidelines and Policies
4. Community Facilities Districts, continued
e.City will limit the maximum property-related taxes or
assessments to one and eight-tenths percent (1.8 percent) of
the projected assessed (base one percent plus with the
general obligation bonds, existing assessments, etc.
f.City shall have discretion to exceed the established limits for
any lands within the CFD which are designated for commercial
or industrial uses.
g.City will retain a special tax consultant to prepare a report
which recommends a special tax rate and method for the
proposed CFD.
32Financing Framework and Policies
Guidelines and Policies
5.Enhanced Infrastructure Financing District
Guidelines and Policies
a.EIFD financing should be considered for public facilities or
infrastructure improvements that confer Citywide benefits.
b.EIFDs should not be used to fund projects’ proportional share
of infrastructure costs otherwise included in the City’s
development impact fees or charged as project-specific
exactions.
c.Seek opportunities to collaborate with the County of San Luis
Obispo to improve infrastructure benefiting the region.
d.The term of the EIFD may not be longer than 30 years, per
SB 628.
e.City should apply a fiscal impact analysis to determine if an
EIFD is fiscally prudent.
33Financing Framework and Policies
DIRECTION
34Financing Framework and Policies
Council Direction
1.Is there Council consensus to move forward with the
proposed Financing Policies as outlined?
1)General Financing
2)Debt Financing
3)Development Impact Fees
4)Community Facilities District or Assessment District
5)Enhanced Infrastructure Financing District
2.Is there Council consensus for staff to proceed with the
Development Impact Fee RFP based on the proposed
Infrastructure Financing framework and policies?
35Financing Framework and Policies
NEXT STEPS
36Financing Framework and Policies
Next Steps
Discovery
•Series of Study Sessions
Consideration
•Financing Framework and Draft Policies
Decision
•Integrate into the FY 17-19 Financial Plan specifically for CIPs
•Capital Facilities Fee Program Nexus Study
1.Consensus on Financing Framework and related policies
2.Authorize RFP for comprehensive Development Impact Fee
Nexus Study
3.Integrate Financing Framework policies into the FY 17-19
Financial Plan that specifically addresses CIP financing and
fair share and coordinate with ongoing infrastructure
financing efforts (e.g., update of Airport Area Specific Plan
Impact Fee)
37Financing Framework and Policies
RECOMMENDATION
38Financing Framework and Policies
Recommendation
•Participate in a study session on public infrastructure
financing and receive and file the background memorandum
and reports.
•Authorize Request for Proposal for Capital Facilities Impact
Fee Program Nexus Study.