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HomeMy WebLinkAboutAgenda Report - April 15, 2015 I-01AGENDA ITEM &Q% CITY OF LODI %W COUNCIL COMMUNICATION TM AGENDA TITLE: Provide Direction to Staff on Request from Reynolds Ranch, Westside and Southwest Gateway Annexation Projects to Reduce Community Facilities District (CFD) Fees and Reduce Annual CFD Indexing MEETING DATE: April 15, 2015 PREPARED BY: City Manager RECOMMENDED ACTION: Provide direction to staff on request from Reynolds Ranch, Westside and Southwest Gateway annexation projects to reduce Community Facilities District (CFD) fees and reduce annual CFD indexing. BACKGROUND INFORMATION: The City of Lodi created a Community Facilities District ("CFD") for Service in 2007 as a condition of its most recent annexations of Reynolds Ranch, and the Westside and Southwest Gateway Annexations. CFD's for Service are relatively new in use in municipal finance. However, unlike CFD's for infrastructure (commonly known as Mello -Roos Districts) CFD's for Service fund things such as landscaping and lighting, police and fire services, parks service and other items traditionally funded by the General Fund. At the time, the fee was set at $600 per year for single family homes and $175 for multi -family units (See attached letters). The fee is subject to annual indexing of the greater of the Consumer Price Index or 5 percent. The index is applied July 1 of each year. As such, the fee is currently set at $804.00 per year and will be $844 per year by the time the first house is occupied. Actual total inflation from 2007 to date totals 13 percent according to the Bureau of Labor Statistics. However, the minimum inflation factor set by the approved formula has been 40 percent. Although a 5 percent minimum may have been reasonable upon the adoption of the CFD, it is generally understood that the economy did not perform as expected in 2008. It is also worth noting that average property taxes in Lodi are approximately $400 per year*, less than half of what these new homes will pay in CFD fees alone. It should be noted that Rose Gate homes are expected to be priced around $400,000 resulting in about $650 in municipally -directed property taxes. In light of the significant difference between inflation and the minimum escalator, staff believes it is appropriate for the City to consider the request. However, any recognition of the economic disadvantages faced by these projects would be incomplete without addressing the City's current Impact Fee program discounts. As Council is aware, the developers of these projects filed vesting tentative maps that, if extended, could allow many of the currently vested units to develop at $5,940 per unit instead of the program calculated $23,195. Van Ruiten Ranch has 200 vested single-family units plus 88 unvested High Density units; Reynolds Ranch has 227 vested single family units plus 330 unvested High Density Units and Rose Gate has 232 vested single-family units. * A house valued at $250, 000 would pay 1 percent of that amount in total property taxes ($2,500) and 16 percent of that amount is then paid to Lodi ($400). APPROVED: e 'hen Schwab er, City Manager As Council recalls, the discount program was initiated to spur development for a three-year period. However, the vesting map process could substantially increase that time frame. As such, staff considers it fair to allow units to develop at the discount for limited period at the start at discounted rates to recognize the original intent of the program. Staff requests authority to negotiate with the requestors a reduction in CFD fees to $500 per single-family unit and $175 per multi -family unit and reduce the index to the greater of CPI or percent. Such a change would reflect actual economic performance and also manage to exchange CFD fees for a waiver of any rights the developers may have to the 60 -percent discount for units that do not pull a building permit (and complete construction within six months) within a brief negotiated time frame. Staff will return to Council for approval of any resulting agreement and for adoption of revisions to the CFD program if the requested authority is granted. FISCAL IMPACT: Undetermined at this time. FUNDING AVAILABLE: Not applicable. Step n- chwabauer, C ty Manager Attachment March 6, 2015 Mayor & City Council City of Lodi c/o Mr. Steve Sehwabauer, City Manager 221 W. Pine Street Lodi, CA 95240 RE: Request to Revise City of Lodi Community Facilities District 2007-1 Dear Steve, The undersigned owners of Vesting Tentative Subdivision maps, which were approved along with their required Growth Management allocations in 2013, (Rose Gate), and 2014, (Van Ruiten and Reynolds Ranch Residential), request that the City of Lodi revise the Lodi Community Facilities District 2007-1, (the "CFD", or "District"). We believe the requirement for a minimum annual assessment increase of 5% established at formation of the CFD has already raised the assessments to an unreasonable level and will result in an unsustainable District. The CFD has essentially been dormant since formation in 2007. The lack of development and construction has resulted in no assessments being made and, likewise, no maintenance cost to the District. However, due to the minimum annual rate increase of 5%, the assessments have risen from approximately $500 to almost $900 per home. The minimum annual increase has outpaced the local Consumer Price Index (CPI) by nearly 5 times. At this level of assessment, it will have a negative effect on new home buyers and within 3 years the adjustment will be well over $1,000. In our opinion, future homeowners will not tolerate such an onerous amount. It should be noted that most homeowners in the City of Lodi are not part of any maintenance district and pay no similar fees or assessments. In the more recently developed neighborhoods, lighting maintenance districts (LLD's) were formed. The annual assessment fees for the LLD's have actually dropped in recent years and now average approximately $60 per house. Finally, we've attached a schedule showing the City's property tax assessments by Tax Rate Area. You'll see that the 'first two Tax Rate Areas comprise 96% of the City's parcels. The average assessed value and the average property tax for those parcels is $230,050 and $2,531 respectively. The City of Lodi receives approximately 16.47% of the property tax from these parcels or about $416 per year. We expect that the property tax rate base from the new neighborhoods in the CFD will be significantly higher. The homes will be larger on average and sold at current values. We request specifically 2 revisions, 1) reset the base assessment to $500, and 2) revise the annual adjustment to 2% or the local CPI whichever is less. Attached is additional data that we believe supports the need to reset and first year assessment and the annual adjustment criteria. We look forward to discussing this matter further with you and the City Council as soon as possible. Best Regards, for Rose Gate for Van Ruiten for Reynolds Ranch Residential Frontiers Secured Property Tax Analysis -City of Lodi For the 2014 / 2015 Tax Year Secured Factor For Secured Prop. Taxes Net Average Net Secured Secured Prop. Taxes Prop. Taxes Paid Back Tax Assessed Assessed Property Secured Property Paid Back Paid Back to the City Rate Area Parcel Value Value Tax Property Taxes Per to the City to the of Lodi per (TRA) Count Secured Per Parcel Rate Taxes Parcel of Lodi City of Lodi Parcel 001-001 10,971 2,717,966,415 247,740.99 1% 27,179,664 2,477 0.162707 4,422,322 403 001-003 7,307 1,907,285,143 261,021.64 1% 19,072,851 2,610 0.166718 3,179,788 435 001-005 107 37,043,806 346,203.79 1% 370,438 3,462 0.161785 59,931 560 001-013 97 42,509,017 438,237.29 1% 425,090 4,382 0.163362 69,444 716 001-021 448 129,152,342 288,286.48 1% 1,291,523 2,883 0.190515 246,055 549 001-023 16 2,830,306 176,894.13 1% 28,303 1,769 0.180037 5,096 318 001-068 1 78,168 78,168.00 1% 782 782 0.182371 143 143 Total 18,947 4,836,865,197 7,982,777 48,368,652 March 9, 2015 Mayor & City Council City of Lodi c/o Mr. Steve Schwabauer, City Manager 221 W. Pine Street Lodi, CA 95240 RE: Request to Revise City of Lodi Community Facilities District 2007-1 Dear Steve, The undersigned owners of Vesting Tentative Subdivision maps, which were approved along with their required Growth Management allocations in 2013, (Rose Gate), and 2014, (Van Ruiten and Reynolds Ranch Residential), request that the City of Lodi revise the Lodi Community Facilities District 2007-1, (the "CFD", or "District"). We believe the requirement for a minimum annual assessment increase of 5% established at formation of the CFD has already raised the assessments to an unreasonable level and will result in an unsustainable District. The CFD has essentially been dormant since formation in 2007. The lack of development and construction has resulted in no assessments being made and, likewise, no maintenance cost to the District. However, due to the minimum annual rate increase of 5%, the assessments have risen from approximately $500 to almost $900 per home. The minimum annual increase has outpaced the local Consumer Price Index (CPI) by nearly 5 times. At this level of assessment, it will have a negative effect on new home buyers and within 3 years the adjustment will be well over $1,000. In our opinion, future homeowners will not tolerate such an onerous amount. It should be noted that most homeowners in the City of Lodi are not part of any maintenance district and pay no similar fees or assessments. In the more recently developed neighborhoods, lighting maintenance districts (LLD's) were formed. The annual assessment fees for the LLD's have actually dropped in recent years and now average approximately $60 per house. Finally, we've attached a schedule showing the City's property tax assessments by Tax Rate Area. You'll see that the first two Tax Rate Areas comprise 96% of the City's parcels. The average assessed value and the average property tax for those parcels is $230,050 and $2,531 respectively. The City of Lodi receives approximately 16.47% of the property tax from these parcels or about $416 per year. We expect that the property tax rate base from the new neighborhoods in the CFD will be significantly higher. The homes will be larger on average and sold at current values. We request specifically 2 revisions, 1) reset the base assessment to $400, and 2) revise the annual adjustment to 2% or the local CPI whichever is less. Attached is additional data that we believe supports the need to reset and first year assessment and the annual adjustment criteria. We look forward to discussing this matter f u-ther with you and the City Council as soon as possible. Best Regards, for Rose Gate for Van Ruiten for Reynolds Ranch Residential Frontiers Secured Property Tax Analysis -City of Lodi For the 2014 / 2015 Tax Year Secured Factor For Secured Prop. Taxes Net Average Net Secured Secured Prop. Taxes Prop. Taxes Paid Back Tax Assessed Assessed Property Secured Property Paid Back Paid Back to the City Rate Area Parcel Value Value Tax Property Taxes Per to the City to the of Lodi per (TRA) Count Secured Per Parcel Rate Taxes Parcel of Lodi City of Lodi Parcel 001-001 10,971 2,717,966,415 247,740.99 1% 27,179,664 2,477 0.162707 4,422,322 403 001-003 7,307 1,907,285,143 261,021.64 1% 19,072,851 2,610 0.166718 3,179,788 435 001-005 107 37,043,806 346,203.79 1% 370,438 3,462 0.161785 59,931 560 001-013 97 42,509,017 438,237.29 1% 425,090 4,382 0.163362 69,444 716 001-021 448 129,152,342 288,286.48 1% 1,291,523 2,883 0.190515 246,055 549 001-023 16 2,830,306 176,894.13 1% 28,303 1,769 0.180037 5,096 318 001-068 1 78,168 78,168.00 1% 782 782 0.182371 143 143 Total 18,947 4,836,865,197 7,982,777 48,368,652 March 9, 2015 Mayor & City Council City of Lodi c/o Mr. Steve Schwabauer, City Manager 221 W. Pine Street Lodi, CA 95240 RE: Request to Revise City of Lodi Community Facilities District 2007-1 Dear Steve, The undersigned owners of Vesting Tentative Subdivision maps, which were approved along with their required Growth Management allocations in 2013, (Rose Gate), and 2014, (Van Ruiten and Reynolds Ranch Residential), request that the City of Lodi revise the Lodi Community 1�acilities District 2007-1, (the "CFD", or "District"). We believe the requirement for a minimum annual assessment increase of 5% established at formation of the CFD has already raised the assessments to an unreasonable level and will result in an unsustainable District. The CFD has essentially been dormant since formation in 2007. The lack of development and construction has resulted in no assessments being made and, likewise, no maintenance cost to the District. However, due to the minimum annual rate increase of 5%, the assessments have risen from approximately $500 to almost $900 per home. The minimum annual increase has outpaced the local Consumer Price Index (CPI) by nearly 5 times. At this level of assessment, it will have a negative effect on new home buyers and within 3 years the adjustment will be well over $1,000. In our opinion, future homeowners will not tolerate such an onerous amount. It should be noted that most homeowners in the City of Lodi are not part of any maintenance district and pay no similar fees or assessments. In the more recently developed neighborhoods, lighting maintenance districts (LLD's) were formed. The annual assessment fees for the LLD's have actually dropped in recent years and now average approximately $60 per house. finally, we've attached a schedule showing the City's property tax assessments by Tax Rate Area. You'll see that the first two Tax Rate Areas comprise 96% of the City's parcels. The average assessed value and the average property tax for those parcels is $230,050 and $2,531 respectively. The City of Lodi receives approximately 16.47% of the property tax from these parcels or about $416 per year. We expect that the property tax rate base from the new neighborhoods in the CFD will be significantly higher. The homes will be larger on average and sold at current values. We request specifically 2 revisions, 1) reset the base assessment to $400, and 2) revise the annual adjustment to 2% or the local CPT whichever is less. Attached is additional data that we believe supports the need to reset and first year assessment and the annual adjustment criteria. We took forward to discussing this matter further with you and the City Council as soon as possible. Best Regards, for Rose Gate for Van Ruiten for Reynolds Ranch _0, /2),&,�� Residential Trustee, General Partner, Van Ruiten Ranch, LTD Frontiers Secured Property Tax Analysis -City of Lodi For the 2014 / 2015 Tax Year Secured Factor For Secured Prop. Taxes Net Average Net Secured Secured Prop. Taxes Prop. Taxes Paid Back Tax Assessed Assessed Property Secured Property Paid Back Paid Back to the City Rate Area Parcel Value Value Tax Property Taxes Per to the City to the of Lodi per (TRA) Count Secured Per Parcel Rate Taxes Parcel of Lodi City of Lodi Parcel 001-001 10,971 2,717,966,415 247,740.99 1% 27,179,664 2,477 0.162707 4,422,322 403 001-003 7,307 1,907,285,143 261,021.64 1% 19,072,851 2,610 0.166718 3,179,788 435 001-005 107 37,043,806 346,203.79 1% 370,438 3,462 0.161785 59,931 560 001-013 97 42,509,017 438,237.29 1% 425,090 4,382 0.163362 69,444 716 001-021 448 129,152,342 288,286.48 1% 1,291,523 2,883 0.190515 246,055 549 001-023 16 2,830,306 176,894.13 1% 28,303 1,769 0.180037 5,096 318 001-068 1 78,168 78,168.00 1% 782 782 0.182371 143 143 Total 18,947 4,836,865,197 7,982,777 48,368,652 AGENDA ITEM TOM l CITY OF LODI ,. COUNCIL COMMUNICATION TM AGENDA TITLE: Provide Direction to Staff on Request from Reynolds Ranch, Westside and Southwest Gateway Annexation Projects to Reduce Community Facilities District (CFD) Fees and Reduce Annual CFD Indexing MEETING DATE: April 15, 2015 PREPARED BY: City Manager RECOMMENDED ACTION: Provide direction to staff on request from Reynolds Ranch, Westside and Southwest Gateway annexation projects to reduce Community Facilities District (CFD) fees and reduce annual CFD indexing. BACKGROUND INFORMATION: The City of Lodi created a Community Facilities District ("CFD") for Service in 2007 as a condition of its most recent annexations of Reynolds Ranch, and the Westside and Southwest Gateway Annexations. CFD's for Service are relatively new in use in municipal finance. However, unlike CFD's for infrastructure (commonly known as Mello -Roos Districts) CFD's for Service fund things such as landscaping and lighting, police and fire services, parks service and other items traditionally funded by the General Fund. At the time, the fee was set at $600 per year for single family homes and $175 for multi -family units (See attached letters). The fee is subject to annual indexing of the greater of the Consumer Price Index or 5 percent. The index is applied July 1 of each year. As such, the fee is currently set at $804.00 per year and will be $844 per year by the time the first house is occupied. Actual total inflation from 2007 to date totals 13 percent according to the Bureau of Labor Statistics. However, the minimum inflation factor set by the approved formula has been 40 percent. Although a 5 percent minimum may have been reasonable upon the adoption of the CFD, it is generally understood that the economy did not perform as expected in 2008. It is also worth noting that average property taxes in Lodi are approximately $400 per year*, less than half of what these new homes will pay in CFD fees alone. It should be noted that Rose Gate homes are expected to be priced around $400,000 resulting in about $650 in municipally -directed property taxes. In light of the significant difference between inflation and the minimum escalator, staff believes it is appropriate for the City to consider the request. However, any recognition of the economic disadvantages faced by these projects would be incomplete without addressing the City's current Impact Fee program discounts. As Council is aware, the developers of these projects filed vesting tentative maps that, if extended, could allow many of the currently vested units to develop at $5,940 per unit instead of the program calculated $23,195. Van Ruiten Ranch has 200 vested single-family units plus 88 unvested High Density units; Reynolds Ranch has 227 vested single family units plus 330 unvested High Density Units and Rose Gate has 232 vested single-family units. * A house valued at $250, 000 would pay 1 percent of that amount in total property taxes ($2,500) and 16 percent of that amount is then paid to Lodi ($400). APPROTr ED: tephen Schwabauer,Manager r As Council recalls, the discount program was initiated to spur development for a three-year period. However, the vesting map process could substantially increase that time frame. As such, staff considers it fair to allow units to develop at the discount for limited period at the start at discounted rates to recognize the original intent of the program. Staff requests authority to negotiate with the requestors a reduction in CFD fees to $500 per single-family unit and $175 per multi -family unit and reduce the index to the greater of CPI or 2 percent. Such a change would reflect actual economic performance and also manage to exchange CFD fees for a waiver of any rights the developers may have to the 60 -percent discount for units that do not pull a building permit (and complete construction within six months) within a brief negotiated time frame. Staff will return to Council for approval of any resulting agreement and for adoption of revisions to the CFD program if the requested authority is granted. FISCAL IMPACT: Undetermined at this time. FUNDING AVAILABLE: Not applicable. Stephen Schwabauer, City Midnager Attachment