Report Prepared by: Julie Nelson, Senior Planner, Development Services Department
Title
SUBJECT: Approval of an Agreement with Goodwin Consulting Group to Prepare a Fiscal Analysis to Consider the Formation of a New Community Facilities District (CFD)
REPORT IN BRIEF
Considers the approval of a contract with Goodwin Consulting Group for the preparation of a Fiscal Analysis to consider the formation of a new Community Facilities District for Services.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving the contract with Goodwin Consulting Group in the amount of $34,000 for the preparation of a Fiscal Analysis to consider the formation of a new Community Facilities District; and,
B. Approving a Supplemental Appropriation in Fund 017-Development Services unencumbered, unreserved fund balance in the amount of $34,000 in 017-0804-512.17-00 Professional Services Planning Division; and,
C. Authorizing the City Manager or Deputy City Manager to execute the necessary documents.
Body
ALTERNATIVES
1. Approve the request as recommended by staff; or,
2. Deny the request; or,
3. Approve, subject to modifications as conditioned by Council; or,
4. Refer back to staff for reconsideration of specific items (specific items to be addressed in City Council motion); or,
5. Continue to a future City Council meeting (date and time to be specified in City Council motion).
AUTHORITY
Merced Municipal Code, Chapter 3.04.110 - The restrictions and requirements a bidding process shall not apply to contracts involving the obtaining of professional or specialized services such as, but not limited to, services rendered by architects, attorneys, engineers, and other specialized consultants.
CITY COUNCIL PRIORITIES
As provided for in the 2022-23 Adopted Budget
DISCUSSION
CFD Annexations
Staff has been evaluating the CFD annexation process and the process for which the City assesses property annexed into the CFD. New projects are required to annex into the CFD for Services; however, taxes are not assessed on any property until such time as a building permit has been issued for that property. Once a building permit is issued, the Finance Department provides a report to the County Assessor of all properties that have building permits issued and are subject to the CFD special tax as of May 1st of each year. The County will then assess the property the following tax year. However, when a building permit is issued after May 1st, the property will not be assessed until the second tax year after permit issuance. This delay in collecting taxes has resulted in a shortfall in revenue for the CFD. As provided in the Deposit and Reimbursement Agreement signed by the property owner, the developer is responsible for all landscape and storm drain maintenance until such time as the CFD has sufficient revenue to pay for these services. While some developers have done a good job in providing the necessary maintenance, some developers have not and subdivisions have been left without the necessary services and the City has no way to pay for providing those services and very little leverage to require the developer to maintain the area.
Therefore, staff is recommending that a new Community Facilities District for Services be formed that would allow the City to apply the special tax to undeveloped parcels. Once a property has been annexed into the new CFD, an “undeveloped parcel” tax could be assessed. This assessment would allow funds to be collected to cover any expenses the City might incur on the property prior to the CFD being fully funded and could be used to fund maintenance once the property is developed possibly, relieving the developer of the obligation of paying for those costs until the CFD is fully funded.
In addition to the benefits of providing better funding for the CFD, there would be a new streamlined process for annexations into the CFD. Currently, the cost of annexation is typically around $25,000. These fees are paid by the owner/developer of each project. The new streamlined process would not only reduce the time it takes to get a property annexed into the CFD, but would also reduce the costs involved.
Staff is recommending a Fiscal Analysis be prepared to determine if the current base rate for services should be adjusted as part of the new CFD for services. The current rates for services used for calculating the Rate and Method of Apportionment (RMA) which determines the CFD Special Tax are 2006 rates. While the CFD has an escalation rate built into it, staff feels it is time to review the rates and provide City Council with the option of using more accurate rates. Goodwin Consulting Group will prepare the Fiscal Analysis according to the scope of work attached as Exhibit A to the contract at Attachment 1. This contract is for $34,000. Goodwin Consulting Group (Goodwin) has worked with the City since the formation of the original Community Facilities District (CFD) in 2003 and are familiar with the City’s operations.
Once the Fiscal Analysis is complete, if the City Council determines it would be beneficial to move forward with the new CFD, a new Rate and Method of Apportionment for the first annexation into the new CFD would be prepared and a new boundary map would be drawn. This work would also be done by Goodwin Consulting Group under a separate contract to be brought to the Council for approval at a later date.
City Council Action
Staff is recommending the City Council approve the contract provided at Attachment 1 as submitted and authorize the City Manager or Deputy City Manager to execute the contract.
IMPACT ON CITY RESOURCES
The initial cost of forming a new CFD would be covered by funds from the City budget. The formation of the new CFD would ultimately provide better maintenance of project areas and reduce the staff time needed to process CFD annexations.
ATTACHMENTS
1. Agreement with Goodwin Consulting Group for Fiscal Analysis