This action updates the Community Facilities District (CFD) Policy.  The Policy gives guidance on the establishment of CFDs including the formation process and application procedures. The update will enhance local control, provide clarity on taxing thresholds, and modernize the policy.
 

 

This action will have no additional fiscal impact. The fees outlined in the policy remain unchanged, are designed to fully recover application costs, and are compliant with state statutes. 


 

A CFD is allowed by state statutes to be formed for the purpose of issuing debt to construct or acquire infrastructure within the boundaries of a district.  The CFD assesses a property tax within those boundaries to make payments for the debt. The City currently has ten CFDs with the last one, King's Ranch being established in 2007.

The original CFD Policy was approved by City Council in 2004 in response to the number of CFD formations that had occurred up to that point.  Nine CFDs had been formed prior to the policy's adoption with only the King's Ranch formation occurring since the policy has been in place.   

In 2017, changes in state statutes required an update to the policy to revise the makeup of the boards, provide limits on application fees, establish formation deadlines, and create specific requirements within the application process.  The board makeup specifically required two board members selected by the largest landowner within the district. The updated policy was adopted on April 23, 2018.

In response to the inability of districts to provide insurance for landowner-selected board members, state statutes were revised in 2021.  The landowner has the option to request the additional board members, but they are no longer required.

An update of the CFD Policy is a Strategic Plan action item under the Fiscal Resource & Management component.
 

The revised CFD policy is included as a part of Resolution 2024-2435 (Attachment A).  The recommended revisions to the CFD policy are proposed to meet the requirements of current state law with regard to board composition, restrict tax rates above the target to situations agreed upon by the City, clarify and modernize portions of the application process, and provide headings to aid the reader.  A redlined version of the proposed policy (Attachment B) is included for comparison.

The major changes in this update are:

• The removal of language regarding landowner designated board members as they are no longer required by state statute.  Applicants may still request to designate board members, but the City will be able to determine the steps necessary to have the landowner properly insure those board members. 
• Districts will not construct infrastructure, but will acquire from or reimburse a developer for infrastructure that they construct.  This is consistent with the current practice of the City.
• Board appointments are specifically outlined to include Chair, Vice Chair, Manager, Clerk, and Treasurer.  This is consistent with the current practice of the City.
• A subsidy rate is no longer automatically in place, but an amount above the target tax rate may be allowed if required financial assurances, determined by the City, are agreed upon and put in place.
• General clarification of the contents of the completed application is added to aid a potential applicant.  This included the removal of a requirement for 10 paper copies of the application.
• General clarification of the components of the formation process.
• A requirement for the applicant to identify any pending material tax appeal has been added to protect the potential district.
• A developer will be responsible for costs associated with the assessment modifications and cost of issuance of bonds.  This is consistent with the current practice of the City.
• Language consistent with current practice was added for collection of taxes, approval of new debt, sale and denomination of bonds, the hiring of associated professional services, and voter authorization.
• Headings were added to each section to enable more streamlined search of the document.

The proposed revisions to the CFD Policy have been reviewed and determined to be in compliance with state law, City policies and the best interest of the City.