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CSMFO Revenue Fundamentals II:Special Financing Districts (SFD)
Tim SeufertNBS
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Why are we here today?
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Property Taxes:
> 1977: > 90% of local
city/county revenues
> 2016: < 66%
Why are we here today?
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What filled the gap?• Sales taxes• Hotel taxes• Utility taxes• Parcel taxes• Community Facilities Districts/CFD• Special assessments• Fees, rates and charges
Why are we here today?
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What are your priorities?
Economic Development
Infrastructure
Ongoing Services
Lunch???
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Develop Priorities
Choose SFD
Tool(s)
21
The fundamental process
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Priorities
1Community needs and desires, fully vetted…
Priorities and policies
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PrioritiesSFD
Tools
2
Choosing funding and financing tools
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Capital vs. services
Ongoing services
One-time capital
investment
SFD options
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Capital vs. services
Taxes vs. Assessments
California Constitution
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SFD revenue tools: The short list
1 Community Facilities District, or CFD
2 “Special” Parcel Tax
3 Special Assessment Districts
4 The others: Property-related fee, EIFD?
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Financing tools: A short list
1 Municipal bonds, taxable or exempt
2 State Revolving Funds/iBank/Other
3 P3?
4 Bank Loans
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Community infrastructure or provision of services
Let’s talk economic development…
Downtown revitalization or conference center/hotels
Infill Development
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Downtown Burlingame Avenue
Source: LAO
• Years of neglect and lack of consensus
• Funding challenges
• Interests coalesce
• Special assessment passed
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San Francisco SOMA Plan Area
• Opt in CFDs
• Max revenues
• Trade off for increased height limits
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Let’s talk infrastructure…
Water/Wastewater/Recycled Water
Streets and Storm Drains
Civic Improvements
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Los Carneros Recycled Water
• Special assessment • Recycled water infrastructure• Strong community support
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Santa Cruz County Libraries
• CFD • Renovate and rebuild libraries• Community-wide support
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Let’s talk services…
Stormwater/NPDES
Schools and Libraries
Public Safety
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Let’s keep talking about services…
Groundwater (GSA/GMA)
Inspections/Code Enforcement/Prop 64/Etc.
???
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SF Bay Restoration Authority
• Parcel tax across 9 counties • Bay restoration, and sea level rise?• Voter approved tax
“Fun” facts: 36-66” sea level rise forecast, with 11,000,000 passengers per year at OAK, and 35,000 residents in Foster City…
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City of Culver City
• Parcel tax for stormwater/NPDES • Creek restoration/environmental perspective• Voter approved tax
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CFDs and Parcel taxes
NOT BENEFIT-BASED
•Reasonable metrics
•Achieves local goals and policies
APPROVAL MECHANISM
• Voter approved, still 2/3 required
• CFD landowner vote(s)
SAMPLEPROJECTS
• Schools and libraries
• New development
• Open space acquisition and maintenance
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Special Assessments
ARE BENEFIT-BASED
• General benefit
• Rigor of assessment engineering
• Still viable…
APPROVAL MECHANISM
• Property-owner
• Protest ballot
• 50% + protest?
SAMPLE PROJECTS
• Infrastructure, new and replacement
• Ongoing maintenance
• PBIDs/CBDs
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Property-related Fee (not water, sewer, trash)
ANALYTICAL RIGOR
• Voluntary nature?
• Analytical analysis
APPROVAL MECHANISM
• “Property-based fees” balloted
SAMPLES
• Palo Alto Storm drain fee
• CSA fees for roads, fire, etc.
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Examples
Case studies:
1. CFD for public safety
2. Parcel tax for recreation and park
services
3. Benefit assessment for fire services
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INITIAL FORMATION ONGOING
CFD: Vacaville (developer-driven)
NEEDS AND POLICY AIMS
•Provide public safety services
•Mitigate negative fiscal impacts
•Fairness to payers
FORMATION AND APPROVAL
• Research and analysis
• Develop RMA (tax formula)
• Ballot and waiver (2/3)
ANNUAL ADMIN
• Tracking, calculating, and collections
• Responding to inquiries
• Annual reporting
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INITIAL FORMATION ONGOING
Parcel tax: GVRD
NEEDS AND POLICY AIMS
•Maintain parks
•Provide services for many users
•Fairness to payers
FORMATION AND APPROVAL
• Research and poll
• Educate and inform
• Develop tax formula
• Mailed ballot election (2/3)
ANNUAL ADMIN
• Tracking, calculating, and collections
• Responding to inquiries
• Annual reporting
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INITIAL FORMATION ONGOING
Benefit assessment: ECCFPD
NEEDS AND POLICY AIMS
•Maintain fire suppression services (Post 13 district)
•Fairness to payers
FORMATION AND APPROVAL
• Community discussions
• Detailed research
• Educate and inform
• Dev assessment
• Protest ballot (50%)
ANNUAL ADMIN
• Tracking, calculating, and collections
• Annual Engineers Report
• Inquiries
• Annual reporting
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Annual administration process
Agency Reports
Customer Service
(inquiries)
State Reporting
Delinquency Management
AnalyzeBudgets
TrackParcels
Calculate Annual Charges
Funds Tracking
Continuing Disclosure
BondCalls
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Recommended resources
Additional Resources:
• League Municipal Revenue Handbook
• NBS’ SFD Primer and Compendium
• League and CSDA Proposition 218
Implementation Guides
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CSMFO Revenue Fundamentals II:Utility Rate Discussion
Tim SeufertNBS
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Utility rates and property-related fees
• Utility rates for water, sewer, trash• Other “property-related fees”• Capacity/connection fees
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What the heck?
• Terminology: Fee vs rate vs tax
• Three “exceptions”
• Who provides service?
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Water rate-making in California today
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Water rate-making in California today
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What is in the Gumbo?
• Drought effects
• Legal challenges
• Revenue instability
• Recycled water needs (DPR anyone?)
• Groundwater issues and challenges
• Critical capital infrastructure needs
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California Drought Conditions
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Legal challenges and more…
Bighorn case started it all…
• San Juan Capistrano tiered rate challenge
• Palmdale customer class case
• Wastewater challenges
• Town of Hillsborough penalties
• Etc.
[+ class actions?]
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Revenue instability
$9.67 Mil.$6.4 Mil.
$10.77 Mil.
$13.25 Mil.
$. Mil.
$5. Mil.
$10. Mil.
$15. Mil.
$20. Mil.
$25. Mil.
Cost Structure Rate Revenue
Cost vs. Revenue Structure
Fixed Variable
53% Variable47% Fixed
67% Variable33% Fixed
Risk!
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Fines and Penalties
Encouraging conservation, beyond tiers
Communication
Incentives and Rebates
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More on communication
What’s happening at the Utility?
Financial Updates
Capital Projects
Conservation Messaging
Rebate Programs
New Regulations
Customers
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• Infrastructure needs
• Revenue doesn’t cover costs
• Cost-of-service is out of balance
• Conservation impacts
• How does the increase affect customers?
• Who feels the most pain?
Keys to a successful rate setting process
Public Outreach Strategy
Tell a Complete Story
Prior Cost Cutting
Measures
Operational Efficiencies
Bill Impacts
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Senate Bill 814
Objective: During a state of emergency or local water supply shortage, establish a method to identify and discourage excessive water use.
Targeted water usage: Single-family residential customers or individually metered (or sub metered) multi-family residential customers.
How to comply: Rate structure or excessive use ordinance and penalties.
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Meeting SB 814 requirements
Rate Structure
• Addition to base rates to discourage excessive use
• Tiered rates
• Water budgets
• Rate surcharges
Excessive UseOrdinance
• Definition/procedure to identify and address excessive water use
• Process to issue written warnings and perform site audit
• Penalty or fine of up to $500/hcf used above excessive use threshold
OR
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Draft Framework - Executive Order B-37-16
Four Main Objectives:
Use Water More Wisely
Eliminate Water Waste
Strengthen Local Drought Resilience
Improve Agricultural Water Use Efficiency and Drought Planning
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Anatomy of a water/sewer rate study
Financial Plan & Revenue
Requirements
Cost-of-ServiceAnalysis
RateDesign
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Developing a cost basis for rates
Accounting/Cost
Water Supply
System Design/Operation
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Case in point on wastewater…
City of Sausalito study
• Volumetric rates
• Enhanced analysis of customer classes
and usage data
• Better synchronicity between residential
and non
• Marin Grand Jury comments
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Storm drain fees?
Still need analysis and approval process
• Property-related fee?
• Parcel tax?
• G.O. bond?
• DIF?
• Etc.
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Trash, recycling, composting…
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Trash, recycling, composting…
Some of the issues:
• Conundrum of encouraging more recycling vis a vis cost
• Cost allocation/rate setting between different sizes of cans, and residential vs. commercial
• Developing [expensive] composting systems for green waste