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  • Community Facilities Districts

    Community Facilities Districts (CFDs) are special taxing districts created under Arizona Revised Statutes Title 48, Chapter 4, Article 7 for the purpose of financing a master-planned community of 600 acres or more. CFDs represents the creation of a new political subdivision that can issue bonds and use the proceeds ·to finance construction, acquisition, operation, and maintenance of public infrastructure that benefits the real property comprising the CFD. This type of district can be used by master-planned communities for the purpose of financing the design and construction of roadways, public sewer transmission mains, public regional parks and any other public infrastructure specifically approved by the governing board.

    What are Community Facilities Districts (CFDs)?

    1. Community Facilities Districts (CFDs) are special taxing districts created under Arizona Revised Statutes Title 48, Chapter 4, Article 7 for the purpose of financing a master-planned community of 600 acres or greater.
    2. CFDs create a new political subdivision that can issue bonds to finance the construction, acquisition, operation and maintenance of public infrastructure within the boundaries of the CFD.
    3. A board of directors governs the CFD.
    4. The CFD should be self-supporting both for construction and operations and maintenance. All administrative costs of the CFD, and the operation and maintenance of public infrastructure in the CFD, must be paid by the CFD, the developer, applicable homeowners’ associations, or any combination of the foregoing, as may be acceptable to the Board.
    5. The bond debt is repaid through taxes and/or special assessments.
    6. The tax limit to repay the bonds is $3.00 per $100 of limited property value.
    7. CFDs are separate legal entities. Pima County is not responsible nor liable for any of the costs of the district’s public infrastructure, nor for any liability, debt or obligation of the CFD.

    Rocking K South Community Facilities District

    Rocking K South Community Facilities District consists of approximately 2,047 acres and is located south of Old Spanish Trail and east of where Valencia Road ends. The legal description of Rocking K South Community Facilities District is: Blocks 1 through 14 of Rocking K South, a subdivision of Pima County, Arizona, as recorded in Book 64 of Maps and Plats, at Page 85, in the office of the Pima County Recorder.

    Frequently Asked Questoins

    Who governs a CFD?

    Unless otherwise agreed by the County, and pursuant to state statutes, the CFD will be governed by a board of directors comprised of the members of the Board of Supervisors. The day-to-day administrative responsibilities of the CFD will be performed, pursuant to an intergovernmental agreement between the CFD and the County, by County staff. The CFD will pay for all services provided by the County.

    Does a CFD need to follow Pima County Procurement procedures?

    All public infrastructure will be acquired or constructed by the CFD using public procurement procedures in accordance with applicable laws, rules and regulations, and County policies.

    Can a CFD use bond proceeds to purchase real property?

    The CFD will not use bond proceeds or other CFD funds to purchase real property or right of way for public infrastructure if, under normal County policies or applicable law, the developer would be required to dedicate and convey that property to the County as a condition of development.

    What is the length of time for CFD debt?

    Unless otherwise agreed by the County, all CFD debt must be issued within the first 15 years of start of construction of the public infrastructure to which it relates. CFD bonds and any other debt obligations will have a maximum term of 15 years.

    What are the application costs?

    At the time of submission of the application, the applicant must pay a non-refundable application fee of $50,000 to offset the costs incurred by the County in connection with the processing and review of the application and the formation of the CFD. If additional funds are required, the County will provide the applicant with an accounting of all costs incurred by the County, and applicant must deposit an additional $25,000. All costs incurred to date must be paid by the applicant at least 14 days prior to the date of the meeting of the Board at which the application is to be considered. Additionally, the developer must pay all costs incurred by the County in connection with the application and formation. This includes paying for the cost of County staff time, and for all outside consultants utilized by the County, including but not limited to engineers, appraisers and attorneys. If authorized by the Board and allowed by law, all or part of such costs may be reimbursed to the developer from bond proceeds. All bond-issuance costs will be paid from bond proceeds, including the cost of financial advisors, bond counsel, and County finance staff.

    Whom should a developer contact for additional information?

    Please contact Pima County Development Services Department (520) 724-9000.

    General Policies and Application Procedures

    General Policies

    • Unless otherwise approved by the governing board as defined in A.R.S. 48-701, CFDs may only be utilized to finance the design and construction of arterial and collector roadways, public sewer transmission mains, public regional parks and any other public infrastructure specifically approved by the governing board for master-planned communities and large commercial or industrial developments. Generally, no enhanced landscaping, land or right-of-way acquisition will be considered. However, a CFD may be utilized to provide an enhanced level of public infrastructure amenities and/or maintenance if authorized by the Board.
    • The CFD will issue bonds and reimburse the developer for the public infrastructure only after the infrastructure has been completed by the developer and accepted by the County.
    • Public infrastructure financed by the CFD must conform to the County's Comprehensive Plan, Pima Prospers.
    • Developer must pay all costs incurred by the County in connection with the application and formation. This includes paying for the cost of County staff time, and for all outside consultants utilized by the County, including but not limited to engineers, appraisers and attorneys. If authorized by the Board and allowed by law, all or part of such costs may be reimbursed to the developer from bond proceeds. All bond-issuance costs will be paid from bond proceeds, including the cost of financial advisors, bond counsel, and County finance staff.
    • The CFD should be at least 600 acres. An area should be governed by as few CFDs as possible, and a preference will be given to one master CFD.
    • Unless otherwise agreed by the County, and pursuant to state statutes, the CFD will be governed by a board of directors comprised of the members of the Board. The day-to-day administrative responsibilities of the CFD will be performed, pursuant to an intergovernmental agreement between the CFD and the County, by County staff. The CFD will pay for all services provided by the County.
    • The County will select all consultants it deems necessary in order to evaluate the application, conduct the formation proceedings, and issue bonds, including, but not limited to, special tax consultants, bond counsel, underwriter, appraiser, engineer.
    • The CFD should be self-supporting both for construction and operations and maintenance. All administrative costs of the CFD, and the operation and maintenance of public infrastructure in the CFD, must be paid by the CFD, the developer, applicable homeowners’ associations, or any combination of the foregoing, as may be acceptable to the Board.
    • The Board will determine, in its sole and absolute discretion, the amount, timing and form of financing to be used by a CFD after reviewing the project feasibility report as required in the Act. Neither the property, the full faith and credit nor the taxing power of the County will be pledged to the payment of any CFD obligations.
    • All public infrastructure will be acquired or constructed by the CFD using public procurement procedures in accordance with applicable laws, rules and regulations, and County policies.
    • The CFD will not use bond proceeds or other CFD funds to purchase real property or right of way for public infrastructure if, under normal County policies or applicable law, the developer would be required to dedicate and convey that property to the County as a condition of development.
    • Unless otherwise agreed by the County, all CFD debt must be issued within the first 15 years of start of construction of the public infrastructure to which it relates. CFD bonds and any other debt obligations will have a maximum term of 15 years.
    • CFD debt may be refinanced to take advantage of improved financial markets, but the length of the repayment period will not be extended beyond the original term.
    • To ensure that an adequate reserve is maintained, the CFD will not issue assessment bond debt greater than what can be supported by 80% of the NAV multiplied by the maximum CFD assessment.
    • These Policy Guidelines and Application Procedures may be modified from time to time by the County. Any Applicant will be given the opportunity to propose alternative approaches to those provided herein, with the understanding that concerns of the County must be adequately addressed before County staff will recommend approval of a CFD to the County Board of Supervisors.

    Application Process and Procedures

    All applications for the formation of a CFD must be submitted to the Pima County Development Services Department in an electronic format acceptable to the County.   Each application must, at a minimum, contain the following:
    1. Applicant Information
      1. General Description. A general description of the Applicant, including its organizational structure. Include the names of all officers and corporate directors and principle owners/stockholders.
      2. Contact(s). The name, address, phone number and other contact information of the primary contact for the Applicant, and of any legal representatives, engineers, architects, financial consultants and/or other consultants significantly involved with the Application.
      3. Experience. A general description of the Applicant's experience with similar types of projects.
      4. Financial Capability. Evidence (including financial statements if necessary) demonstrating the Applicant's ability and capacity to undertake the proposed development. 
    2. Proposed CFD
      1. Description and Purpose. A general description of the proposed CFD, its purpose, and a statement of how the proposed CFD is consistent with the County’s objective of promoting development consistent with healthy community principles, enhancement of the local economy, and conservation values. Describe the degree to which the CFD is consistent with the County's Comprehensive Plan, Pima Prospers Land Use Map for the area.
        1. Location. A description of the proposed CFD's general location within the County, an area site map illustrating the proposed boundaries, and a legal description. Include an analysis of the appropriateness of the CFD boundaries.
        2. Ownership Interests. The identity and address of all persons or entities with any interest in property within the proposed CFD boundaries, including lien holders and purchasers under pending sales contracts, and the names and addresses of any qualified electors located within the proposed CFD boundaries. Include a certificate from the Pima County Assessor or, if not accurate, a current title report together with a certificate from the Pima County Elections Department, as supporting evidence. The application must be signed by all the owners of the land within the proposed CFD boundaries, as well as all qualified electors residing on the property.
    3. Proposed Improvements
      1. Estimated Costs. An estimate of the cost of each component of the infrastructure to be completed by the CFD, and projected   operating, maintenance, and replacement costs.
      2. Timetable. A timetable describing the scheduling, timing or phasing of the various components of the planned development. Each phase of the development should be shown separately.
    4. Financing Plan and Feasibility Study
      1. Source of Funds. A description of the sources and uses of funds for the public infrastructure and private development. This description should include the amount and type of any proposed bonds, as well as the sources of the financing for the private development, including any debt or equity.
      2. Financial Feasibility Study. A financial feasibility study for the entire project broken into five-year phases.  The study should include both public and private infrastructure costs.
      3. User Impact. An analysis of how the proposed debt financing, operation and maintenance costs, user charges and other CFD costs will impact the ultimate end users of the development, calculated as of the beginning, midway through and at the end of the market absorption period or based on the phasing of the project to be financed, as applicable. Describe, specifically, the projected property taxes and property tax rates, special assessments, fees, charges and other costs that would be borne by property in the CFD. If assessment bonds are utilized, include an agreement to obtain at the time of any future feasibility reports an appraisal of the fair market value of the property with the proposed CFD, prepared by a certified appraiser, and the assessed value as shown on the most recent tax roll. The analysis should also address the impact these costs will have on the marketability of the private development and a comparison of proposed tax rates and charges in adjoining and similar areas outside of the proposed CFD.
      4. Market Analysis. A market absorption study for the private development in the CFD acceptable to the County. Include estimates of the revenue to be generated by the development and a market absorption calendar for the private development.
      5. Operation and Maintenance   Costs.   A detailed description and a financial pro-forma of the estimated annual operation and maintenance costs of the public infrastructure, including for replacement reserves, if appropriate. List the specific entities, such as the CFD, Homeowners Associations, the developer, County, etc., that will be responsible for funding those on-going operation and maintenance costs.
    5. Disclosure to Prospective Property Owners

      A draft disclosure form that explains the expected and possible tax, assessment and other financial burdens of the CFD to prospective CFD landowners, which the developer will record, with the legal description of the CFD attached.  Upon each sale of property in the CFD, the developer and property owner must file with the County a receipt, signed by the purchaser, that acknowledges the purchaser's receipt of the disclosure form. Developers are required to describe in their promotional material the financial and other relative impacts on the property owners in the CFD.

    6. Development Agreements

      Describe any agreements entered into between the County and the Applicant relating to the proposed development, and explain the impact of those agreements and whether they must be amended in any way if the CFD is formed. Attach copies of the agreements as an appendix.

    7. Form of Resolution

      Applicant will include, with the application, a draft form of a resolution declaring an intent to form a CFD, which includes all information required by A.R.S. § 48-702.

    Application Procedures

    1. Administrative Fee. At the time of submission of the application, the applicant must pay a non-refundable application fee of $50,000 to offset the costs incurred by the County in connection with the processing and review of the application and the formation of the CFD.  If additional funds are required, the County will provide the applicant with an accounting of all costs incurred by the County, and applicant must deposit an additional $25,000. All costs incurred to date must be paid by the applicant at least 14 days prior to the date of the meeting of the Board at which the application is to be considered.
    2. Conference. After the application fee and deposit are submitted, the Development Services Director will arrange an initial conference with the appropriate County staff for the purpose of reviewing the application for conformity with County policies.
    3. Supplemental Information. If County staff, at any time during the application process, requests additional information, the applicant must provide any and all supplemental information requested.
    4. Report. After reviewing the application, County staff, under the direction of the Finance Director and the Development Services Director, may prepare a report including recommendations relating to the CFD, an analysis of the impact of the formation of the CFD and its effects on the County.  The report may provide a recommended disposition of the application and any additional requirements that will be placed on the developer and the CFD.
    5. Submission to the Board. If the application meets the requirements in this Policy, the application, along with any report and recommendations by county staff, and a proposed resolution declaring an intention to form a CFD, will be forwarded to the Board.
    6. Formation. If the Board approves an application for formation of a CFD and adopts a resolution declaring an intent to form a district, the developer and County staff will develop a list of tasks for formation of the CFD and will negotiate appropriate agreements among the County, the developer, and the CFD.
    7. All appropriate agreements and a resolution forming the CFD will be completed and submitted to the Board for approval within 180-days of the Board’s resolution of intent. The resolution will contain all statutorily-required information, authorize the issuance of bonds, if appropriate, and set a target ad valorem tax rate for the support of the CFD and payment of debt service.  The resolution will also call for an election for bond authorization and vote of the resident electors (if any).  Extensions of one 180 day period may be granted by the Development Services Director in conjunction with the Finance Director if conditions have not materially changed. Formations not completed within the required timeframe will be closed and the Applicant will be required to resubmit a new application for the CFD, as well as pay all application fees.

    CFD Operations and Debt Financing

    1. Initial Expenses. The administrative fee paid by the Applicant will continue to be used to support operation of the CFD after its formation until such time as other revenues become available for such purposes, and the applicant will continue to supplement the fee from time to time as necessary.
    2. Debt. The Board will not authorize the issuance of debt obligations in an amount that might have a substantial direct or indirect negative impact on the debt or financing capabilities of the County, or that imposes an unreasonably high financial burden on future CFD residents and property owners, as determined by the Board in its sole legislative discretion.
    3. Debt Service Guaranty. A portion of the proceeds of each bond issue may, to the extent allowed by applicable law, be applied to fund a debt service reserve fund or used to pay for an acceptable reserve fund surety bond, insurance policy or other guarantee. If applicable law does not permit the funding of such a reserve fund, the Applicant or third parties may be required to provide amounts for such purpose under circumstances acceptable to the Board.
    4. Tax Subsidy Agreements

      Any written agreement from a third party or parties (collectively, the "Obligated Party") to pay all or a portion of the debt service on any CFD general obligation bonds that is not paid by tax collections levied and received for such purpose (such as a standby contribution agreement) (the "Subsidy Payment Agreement”) must comply with the following conditions, in addition to any other conditions required by the Board.

      1. The Subsidy Payment Agreement must constitute a valid, enforceable obligation of the Obligated Party, and the obligation to pay the Subsidy Amount (as defined below) cannot be subject to any set off, claim or encumbrance;
      2. The Obligated Party must be required to pay a portion of the debt service on the bonds sufficient to cause the actual tax rate per $100 of limited property value levied for payment of the subsidized bonds to be no greater than a Target Tax Rate established by the Board (the "Subsidy Amount”);
      3. The tax rate per $100 of limited property value that would be necessary to pay all outstanding debt obligations, without reduction by deduction of the Subsidy Amount, must be low enough that, if it were levied, it would not cause the maximum tax rate for the CFD to be exceeded;
      4. For purposes of calculating the Target Tax Rate and the Nonpayment Tax Rate, use the assessed valuation of the CFD as shown on the tax rolls of the County Assessor or, if more current, the values shown on the Assessor's special districts extract for the CFD (the "AV");
      5. The Obligated Party must have an audited net worth at all times during the term of the Subsidy Payment Agreement of at least 5 times the principal amount of the subsidized bonds. If the net worth of the Obligated Party becomes less than the amount required, the Obligated Party must promptly provide the District with other collateral (such as a surety bond, letter of credit or cash) satisfactory to the District in the amount of any shortfall;
      6. The Subsidy Payment Agreement must provide for the annual payment of the Subsidy Amount pertaining to the next succeeding fiscal year not later than March 30th of each year;
      7. For purposes of calculating the Target Tax Rate, the AV shall exclude the limited property value of any taxable property in the CFD owned by the Obligated Party or owned by any entity owned or controlled by any Obligated Party (the "Controlled Parties") (for purposes of this subparagraph "owned or controlled by" means any entity, of which 50% or more of the ownership interests are owned or controlled by an Obligated Party) if the Obligated Party or Controlled Parties,  in the aggregate, own parcels totaling twenty percent (20%) or more of the AV of the CFD;
      8. In no event shall the aggregate of all Tax Rate Exposures of any CFD general obligation bonds and any overlapping CFDs exceed $ 3.00 per $100 of limited property value; and
      9. The Subsidy Payment Agreement may not adversely affect the tax-exempt status ofany related bonds and shall be delivered with all certificates and opinions required by the CFD.

    Indemnity

    The developer (or another party acceptable to the County and the CFD) must agree to indemnify the County and the CFD and their agents and employees, and hold them harmless for, from and against any and all liabilities, claims, costs and expenses including attorneys' fees, incurred in any challenge or proceeding to the formation, operation, administration of the  CFD, the offer and sale of CFD bonds, the levying by the CFD of any tax, assessment or charge and the operation and maintenance of public infrastructure financed or owned by the CFD.