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HomeMy WebLinkAboutMINUTES - 03211995 - 1.59 - Contra Costa TO: BOARD OF SUPERVISORS County TAC uh�J FROM: Harvey E. Bragdon Director of Community Development DATE: March 21, 1995 SUBJECT: Assessment Bonds/Mello-Roos Bonds SPECIFIC REQUEST(S) OR RECOMMENDATIONS(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS ADOPT position opposing certain aspects of proposed Internal Revenue Service regulations governing "private activity bonds"which could adversely affect public infrastructure financings through Assessment Bond or Mello-Roos Bond proceedings; and AUTHORIZE Chair to execute a letter to the County's Legislative Delegation and to the Internal Revenue Service stating the concerns of the County. FISCAL IMPACT This recommendation has no fiscal impact. The proposed regulation of the Internal Revenue Service could have an impact on the General Fund of an indeterminate nature by making development projects more costly to construct. BACKGROUND/REASONS FOR RECOMMENDATIONS The 1986 Tax Reform Act created two categories of tax exempt bonds - governmental bonds (public facilities and infrastructure) and private activity bonds (single and multi-family housing, CONTINUED ON ATTACHMENT: XX YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR R OMMEND ION OF BOA COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON �4Q,,.pl�, �.1 . 1995 APPROVED AS RECOMMENDED ,/ OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. Source: Community Development 646-4208 cc: County Administrator ATTESTED�'Yla,c,� a'ZI. J 99S County Counsel PHIL BATCHELOR, CLEK OF Public Works THE BOARD OF SUPERVISORS Auditor-Controller AND COUNTY ADMINISTRATOR Treasurer-Tax Collector " Assessor Redevelopment Agency ;7 via Redevelopment BY , DEPUTY CSAC JK:Ih sral Wbond.bos industrial development, pollution control, etc.). Assessment bonds and Mello-Roos bonds, which must be used for public infrastructure, facilities, schools, parks, etc., have always been categorized as governmental bonds. On December 29,1994, the Internal Revenue Service released proposed regulations governing "private activity bonds." Among other things, the proposed regulations contain provisions that could cause Mello-Roos and Assessment bonds to be defined as "private activity bonds," or worse, effectively prohibit the use of tax exempt assessment and Mello-Roos bond financing for most developments. Perhaps the most troublesome portion of the Proposed Regulations is that section which states a private use occurs if bond proceeds are used in a fashion that discharges a "primary legal obligation" of the user. The Proposed Regulations proceed to describe public infrastructure obligations pursuant to development conditions of approvals as a "primary legal obligation." In the development context, it is nearly universal that the subdivision and development of property is conditioned on the installation of streets, sewer, drainage, sidewalks, and other public improvements. This is certainly the case in Contra Costa County, where our Growth Management Element of the General Plan stipulates that infrastructure is to be provided before or concurrent with approved development. Staff has contacted members of the public finance industry, including lawyers and investment bankers. These parties have a significant interest in the issues raised by the Proposed Regulations, and are commenting directly. Their interest can be construed as self-interest. Public entities may be more effective spokespersons for the issues raised. Staff has also communicated with staff of the California State Association of Counties (CSAC), and a statewide response is being prepared. The Board of Supervisors Contra �ekofthehBoard Costa and County Administration Building County Administrator 651 Pine Street, Room 106 (510)646-2371 Martinez, California 94553-1293 County Jim Rogers,1 st District Jeff Smith,2nd District Gayle Bishop,3rd District .- Mark DeSaulnier,4th District # Tom Torlakson,5th District z �acoc�T' March 21, 1995 Internal Revenue Service CC:DOM:CORP:T:R (FI-72-88) Room 5228 PO Box 7604 Ben Franklin Station Washington D.C. 20044 Dear Sirs: This is in regards to the proposed private activity bond regulations released by the Internal Revenue Service on December 29, 1994. The regulations will have a severe adverse impact on the ability of local officials to deal responsibly with growth and development issues, particularly here in California. Most communities in California, including my County, practice responsible growth management which requires that facilities and infrastructure necessary to support new development be provided prior to or concurrent with new development. It is wise growth management policy to require land developers to construct specific public improvements as a condition of development approval. The proposed IRS regulations would create regulatory standards that would jeopardize the ability of localities to finance necessary public improvements in an economically efficient manner through the issuance of tax exempt bonds: 1. Section 1.141-3(b)(8)of the proposed regulations states that facilities required of land developers as a condition of development approval would be a "private use" and hence subject to the private activity bond regulations. In Contra Costa County, assessment bonds and Mello-Roos special tax bonds have been used extensively to finance such infrastructure. Those bonds have always been viewed to be "governmental" bonds because they finance essential infrastructure and facilities that are (or will upon completion) be publicly owned. The proposed regulations would cause these essential public facility financings to compete for extremely limited private activity bond authority with other meritorious, but clearly "private activity" uses such as single family housing, multi-family housing, and industrial development or be issued as taxable securities. This is neither fair nor efficient. Internal Revenue Service -2- March 21, 1995 CC:DOM:CORP:T:R(FI-72-88) 2. Section 1.141-5(c)(3) of the proposed regulations appears to preclude special assessments or special taxes which are not based on either property frontage, assessed valuation, or direct benefit. These limitations would make it virtually impossible for public agencies in California to fund with tax exempt financing general benefit facilities such as police stations, fire stations, libraries, freeways, and other regional facilities. Property frontage is not relevant for most general benefit facilities and, in California,the State Constitution prohibits assessments or special taxes based on the value of property. The proposed IRS regulations would dramatically impede the construction of public improvements for new real estate development projects. This would further impair the recovery of California's economy. The proposed regulations would further exacerbate the cost of housing in California. They would also precipitate decreases in state and local government revenues at a time when they are drastically needed to cope with the dual problem of an expanding population and demand for public services, and an economy just now beginning to show signs of a recovery from an extended recession. I urge you to consider all of these issues when finalizing the regulations. Deletion of the aforementioned Sections of the proposed regulations would be appropriate. Sincerely, Gayle Bishop, Chair Board of Supervisors GB:IK:Ur cc: Senator Feinstein Senator Boxer Congressman Miller Congressman Stark sra 17Jirs.ltr Phil Batchelor The Board of Supervisors Contra Clerk of the Board and County Administration BuildingCosta CountyAdministrator 651 Pine Street, Room 106 (510)646-2371 Martinez, California 94553-1293 County Jim Rogers,1st District Jeff Smith,2nd District Gayle Bishop,3rd District ------ .Mark --Mark DeSaulnier,4th District \ 'i Tom Torlakson,5th District ci ;< STS c6irt' March 21, 1995 Senator Barbara Boxer Hart Bldg, #112 U. S. Senate Washington D.C. 20510 Dear Senator Boxer: RE: Internal Revenue Service Notice of Proposed Rulemaking (FI-72-88), December 29, 1994 I am writing to apprise you of a serious threat to the health and vitality of the California and Contra Costa County economy. The proposed rule referenced above would dramatically impair the ability of cities and counties in California to issue tax exempt bonds to finance infrastructure required by our growing communities. As you know, since the passage of Proposition 13 California localities have adopted the responsible growth management principle of requiring new real estate development projects to provide required public infrastructure and facilities to be completed prior to or concurrent with the new development. The proposed regulations of the IRS would drastically impair the ability of localities to assist in the efficient financing of this public infrastructure through the issuance of assessment bonds and Mello-Roos special tax bonds. A copy of our County's comments to the IRS are provided for your information. The County of Contra Costa has included in its adopted General Plan a Growth Management Element. The Growth Management Element implements public policy of providing infrastructure in advance of or concurrent with new development. A primary example of this policy in action is around the Pleasant Hill BART Station Area. This "transit based development" node represents a rare opportunity to locate jobs and housing in close proximity to a regional transportation hub. In order to implement the Pleasant Hill BART Specific Plan, approximately $40 million of public road and drainage improvements are necessary. Requiring the new development to pay its fair share, and requiring that it be paid prior to or concurrent with the development, resulted in the sale of assessment bonds and Mello-Roos special tax bonds to finance the required public infrastructure. The availability of tax exempt financing was critical to the efficient development of the Pleasant Hill BART Station as a center for "transit based development." The proposed IRS regulations could so impair the use of such financing that this County would be unable to proactively regulate and implement development activities, such as the Pleasant Hill BART Station, in a manner consistent with accepted growth management practices. Senator Barbara Boxer -2- March 21, 1995 In short, the proposed IRS rulemaking runs counter to the needs of our communities. I, and my colleagues on the Board of Supervisors,urge you to exert any and all efforts to prevent the adoption of the proposed IRS regulations in their present form. I am advised that the following would address our concerns: 1. Delete Section 1.142-3(b)(8), entitled "Discharge of Primary Legal Obligation;" and 2. Delete Section 1.141-5(c)(3), entitled "Mandatory Tax or Other Assessment." Should you or your staff have any further information requirements, please feel free to contact myself or Jim Kennedy, Deputy Director - Redevelopment, at 510-646-4076. Sincerely, t� Gayle Bishop, Chair Board of Supervisors GB:JK:lh cc: County Administrator County Counsel Auditor-Controller Treasurer-Tax Collector Public Works Community Development Growth Management&Economic Development Agency CSAC ALHFA NACO sra 17/irs2.ltr Phil,Batchelor The Board of Supervisors Contra Clerk of the Board and County Administration BuildingCosta County Administrator 651 Pine Street, Room 106 (510)646-2371 Martinez,California 94553-1293 County Jim Rogers,1st District Jett Smith,2nd District Gayle Bishop,3rd District Mark DeSsulnier,4th District Tom Torlakson,5th District = � yea c6i�`' March 21, 1995 Senator Dianne Feinstein Hart Bldg, #331 U. S. Senate Washington D.C. 20510 Dear Senator Feinstein: RE: Internal Revenue Service Notice of Proposed Rulemaking (FI-72-88), December 29, 1994 I am writing to apprise you of a serious threat to the health and vitality of the California and Contra Costa County economy. The proposed rule referenced above would dramatically impair the ability of cities and counties in California to issue tax exempt bonds to finance infrastructure required by our growing communities. As you know, since the passage of Proposition 13 California localities have adopted the responsible growth management principle of requiring new real estate development projects to provide required public infrastructure and facilities to be completed prior to or concurrent with the new development. The proposed regulations of the IRS would drastically impair the ability of localities to assist in the efficient financing of this public infrastructure through the issuance of assessment bonds and Mello-Roos special tax bonds. A copy of our County's comments to the IRS are provided for your information. The County of Contra Costa has included in its adopted General Plan a Growth Management Element. The Growth Management Element implements public policy of providing infrastructure in advance of or concurrent with new development. A primary example of this policy in action is around the Pleasant Hill BART Station Area. This "transit based development" node represents a rare opportunity to locate jobs and housing in close proximity to a regional transportation hub. In order to implement the Pleasant Hill BART Specific Plan, approximately $40 million of public road and drainage improvements are necessary. Requiring the new development to pay its fair share, and requiring that it be paid prior to or concurrent with the development, resulted in the sale of assessment bonds and Mello-Roos special tax bonds to finance the required public infrastructure. The availability of tax exempt financing was critical to the efficient development of the Pleasant Hill BART Station as a center for "transit based development." The proposed IRS regulations could so impair the use of such financing that this County would be unable to proactively regulate and implement development activities, such as the Pleasant Hill BART Station, in a manner consistent with accepted growth management practices. Senator Dianne Feinstein -2- March 21, 1995 In short, the proposed IRS rulemaking runs counter to the needs of our communities. I, and my colleagues on the Board of Supervisors, urge you to exert any and all efforts to prevent the adoption of the proposed IRS regulations in their present form. I am advised that the following would address our concerns: 1. Delete Section 1.142-3(b)(8), entitled "Discharge of Primary Legal Obligation;" and 2. Delete Section 1.141-5(c)(3), entitled "Mandatory Tax or Other Assessment." Should you or your staff have any further information requirements, please feel free to contact myself or Jim Kennedy, Deputy Director- Redevelopment, at 510-646-4076. Sincerely, Gayle Bishop, Chair Board of Supervisors GB:JK:lh cc: County Administrator County Counsel Auditor-Controller Treasurer-Tax Collector Public Works Community Development Growth Management&Econonuc Development Agency CSAC ALHFA NACO sra 17/irs2.ltr I Phil The Board of Supervisors Contra Clerk ooffthe hBoard and County Administration BuildingCosta County Administrator 651 Pine Street, Room 106 (510)646-2371 Martinez,California 94553-1293 County Jim Rogers,1st District Jeff Smith,2nd District F s e Gayle Bishop,3rd District >.• Mark DeSsulnier,4th District Tom Torlakson,5th District ST'q CO L'•'� March 21, 1995 Congressman Bill Baker Longworth Bldg., #1724 U. S. House of Representatives Washington D.C. 20515 Dear Congressman Baker: RE: Internal Revenue Service Notice of Proposed Rulemaking (FI-72-88), December 29, 1994 I am writing to apprise you of a serious threat to the health and vitality of the California and Contra Costa County economy. The proposed rule referenced above would dramatically impair the ability of cities and counties in California to issue tax exempt bonds to finance infrastructure required by our growing communities. As you know, since the passage of Proposition 13 California localities have adopted the responsible growth management principle of requiring new real estate development projects to provide required public infrastructure and facilities to be completed prior to or concurrent with the new development. The proposed regulations of the IRS would drastically impair the ability of localities to assist in the efficient financing of this public infrastructure through the issuance of assessment bonds and Mello-Roos special tax bonds. A copy of our County's comments to the IRS are provided for your information. The County of Contra Costa has included in its adopted General Plan a Growth Management Element. The Growth Management Element implements public policy of providing infrastructure in advance of or concurrent with new development. A primary example of this policy in action is around the Pleasant Hill BART Station Area. This "transit based development" node represents a rare opportunity to locate jobs and housing in close proximity to a regional transportation hub. In order to implement the Pleasant Hill BART Specific Plan, approximately $40 million of public road and drainage improvements are necessary. Requiring the new development to pay its fair share, and requiring that it be paid prior to or concurrent with the development, resulted in the sale of assessment bonds and Mello-Roos special tax bonds to finance the required public infrastructure. The availability of tax exempt financing was critical to the efficient development of the Pleasant Hill BART Station as a center for "transit based development." The proposed IRS regulations could so impair the use of such financing that this County would be unable to proactively regulate and implement development activities, such as the Pleasant Hill BART Station, in a manner consistent with accepted growth management practices. I Congressman Bill Baker -2- March 21, 1995 In short, the proposed IRS rulemaking runs counter to the needs of our communities. I, and my colleagues on the Board of Supervisors,urge you to exert any and all efforts to prevent the adoption of the proposed IRS regulations in their present form. I am advised that the following would address our concerns: 1. Delete Section 1.142-3(b)(8), entitled "Discharge of Primary Legal Obligation;" and 2. Delete Section 1.141-5(c)(3), entitled "Mandatory Tax or Other Assessment." Should you or your staff have any further information requirements, please feel free to contact myself or Jim Kennedy, Deputy Director- Redevelopment, at 510-646-4076. Sincerely, t6� Gayle Bishop, Chair Board of Supervisors GB:JK:lh cc: County Administrator County Counsel Auditor-Controller Treasurer-Tax Collector Public Works Community Development Growth Management&Economic Development Agency CSAC ALHFA NACO sra 17/irs2.ltr The Board of Supervisors Contra - Ce11Batchelor r Costa and County Administration Building County Administrator 651 Pine Street, Room 106 (s1o>sas-23» Martinez, California 94553-1293 County Jim Rogers,1st District Jeff Smith,2nd District `F,.,s g c. o f Gayle Bishop,3rd District ••�== Mark DeSaulnler,4th District *'` Tom Torlakson,5th District s•; March 21, 1995 Congressman George Miller Rayburn Bldg., #2205 U. S. House of Representatives Washington D.C. 20515 Dear Congressman Miller: RE: Internal Revenue Service Notice of Proposed Rulemaking (FI-72-88), December 29, 1994 I am writing to apprise you of a serious threat to the health and vitality of the California and Contra Costa County economy. The proposed rule referenced above would dramatically impair the ability of cities and counties in California to issue tax exempt bonds to finance infrastructure required by our growing communities. As you know, since the passage of Proposition 13 California localities have adopted the responsible growth management principle of requiring new real estate development projects to provide required public infrastructure and facilities to be completed prior to or concurrent with the new development. The proposed regulations of the IRS would drastically impair the ability of localities to assist in the efficient financing of this public infrastructure through the issuance of assessment bonds and Mello-Roos special tax bonds. A copy of our County's comments to the IRS are provided for your information. The County of Contra Costa has included in its adopted General Plan a Growth Management Element. The Growth Management Element implements public policy of providing infrastructure in advance of or concurrent with new development. A primary example of this policy in action is around the Pleasant Hill BART Station Area. This "transit based development" node represents a rare opportunity to locate jobs and housing in close proximity to a regional transportation hub. In order to implement the Pleasant Hill BART Specific Plan, approximately $40 million of public road and drainage improvements are necessary. Requiring the new development to pay its fair share, and requiring that it be paid prior to or concurrent with the development, resulted in the sale of assessment bonds and Mello-Roos special tax bonds to finance the required public infrastructure. The availability of tax exempt financing was critical to the efficient development of the Pleasant Hill BART Station as a center for "transit based development." The proposed IRS regulations could so impair the use of such financing that this County would be unable to proactively regulate and implement development activities, such as the Pleasant Hill BART Station, in a manner consistent_ with accepted growth management practices. Congressman George Miller -2- March 21, 1995 In short, the proposed IRS rulemaking runs counter to the needs of our communities. I, and my colleagues on the Board of Supervisors, urge you to exert any and all efforts to prevent the adoption of the proposed IRS regulations in their present form. I am advised that the following would address our concerns: 1. Delete Section 1.142-3(b)(8), entitled "Discharge of Primary Legal Obligation;" and 2. Delete Section 1.141-5(c)(3), entitled "Mandatory Tax or Other Assessment." Should you or your staff have any further information requirements, please feel free to contact myself or Jim Kennedy, Deputy Director - Redevelopment, at 510-646-4076. Sincerely, Gayle Bishop, Chair Board of Supervisors GB:JK:Ih cc: County Administrator County Counsel Auditor-Controller Treasurer-Tax Collector Public Works Community Development Growth Management&Economic Development Agency CSAC ALHFA NACO sra 17/irs2.ltr