The northern part of Peoria has seen expansive growth in recent years and has been a prime opportunity for developers to bring in massive master planned communities.
Pushing the northern corners of the city, names such as Saddleback Heights on 6,052 acres and Trilogy West on 360 acres might ring a bell.
One way infrastructure such as roads and streetlights within a master community can be funded is through mechanisms called Community Facilities Districts.
Parts of the massive 7,100-acre Vistancia community might not have been built if not for funding from CFDs.
And two new CFDs were recently created and approved by the Peoria City Council, paving the way for new infrastructure to support nearly 6,000 homes.
With still much undeveloped land in the northern part of the city, more CFDs could be created.
Peoria CFO Sonia Andrews said that under the city’s CFD policies, this type of funding mechanism is primarily used for large regional infrastructure in master planned communities.
“For the northern part of the city where there is undeveloped land and significant regional infrastructure that would be required to allow for development, CFDs can be useful as a financing mechanisms,” she said.
The council recently approved CFDs for the Vistancia North and Mystic at Lake Pleasant Heights communities, with 3,200 homes and 2,560 homes planned, respectively.
In both cases, CFD funds will allow the developers to bring enhanced amenities to the communities including expansive open space and trail systems, neighborhood parks on five to 10 acres, and community clubhouses on more than three acres, as well as enhanced entry monuments and right-of-way landscaping.
Funds collected through the Vistancia North CFD will go to water and waste water infrastructure for residents. This will include the Vistancia Boulevard lift station, the Lone Mountain waterline, Saddleback water reservoir, an expansion of the Jomax treatment plant and other reservoirs and pump stations.
Funds collected through the Mystic at Lake Pleasant Heights CFD will go to the El Mirage and Westland sewer/waterlines, the Westland water campus, Lone Mountain waterline, El Mirage and Westland roads, as well as other water and sewer infrastructure.
Ms. Andrews said CFDs can allow the developer to construct infrastructure the developer may not have been able to finance otherwise. Also, since the infrastructure is financed with tax exempt debt, which the developer would not be able to obtain otherwise, it allows the property owners — the ones who truly benefit from the infrastructure — to pay over time through property taxes, she said.
Other benefits can include spurred economic growth and increase in land values, Ms Andrews said.
“So a CFD is a very useful financing mechanism for infrastructure and if it is done right it can have significant benefits for developments and communities,” she said.
The average home price in Vistancia North is expected to be $475,000, and the average home price in Mystic at Lake Pleasant Harbor is expected to be $377,000.
Homes in these communities are expected to be occupied in the first quarter of 2021.
Residents can expect to pay a tax rate of $2.65 per $100 of assessed value. For example, for a home with a market value of $450,000, the CFD tax will be about $668 annually.
Ms. Andrews said this tax rate is an acceptable finance plan that meets the city’s policy requirements.
“We believe this rate will not place an unreasonable financial burden on future property owners in the district, which is one of our policy requirements,” she said.
Arizona state statutes governs what a CFD can and cannot do, ranging from the powers of CFD and application requirements to the formation process and operations. City policy can go deeper and require more specific application requirements, financial protection for property owners and financial commitments from the developer.
Spencer Kamps, vice president of legislative affairs with Home Builders Association of Central Arizona, said CFDs are necessary tools to provide public infrastructure for large projects, but only in limited applications.
HBACA is a trade association for the residential construction and development industry.
“Due to the cost for homeowners and the potential for abuse, we believe the use of CFDs should be the exception and not the norm while other methods are looked at for financing infrastructure costs,” Mr. Kamps said.
Under Peoria policy, CFDs are required to be self-supporting with no reliance on the general fund.
To begin the process, the developer must first submit a CFD application to the city. If approved, the city will create and form the CFD. The CFD then enters into a development agreement with the developer for funding the infrastructure. The CFD issues debt to pay the developer to acquire and build the infrastructure. Finally, the CFD assesses a property tax on the homeowners who live in the CFD to pay the debt over time.
Applications are carefully reviewed by a team of staffed consultants, Ms. Andrews said.
“All this means we have to review the CFD applications very carefully to make sure the CFDs don’t create an unreasonable financial burden on future property owners or the city,” Ms. Andrews said.
CFDs are stand alone separate legal entities so they are governed by a board of directors, like a separate fire district or library district. The board of directors function as the governing body for the CFD, and they would approve bond elections, bond issuances, annual budgets, tax levies and conduct any other business of the CFD.
The two citizen board members must be independent, or have no conflict of interest, for example, they cannot own more than 40 acres of land in the proposed CFD, or they cannot be agents, employees or directors of the developers or the city.
For CFDs formed after August 2017, state statutes require the board be made up of the city council and two citizen board members. The council approved Jerry Johnson and Mike Heath to the boards of the Vistancia North and Mystic at Lake Pleasant Heights CFDs June 16.
They are residents of Peoria and currently serve on other city boards and commissions.
Philip Haldiman can be reached at 623-876-3697, email@example.com, or on Twitter @philiphaldiman.
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