Supervisors approve Community Facilities District for Rocking K South, first of its kind for Pima County, Ground Breaking Planned for 2018
PIMA COUNTY, Arizona – The Pima County Board of Supervisors Jan. 17 voted 5-0 to approve a Community Facilities District (CFD) for an affiliate of Tucson-based Diamond Ventures, Rocking K South, a residential master planned development on the southeast side of the metro Tucson, in the County. Community Facilities Districts, more commonly used by municipalities, are a means for financing infrastructure for developments, such as roads, water and sewer lines.
The state Legislature extended the authorization to create CFDs to counties since the mid-2000s, however, this is the first time Pima County has created one as new construction rebounds from the recession while homebuilding was slower and many master planned communities remained undeveloped.
Typically, infrastructure needs for new residential development are funded up front by developers via conventional financing, which are then passed on to consumers through the price of the home. CFDs are a means for the developer to recoup its cost from a property tax rather than the cost of the home. Community Facilities District go to the bond market and sell general obligation bonds to raise the funds to purchase the infrastructure from the developer. The bonds are then paid off through the property tax revenue.
CFDs are a legally available means of financing infrastructure for the development community. Several CFDs already exist in Marana, including Dove Mountain, Saguaro Springs and Gladden Farms, as well as in the Town of Sahuarita.
The develop may petition and the County must approve before the taxing district can be formed. For example the developer of Rocking K South will build the infrastructure necessary to serve the master planned community. After inspection and acceptance, the CFD will purchase the infrastructure from the developer through the issuance of bonds.
This funding system allows homebuilders to set a lower price, since the infrastructure costs are repaid over time rather than all at once through property sales. The amount of bonds are limited to an amount that can be supported by the assessed value of the property. A small amount is dedicated for maintenance of the infrastructure.
CFDs are legal entities and the county, even though overseeing the district, is not liable for the infrastructure costs, or for the debt. Rocking K Development Company, requesting the petition, plans for the CFD to issue $46.5 million of CFD general obligation debt to purchase $39 million of infrastructure improvements. The general obligation debt would be repaid by property taxes within the district. The applicant’s plan proposed issuing debt 21 times, beginning in 2020 and continuing through 2043, based on selling an average 260 homes per year at an average sales price of $382,000 for 14-years, starting in 2019. Similarly, the applicant’s financing relies on sold homes increasing five percent in taxable value each year during the 14-year sale period and then by two percent each year thereafter, according to the Rocking K South proposal.
The 2,047-acre Rocking K South development is planned for about 3,653- SFRs, plus approximately 30,000-square-feet of commercial/mixed-use development, parks and open space. Located south of Old Spanish Trail and west of Camino Loma Alta in the southeast submarket.
Pima County Development Services Department oversees Pima Prospers, the county’s comprehensive plan for growth and development. Pima Prospers contains goals and policies to encourage planned development and explore financing methods to recover the cost of new facilities in a fair manner. Development funding systems such as CFDs promote growth paying for itself.
