OCEANSIDE — The City Council recently approved two special tax districts, or Mello-Roos, to help fund public improvement and fire services related to the North River Farms development project.
When the council first approved the controversial North River Farms housing project in the South Morro Hills area in 2019, the developer agreed to make several public improvements to nearby roadways and add a fire station to help service the new community as part of its conditions of approval.
To fund these improvements, the developer requested establishing two community facilities districts – Facilities CFD to pay for public improvements by levying a special tax and issuing bonds, and Services CFD to fund a new fire station’s operations.
The project’s developer is The NRF Project Owner, a joint venture between Lennar Homes and Integral Communities.
Community facilities districts, also called CFDs or Mello-Roos, are special tax districts by which property owners in a specific geographic location agree to impose taxes on their property to fund public improvements and infrastructure projects.
A city is not responsible for any debt incurred by the tariffs, which instead falls on the responsibility of the property owners.
In addition to a new fire station, Mello-Roos taxes would help purchase a new fire truck, widen the College Boulevard Bridge and North River Road, install more extensive sewer lines, dual roundabouts and traffic signals on North River Road and traffic signals at Leon Street and Madras Lane, improve the College Boulevard and state Route 76 intersection and North Valley Lift Station, and install a reclaimed water system.
An additional gap funding agreement requires the landowner to reimburse the city for $1.05 million for a portion of the costs to operate the city-owned fire station until the service tax supports its operations. The fire station will be financed from the proceeds of bonds issued by the facilities tax.
The maximum amount of bonded indebtedness proposed for the facilities tax is $45 million.
The facilities tax will consist of five zones with tax rates based on square footage. Annual taxes for property owners will start at $3,135 annually in the least square footage zone to $5,120 in the highest square footage zone. The tax rates will increase by 2% each year starting in 2024.
The service tax will tax each property $1,664 and increase each year based on the percentage change in the Consumer Price Index with a maximum annual increase of 6% and a minimum of 2% starting in 2024.
The City Council approved both taxes, although not everyone was happy.
Deputy Mayor Ryan Keim highlighted that the property taxes used to pay for the fire services would go into the general fund and come out of it.
“When this project came forward, we were told repeatedly that it’s not gonna cost the general fund any money… it puts the city in a difficult position now,” Keim said. “I’m not very happy about it.”
Mayor Esther Sanchez noted that she doesn’t like Mello-Roos projects and believes that the developer is within their means of paying for the additional public improvements that the facilities tax is meant to cover without having to impose a tax on future residents of the development. She voted against the facilities tax but approved the services tax.
“These are very difficult homes to sell,” Sanchez said.
Like Keim, Sanchez initially voted against the North River Farms development project.
In 2019, the project was narrowly approved by a council majority. A voter referendum revoked the council’s decision to approve the project in 2020 by a majority vote from citizens, but a Superior Court judge ruled the referendum was invalid the following year, allowing the development to continue.
A settlement between two lawsuits related to the project removed nearly 200 homes from the project, reducing it from the originally proposed 585 units to 395 units.