FROM:
Finance
SUBJECT:
Title
Levy of a Special Taxes for Fiscal Year 2026-27 with respect to Community Facilities Districts of City of Fontana.
End
RECOMMENDATION:
Recommendation
Adopt Resolution No. 2026-059, of the City Council of the City of Fontana, California, authorizing the Levy of a Special Tax for the City of Fontana’s Community Facilities Districts for Fiscal Year 2026-2027.
End
COUNCIL GOALS:
• Practice sound fiscal management by fully funding liabilities and reserves.
• Practice sound fiscal management by developing long-term funding and debt management plans.
DISCUSSION:
Community Facilities Districts (CFD) for infrastructure were established for the purpose of funding annual debt service for authorized bonded indebtedness. The City maintains 27 infrastructure CFDs of which 23 also have maintenance services assessed for landscape, lighting, and park maintenance within each CFD and the surrounding areas throughout the City and a separate special tax is calculated for each. The special taxes are referred to as Special Tax Rate A (Bond) and Special Tax Rate B (Maintenance).
The special tax levied on each assessable parcel within each CFD is necessary to pay principal and interest on the outstanding bonded indebtedness and authorized administrative expenses (Special Tax A); and the annual maintenance costs of each District (Special Tax B).
Special Tax Rate A (Bond)
Pursuant to Government Code Section 53340, Ordinances have been adopted to levy a special tax at the rate and in the manner specified in each district Rate and Method of Apportionment, and a resolution must be adopted by the City Council annually to levy a special tax to pay for the maturing principal and interest on the bonds. The rate and method of apportionment of the special tax was originally set forth at the time of formation for each of the CFDs. Annually, the City Council adopts a resolution as required by the County of San Bernardino Auditor-Controller/Treasurer/Tax Collector to place the special tax on the next County assessment roll.
The portion of the special tax rate necessary to pay the principal and interest on the outstanding bonded indebtedness and authorized incidental expenses is comprised of available cash balance, debt service payments, and administration costs (Exhibits B, Schedule 1).
The proposed special tax rates for Fiscal Year 2026-27 were developed according to the Rate and Method of Apportionment for each of the Community Facilities Districts. The amount of special taxes proposed for enrollment for Fiscal Year 2026-27 do not exceed the maximum annual rates approved at the time of formation for each of the CFDs.
The levies proposed for Special Tax Rate A (Bond) for Fiscal Year 2026-27 are generally unchanged from the prior fiscal year, except for the following districts:
• CFD #7 - a decrease of 35% is proposed as the bond is scheduled to mature in 2028, and a projected surplus from FY 2025-26 will be applied as a credit toward the annual levy.
• CFD #11 - a decrease of 21% is proposed as the bond is scheduled to mature in 2028, and a projected surplus from FY 2025-2026 will be applied as a credit toward the annual levy.
• CFD #12 - a decrease of 1% is proposed as the bond is scheduled to mature in 2030, and a projected surplus from FY 2025-26 will be applied as a credit toward the annual levy.
• CFD #113 - an increase of 53% is proposed to fund the additional FY 2025-26 development.
• CFD #117 - first year of Special Tax A Levy for FY 2025-26 development.
Special Tax Rate B (Maintenance)
Community Facilities Districts (CFD) for maintenance services were established for the purpose of funding annual landscape, lighting, and park maintenance within each CFD and the surrounding areas throughout the City. The City maintains 106 maintenance CFDs including 23 in this item and the other 83 being presented as companion items on today’s agenda. Of the 106 CFDs being considered on today’s agenda, the average increase is 3.82% (does not include one CFD that is increasing due to additional development having been completed over the last fiscal year).
CFDs are categorized in three financial categories including solvent/self-sufficient, at risk/structurally imbalanced, and operational deficit and are detailed below:
• Solvent/Self-Sufficient: Based upon current funding levels, 37 CFDs are considered to be solvent with no going-concern as their revenue is sufficient for their operating expenditures or the use of fund balance annually supports the CFD for more than 20 years. As such, 17 of these CFDs have recommended increases for 2026-27 to maintain their solvency.
• At Risk/Structurally Imbalanced: Current funding levels for 61 CFDs are inadequate and as programmed require use of the individual district’s fund balance (one-time revenue) to support operations. These CFDs are at risk and will have an operating deficit in less than 20 years (27 CFDs within five (5) years, 21 within 10 years, and 13 within 10-20 years). Increases are being recommended in 2026-27 for these CFDs to mitigate the current and future risk.
• Operational Deficit: Current funding levels for 8 CFDs are inadequate and as programmed are operating in a deficit (expenses exceed revenues). Increases are being recommended for these CFD’s as part of a five-year funding plan to mitigate their current deficiencies.
Pursuant to Government Code Section 53340, Ordinances have been adopted to levy a special tax at the rate and in the manner specified in each district Rate and Method of Apportionment. Each district Rate and Method of Apportionment has been approved and adopted by the City Council. Annually, the City Council adopts a resolution as required by the County of San Bernardino Auditor-Controller/Treasurer/Tax Collector to place the special tax on the next County assessment roll.
Proposed increases are required due to:
• Operational deficit - CFD #111
• At risk/structural imbalance - CFD #s 7, 31, 81, 87, 107, and 112
• New development - CFD #113
The proposed Fiscal Year 2026-27 special tax rates (Special Tax A and Special Tax B) are outlined in Exhibit B, Schedule 2.
A comparison of the total special tax levy and rates (A and B) for Fiscal Year 2025-2026 and Fiscal Year 2026-2027 is outlined in Exhibits B, Schedule 3.
FISCAL IMPACT:
The fiscal impact associated with the approval of this item is an increase in the Fiscal Year 2026-27 Special Tax A rates of $191,513 for a total of $23.0 million to fund annual debt service payments and administrative costs and an increase in the Special Tax B rates of $216,266 for a total of $4.9 million to fund annual maintenance costs within each CFD.
MOTION:
Approve staff recommendation.