SCIP Helps Cities Finance Infrastructure Needs
by James Hamill
For more information, contact: James Hamill, program manager, California Communities; phone: (800) 635-3993, ext. 216; or visit www.cacommunities.org.
As California’s population continues to grow, cities are facing challenges to meet the infrastructure needs that coincide with this growth. These challenges include the inability of cities to finance major infrastructure in advance of new development.
Since 2003, the League and the California State Association of Counties (CSAC) have been offering cities a way to help finance these infrastructure needs through the Statewide Community Infrastructure Program (SCIP) of the California Statewide Communities Development Authority, also known as California Communities. Through SCIP, impact fees for roads, water, sewer, drainage facilities, parks and other fees that qualify under the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915 (with the exception of school fees) can be funded by tax-exempt bonds.
Under SCIP, the assessment district formation proceedings, the issuance of the bonds and subsequent administration are handled by California Communities, a joint powers authority sponsored by the League and CSAC, comprising 462 local public agency members, including 324 cities. Cities can join the program by adopting a one-time resolution and receive the benefit of bond proceeds — without the inconvenience of managing a bond sale and ongoing administration.
Two Options Available
SCIP offers two programs: the Reimbursement Program and the Pre-Funding Program. The impact fees for both programs are funded through the issuance of bonds by California Communities in association with the formation of assessment districts. Each program requires that the funds be used by the city to pay for public improvements and infrastructure costs.
Under the Reimbursement Program, the property owner pays all development impact fees at the time the building permit is issued. The property owner then submits an application through the city to SCIP and is reimbursed for the eligible impact fees from bond proceeds. An assessment is levied on the property and placed on the county tax roll. The assessment is paid by the property owner and administered by California Communities.
The program’s features include the following conveniences:
Cities may withdraw the fees paid, including interest earnings, at any time to use for public improvements and infrastructure; and
The city does not run the risk of a property owner failing to pay development impact fees or not paying the assessment fee.
The Pre-Funding Program is structured somewhat differently. The developer submits an application to SCIP, and the eligible impact fees are funded through the next available SCIP bond issue. These funds are deposited into the city’s SCIP account and are available for expenditure by the city well in advance of issuing building permits. But as with the Reimbursement Program, an assessment is levied on the property, placed on the county tax roll, and paid by the property owner and administered by California Communities.
The program offers these advantages:
Large blocks of development impact fees can be financed up front; and
is particularly beneficial to fast-growing cities where development has outpaced the capacity of water, sewer and road systems to accommodate new growth.
Why SCIP Is an Attractive Option
SCIP can be used for commercial, industrial, retail and multi- and single-family residential projects. Each local agency can modify the use of the program for specific land uses. SCIP can substitute for riskier and more cumbersome fee deferral programs, and works well in situations where it may be too expensive to form a stand-alone assessment district.
This program has been used as an economic development tool by many local governments in California, including Brentwood, Elk Grove, Lincoln, Millbrae, Napa, Oxnard, Richmond, Rocklin, Roseville and San Mateo County.
The City of Roseville has been a member of SCIP since 2003. Karen Garner, economic development analyst with the city’s Economic Development Department, describes their experience with SCIP, saying, “Both the city and the developer have been very pleased. SCIP is a useful economic development tool that provides smaller projects with tax-exempt financing, which previously had been available only for the city’s larger developments. We also use SCIP in place of our former fee-deferral program, which was very difficult to administer and put the city in a riskier position of not receiving the fees. We’re currently working with our neighboring cities, Lincoln and Rocklin, to expand the use of SCIP to include fees levied by local transportation joint powers authorities.”
California Communities has assembled a team of highly trained professionals to minimize the duties of each participating city. SCIP applications are available to property owners at the building permit counter or online at www.cacommunities.org. The city must sign off on each application in addition to signing a closing certificate, and may withdraw funds from its SCIP account at any time for project expenditures.
Pam Ehler, city treasurer and director of finance for the City of Brentwood, comments on the ease of using the SCIP program: “Brentwood has participated in three consecutive annual SCIP issuances, worked with seven developers and bonded more than $5.6 million through this program. Working with the SCIP representatives has been a very pleasant experience.”
The SCIP program provides economies of scale by greatly reducing cost of issuance and improving interest rates for projects of any size. With no foreseeable end to the growth of California cities and the increasing need for new public infrastructure, SCIP helps cities continue to grow from the ground up.