Community Member Question:
I have heard that crime has decreased over the years but I often see articles of crime in our community with much more exposure than others. It would seem that some communities conceal some of these negative situations but Fontana is very open about it and actually has crime mapping link on the PD web link http://fontana.org/index.aspx?nid=112 . Though I am certain Fontana's crime rates are very much alike the cities to the west, the openness at times versus concealing seems to have a negative image of our community. My question is wouldn't it be better to release only the articles that have a criminal at large?
City Manager Answer:
Thank you for your question. The issue of transparency is very important to the Mayor and City Council and as such, they encourage all departments to make available as much information to the public as possible. The following is a comment provided by our Chief of Police on the issue of releasing criminal information.
Chief of Police Rod Jones:
We have heard before, that the police department releases too much information to the media. The police department prides itself on its very open–transparent relationship with the media and the community they serve. Not only does the police department frequently release information to the local news outlets; it allows residents to sign up for ‘Nixle’ updates, it has a Facebook page, provides for updates and notifications for sex registrants, and holds numerous community meetings throughout the year in a variety of Fontana communities.
While this open and vibrant relationship with the media may bring too much attention on criminal events, it is far worse to have an uninformed community. The men and women of the Fontana Police Department are dedicated to the community they serve. They risk their lives every day protecting Fontana residents. Many crimes are crimes of opportunity. Some criminals prey on a specific behavior or practice. By keeping the City of Fontana informed, the police department can better educate its residents so they can avoid being victimized by opportunistic criminals.
Wednesday, May 18, 2011
Monday, May 2, 2011
City Council & the Goal Setting Process
Every year, the elected officials sit down at a special workshop to discuss the City’s goals and priorities for the next fiscal year. At the workshop, the members of the City Council, the City Treasurer, and the City Clerk receive information about the accomplishment of the goals for the current year, review the status of the current budget, and provide staff with input on what priorities the City should focus on to best meet the needs of residents. Many issues are brought forward by the elected officials and eventually, a process is undertaken to identify which of the priorities discussed are supported by a majority of the elected officials.
Preparation for the goal-setting process starts in November when each department evaluates how successful they were in achieving the previous year’s goals. The departments prepare their evaluation and make presentations to the elected officials highlighting completed projects and future projects. When goals were not met, the departments present the reasons why and provide an update on future actions which may be initiated.
The elected officials develop goals based upon community need as well as recommendations by the City Manager and Commissions. The discussion is not about telling a department how to accomplish its basic operating functions but rather about the issues the Mayor and City Council would like additional focus on. The elected officials discuss and decide which goals are most important to the community. Once those goals have been set, the City Departments develop their budgets and work plans towards achieving the goals. This involves a city-wide effort on the part of all departments to allocate financial resources needed to accomplishment of these priorities. The process culminates in June with a recommended budget being transmitted from the City Manager to the Mayor and City Council. In addition, to the Recommended Operating Budget, the City Manager submits a book with specific work plans to the Mayor and City Council which identifies what is being committed to in regards to the priorities set by the elected officials.
This goal setting process has been working well in Fontana for the past decade. This year, the Council’s goal-setting workshop took place on January 22. There were many topics considered during the workshop and after some discussion the elected officials determined what they believe to be the most important objectives for the year. Some of the notable goals set for this year included the phase III Downtown façade, Redevelopment advocacy, Chaffey College phase IV expansion, construction of a new Freeway 210 Sports Park, veteran’s support, and creation of a joint powers authority for animal control shelter services.
The elected officials have also set a goal to start construction of the Duncan Canyon Interchange off Interstate 15 which would open up the northern portions of Fontana for development; the reconstruction of the Citrus Avenue and Cherry Avenue I-10 Interchanges ; as well as widening and street improvements to Citrus and Cypress Avenues . These transportation projects will make it easier for traffic to get in, out and around Fontana.
City staff have much work ahead to meet these goals set forth by the Council. But thanks to the goal-setting process, there is clear vision and focus to help move Fontana forward in 2011.
Preparation for the goal-setting process starts in November when each department evaluates how successful they were in achieving the previous year’s goals. The departments prepare their evaluation and make presentations to the elected officials highlighting completed projects and future projects. When goals were not met, the departments present the reasons why and provide an update on future actions which may be initiated.
The elected officials develop goals based upon community need as well as recommendations by the City Manager and Commissions. The discussion is not about telling a department how to accomplish its basic operating functions but rather about the issues the Mayor and City Council would like additional focus on. The elected officials discuss and decide which goals are most important to the community. Once those goals have been set, the City Departments develop their budgets and work plans towards achieving the goals. This involves a city-wide effort on the part of all departments to allocate financial resources needed to accomplishment of these priorities. The process culminates in June with a recommended budget being transmitted from the City Manager to the Mayor and City Council. In addition, to the Recommended Operating Budget, the City Manager submits a book with specific work plans to the Mayor and City Council which identifies what is being committed to in regards to the priorities set by the elected officials.
This goal setting process has been working well in Fontana for the past decade. This year, the Council’s goal-setting workshop took place on January 22. There were many topics considered during the workshop and after some discussion the elected officials determined what they believe to be the most important objectives for the year. Some of the notable goals set for this year included the phase III Downtown façade, Redevelopment advocacy, Chaffey College phase IV expansion, construction of a new Freeway 210 Sports Park, veteran’s support, and creation of a joint powers authority for animal control shelter services.
The elected officials have also set a goal to start construction of the Duncan Canyon Interchange off Interstate 15 which would open up the northern portions of Fontana for development; the reconstruction of the Citrus Avenue and Cherry Avenue I-10 Interchanges ; as well as widening and street improvements to Citrus and Cypress Avenues . These transportation projects will make it easier for traffic to get in, out and around Fontana.
City staff have much work ahead to meet these goals set forth by the Council. But thanks to the goal-setting process, there is clear vision and focus to help move Fontana forward in 2011.
Tuesday, March 29, 2011
Policy Process
Community Member Question:
I have looked into policies of some other cities on signs. Some have adopted a policy that requires no permit for yard sales while others have increased the number of allowed yard sales from two to four with the city establishing the weekends when residents are allowed to have yard sales. I would be supportive of such a policy for Fontana. My question is, what is the process to create or change policies?
City Manager Response:
Thank you for the question. It is the role of the City Council to make and to modify policies for the city. With regard to bringing an issue to the attention of the City Council, the best way to do this is to attend a city council meeting and to speak during public communication regarding the issue you have interest in. I have found the City Council to be very responsive to such suggestions. The members of the City Council, generally under City Council comments, may request that an issue be placed on the agenda for an upcoming meeting to discuss what, if any, changes they would like to make in a policy.
Another effective way of bringing an issue to the attention of the City Council is to talk individually to them about it or to send them an email about your thoughts. Email addresses are available on the City’s website www.fontana.org. The members of the City Council are also good about reading and responding to emails they received from the residents of the community.
Thank you for your interest in Fontana. By continuing to work together we can keep the city moving forward toward accomplishing its potential.
I have looked into policies of some other cities on signs. Some have adopted a policy that requires no permit for yard sales while others have increased the number of allowed yard sales from two to four with the city establishing the weekends when residents are allowed to have yard sales. I would be supportive of such a policy for Fontana. My question is, what is the process to create or change policies?
City Manager Response:
Thank you for the question. It is the role of the City Council to make and to modify policies for the city. With regard to bringing an issue to the attention of the City Council, the best way to do this is to attend a city council meeting and to speak during public communication regarding the issue you have interest in. I have found the City Council to be very responsive to such suggestions. The members of the City Council, generally under City Council comments, may request that an issue be placed on the agenda for an upcoming meeting to discuss what, if any, changes they would like to make in a policy.
Another effective way of bringing an issue to the attention of the City Council is to talk individually to them about it or to send them an email about your thoughts. Email addresses are available on the City’s website www.fontana.org. The members of the City Council are also good about reading and responding to emails they received from the residents of the community.
Thank you for your interest in Fontana. By continuing to work together we can keep the city moving forward toward accomplishing its potential.
Wednesday, January 26, 2011
RDA Press Conference
Today Mayor Acquanetta Warren, Mayor Paul Leon of Ontario and Mayor Pro Tem Sam Spagnolo held a press conference announcing their opposition to the Administration's January State budget proposal to eliminate redevelopment agencies and shift their funds from local communities to the state. I would like to share the following comments from Mayor Warren:
I am here today with many other community leaders because we’re infuriated that, once again, Sacramento is attempting to balance its budget by raiding local government funds.
Just three months ago, an overwhelming 61% of California’s electorate voted to pass Proposition 22 to prevent state raids of local government funds, including redevelopment funding. This was passed overwhelmingly because they know that redevelopment supports families.
Many others will talk about jobs, projects, and tax dollars; but, the bottom line truth is we are really talking about FAMILIES!
REDEVELOPMENT SUPPORTS FAMILIES!
It creates jobs, good jobs that support families;
It builds streets and storm drains and other projects that protect our lives and properties;
It supports schools by building needed streets and sidewalks and intersections that create “safe walking routes” for children;
It helps families by keeping local taxes lower;
The State’s own numbers show that killing redevelopment will bring very little financial relief for the State or the Schools.
All over Fontana we have examples of redevelopment at work, building housing for our seniors, parks for our kids, and a safer community for all families who chose to make Fontana their home.
More than 1,100 low-income homes including almost 400 senior units in Fontana’s downtown;
Sewer, storm drains and sidewalks throughout the City.
Pacific Electric Trail – converted an old unused railroad line to a regional walking and biking trail for our families and others throughout the region;
I-10 Cypress Overpass Improvements
I-10/Sierra Interchange
Just head east on Foothill Boulevard and see firsthand a road project that is changing the most dangerous street in the country for pedestrians into a safe, functional and beautiful roadway.
This is not “corporate welfare” this is “community well-being”. This is supporting families.
Here in Fontana we know that shutting down redevelopment will cost our community over 6,100 jobs, and billions in future economic activity.
These are staggering numbers.
It would truly be tragic for our community, our local economy, and the thousands of families who call Fontana their home if this proposal became law.
We urge the Governor and Legislature to abandon this proposal.
We appreciate the difficult choices facing Governor Brown. But there is nothing more important than building the state’s economy. Redevelopment is the best tool available to accomplish this.
The redevelopment proposal is a non-starter for cities and for the residents we represent. It will cause significant economic damage for decades to come.
I am here today with many other community leaders because we’re infuriated that, once again, Sacramento is attempting to balance its budget by raiding local government funds.
Just three months ago, an overwhelming 61% of California’s electorate voted to pass Proposition 22 to prevent state raids of local government funds, including redevelopment funding. This was passed overwhelmingly because they know that redevelopment supports families.
Many others will talk about jobs, projects, and tax dollars; but, the bottom line truth is we are really talking about FAMILIES!
REDEVELOPMENT SUPPORTS FAMILIES!
It creates jobs, good jobs that support families;
It builds streets and storm drains and other projects that protect our lives and properties;
It supports schools by building needed streets and sidewalks and intersections that create “safe walking routes” for children;
It helps families by keeping local taxes lower;
The State’s own numbers show that killing redevelopment will bring very little financial relief for the State or the Schools.
All over Fontana we have examples of redevelopment at work, building housing for our seniors, parks for our kids, and a safer community for all families who chose to make Fontana their home.
More than 1,100 low-income homes including almost 400 senior units in Fontana’s downtown;
Sewer, storm drains and sidewalks throughout the City.
Pacific Electric Trail – converted an old unused railroad line to a regional walking and biking trail for our families and others throughout the region;
I-10 Cypress Overpass Improvements
I-10/Sierra Interchange
Just head east on Foothill Boulevard and see firsthand a road project that is changing the most dangerous street in the country for pedestrians into a safe, functional and beautiful roadway.
This is not “corporate welfare” this is “community well-being”. This is supporting families.
Here in Fontana we know that shutting down redevelopment will cost our community over 6,100 jobs, and billions in future economic activity.
These are staggering numbers.
It would truly be tragic for our community, our local economy, and the thousands of families who call Fontana their home if this proposal became law.
We urge the Governor and Legislature to abandon this proposal.
We appreciate the difficult choices facing Governor Brown. But there is nothing more important than building the state’s economy. Redevelopment is the best tool available to accomplish this.
The redevelopment proposal is a non-starter for cities and for the residents we represent. It will cause significant economic damage for decades to come.
Monday, January 10, 2011
Community Question Regarding Temporary Agencies
Question
It is my opinion that Temp Agencies pose a negative impact on the competitive labor market due to lower wages that employees receive in order for the employee to be covered with disability insurance as well as allow the profit margin the service charges. As the economy gets better, will the city be hiring from temp agencies or direct by application for temporary employment for part-time employees?
Answer
Thank you for the question. The City of Fontana has a policy that does allow us to use temporary agencies to meet short-term work flow needs. We have and do use this as a tool when justified. The decision to use temp agencies is not made as a tool for undercutting full-time employment; it is rather used to meet processing needs that occur from time to time or to temporarily fill-in for a vacancy which may occur when staff leaves employment. Use of a temp agency staff, as a matter of policy, is limited to a six-month time period. There is no plan to change this policy.
With this said, the City of Fontana is continuously looking at ways to provide services expected by the community in the most cost effective manner as possible. As a management approach, we look towards technology and organizational issues to reduce administrative costs associated with the services being provided. We like to focus on front-line services and limiting administrative costs whenever possible.
Evidence of the effectiveness of this management philosophy is provided by the following statistic. Outside of the Public Safety staffing, the City of Fontana currently employs 1.5 full-time employees per 1,000 residents in the community. This compares favorably to the Cities of Rancho Cucamonga and Corona at 2.2 full-time employees per thousand, the City of San Bernardino at 2.3 employees per thousand, the City of Ontario at 3.1 employees per thousand, and the City of Moreno Valley at 3.2 employees per thousand.
It is my opinion that Temp Agencies pose a negative impact on the competitive labor market due to lower wages that employees receive in order for the employee to be covered with disability insurance as well as allow the profit margin the service charges. As the economy gets better, will the city be hiring from temp agencies or direct by application for temporary employment for part-time employees?
Answer
Thank you for the question. The City of Fontana has a policy that does allow us to use temporary agencies to meet short-term work flow needs. We have and do use this as a tool when justified. The decision to use temp agencies is not made as a tool for undercutting full-time employment; it is rather used to meet processing needs that occur from time to time or to temporarily fill-in for a vacancy which may occur when staff leaves employment. Use of a temp agency staff, as a matter of policy, is limited to a six-month time period. There is no plan to change this policy.
With this said, the City of Fontana is continuously looking at ways to provide services expected by the community in the most cost effective manner as possible. As a management approach, we look towards technology and organizational issues to reduce administrative costs associated with the services being provided. We like to focus on front-line services and limiting administrative costs whenever possible.
Evidence of the effectiveness of this management philosophy is provided by the following statistic. Outside of the Public Safety staffing, the City of Fontana currently employs 1.5 full-time employees per 1,000 residents in the community. This compares favorably to the Cities of Rancho Cucamonga and Corona at 2.2 full-time employees per thousand, the City of San Bernardino at 2.3 employees per thousand, the City of Ontario at 3.1 employees per thousand, and the City of Moreno Valley at 3.2 employees per thousand.
Redevelopment Agencies – A Proven Tool for Economic Expansion
There has been a great deal written in recent months about the value of Redevelopment Agencies to local economic expansion. As the State continues to wrestle with cutting its own budget deficit, I suspect that more will be written about the subject in recent months. Following is a brief summary about Redevelopment and a list of projects that have made use of this tool in the City of Fontana in recent years.
First, it is important to realize that the creation and use of redevelopment agencies does not change or increase taxes to anyone living within the boundaries of a project area. Under the auspices of Proposition 13, the property tax rate by property owners remains fixed. This remains true whether the property is within a Redevelopment project area or not. In short, the growth in property value over time results in increased revenue to redevelopment agencies. Redevelopment becomes a tool that requires this increase in revenue to be returned and ultimately spent within the project area it is generated in.
There are a number of restrictions on the monies received by a Redevelopment Agency. Twenty (20) percent of the funding received must be used for the creation of low and moderate income housing. Redevelopment revenues can generally not be use to pay for operational expenses such as salaries and public safety.
Apart from the low and moderate income set aside money, the Fontana Redevelopment Agency uses its revenues to build community needed infrastructure that will facilitate new private sector investment in the community. I have read a study that indicates that on average, every dollar of Redevelopment money spent results in an $11 investment from the private sector. It is this synergistic relationship that has allowed the community of Fontana to benefit significantly from investments made by the Redevelopment Agency.
Two years ago, the State raided Redevelopment money in its attempt to balance its budget. This take-away resulted in a $40 million loss for the community of Fontana. This taking of local money has resulted in the deferment of the Duncan Canyon Interchange, elimination of Phase III of the downtown façade program, and deferment of Jurupa Avenue improvements, among others.
Specific examples of projects that have been funded in recent years include:
Baseline Avenue from the city boundary on the west to Mango Avenue on the east
Baseline Avenue storm drain from the city boundary on the west to Mango Avenue of the east
Cherry Avenue from Jurupa Avenue to Slover Avenue
Foothill Boulevard from East Avenue to Hemlock
Jurupa Avenue from Sierra to Poplar
Sierra Avenue from Interstate 10 to San Bernardino Avenue
Sierra Avenue from South Highland to Baseline
South Highland Avenue from San Sevaine to Sierra
Foothill Avenue from Tokay to Almeria
Summit Avenue Storm Drain
Fire Station 79
Etiwanda/Slover traffic signal improvements
Heritage multi-purpose trail
Sewer, street and storm drain improvements at the Empire Center at Sierra and Slover
Knox Avenue from s. Highland to walnut
Summit Avenue from Citrus to Cypress
San Sevaine Trail lighting
Slover Avenue widening
Santa Ana Avenue and Live Oak Intersection improvements
Elm Street Jurupa to Slover
Philadelphia Avenue/San Sevaine Channel improvements
Redwood Avenue Jurupa to Slover
East Avenue Storm Drain
Duncan Canyon Storm Drain
Duncan Canyon Interchange
Walnut Avenue Citrus to Sierra
Valley Blvd. Catawba to Poplar
Lytle Creek Avenue north and south
Chaffey College Campus Expansion
Rehabilitation of Center Stage
Lewis Library
Senior Community Center
Civic Auditorium
Downtown Façade
Pacific Electric Trail System
Citrus/Interstate 10 Interchange
Side walk Improvements
Village of Heritage Community Center
Fontana Park
Jessie Turner Community Center
Ralph M. Lewis Park Field Renovation
210 Sports Park
Central Park
Valley Blvd. Strategic Plan
Foothill Blvd. Streetscapes
Redevelopment Agencies remain a value tool for economic expansion and community development. The City of Fontana has made use of this important tool for several years and has seen the direct benefits from this program. More specific information about Redevelopment can be found on the City’s website at www.fontana.org.
First, it is important to realize that the creation and use of redevelopment agencies does not change or increase taxes to anyone living within the boundaries of a project area. Under the auspices of Proposition 13, the property tax rate by property owners remains fixed. This remains true whether the property is within a Redevelopment project area or not. In short, the growth in property value over time results in increased revenue to redevelopment agencies. Redevelopment becomes a tool that requires this increase in revenue to be returned and ultimately spent within the project area it is generated in.
There are a number of restrictions on the monies received by a Redevelopment Agency. Twenty (20) percent of the funding received must be used for the creation of low and moderate income housing. Redevelopment revenues can generally not be use to pay for operational expenses such as salaries and public safety.
Apart from the low and moderate income set aside money, the Fontana Redevelopment Agency uses its revenues to build community needed infrastructure that will facilitate new private sector investment in the community. I have read a study that indicates that on average, every dollar of Redevelopment money spent results in an $11 investment from the private sector. It is this synergistic relationship that has allowed the community of Fontana to benefit significantly from investments made by the Redevelopment Agency.
Two years ago, the State raided Redevelopment money in its attempt to balance its budget. This take-away resulted in a $40 million loss for the community of Fontana. This taking of local money has resulted in the deferment of the Duncan Canyon Interchange, elimination of Phase III of the downtown façade program, and deferment of Jurupa Avenue improvements, among others.
Specific examples of projects that have been funded in recent years include:
Baseline Avenue from the city boundary on the west to Mango Avenue on the east
Baseline Avenue storm drain from the city boundary on the west to Mango Avenue of the east
Cherry Avenue from Jurupa Avenue to Slover Avenue
Foothill Boulevard from East Avenue to Hemlock
Jurupa Avenue from Sierra to Poplar
Sierra Avenue from Interstate 10 to San Bernardino Avenue
Sierra Avenue from South Highland to Baseline
South Highland Avenue from San Sevaine to Sierra
Foothill Avenue from Tokay to Almeria
Summit Avenue Storm Drain
Fire Station 79
Etiwanda/Slover traffic signal improvements
Heritage multi-purpose trail
Sewer, street and storm drain improvements at the Empire Center at Sierra and Slover
Knox Avenue from s. Highland to walnut
Summit Avenue from Citrus to Cypress
San Sevaine Trail lighting
Slover Avenue widening
Santa Ana Avenue and Live Oak Intersection improvements
Elm Street Jurupa to Slover
Philadelphia Avenue/San Sevaine Channel improvements
Redwood Avenue Jurupa to Slover
East Avenue Storm Drain
Duncan Canyon Storm Drain
Duncan Canyon Interchange
Walnut Avenue Citrus to Sierra
Valley Blvd. Catawba to Poplar
Lytle Creek Avenue north and south
Chaffey College Campus Expansion
Rehabilitation of Center Stage
Lewis Library
Senior Community Center
Civic Auditorium
Downtown Façade
Pacific Electric Trail System
Citrus/Interstate 10 Interchange
Side walk Improvements
Village of Heritage Community Center
Fontana Park
Jessie Turner Community Center
Ralph M. Lewis Park Field Renovation
210 Sports Park
Central Park
Valley Blvd. Strategic Plan
Foothill Blvd. Streetscapes
Redevelopment Agencies remain a value tool for economic expansion and community development. The City of Fontana has made use of this important tool for several years and has seen the direct benefits from this program. More specific information about Redevelopment can be found on the City’s website at www.fontana.org.
Tuesday, October 5, 2010
Managing the City’s Debt
I have decided to use today’s blog to give a general overview regarding the management of the City of Fontana’s long-term debt. This is not intended to be a technical accounting discussion, but rather an overview regarding the long-term implications of the existing debt to the community.
At the risk of oversimplifying, two broad categories of debt will be discussed within this blog: Bonded Debt and Developer Debt.
Bonded Debt (about $600 million) is fully amortized debt, meaning that it will be completely paid off during the term of the bonds. This type of debt is similar to a house mortgage. Money is borrowed, an interest rate is assessed based upon market conditions and the strength of the credit and there is a schedule of payments that will completely pay off the debt over time, usually 30 years.
Most of the bonded debt is issued by the Fontana Redevelopment Agency (RDA) (about $400 million) or by Community Facilities Districts (CFD) (about $145 million). Debt issued by the RDA is repaid from property tax revenues collected by the RDA. These are not new taxes, higher taxes, or additional assessments; the funding for this debt comes from the basic property tax that all property owners pay.
CFD Debt is repaid from assessments made against property. This obligation can only be created through a vote of the property owners which often takes place during the construction of new developments. Individuals who buy into developments with bonded CFDs must be notified of the added assessments prior to purchasing the property. The current City Council’s policy regarding bonded CFDs is that they will not approve the creation of new CFDs unless there is a significant community benefit that can be identified. The existing CFD debt for Hunters Ridge and Walnut Village will be fully paid off in 2015. The Village of Heritage bonded CFD will be retired in 2017. When these bonds are fully paid, the collection of assessments from the property owners will also cease.
Both RDA and CFD bonded debt is typically issued to pay for the cost of construction of regional back-bone infrastructure. This infrastructure typically includes roads, sewer and storm drain construction. Another significant safeguard for such debt is that the debt is an obligation of the RDA and/or the CFD. It is not a debt of the city nor is it backed by the general fund. Should a default occur on such debt, the recourse of the bond holder is only against the assets of the RDA or CFD. Each RDA project area and CFD is a separate legal entity so the debt does not have recourse against other residents within the City of Fontana, even under a default.
All of the current RDA and CFD bonded debt obligations are in the black, meaning that there is sufficient revenue being generated within those districts to pay for both the principal and interest payments as they become due. When feasible, the RDA and CFD debt is refinanced to take advantage of lower interest rates. When such refinancing takes place, the term of the debt is not extended and any savings that results from the CFD refinancing is usually passed on to the property owners in the CFD district. Many property owners in the City who live in CFD districts have benefitted from such a restructured refinancing in the past.
A look at revenues and expenditures in the Fontana Redevelopment Agency shows annual revenues of about $100 million and total bonded debt service of $32 million. The surplus of revenues over expenditures in RDA is used for a variety of purposes including low-income housing (required by State law), pass-through financing to other entities such as the fire department and schools, and to pay for capital projects such as roads, sewers, storm drains, parks, libraries, economic development, and administration. Many of the new facilities and community improvements constructed over the past few years have, at least in part, been accomplished with contributions from the surplus of RDA revenues over debt service.
Developer Debt (about $200 million) was created to repay a developer for infrastructure they built in connection with the construction of the Southridge Village. In the 1980’s, a developer approached the City Council with a plan to construct a 10,000 unit housing development in South Fontana. As you might imagine, there was a great deal of infrastructure needed to support the proposed development. The City of Fontana did not have the money to build the needed infrastructure for the proposed development. As such, the developer proposed, and the city agreed to a plan that would require the developer to pay for all of the required infrastructure for the project and in exchange, the City would reimburse the developer over time for the cost of the infrastructure from the property tax revenue it received from the Southridge Development through its Redevelopment Area (Jurupa Project Area).
The unusual aspect of this agreement is that the millions of dollars invested by the developer of the Southridge Village accrues interest at a rate of 15 ½ % per year. Admittedly, while this seems to be an excessive interest rate in today’s market, I am told that this was a market based rate of interest at the time the transaction was negotiated, nearly 30 years ago.
Over time, the interest accrued has been adding to the debt since it has and will continue to grow much faster than the RDA’s ability to repay the debt. Therefore, on paper, this debt continues to grow significantly. For example, 15 ½ % on a debt of $200 million is $31 million. Regardless of the growth of the amount owed, however, the obligation to repay the developer does not change. The repayment is limited to the amount of property tax revenue taken in by the Jurupa Project Area of the Fontana Redevelopment Agency. When the Jurupa RDA Project Area goes away in the year 2033, the Fontana RDA will no longer collect taxes for this project and as such, will no longer have an obligation to pay on this debt.
At times there is discussion about the State Controller’s Report that lists Fontana with in excess of $2 billion of debt. This report calculates both principal and interest accrued over time. (For comparison purposes, this would be similar to an individual borrowing $300,000 to buy a house and then being told they owe $1 million when you add up the total of all payments being made over time.) The growth of the developer debt over time is primarily responsible for the numbers included in this report. Regardless of whether this developer debt grows to $2 billion or $20 billion, the obligation to pay on this debt remains unchanged. Categorizing this debt as a burden to future generations of Fontana residents is a misstatement of the facts generated from a lack of understanding of the nature of this debt.
Final Thoughts. The City of Fontana, like any City is focusing on the need to encourage economic development and to create jobs for the community. The basic building block for economic expansion is the construction of City infrastructure. The issuance of debt, when well managed, is a critical component to the completion of such infrastructure.
The City of Fontana’s debt is being well managed and represents a significant investment within our community. The City will continue to management its debt and has not nor will not create an environment that saddles the future residents with debt. This is the philosophy of this City Council and I am confident that it will continue to be the philosophy of future City Council’s as well.
If you would like additional information about the City’s debt structure or would like to examine the issues in more detail, please feel free to contact our Management Services Department at (909) 350-7671 to schedule an appointment. The financial records of Fontana are available to everyone and I am sure that staff would be happy to address whatever additional questions you may have.
At the risk of oversimplifying, two broad categories of debt will be discussed within this blog: Bonded Debt and Developer Debt.
Bonded Debt (about $600 million) is fully amortized debt, meaning that it will be completely paid off during the term of the bonds. This type of debt is similar to a house mortgage. Money is borrowed, an interest rate is assessed based upon market conditions and the strength of the credit and there is a schedule of payments that will completely pay off the debt over time, usually 30 years.
Most of the bonded debt is issued by the Fontana Redevelopment Agency (RDA) (about $400 million) or by Community Facilities Districts (CFD) (about $145 million). Debt issued by the RDA is repaid from property tax revenues collected by the RDA. These are not new taxes, higher taxes, or additional assessments; the funding for this debt comes from the basic property tax that all property owners pay.
CFD Debt is repaid from assessments made against property. This obligation can only be created through a vote of the property owners which often takes place during the construction of new developments. Individuals who buy into developments with bonded CFDs must be notified of the added assessments prior to purchasing the property. The current City Council’s policy regarding bonded CFDs is that they will not approve the creation of new CFDs unless there is a significant community benefit that can be identified. The existing CFD debt for Hunters Ridge and Walnut Village will be fully paid off in 2015. The Village of Heritage bonded CFD will be retired in 2017. When these bonds are fully paid, the collection of assessments from the property owners will also cease.
Both RDA and CFD bonded debt is typically issued to pay for the cost of construction of regional back-bone infrastructure. This infrastructure typically includes roads, sewer and storm drain construction. Another significant safeguard for such debt is that the debt is an obligation of the RDA and/or the CFD. It is not a debt of the city nor is it backed by the general fund. Should a default occur on such debt, the recourse of the bond holder is only against the assets of the RDA or CFD. Each RDA project area and CFD is a separate legal entity so the debt does not have recourse against other residents within the City of Fontana, even under a default.
All of the current RDA and CFD bonded debt obligations are in the black, meaning that there is sufficient revenue being generated within those districts to pay for both the principal and interest payments as they become due. When feasible, the RDA and CFD debt is refinanced to take advantage of lower interest rates. When such refinancing takes place, the term of the debt is not extended and any savings that results from the CFD refinancing is usually passed on to the property owners in the CFD district. Many property owners in the City who live in CFD districts have benefitted from such a restructured refinancing in the past.
A look at revenues and expenditures in the Fontana Redevelopment Agency shows annual revenues of about $100 million and total bonded debt service of $32 million. The surplus of revenues over expenditures in RDA is used for a variety of purposes including low-income housing (required by State law), pass-through financing to other entities such as the fire department and schools, and to pay for capital projects such as roads, sewers, storm drains, parks, libraries, economic development, and administration. Many of the new facilities and community improvements constructed over the past few years have, at least in part, been accomplished with contributions from the surplus of RDA revenues over debt service.
Developer Debt (about $200 million) was created to repay a developer for infrastructure they built in connection with the construction of the Southridge Village. In the 1980’s, a developer approached the City Council with a plan to construct a 10,000 unit housing development in South Fontana. As you might imagine, there was a great deal of infrastructure needed to support the proposed development. The City of Fontana did not have the money to build the needed infrastructure for the proposed development. As such, the developer proposed, and the city agreed to a plan that would require the developer to pay for all of the required infrastructure for the project and in exchange, the City would reimburse the developer over time for the cost of the infrastructure from the property tax revenue it received from the Southridge Development through its Redevelopment Area (Jurupa Project Area).
The unusual aspect of this agreement is that the millions of dollars invested by the developer of the Southridge Village accrues interest at a rate of 15 ½ % per year. Admittedly, while this seems to be an excessive interest rate in today’s market, I am told that this was a market based rate of interest at the time the transaction was negotiated, nearly 30 years ago.
Over time, the interest accrued has been adding to the debt since it has and will continue to grow much faster than the RDA’s ability to repay the debt. Therefore, on paper, this debt continues to grow significantly. For example, 15 ½ % on a debt of $200 million is $31 million. Regardless of the growth of the amount owed, however, the obligation to repay the developer does not change. The repayment is limited to the amount of property tax revenue taken in by the Jurupa Project Area of the Fontana Redevelopment Agency. When the Jurupa RDA Project Area goes away in the year 2033, the Fontana RDA will no longer collect taxes for this project and as such, will no longer have an obligation to pay on this debt.
At times there is discussion about the State Controller’s Report that lists Fontana with in excess of $2 billion of debt. This report calculates both principal and interest accrued over time. (For comparison purposes, this would be similar to an individual borrowing $300,000 to buy a house and then being told they owe $1 million when you add up the total of all payments being made over time.) The growth of the developer debt over time is primarily responsible for the numbers included in this report. Regardless of whether this developer debt grows to $2 billion or $20 billion, the obligation to pay on this debt remains unchanged. Categorizing this debt as a burden to future generations of Fontana residents is a misstatement of the facts generated from a lack of understanding of the nature of this debt.
Final Thoughts. The City of Fontana, like any City is focusing on the need to encourage economic development and to create jobs for the community. The basic building block for economic expansion is the construction of City infrastructure. The issuance of debt, when well managed, is a critical component to the completion of such infrastructure.
The City of Fontana’s debt is being well managed and represents a significant investment within our community. The City will continue to management its debt and has not nor will not create an environment that saddles the future residents with debt. This is the philosophy of this City Council and I am confident that it will continue to be the philosophy of future City Council’s as well.
If you would like additional information about the City’s debt structure or would like to examine the issues in more detail, please feel free to contact our Management Services Department at (909) 350-7671 to schedule an appointment. The financial records of Fontana are available to everyone and I am sure that staff would be happy to address whatever additional questions you may have.
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