Now that there are a lot of CFD consulting companies available, you may be wondering what CFD means. CFD is the abbreviation of community facilities districts and these are special tax districts that impose taxes on property. These districts were created by Assemblyman Mike Roos and Senator Hendry Mello in the USA.
The CFD tax is assessed against the property, but not based on the assessed property value. This means that it is a viable option for securing funding even when there are some limitations imposed.
Who can form a CFD?
Any public agency that has the authority to provide public facilities and services may form a CFD. Counties, cities, special districts and school districts are some of the users of this avenue. A lot of CFDs are formed in California to fund billions of dollars in public infrastructure.
The formation process
When forming a viable CFD, there is a seven-step process required. The first step is the initiation of the CFD. It starts when a government entity or property owner starts the process of establishing a community facility district.
Adaption of the local policies and goals
This is the second step of forming a CFD. Local policies and goals should be adopted by the agency that proposed the special tax district to be formed. These are the rules that should be followed by the participants for the prospective community facility district. After this stage, the method and rate of apportionment should be determined and developed. A CFD consulting firm can help with this stage.
Proposal of resolution of intention
In case there are no objections to the policies and rules proposed in the above stage, the CFD will be formally proposed.
At this stage, a public hearing is held. If there are objections from the majority of the participants to the formation by the participants, the CFD formation process will continue.
Adoption of resolution of formation
This is the resolution to incur any applicable debt.
Elections are held amongst the property owners or residents. For a CFD to be established, a two-thirds affirmative vote of the owners is required if there are no more than twelve registered voters living in the proposed district. If there are more than twelve registered voters living in the district then a two-thirds vote of the registered voters will be required.
The last step in the formation of a CFD is to issue debt such as bank loans and land-secured municipal bonds. This step is only applicable if there are any debts. Once the formation process is complete, there will be a special tax imposed on all property within the CFD. The tax isn’t a property tax.
Things CFDs can fund annually
CFDs work hand in hand with CFD consulting firms to fund different things. Some of the most common things that CFDs can fund include services such as police protection services, recreation program services, fire protection, maintenance and lighting of parkways, parks, streets and so on. CFDs can also fund capital projects such as schools, libraries, parks, childcare facilities and so on.
Written by Luke Bonaventura