Sharon Thomas
A recent posting by Michael Swickard contained many inaccuracies and reflects an incomplete understanding of the elements involved in the effort to extend Sonoma Ranch Boulevard north from U.S. Highway 70 to two new public schools and the new Las Cruces Country Club golf course. Here is what has happened to date:
For some time now, the members of the Las Cruces Country Club (LCCC) have been anxiously waiting for their new golf course and club house located north of US-70 at the end of the proposed Sonoma Ranch Boulevard. Originally, the LCCC had an agreement with the developer, Mr. Philip Phillippou, to obtain their new facility. Mr. Phillippou would build a new LCCC golf course and clubhouse and the LCCC would give Mr. Phillippou their old golf course and country club located at Solano and N. Main.
Mr. Phillippou did build the golf course, but not the clubhouse or other amenities, nor the extension of Sonoma Ranch Boulevard.
In Las Cruces, roads get built when the adjacent property is subdivided. The city does not usually build roads. If a developer asks to subdivide property in order to develop it, that developer is responsible for building the adjacent roads.
In this case, several parties probably assumed that Mr. Phillippou would build the road when he subdivided the property. That group could include the members of the country club, other developers and builders who have projects in that area, and the Las Cruces Public Schools (LCPS).
LCPS had agreed to participate in the building of the road as they know they are responsible for all off-site infrastructure (roads and utilities) needed for new schools. Early estimates for their share of the road were around $400,000 and for bringing the utilities to the schools around $600,000, for a total of approximately $1 million.
LCPS is currently putting in that infrastructure. It is being built to complement city standards and will be added to when funding becomes available to complete the road to meet full city standards. LCPS cannot be reimbursed from the proposed special assessment district (SAD). Reimbursement for work completed before the SAD was in place would be highly questionable.
The special assessment district proposal
In January, Mr. Moscato, who has apparently taken over Mr. Phillippou’s projects in this area, came to the city council to ask the city for support to apply for a SAD in order to extend Sonoma Ranch Boulevard north to the new golf course. Because this idea represented a possible solution to the problem of providing a road to the new schools as well, the city council passed a resolution declaring its intent to form that district and “to levy assessments on real property benefiting from the improvements to pay the cost of the improvements and the district.”
Part of the current confusion swirling around this road project probably stems from this resolution. First of all, it was a resolution, not an ordinance. Resolutions do not have the binding power of an ordinance. Secondly, “intent” in this case does not mean the SAD is going to be formed. “Intent” only triggers the process that must be followed in order (eventually) to pass an ordinance (the enabling legislation that would be binding, like a law).
The next step after the “intent” resolution was a “preliminary hearing.” That hearing was held in April at a council work session and included information on the proposed SAD, the improvements to be included, the appraisal results, a possible financing plan and schedule, etc. Council members are not allowed by law to vote at a work session. They can attempt to reach consensus through discussion, but they cannot vote.
If consensus had been achieved at this meeting, the next step would have been to bring forward a “formation resolution” at the April 19 council meeting, which would have been followed by the need to procure construction bids in order to determine the cost of the project. Then, there would have been a date set for a public meeting, after which an ordinance could be passed to formalize the SAD and delineate all the requirements.
At that point, the city would have to decide where to go to get funding for this project – the bond market, New Mexico Finance Authority, etc. Clearly, the process includes a number of statutory legislative requirements and could not have been completed before the new schools opened, even if consensus had been achieved at the preliminary hearing in early April.
Failure to gain consensus
In a SAD, the property owners agree to tax themselves in order to pay for the building of something from which they will all benefit. For example, the residents along an unpaved road might decide they want their road paved. They could go to the city or the county and ask for a special assessment on their properties in order to pay for the construction of the road.
The residents themselves can initiate a SAD or, more often, the city or county initiates the SAD for the purpose of correcting deficiencies – paving a dirt road, for example. The Sonoma Ranch Boulevard request was unusual because it was neither resident nor city initiated. Furthermore, in this case, the property to be assessed was not yet developed so the people who will eventually pay for the road (the future home and business owners who will pay the additional property tax assessment) could not be consulted. All of these factors contributed to the failure to gain consensus at the April work session.
In addition, it was unclear how the additional property assessment would operate. Most SADs previously approved by the City of Las Cruces have had triggers that determine when the SAD payments begin. There were no such triggers in this SAD proposal.
Furthermore, the city would have to assess and collect the additional property taxes or negotiate with the county to do so. That could be a complicated and costly project over the 20 years of the SAD as different properties will be developed differently and so have different resulting assessed values, plans might change over time, properties could be sold several different times, etc. From what we could ascertain, this would be a billing and collection nightmare.
Another problem is the fact that not all of the properties that will benefit from the road were included in the presented list of properties to be assessed. Even though the law requires that all properties that benefit should be assessed, the planned Metro Verde development, located at the end of the road and standing to benefit most from the project, was not included.
Developer could try again
In normal practice, the developer gets private financing to cover the cost of roads in areas of new development. These are not normal times, so the developer asked the city to help get the financing through a SAD. The question before the council was whether or not it was fiscally responsible for the city to work with this developer to access the SAD process.
In order to protect our residents, the city council must assess the risk to the city (and, therefore, the taxpayers) of joining in this SAD venture. Currently, the city has a very high credit rating. If the bond payments are not made, what happens? The city would be required to exercise the lien, sell the property, and use the proceeds to make the bond payments.
If the property doesn’t sell or the proceeds are less than the bond payment, the city does not have to make up the difference; those people who bought the bonds would suffer the loss. However, the city’s credit rating could be indirectly, but severely, impacted. That could put a damper on the city’s ability to borrow money for other projects.
The April work session was only a preliminary hearing on the SAD proposal, and no vote was taken. The city council expressed concerns just as any responsible party would in a business negotiation. The first offer is seldom the final offer. Some of those concerns came to the council from their constituents who had questions about the city entering into this particular business agreement with this particular developer on this particular property. There was no “anonymous” memo. Rather, citizens (taxpayers) were asking questions about the development and the developer’s financial well being.
As in any business negotiation, the developer could come back to the city council with a revised proposal that answers some of the concerns expressed at the preliminary hearing. Council could hold another preliminary hearing to hear another proposal. If consensus is reached, the process could begin.
Thomas is the Las Cruces city councilor representing District 6 and the mayor pro-tem.