Homebuyers in Avila Ranch project will be hit with special $2,000-$3,000 tax — each year

Prospective homebuyers in the future Avila Ranch development in San Luis Obispo will have to consider a special annual tax of between $2,000 and $3,000 levied by the city to help close a funding gap on project-related services, maintenance and infrastructure.

The San Luis Obispo City Council voted unanimously Tuesday to move forward with the tax, called a community facilities district, or Mello Roos tax — the first of its kind in city history.

Prices in the 720-home development off Buckley Road in southern San Luis Obispo, approved by the council in September, range between $250,000 and $750,000 in today’s dollars, with most priced from $350,000 to $650,000, though those ranges aren’t guaranteed.

The funding gap stems from the city being unable to collect standard property taxes from Avila Ranch homeowners under a tax-sharing agreement with the county for the airport area, where about 620 acres was annexed to the city in 2008.

The agreement blocks a transfer of taxes to the city, which came as part of the annexation deal, though discussions are planned to possibly restructure that agreement.

The special tax will range from about $2,000 annually for multifamily homes under 1,500 square feet and roughly $3,000 for single-family homes above 1,500 square feet. The city’s projected budget gap is about $1.1 million in maintenance and $414,000 in services.

The tax will cover a range of needs, including park and open space management, lighting and street maintenance, police and fire protection and flood and storm management.

Developer Andy Mangano is expected to pay $57 million toward project-related infrastructure, according to a report by city consultant Economic & Planning Systems. He will need to be reimbursed through the special tax for infrastructure projects that aren’t part of his agreed upon “fair share” costs.

The special annual tax is expected to be implemented in the fiscal year 2018-2019 before new homes are constructed in late 2019 or early 2020. The tax will show up on property tax bills.

“The city’s policy is that development should pay its own way, and this is the practical application of that policy,” said Stephen Peck, Avila Ranch’s developer planning consultant. “The CFD is the only public finance tool that can be used to cover that gap.”

However, former city council candidate Mila Vujovich-LaBarre said at a City Council meeting Oct. 24 that she believes the special tax could price out some buyers.

“I just think this tax completely cuts into what the affordability was as this development was touted in front of the council,” Vujovich-Labarre said. “I see a $2,000 to $3,000 per year payment for someone who’s trying to get into affordable housing as being somewhat substantial.”

Property owners will still pay a 1 percent property tax with about 40 percent of that amount going to San Luis Coastal School District, about 35 percent to the county and the balance going various special districts. The city’s special tax will bring the combined amount to about 1.45 percent.

Peck said that efforts were made to keep costs down, and the tax — equating to about $200 per month — is similar to homeowners association fees elsewhere.

The part of the special tax that reimburses Mangano will expire in 2035-2036, while the payments for city services will continue in perpetuity.

Meanwhile, a lawsuit is pending against the city and developer that was filed in October by grassroots groups of residents claiming the planned project failed to “adequately disclose and mitigate project-related impacts,” including traffic, noise and light and air pollution.

City Attorney Christine Dietrick and Peck responded by saying that the environmental impacts were fully addressed over a three-year planning process that included a full environmental impact report.

This story was originally published November 8, 2017 at 6:10 PM with the headline "Homebuyers in Avila Ranch project will be hit with special $2,000-$3,000 tax — each year."