Could the formation of a finance district solve Sebastopol’s infrastructure woes?

Sebastopol city officials are considering formation of a special taxing district that would funnel levies on new development — at least $25 million over 45 years — to fund repairs for the city’s most heavily used roads and buildings and upgrade its aging sewer and water infrastructure.

The step will take some political consensus, and that’s been hard to come by lately as City Hall confronts one of the more dire fiscal crises in years.

The funding mechanism, known as an enhanced infrastructure financing district, takes a slice of regular property taxes from new development projects completed within the district’s boundaries.

The funding occurs without imposing new taxes on existing commercial and residential developments or additional fees on new development. Rather, a greater share of future property taxes that would normally go to the city’s general fund is set aside for public projects or economic development that helps the community as a whole.

“One of the reasons to do an EIFD is if the area has potential for redevelopment, it has a cataclysmic effect,” Felicia Williams of Kosmont Companies, the consultant hired for the project, said. “Infrastructure spurs development.”

Santa Rosa is the only jurisdiction in Sonoma County with such a district. The districts have been available as a funding mechanism for California cities and counties since 2014 and are seen as a tool similar to redevelopment agencies, which were killed under Gov. Jerry Brown in 2012.

For Sebastopol, the formation of the district would also enable the city, which is operating at a $669,000 deficit for the current fiscal year, to partner with Sonoma County, as Supervisor Lynda Hopkins seeks to create a district that includes both the city and unincorporated west Sonoma County.

Taking advantage of future development

A key question hanging over the proposal is the shape of any new taxing district.

Williams said the boundaries should include property that has the potential for high value development or redevelopment — a target area that would likely include corridors sprouting from downtown. The boundaries don’t have to be contiguous, meaning the lines can more or less be gerrymandered throughout the city and west Sonoma County.

As such, the district could include Healdsburg Avenue, Bodega Avenue, Sebastopol Avenue and Gravenstein Highway within city limits.

Staff from Supervisor Hopkins’ office said the municipal advisory councils serving her Fifth District will be discussing potential boundaries in their upcoming meetings.

Beyond the names of a few main corridors, the boundaries of any future district are still nebulous, including to some members of the city council.

“Where are the lots that we can develop?” asked Council member Jill McLewis during the Sept. 3 city council meeting. “Because I walk. I’m all over the city every day and I’m just dumbfounded by these lots we can suddenly develop. I mean, I’m serious. I’d like to know where they are.”

City attorney Alex Mog said the enhanced infrastructure funding district should be viewed more as a long-term tool.

“There might not be any development tomorrow,” he said. “But there might be redevelopment over the horizon. Twenty years from now, something could be developed.”

Single-family homes are typically left out of such taxing districts, Williams said, as are government buildings since the latter don’t generate property taxes.

City lots with redevelopment potential that could be in the new district include the Redwood Market Place on Highway 116, banks and the closed laundromat on Main Street.

What would taxes go?

A future district that includes both the city and west Sonoma County could bring in around $125 million, giving the city access to considerably more in property taxes than if it formed the district by itself.

“If the city and county form it together, the city would get county property taxes,” Williams, the city consultant, said.

But the money would not be just Sebastopol’s to spend. By joining forces, the city and county would establish a public financing authority comprising city council members, supervisors and members of the public. This board would be charged with deciding how the funds would be spent.

“The money can be used on anything with a useful life of 15 years,” Williams said, adding that projects don’t have to fall within the boundaries of the district.

Such desired projects within the city include affordable housing, a library, city hall, firehouse, community center, upgraded downtown corridor, flood control improvements, unfunded roadway projects or sewer and water infrastructure upgrades.