Scotts Valley council opens talks with county, fire district on financing tool to pay for town center infrastructure

Scotts Valley city leaders on Tuesday heard a consultant's feasibility analysis for creating an enhanced infrastructure financing district, or EIFD, and signaled consensus to continue partner outreach with Santa Cruz County and the Scotts Valley Fire Protection District to explore how the tool might help pay for town center infrastructure, affordable housing and regional transportation needs.

Joe Dominguez, a consultant from Cosmont, told the council the EIFD would not create any new tax for property owners but would designate a portion of future property-tax revenues from selected parcels and set that revenue aside for infrastructure and community benefits. "None of this involves creation of a new tax," Dominguez said. He presented scenario models showing a town-center-only boundary producing a relatively modest long-term revenue stream and a broader 236-acre boundary including housing-opportunity and pipeline-project sites that, with participating taxing agencies, could generate up to about $65 million in present-value revenue over a multi-decade term.

The analysis and council discussion repeatedly linked EIFD potential to the city's recently closed town-center land purchase and efforts to encourage private development there. The city manager said closing escrow on the 8-acre town-center parcel was a milestone that substantially changes the starting point: "Right now, if you think about our town center land that sits, you know, vacant, there's no tax basis for it. County is not receiving anything. The city doesn't receive anything," the city manager said.

County and fire leaders at the meeting asked governance and fiscal-impact questions. Monica Martinez, Santa Cruz County supervisor for the Fifth District, asked whether an agreement could expand the EIFD boundary into unincorporated county areas or whether a county partner could join without boundary changes. "There is absolutely flexibility to extend that, if desired, beyond the city limits," Dominguez replied, noting precedents where districts included both incorporated and unincorporated land.

Nicole Coburn, assistant county executive officer, reminded the council the county relies heavily on property tax revenues to fund mandated services and said county staff would weigh boundary, term and project choices against county fiscal needs. "The county is highly dependent on property tax," Coburn said. She asked specifically about the district term length and whether different partners might accept different term commitments.

Council members and the fire district board discussed governance, project lists and the degree of partner buy-in. Fire board member Darren Pashoda said the fire district has urgent facility needs and expressed interest in collaborative solutions: "Working collaboratively with the city, with the county potentially, and other agencies is huge because I think we need to stick together and be, again, forward thinkers in what's gonna happen not only today, but what's gonna happen in the future." Dominguez explained that governance is set in the enabling law and that the public financing authority that would run an EIFD must include at least five members, a majority of whom are elected officials from participating taxing entities, plus at least two public members.

Dominguez and staff described other common issues for jurisdictions considering EIFDs: (1) EIFDs tie up a portion of future property-tax revenue that would otherwise be unrestricted general-fund dollars, (2) bonds issued against EIFD revenue typically carry higher interest rates than some other municipal borrowing because bondholders lack a general-fund pledge, and (3) EIFDs require a transparent public process with hearings and protest rights. Dominguez also noted state-level grant programs increasingly score applicants more favorably when a local agency demonstrates a long-term revenue commitment like an EIFD.

After questions from council, county and fire representatives, the council signaled consensus for staff to pursue further engagement with Santa Cruz County and the Scotts Valley Fire Protection District this summer to refine boundary options, project priorities and the fiscal impact analysis. There was no formal binding vote; the mayor announced that council consensus had been reached for outreach and further study.

Next steps described in the meeting would include detailed fiscal-impact work on how much each taxing entity could reasonably contribute, further public outreach, and follow-up public hearings before any formation resolution would be brought back to the council or to partner boards.