INTRODUCTION TO TAX INCREMENT FINANCING TOOLS

Transcription

1 INTRODUCTION TO TAX INCREMENT FINANCING TOOLS CALED ANNUAL TRAINING CONFERENCE D E B B I E KERN K E YSER MARSTO N A S S O C I ATES, INC. March 22, 2017

2 KMA EXPERIENCE Adopted IFDs/EIFD/IRFD Rincon Hill, San Francisco (2011) Legoland, Carlsbad (2000) Pier 70, San Francisco (2016) Treasure Island, San Francisco (2017) Current EIFD/IRFD Assignments Otay Mesa EIFD West Sacramento Citywide EIFD Placer County IRFD Broadway Corridor, Sacramento EIFD Mission Rock, San Francisco WEIFD 2

3 PRIMARY POST REDEVELOPMENT TAX INCREMENT FINANCING TOOLS Enhanced Infrastructure Financing Districts (EIFDs) Community Revitalization and Investment Authorities (CRIAs) Infrastructure and Revitalization Financing Districts (IRFDs) variant of IFD 3

4 WHAT ARE TAX INCREMENT FINANCING TOOLS? Voluntary diversion of future property tax revenues from cities/counties/taxing agencies to a special pool to fund: Infrastructure public facilities, and eligible economic development projects School districts cannot participate 4

5 KEY DISTINCTIONS BETWEEN NEW TOOLS AND REDEVELOPMENT Voluntary participation by taxing agencies Reduced share of property tax increment revenue RDAs retained 80% of tax increment EIFDs/CRIAs typically funded by City s or County s share Powers/uses are more limited (except for CRIAs) Voter approval required to issue EIFD bonds Fewer affordable housing requirements (except for CRIAs) No blight findings for formation, but CRIAs have socioeconomic requirements 5

6 QUALIFICATION REQUIREMENTS FOR CRIAS Disadvantaged Communities per State EPA; or Former military base; or At least 80% of property must have Median Household Income that is less than 80% of the State, County or Citywide household income and three of the following four: Unemployment rate that is 3% higher than Statewide average Crime rate that is 5% higher than Statewide average Deteriorated or inadequate infrastructure Deteriorated commercial or residential structures 6

7 HOW DOES FUNDING WORK? Similar to Redevelopment TIF a portion of the growth in annual property tax revenues are deposited into district No new tax or any other liability on property owner 7

8 $Assessed Value (AV) TAX INCREMENT - CONCEPT Increment = Increase in AV over the base City and other taxing agencies may contribute their share of increment to District Base Year Assessed Value: revenue is allocated to taxing agencies Year 8

9 REVENUE GENERATING CAPACITY Share of increment District Share of Property Tax Increment Placer County 22% West Sacramento 48% Sacramento 25% Otay Mesa 14.2% San Francisco (City and County) 65% Revenues can be increased by also depositing Property taxes in-lieu of vehicle license fees Residual RPPTF funds Assessment district funds 9

10 EXAMPLE ALLOCATION OF TAX INCREMENT City share: 15% = $15,000 75% of City to EIFD = $11,250 50% of County to EIFD = $11,000 Total to EIFD = $22,350 Other Taxing Agencies 63% = $63,000 County share: 22% = $22,000 County share 22% = $22,000 Balance to fund service costs Example: TI = $100,000 Allocation to EIFD 10

11 HOW DOES FUNDING WORK? Revenue term: EIFD: 45 years from approval of bond issuance or loan by public agency CRIA: 45 years from adoption Initially a back end source of funding Issuance of bonds subject to: 55% voter approval (EIFD) Protest (CRIA) 11

12 WHAT ARE ELIGIBLE USES OF EIFD FUNDS? Tangible property useful life of at least 15 years Broad list of eligible improvements of community wide significance Infrastructure and public facilities Environmental remediation Affordable housing Private Industrial buildings Transit priority projects Sustainable community projects Cannot fund maintenance or services Planning and design work are eligible May be outside of the boundaries of the district no nexus required Must be identified in IFP 12

13 ADDITIONAL POWERS OF CRIAs Eminent Domain 12 years Convey land for economic development purposes Direct business assistance for industrial and manufacturing uses Expenditures must be within boundaries of Revitalization Area 13

14 EIFD FORMATION PROCESS Adopt Resolution of Intention to create District Establish Public Finance Authority (EIFD) Prepare Infrastructure Financing Plan (IFP) Send IFP to landowners and affected taxing entities All participating taxing agencies must adopt a resolution approving IFP Hold public hearing to adopt IFP and Form District No voter election required for adoption (EIFD) 14

15 WHAT ARE THE KEY COMPONENTS OF AN INFRASTRUCTURE FINANCING PLAN? Map of the proposed district Description of facilities to be funded by the District The goals to be achieved by the District Projection of tax revenues to be deposited into the District A plan for financing the facilities, including intent to incur debt A limit on the total number of dollars of taxes that may be allocated to the District An analysis of the fiscal impact of the district on the City An plan for replacing housing that is intended to be removed during the course of new construction within the District 15

16 CRIA FORMATION PROCESS City or County establishes the Community Revitalization and Investment Authority or Joint Powers Authority CRIA Prepare Draft Revitalization Plan Send Draft Revitalization Plan to landowners Hold 3 public protest hearings Adopt Revitalization Plan by ordinance 16

17 KEY COMPONENTS OF COMMUNITY REVITALIZATION AND INVESTMENT PLANS Statement of goals and objectives of the Plan Description of deteriorated/ inadequate infrastructure and construction program Affordable housing program Program to remedy hazardous materials Program to provide funding to facilitate economic revitalization Fiscal analysis over 5-year horizon, including bonding Provision for tax increment financing, if CRIA so elects Time limits 30 years to establish debt; 45-years to receive increment Two-Year replacement housing requirement Prohibition on reduction of total number of housing units occupied by low income households over life of plan 17

18 OPTIMAL ENVIRONMENT Area with significant growth potential Strong voter support Jurisdiction receives a large share of base property tax and can add other sources Growth is dominated by land uses requiring limited City services Area with limited or no RDA debt 18

19 KEY CONTRASTING FEATURES EIFD CRIA IRFD Governance Public Financing Authority CRIA or JPA Governing body of Jurisdiction Sources of Revenue Voter approval for formation Area Qualification Requirements Use of funds TI; RPTTF residual, VLF, assessment district Same as EIFD TI and RPTTF None Subject to protest vote Yes 2/3 None Broad list of public facilities Yes income; crime, etc. EIFD + financial subsidies + eminent domain Same as EIFD Voter approval for bonds Yes 55% No Yes 2/3 Revenue term 45- years from approval of bonds 45 years from formation Ability to annex project areas Affordable housing Requirements 40 years from specified date can be tied to tax increment threshold Not addressed Not addressed Yes No revenue set-aside; 100% of units constructed by District must be Low/Mod Most stringent 25% revenue set-aside; 15% to 30% of units No revenue set-aside; 20% of units constructed by District must be Low/Mod Reporting Requirements Audit every two years after issuance of debt Substantive annual reporting Annual report 19

20 HOW TO CHOOSE WHICH TOOL IS BEST FOR YOUR COMMUNITY CRIA may be best if: Area meets CRIAs eligibility requirements Desire to use broad economic development powers Desire to meet stringent affordable housing requirements EIFD may be best if: There are 12 or more registered voters within the District Desire to deposit property tax in-lieu of VLF revenues, or CFD or assessment district revenues into District No desire to issue bond debt IRFD may be best if: There are fewer than 12 registered voters within the District The District is comprised of one or several new development projects There are multiple phases of new development, spanning different time periods No desire to dedicate VLF or other revenues only tax increment 20

21 CASE STUDY: WEST SACRAMENTO Intend to form single EIFD covering 4,100 acres, across city Full range of land uses Will incorporate Bridge District IFD City s General Fund receives 48% of property tax increment Key consideration is balance of funding for infrastructure and municipal services City receives approximately $5 million of residual RPTTF funds that can serve as seed money for improvements until new development starts 21

22 CASE STUDY: WEST SACRAMENTO 22

23 CASE STUDY: PLACER COUNTY 8,900 acre mixed use area Fewer than 12 registered voters County receives approximately 22% of property tax increment Several large property owners Intend to form project areas and annex to IRFD over time, based on schedule of development 23

24 CASE STUDY: PLACER COUNTY 24

25 CASE STUDY: TREASURE ISLAND 8,000 housing units (27% affordable) 500 hotel rooms + 500K sf of retail/office IRFD will fund infrastructure and affordable housing IRFD being formed to implement 2011 DA IRFD consists initially of 5 project areas, adopted in 2017 Maximum aggregate bond principal amount of $780M (nominal) from Initial Project Areas Separate start dates for each project area, based on tax increment thresholds For example, project area one will start when tax increment exceeds $150,000 per year 25

26 CASE STUDY: TREASURE ISLAND 26

27 CALED SAN DIEGO DANIEL ROFOLI, CONSULANT COMMUNITY DEVELOPMENT COMMISSION OF THE COUNTY OF LOS ANGELES March 2017

28 MISSION & GOALS Building Better Lives & Better Neighborhoods Strengthening Neighborhoods Supporting Local Economies Empowering Families Promoting Individual Achievement COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

29 TOPICS LOS ANGELES COUNTY GUIDELINES FOR PARTICIPATION IN MUNICIPAL TAX INCREMENT PROGRAMS NEW LEGISLATION AUTHORITY FOR PROPERTY ACQUISITION AND DISPOSITION (AB 806, 2016) COMMUNITY DEVELOPMENT BLOCK GRANT REAL PROPERTY ACQUISITION AND DISPOSITION COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

30 TAX INCREMENT BACKGROUND 88 Incorporated Cities In Los Angeles County 70 Former Municipal Redevelopment Agencies County utilized Redevelopment on small scale since the 1970s to address seriously blighted areas COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

31 TAX INCREMENT BACKGROUND (CONT D.) LA County s mixed opinions on tax increment: The County became concerned about loss of property taxes from redevelopment agencies County would heavily scrutinize blight findings and would not hesitate to litigate The County engaged in a joint redevelopment project with the City of Los Angeles for a seriously blighted area while simultaneously suing the City over a non-blighted project area proposal County was officially neutral on ABx1 26 COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

32 COUNTY PARTICIPATION IN TAX INCREMENT State Property Tax Increment Programs provide for County financial participation Community Revitalization and Investment Authority (CRIA) Enhanced Infrastructure Financing Districts (EIFD) Joint City-County participation EIFD, Government Code CRIA, Government Code School Districts are prohibited from participating COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

33 COUNTY PARTICIPATION IN TAX INCREMENT What portion of incremental property tax money is available? Incremental property tax growth following CRIA/EIFD adoption County Auditor-Controllers distribute property tax to taxing entities (Cities, County, Schools) Tax Rate Areas (TRAs) state how much property tax is received by each entity Los Angeles County share overall is 24% of property taxes City share ranges widely from 10% to over 30% (AB 8, 1979) COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

34 COUNTY PARTICIPATION IN TAX INCREMENT Law Requires County Representation on the Board Official County guidelines for participation Not formalized or adopted yet Decisions made on a case-by-case basis County CEO will evaluate and make recommendation County General Fund revenues only (probably) COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

35 Financial Criteria: COUNTY PARTICIPATION IN TAX INCREMENT Must have clear vision of actual development projects to be undertaken with tax increment Project(s) potential increment and eventual financial or other benefits to the County Will the proposed projects be feasible without County participation? Gap analysis required The but for test - But for the County s participation, the project(s) are infeasible COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

36 COUNTY PARTICIPATION IN TAX INCREMENT Do the proposed projects meet County goals? Affordable Housing / Homeless Job Creation Local Hiring Prevailing Wage Community Participation COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

37 ECONOMIC OPPORTUNITY ASSEMBLY BILL 806 (2016) Disclaimer Your CALED Legislative Action Committee Restores important local government authority lost by elimination of redevelopment Grants powers to cities and counties to acquire, sell or lease property to help create an economic opportunity Allows for land write downs to subsidize projects COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

38 ECONOMIC OPPORTUNITY ASSEMBLY BILL 806 (2016) (CONT D.) What projects qualify as an economic opportunity? Agreements that will create at least one full time job for every $35,000 in assistance after project completion Agreements that will increase property tax by at least 15% compared to the year prior to property acquisition Agreements to create affordable housing COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

39 What projects qualify as an economic opportunity? (continued) Projects that meet the goals of sustainable community plans (Chapter 728, Statutes of 2008) Transit priority projects (50%+ residential) PRC) Eminent Domain ECONOMIC OPPORTUNITY ASSEMBLY BILL 806 (2016) (CONT D.) AB806 does not restore redevelopment eminent domain powers Exception for Successor Agency properties COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

40 What projects qualify as an economic opportunity? (continued) Projects that meet the goals of sustainable community plans (Chapter 728, Statutes of 2008) Transit priority projects (50%+ residential) PRC) Eminent Domain ECONOMIC OPPORTUNITY ASSEMBLY BILL 806 (2016) (CONT D.) AB806 does not restore redevelopment eminent domain powers Exception for Successor Agency properties COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

41 ECONOMIC OPPORTUNITY ASSEMBLY BILL 806 (2016) (CONT D.) Requires a noticed public hearing of City Council or Board of Supervisors, to adopt a Resolution Requires preparation of a Report including: Copy of the proposed purchase, sale, or lease Cost of the agreement (all costs) Explanation of how the transaction will create economic opportunity COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

42 ECONOMIC OPPORTUNITY ASSEMBLY BILL 806 (2016) (CONT D.) Summary Report continued... For sales or leases (compare to old H&S 33433) Estimated value of interest to be conveyed If sales/rent price is below FMV (write down) Value of Property as is vs. value of property with constraints and requirements imposed by Disposition and Development Agreement (DDA) If the sale price or total rental amount is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best use, then the city, county, or city and county shall provide as part of the summary an explanation of the reasons for the difference. COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

43 ECONOMIC OPPORTUNITY ASSEMBLY BILL 806 (2016) (CONT D.) Transaction requires adoption of a Resolution by the City Council/County Board of Supervisors For sale or lease, the Resolution must find either: Consideration is not less than fair market value at highest and best use Consideration is not less than fair reuse value at the use and with the covenants and conditions and development costs authorized by the sale or lease COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

44 ECONOMIC OPPORTUNITY ASSEMBLY BILL 806 -IMPLICATIONS AB 562 (2013) Requires reporting of Economic Development Subsidies GC (Referenced in AB 806) Requires approval by Council/Board prior to granting an economic development subsidy of over $100,000 Requires making certain information about the subsidy available to the public and posted on the internet Requires issuing a report and holding a public hearing within term of the subsidy Prevailing Wage for subsidy COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

45 CDBG REAL PROPERTY ACQUISITION AND DISPOSTION Community Development Block Grant (CDBG) Federal Department of Housing and Urban Development (HUD) CDBG targeted for elimination in the President s budget proposal Not dead yet! Congress has defeated previous attempts to eliminate the program COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

46 CDBG REAL PROPERTY ACQUISITION AND DISPOSTION Acquisition of Real Property (24 CFR ) Must meet a national objective (24 CFR ) Benefits to low- and moderate- income (LMI) residents (jobs, area benefit) Slum/Blight area (requires local designation, or documentation of deteriorated structures) Urgent Need (Threats to health and welfare of community) Other permitted Economic Development activities Business rehabilitation, revolving loan funds, technical business assistance, job training, public improvements, microenterprise assistance (24 CFR ) COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

47 CDBG REAL PROPERTY ACQUISITION AND DISPOSTION Disposition of Property (24 CFR ) Holding (maintenance) and disposition (legal, surveys, marketing) costs are eligible expenses as long as national objectives are met Any subsidy (sale or lease at less than FMV) to a for-profit business for economic development purposes needs to meet the Public Benefit Test COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

48 CDBG REAL PROPERTY ACQUISITION AND DISPOSTION Public Benefits Test Two basic ways to satisfy for an individual project (24 CFR ) Create or retain one full-time equivalent job for every $35,000 (or $50,000 single project) subsidy $350 ($1,000 single project) per low- and moderate- income person to which goods or services are provided by activity Trade area for a market or retail business Demographic information available from HUD, utilizes American Community Survey COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY

49 SUMMARY - SUMMARY County participation with City, tax increment SB 108 ( Meeting the Challenge session) CDBG (Save CDBG) Daniel Rofoli, Consultant Community Development Commission of the County of Los Angeles Daniel.Rofoli@lacdc.org COMMUNITY DEVELOPMENT COMMISSION OF LOS ANGELES COUNTY