Commercial Redevelopment Public-Private Financing 101

Transcription

1 Commercial Redevelopment Public-Private Financing 101 presented to ICSC Colorado Alliance presented by Daniel R. Guimond Economic & Planning Systems Carolynne White Brownstein Hyatt Farber Schreck October 14, 2010

2 Perspectives: Public v. Private Increased/more sophisticated public demand for infrastructure and services Changes in tax policy more public improvements financed by private developers Result More public/private partnerships, lines blurred Note to developers: public $$ has strings attached Someday, all this will be infrastructure. Commercial Redevelopment Public-Private Financing 101 2

3 Financing - Solutions Capital Stack financing multiple sources Debt Equity Public/private partnerships Phased financing/construction Fee waivers/offsets Incentives affordable housing green building transit oriented development Commercial Redevelopment Public-Private Financing 101 3

4 Public Sector Financing Roles Most large scale redevelopment projects have some public sector assistance and/or financial support Many smaller projects do as well if: In a designated URA plan area Meet other identified public policy objectives Common public roles: Land contributions (sale or equity partner) Land assembly and redevelopment (urban renewal) Public financing Tax increment financing (URA, DDA) Land secured financing (Metro District) Other fees and charges (PIF, Sales Fee) Commercial Redevelopment Public-Private Financing 101 4

5 Example Public Cost Categories Land Land purchase Demolition and remediation Assembly and relocation costs Structured parking Open to the public Does not include residential Infrastructure Roads and ROW Utilities and drainage Parks, plazas and open space Pedestrian bridge Commercial Redevelopment Public-Private Financing 101 5

6 Political, Legal, and Regulatory Relationships Statutory Authority Political Will IRS Regulations Commercial Redevelopment Public-Private Financing 101 6

7 Redevelopment Public Financing Tools Special Authorities Urban Renewal Authority (URA) Downtown Development Authority (DDA) Special Districts Title 32 Metropolitan District Private Financing Tools Public Improvement Fee (PIF) Enhanced Sales Tax Incentives Program (ESTIP) Commercial Redevelopment Public-Private Financing 101 7

8 Urban Renewal Authority (URA) Municipal corporation separate entity from City Eliminate slum or blight by purchasing, rehabilitating, and selling land for urban renewal or redevelopment Council must find that urban renewal plan will afford maximum opportunity, consistent with the sound needs of the municipality as a whole, for the rehabilitation or redevelopment of the urban renewal area by private enterprise. (C.R.S (4)(c)) Has condemnation powers Authority boundaries same as city boundaries, but designated urban renewal area can be located anywhere - downtowns, commercial corridors, defunct shopping centers, even greenfields Commercial Redevelopment Public-Private Financing 101 8

9 Urban Renewal Authority (URA) - continued Financing TIF Bonds issued by the Authority Maximum of 25 years No taxing authority Formation Petition of 25 electors to form URA Blight study Urban renewal plan Commercial Redevelopment Public-Private Financing 101 9

10 Urban Renewal Authority (URA) Board of Directors Board of 5 to 11 members appointed by mayor/council City Council can appoint itself as Board Limitations Blight finding 4 of 11 possible criteria listed in the Statutes 5 if condemnation is to be used 1 with landowner consent Ability to collect TIF limited to 25 years by statute Collection of property tax increment requires county impact report Commercial Redevelopment Public-Private Financing

11 Urban Renewal Projects Recent Colorado examples: Streets at Southglenn, Centennial Downtown Denver Pavilions Lowenstein/Tattered Cover Redevelopment, Denver Belmar, Lakewood Centerra, Loveland Buckingham Redevelopment, Aurora Arista TOD Development, Broomfield Commercial Redevelopment Public-Private Financing

12 Downtown Development Authority (DDA) Quasi-municipal corporation Plan, propose and implement development and redevelopment plans in central business districts Financing Property and sales TIF for up to 30 years (plus rolling 20 years -- HB ) Property tax of up to 5 mills imposed by City Formation Initiated and approved by City Council Plan to determine need and boundaries Election by majority of property owners, business owners, and residents within district Commercial Redevelopment Public-Private Financing

13 Downtown Development Authority (DDA) Board of Directors 5 to 11 members Majority must live or own property in the District One member of Council must be on Board Limitations Limited to central business districts (CBDs) can only be one DDA per City Cannot condemn property Revenue bonds are issued on its behalf by the City Bonds subject to TABOR even if DDA is de-bruced, because City is issuer Commercial Redevelopment Public-Private Financing

14 DDA Redevelopment Projects Most DDAs are formed for downtown-wide improvements and marketing Project specific DDA redevelopment is new Denver Union Station DDA Formed in 2008 to help finance DUS project 40-acre site including 19-acre station property and adjacent TOD area $717M to $853M in TIF revenues Commercial Redevelopment Public-Private Financing

15 Tax Increment Financing Directs the incremental taxes within a URA or DDA to the Authority to be used for eligible expenses Applies to property taxes from all taxing entities City can apply its local sales and/or lodging taxes Date of adoption of plan establishes the Tax Base Example Existing AV is $1.0 million as of tax year ending prior to adoption of plan Redevelopment project increases AV to $10.0 million Taxes on $1.0 million continue to go to city, county, school district Taxes on $9.0 million go to authority Commercial Redevelopment Public-Private Financing

16 Tax Increment Financing Commercial Redevelopment Public-Private Financing

17 Title 32 Metropolitan District Quasi-municipal independent special district Powers Finance infrastructure improvements Generally formed by developer to issue up front revenue bonds to be repaid by future property owners Can form multiple districts for residential and commercial properties to address Gallagher assessment rate disparities Financing Mill levy property taxes on all development within district Can be for up to 50 years Formation City approved service plan Election approval by property owners within district Governed by elected board of directors Commercial Redevelopment Public-Private Financing

18 Title 32 Metropolitan District Limitations 50 mill limit established by State Cannot levy sales taxes Needs to address two or more types of improvements Typically developer controlled Relatively high administrative burden Example Landmark Metropolitan District Separate residential and commercial districts 15 mills residential and commercial Complements $16.9 M in ESTIP from City ESTIP revenues back Metro District bonds Commercial Redevelopment Public-Private Financing

19 Public Improvement Fee (PIF) Private development improvement fee Powers Imposed by developer on retail/services tenants to finance public improvements Established by development covenant or lease agreement Financing Similar but in addition to sales tax rate City can reduce its sales tax rate to lower total impact on buyers ( PIF plus waiver ) Can be used to back city- or metro district- issued revenue bonds Limitations Generally most applicable to major retail projects Part of the cost of sales and services so subject to sales tax Sensitivity to competition Commercial Redevelopment Public-Private Financing

20 Example PIF - Belmar Lakewood 2.5% PIF on retail and services City initially waived 1% of 2% sales tax rate Has since reinstated total rate Revenue bonds for $165M in public improvements backed by TIF, PIF, and metro district revenues Commercial Redevelopment Public-Private Financing

21 PIF Rates and Total Tax + PIF Burden Project Belmar Colorado Mills Creekside Shopping Center Pueblo Crossing Retail Center Promenade Shops at Centerra The Broadmoor Glenwood Meadows Prairie Center PIF 2.5% %.5% capped at $1.5M 1.25% Also a Retail Sales Fee of 1% 2.25% 1.5% 1% Total Tax + PIF Burden 8.1% 7.0% 8.1% 7.9% 7.7% 11.65% 9.7% 8.3% Commercial Redevelopment Public-Private Financing

22 Enhanced Sales Tax Incentive Program (ESTIP) ESTIPs or more generic sales tax shareback agreements Powers Based on municipal home rule powers Primarily to attract or retain regional retail projects Can support other economic development goals Similar to sales tax increment financing (TIF) Not limited to urban renewal or downtown settings Commercial Redevelopment Public-Private Financing

23 ESTIPs and Sharebacks Financing City agrees to share a portion of future sales tax revenues with developer to pay for eligible public improvements Usually annual payment reimbursements Can be used for debt service on revenue bonds issued by a metro district Limitations Basis for determining eligible funds = political will Most cities limit shareback to 50% of net new sales Specify maximum amount and payback period Issue of cannibalization Commercial Redevelopment Public-Private Financing

24 Colorado cities with formal ESTIP policies/codes Aurora Broomfield Centennial Evans Glenwood Springs Greenwood Village Lone Tree Northglenn Sheridan Silverthorne Wheat Ridge Many other cities have agreed to project-specific sharebacks as part of a development agreement Commercial Redevelopment Public-Private Financing

25 ESTIP Example - Greenwood Village Landmark Project I-25 and Orchard High density TOD 301 high rise luxury condos 160,000 sq ft specialty retail center ESTIP agreement for $16.9M in public improvements Primarily roads and structured parking 50% of sales tax for 20 years Commercial Redevelopment Public-Private Financing

26 ESTIP Example - Silverthorne Target 124,000 sq ft major store opened in 2003 Estimated $1.5M in new sales tax to $6.2M base $2.34M ESTIP for public improvements and façade enhancements over 8 years Town provided 50% of the eligible funds 60% of the Town s 4% tax rate = $400,000/yr Paid off in 2009 Commercial Redevelopment Public-Private Financing

27 Public/ Private Roles and Responsibilities Roles City URA /DDA Metro District Master Developer Vertical Developers Zoning Subdivision Land Equity $ Construction Finance Permanent Finance Tenants/ Residents Public Amenities Trunk Infrastructure In-Tract Infrastructure Vertical Construction Operations Maintenance Primary Responsibility Partial Responsibility Commercial Redevelopment Public-Private Financing

28 Discussion Questions? Comments Contact Carolynne C. White Daniel R. Guimond Commercial Redevelopment Public-Private Financing