Transcript Group Presentation - Association of Defense Communities

Infrastructure Finance Districts (IFDs) –
The California Case Study
Tuesday - August 7, 2012
12:30 pm to 1:45 pm
Panelists
 Mr. Michael Wright, Director, Community Reuse
Planning, City of Concord, CA
 Robert M. Haight, Jr., Partner, Goodwin Procter, Los
Angeles, CA
 Suheil Totah, Executive Vice President, Lennar Urban
Development, San Francisco, CA
Moderator
 Ms. Kristie Reimer – Associate Vice President,
ARCADIS–US, Marina, CA
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Background
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Redevelopment project financing is complex, and adequate funding for
infrastructure improvements are critical to overall project success.
In February 2012, 400 redevelopment agencies throughout the State of
California were abolished.
Redevelopment agencies used a portion of property tax money (tax
increment) in partnership with developers to encourage development in
blighted areas.
This equated to billions of dollars per year in tax revenues – a portion of
which were allocated to support redevelopment on former military
installations.
Reuse and redevelopment of former military bases is a complicated
process, and in now in California it is even more challenging without these
fiscal tools.
LRAs are promoting State law amendment to provide an easier process to
create Infrastructure Financing Districts (IFDs); allowing a percentage of
tax increment used to fund public infrastructure improvements.
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Focus of the Panel
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This session will provide details on IFDs, their applicability and potential
benefits to BRAC sites.
Various perspectives will be presented:
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Session Outline
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Local Reuse Authority viewpoint and realities
Legal interpretations and aspects
Developer experience and outlook
Background / Impact from loss of Redevelopment
IFD Options and Application
Legislation
Implications to Redevelopment
Panelist will engage in an active discussion and encourage an open Q&A
discussion
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Impact from Loss of Redevelopment
 Loss of tax increment for infrastructure +
affordable housing contribution by
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municipalities
 Impact is to recently closed bases and early
round closures that have progressed to issuing
bonds
 Reduced attractiveness of reuse of closed
bases
 Adds years to development build-out
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IFDs
 What are they?
 What can they do?
 Are they a substitute for RDAs?
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IFDs:
The Drew Barrymore of Public Finance
Drew Barrymore
IFDs
Drew is Offspring of Famous Parentage
(i.e., the Barrymore family).
IFDs are Offspring of Famous Parentage
(i.e., Mello-Roos CFDs and RDAs).
At a young age, Drew made a movie (E.T.)
that has thrilled children for decades.
At a young age, IFDs financed a theme park
(Legoland) that has thrilled children for
decades.
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After early success, Drew fell into obscurity. After early success, IFDs fell into obscurity.
Drew went through rehab to fix her
problems.
IFDs now going through rehab
(legislatively) to fix its problems.
Drew rediscovered in her early 20’s.
IFDs rediscovered in its early 20’s.
Drew marked her comeback taking over role
made famous by another (Farrah Fawcett) in
reboot of well-known franchise (Charlie’s
Angels).
IFDs mark its comeback by taking over role
made famous by another (RDAs) in reboot
of well-known financing vehicle (tax
increment).
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IFDs
 IFD legislation enacted in 1990.
 Only two IFDs in existence:
 City of Carlsbad (Legoland Improvements)
(early 90’s)
 City of San Francisco (Rincon Hill) (2011)
 Hybrid of Mello-Roos CFD Law and RDA
Law.
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Formation of IFDs
(Like a CFD)
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IFDs
CFDs
Yes
Yes
Report
Infrastructure Financing
Plan (IFP)
(very detailed)
Community Facilities
District Report
(very simple)
Public Hearing
60 days notice after IFP
30 days notice after ROI
Resolution of Formation
Yes
Yes
Resolution Calling Election
Yes
Yes
Resolution of Intention (ROI)
(to form IFD and to authorize
issuance of bonds)
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Formation of IFDs
(Like a CFD)
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IFDs
Waiver of Election Time
and Formalities?
Qualified Electors
CFDs
100% of Qualified Electors 100% of Qualified Electors
Registered Voters if 12 or
more in territory 90 days
prior to public hearing;
otherwise Landowners.
Same
Election
(on IFD formation and to
authorize issuance of bonds)
Ordinance
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2/3 Vote
of Qualified Electors
Voting
Same
Yes (to create IFD)
Yes (to levy special taxes)
Financing Method
(Like an RDA)
IFDs
RDAs
Tax Increment
Tax Increment
(of Issuer and Consenting
Taxing Entities Only)
(of All Taxing Entities and
ERAF)
30 years
Up to 45 Years
May not be formed over
property that is, or ever
was, in a RDA Project Area
N/A
Pass-Through Agreements
No
Yes
Housing Set-Aside
No
Yes (20%)
Revenue Source
Term of Tax Increment
Location
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IFDs
(Unlike an RDA)
 Participation in an IFD is 100% voluntary:
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 Tax increment that is usually paid to an “affected
taxing entity” may NOT be allocated to an IFD
without the affected taxing entity’s explicit
approval.
 Education districts may not participate in IFDs.
 ERAF not allocated to IFDs.
 IFDs formed only by City or County.
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Other IFD Restrictions
 Facilities
 Public Capital Facilities only (no private
facilities).
 Useful Life of 15 Years or greater.
 Finding of Community-Wide Significance.
 Finding that Facilities benefit an area larger
than the IFD.
 Only “completed” Facilities may be acquired.
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Other IFD Restrictions
 Housing
 Like RDAs:
 Housing that is destroyed by development must
be replaced.
 Unlike RDAs:
 No tax increment set aside.
 If the IFD finances public housing, then 20% of
units must be set aside for affordable housing.
 No Eminent Domain powers.
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So Why Aren’t IFDs More Popular?
 IFDs can’t be formed in a former RDA
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project area.
 Voluntary nature of IFDs drastically
reduces tax increment amounts.
 30-year life limits bond financing capacity.
 Less flexible than RDAs.
 More complicated than CFDs.
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Infrastructure Financing Districts
Alternative to Redevelopment
 Existing sections of California Government Code and Health
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Safety Code allow for formation of IFD
 Existing law is restrictive and cumbersome in terms of formation
and operation of a District
 Six basic goals for change
 Waive existing District formation restrictions
 Streamline formation requirements
 Extend term of the District
 Match affordable housing requirements to Redevelopment
 Expand definitions for use of funds
 Affected tax entities control
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Redevelopment/IFD Comparison
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Redevelopment
IFD Scenario 1
City share only
IFD Scenario 2
City + County
IFD Scenario 3
City/County/ERAF
780,000,000
84,420,000
335,000,000
387,920,000
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Legislative “Fixes” in the Works
 AB 2144 (Perez)
 Renames IFDs “Infrastructure and Revitalization
Financing Districts”.
 Removes RDA Project Area restriction.
 Extends tax increment life to 40 years from date of
Ordinance, or such later date as set forth in
Ordinance.
 Allows certain private facilities, including housing.
 Lowers vote to 55% (from 2/3).
 No vote required for former military bases under
certain circumstances.
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Legislative “Fixes” in the Works
 SB 214 (Wolk)
 Creates new “Public Financing Authority” to be
appointed by Issuer.
 Removes RDA Project Area restriction.
 Extends tax increment life to 40 years.
 Eliminates voting requirement for formation and bond
authorization.
 Allows for tax increment to be used for maintenance
of constructed facilities.
 Imposes public accountability measures.
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Legislative “Fixes” in the Works
 SB 1156 (Steinberg)
 Creates new “Sustainable Communities Investment
Authority” (SCIA) as a substitute for RDAs (not IFDs).
 For transit oriented and sustainable communities only
through Metropolitan Planning Organizations
(MPOs).
 SCIA formed by County, or as joint powers agency
with City and County.
 SCIA has all powers of an RDA.
 If joint powers agency, tax increment generated from
both City and County (but not ERAF).
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