Transcript Entitlements and Governmental Agreements: What you need to

Public Infrastructure:
New Tools, New Opportunities
Eric M. Braun
Partner
K&L Gates
Overview
I.
Introduction
II.
Special Assessment Districts
III.
Tax Increment Financing
IV.
Development Agreements
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I. Introduction
 Public infrastructure continues to deteriorate
 Citizens demand higher levels of service, amenities
and improved infrastructure
 Tax revenues continue to decline
 In order to: deliver higher levels of service; meet
citizen demands improve existing infrastructure, all
with less tax revenue,
 Must use of new financing techniques
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http://www.ncruralcenter.org/water2030/index.html
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http://www.ncruralcenter.org/water2030/index.html
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II. SAD Background

On August 3, 2008, Session Law 2008-165 was signed into law authorizing Special
Assessment Districts.
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Langtree at the Lake in Mooresville
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SADs are initiated by a petition of at least a majority of owners constituting 66% of
the assessed value of the proposed district and created by a Town, City, or County to
finance public improvements benefitting the district.
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Assessments are paid in annual installments, and the installments are used to pay
debt service on assessment bonds.
 The following types of facilities are eligible
to be financed through an SAD:
 Sanitary sewer systems
 Storm sewers and flood control facilities
 Water Systems
 Public transportation facilities
 School facilities
 Streets and sidewalks
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Legislative effort to expand potential uses of SAD’s
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SAD Bond Structure Overview

SAD bonds are non rated, land secured debt often referred to as “dirt bonds”.
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Debt service on the bonds is paid by the owners of benefited property within the
SAD.
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Bondholders look to the underlying value of the land as security for the bonds.
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Up to two years of capitalized interest can be funded from bond proceeds. During the
capitalized interest period, no debt service payments are made by owners of
property within the SAD.
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A reserve fund is funded from bond proceeds. The reserve fund is used to ensure
timely payments to bondholders in the case of delinquent installments.
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SAD Bond Structure Overview
(continued)

The cost of district formation and issuance of bonds is payable from bond proceeds.
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All administrative expenses related to the SAD are included in the assessment
installments paid by property owners within the SAD. Therefore, the SAD is fiscally
neutral to the Town.

Prior to the issuance of bonds, a market study will be performed.
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Prior to the issuance of bonds, an appraisal will be performed.
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Municipality is not responsible for the debt of the SAD.
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SAD Bond Security
Jon Snyder
Managing Principal
Development Planning & Financing Group
(512)732-0295
[email protected]
Impact of SADs on Local Governments
 No obligation to repay SAD bonds under any circumstances.
 The SAD is fiscally neutral to issuing government.
 Potential up-front funding of facilities accelerates absorption and tax
collections by local government.
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III. Tax Increment Financing
 Means of creating a revenue stream to finance
public infrastructure
 Process of issuing bonds without a referendum
 In NC, called “project development financing” or “selffinancing bonds”
 Typically used to attract new business or industry
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Tax Increment Financing (continued)
 When a district is created, a base property valuation
is established
 This base value is used for general tax revenue
purposes
 New public investment is then made, creating “new
value”
 This “incremental” increase in assessed value is used
to finance bonds used for additional public
improvements
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Tax Increment Financing (continued)
 May be used for:
 Any use authorized for General Obligation Bonds
 Any purpose for which a municipal service district
may be established in N.C.G.S. 160A-536
 Beach erosion control, flood, hurricane protection, utilities,
water resources, drainage and control, Streets,
streetscapes, sidewalks, transit-oriented development,
parking, healthcare, civic, cultural, entertainment, affordable
housing, industrial development, historic preservation, and
redevelopment
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Approval Process Required By Statute
 Define Development Financing District
 Total land area may not exceed 5% of the total land
area of the local government
 Property must be comprised of either:
 Blighted, deteriorating or underdeveloped;
 Appropriate for rehabilitation or conservation
activities; or
 Appropriate for economic development of the
community
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Statutory Approval Process (continued)
 Establish a Development Financing Plan
 Apply to Local Government Commission
 Determination of Incremental Valuation
 Owners may agree to a “Voluntary Minimum
Assessed Value”
 Minimizes risk that no “increment” will be created
 Revenue Increment Fund
 Used to finance bonds or pay for new infrastructure
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Statutory Approval Process (continued)
 Local Government Commission Guidelines for
Approval of a Project
 Proposal is necessary to secure significant new
project development for district
 The amount of the bond issuance is adequate and
not excessive
 The proposed project is feasible
 The local government’s debt management policies
and procedures are good
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Statutory Approval Process (continued)
 The proposed private development would likely not
occur without the proposed public projects
 The proposed bond issue can be marketed at a
reasonable cost to the local government
 A development financing plan has been adopted
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Recent TIF Projects
 Carolina Crossroads Music & Entertainment
District - Roanoke Rapids, NC
 This was the first project development financing project approved in
North Carolina. Roanoke Rapids issued $21.5 million to purchase a
newly-constructed 1500-seat theater intended as a centerpiece for a
future entertainment complex at the intersection of Interstate 95 and
NC Highway 125.
http://www.carolinacrossroads.com/contact/index.php
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Recent TIF Projects
 North Carolina Research
Campus - Kannapolis, NC
 The Local Government Commission approved over $160 million in
project development financing bonds for projects associated with the
North Carolina Research Center in Kannapolis, NC. This project is
supported by the City of Kannapolis and Cabarrus County, and is a
joint venture between Dole Foods, Duke University, and the University
of North Carolina system. The NC Research Campus encompasses a
350-acre site, that will include research facilities, office space, retail
uses and town homes. Infrastructure improvements in the TIF district
include roadway, streetscape, stormwater, utility, and waterline
improvements.
http://www.ncresearchcampus.net
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Recent TIF Projects
 Woodfin Downtown
Corridor - Woodfin, NC
 In August 2008, Buncombe County issued $12.6 million in project
development revenue bonds to finance public improvements in order
to create a town center for Woodfin, NC. The county is authorized to
issue up to $25 million total in TIF bonds. The TIF district is 205
acres along Interstate 26, near Asheville, NC. The infrastructure
improvements to be paid with bond proceeds include streets,
water/sewer extensions, pedestrian walkways and bike trails, and
possibly a parking facility.
http://www.buncombecounty.org/news_Detail.asp?newsID=4043
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IV. Development Agreements
 Many states have used Development Agreements (“DAs”) for
years
 Arizona
 California
 Colorado
 Florida
 Hawaii
 Idaho
 Maryland
 Nevada
 New Jersey
 Oregon
 South Carolina
 Virginia
 Washington
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Evolution of Development Agreements
 Emerging Trends in Real Estate Development
 More complex projects (i.e., vertical and horizontal mixed-use)
 Larger tract development – especially in coastal and mountain
regions (±1,000 acre developments more common)
 Facilitates installation of infrastructure-more certainty
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Evolution of Development Agreements
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Need for more certainty
Demands on public infrastructure
Citizen demand for services and amenities
Limitations on vested rights
 Common Law
 Statutory
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To Take Advantage of the Statute Authorizing
DAs:
 The property must contain 25 acres (exclusive of
wetlands, mandatory buffers, unbuildable slopes, and
other undevelopable portions of the property)
 So, may need substantially
more than 25 acres
to utilize statute
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The DA must contain the following:
 Legal description of property and the names of its
owners;
 Duration of the agreement (up to a maximum of 20
years);
 Uses permitted on the property, including population
densities and building types, intensities, site layout, and
design;
 Description of developer provided public facilities that
will serve the property along with construction schedule;
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The DA must contain the following:
 If the agreement calls for the local government to
provide public facilities, then agreement must specify
that providing the facilities will be tied to successful
implementation by the developer of the proposed
development;
 Description of land to be dedicated and provisions to
protect environmentally sensitive areas of property;
 Description of all local permits approved or needed to be
approved for the development;
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The DA must contain the following
(continued):
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Description of conditions of approval to protect
public health, safety, and welfare; and
Where applicable, provisions related to historic
structures
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Why Use a Development Agreement?
 Nature and complexity of development necessitates
more certainty over time
 Lack of predictability costs developers and local
governments alike
 Helps coordinate funding and installation of private
and public infrastructure
 Encourages creativity
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Benefits of Development Agreement
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Provides certainty to government and development
Allocates risk and responsibility
May encourage better planning
May encourage more effective large scale planned
communities
 May foster more creative projects and development
styles
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Specific items that may be addressed in DAs:
 Affordable housing
 Water and sewer capacity
reservations
 School sites and
construction
 Off-site improvements
(otherwise, generally
prohibited by Statute)
 Public safety (i.e., police, fire
& rescue)
 Parks, open space &
greenways
 Public water and sewer
infrastructure
 Streets
 Lock-in impact fees
 Public parking
 Land banking
 Protection of sensitive
environmental areas
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Questions??
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For More Information Contact:
Eric M. Braun
Partner
K&L Gates
430 Davis Drive, Suite 400
Morrisville, NC 27560
Tel. 919-466-1263 or 919-743-7315
Email: [email protected]
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