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Presentation to California Special Districts Association Enhanced Infrastructure Financing Districts Should Special Districts Join the Party? October 13, 2016 PRESENTED BY Kosmont Companies 1601 N Sepulveda Blvd., #382 Manhattan Beach, CA 90266 (424) 456-3088 I www.kosmont.com New Financing Districts in California • State has approved new “districts” (EIFDs, other): • Enable tax increment financing for local/regional projects • Compel joint ventures with cities, counties, special districts and private developers • New districts creating paradigm shift in California • Districts geared to sustainability, infrastructure, energy efficiency • Districts induce “multi-jurisdictional partnerships” for economic development and infrastructure Legislation Supports Partnerships & Sustainability Sustainable Policy Economic Development New Revenues and Jobs AB 32 (Perez) Compliance SB 628 (Beall) & AB 313 (Atkins) Cap and Trade: Com Dev Investment Tax Credits Enhanced Infrastructure Financing Districts SB 375 (Steinberg) SB 614 (Wolk) & AB 229 (Perez) GHG Reductions: Sustainable Comm Strategy Special Districts Annex Area and Former Military Bases for Infrastructure Financing & Revitalization AB (Alejo) Community Revitalization Authority SB 743 (Steinberg) CEQA: Environmental Quality Streamlining for TOD / Infill Dev AB 850 (Nazarian) Financing Public Capital Facilities: Water Quality AB 1471 (Proposition 1; Rendon) Financing Water Quality, Supply & Infrastructure Improvement: Bond Issuance AB 2660 (Aguiar) Infrastructure Financing Act: User Fees and P3s Local & Regional Infrastructure SB 1168 (Pavley) Groundwater Sustainability Agency & Plan: Priority Basins AB 1739 (Dickinson) Groundwater Mgmt: Sustainability Plan & Extraction Reporting SB 535 (De Leon) Greenhouse Gas Reduction Fund: Benefits to Disadvantaged Communities SB 350 (De Leon & Leno) Accelerated emissions standards including required energy reduction for buildings SB 32 (Pavley) GHG emissions 40% below 1990 levels by 2030 AB 197 (Garcia) CARB powers expanded (local funding pending) Regional Sustainability Public Agency Joint Ventures Mean More $$$ for Projects • EIFD districts push cities to create local/regional infrastructure projects (water, roadway, sewer, digital) • EIFDs can finance implementation of regional infrastructure via Public Financing Authority which uses property tax increment • Most cities need other agencies increment to fund/expedite projects • Regional approach elevates eligibility for external funding sources • Cap-and-trade grant funds (GRGF) reward projects that reduce GHG emissions with billions in potential funds • Prop contains over $7.5 billion in water infrastructure project funds EIFDs Allow for Special District Participation • Only Cities and Counties can initiate EIFD formation • Special Districts can help govern EIFDs as affected taxing entities • Participation in an EIFD is voluntary • Membership requires tax increment (or fee) contribution Why Participate in an EIFD? • • • • • EIFDs potentially represent new funding sources for Special District capital improvement projects Authorized to use property-based Tax Increment Financing, and numerous other funding tools Can fund an array of economic development projects, including infrastructure Enables compliance with state energy and conservation mandates (SB 32 & SB 375) Induces partnerships with the public and private sector EIFDs are Capital Improvement Programs • Core document of an EIFD is the Infrastructure Financing Plan (IFP) • • • IFP describes public facilities & development to be financed by the EIFD Represents the capital improvement strategy for the district Implemented by governing EIFD board (Public Financing Authority – PFA) • Participating special districts can get projects written into the IFP • Projects financed through tax increment contributions, private sector investment, SD fee revenues, and other sources How Special Districts Participate? • Participation through voluntary partnerships (can’t force like RDA) • Special Districts must partner with City and/or County as lead • Requires agreement on: • Level of representation on Public Financing Authority • Financial contribution / TI allocation • Projects and phasing in IFP Economic Development 2.0 Today, use partnerships to accomplish: Sustainability Infrastructure Energy/Resource Efficiency GHG Reduction Regional Cooperation PLACEMAKING Benefits of an EIFD • Can be used as a replacement to redevelopment • • • Catalyzes projects in development driven scenarios • • City/County can revitalize area with Tax Increment Financing (TIF) EIFD allowed to use City, County, and/or Special District property tax share and revenues pledged by special districts, as agreed Developer interested in pursuing project can use EIFD tax increment to help finance necessary infrastructure (reimbursement) EIFD created for 45 years with a focus on infrastructure, energy efficiency, and P3 partnerships • Managed by Public Financing Authority with or more public agencies 10 Types of Projects EIFDs Can Fund Industrial Structures Wastewater/Groundwater Parks & Open Space Aff Housing / Mixed Use TOD Projects Light / High Speed Rail Civic Infrastructure Childcare Facilities Brownfield Remediation 11 EIFD - Summary of Key Terms Enhanced Infrastructure Financing District • Governmental entity established by a city or county that carries out a plan within a defined area to construct, improve and rehabilitate infrastructure THE AREA Public Financing Authority (PFA) • • Legislative body that governs the EIFD Composed of participating governments & members of public THE TEAM Infrastructure Financing Plan • • Plan adopted by city or county Describes public facilities & development to be financed by the EIFD Implemented by Public Financing Authority (PFA) THE STRATEGY 12 How is an EIFD Formed? Adopt Resolution of Intention Prepare & Adopt Infrastructure Financing Plan Enter into tax sharing agreements with other public entities/special districts Approve IFP and form EIFD PFA implements Infrastructure Plan 13 Illustrative Public Agency Property Tax Distribution Public Agency Share of Property Taxes Vary* 3-26% 8-45% 0.1-20% City Special Districts Local Schools 45% County *All ranges hypothetical 14 EIFDs – Use Diverse Funding Sources • Can use multiple funding sources with tax increment: • If Bond Issuance then 55% voter approval required • Potential to apply State funding sources: • • Proposition bond funds Cap-and-trade proceeds • Federal & State Grants • • Greenhouse Gas Reduction Funds Federal DOT/EPA/DOE funding programs • Other Funding Sources: • • • • • • • Property tax revenue including RPTTF Vehicle License Fee (VLF) prop tax backfill increment Development Agreement / Impact Fees User fees City / county / special district loans Hotel TOT Benefit assessments • Contribution from Special District • Levied by EIFD • EIFD Fund Private investment 15 EIFDs: Sustainability, Energy Efficiency & Infrastructure Road Improvements Digital Connectivity Infrastructure Mixed-Use/ TransitOriented Developments Water and Sewer Infrastructure Renewable Energy Investments Landscaping and Maintenance 16 17 17 GOAL Raise $200,000 FEASIBILITY STUDY for public-private financing to implement Aerotropolis Vision: To improve East County’s housing/job balance & create employment where talent lives Produce concrete, sound, executable PLAN: • Innovative financing options, including Enhanced Infrastructure Financing Districts (EIFD) • Identify and Quantify Investment in East County • Roadmap for EIFD Implementation 18 18 THE VISION An Economic Hub • A concentration of “High Value” Employers that attract investment in the region An Employment Center • Modern Infrastructure for expanding companies • Employment for East County’s skilled workforce Collaboration of Multiple Jurisdictions & Sectors • Cities of El Cajon, Santee, La Mesa, Lemon Grove, Lakeside, Alpine; County of San Diego • Business & Industry, Education, Government 19 19 LABOR FORCE COMPARED TO ALL JOBS About half (48%) of the 500,000 57% 250,000 1.9 labor force participants for each job in the region 282,000 Not-employed Residents 24,000 43% 214,000 people in East Suburban MSA live in one of the four incorporated cities 111K gap is about the total population of Santee and La Mesa combined Employed Residents 127,000 jobs for labor force participant in the region Population Jobs 496,000 EAST SUBURBAN UNEMPLOYMENT RATE (9.8%) IS MORE THAN DOUBLE THAT OF SAN DIEGO (4.7%) 20 20 10 EAST SUBURBAN WHERE WE WORK 196,000 Resident Workers 4,000 2% 5,400 3% Work outside San Diego County 1,900 1% 58,000 30% 31,000 16% 144,000 73% 52,000 27% Work in area Commute outside area 34,000 17% 9,600 5% * Primary job 21 21 WHY AEROTROPOLIS MAKES SENSE FOR EAST COUNTY Connectivity • • • • Centrally located between major freeways Trans-border access Multimodal transportation Employment hub for multiple jurisdictions East County 2030 • • • Infrastructure improvement required 2020 Earthquake Safety Standards State sustainability mandates 22 22 11 EAST COUNTY COMPANIES GKN Aerospace/Chemtronics In El Cajon over 60 years Fox Factory Award-wining off-road & military shock absorber Karl Strauss Brewing Company Planning headquarters & production in Santee Taylor Guitars East County Manufacturing icon since 1974 Calbiotech Worldwide immunoassay manufacturing Aerotropolis supports for company growth & sustainability: Infrastructure Improvements, Locations for expansion, Transport Capacity, Skilled Workforce 23 23 HOW TO ACCOMPLISH Enhanced Infrastructure Financing District (EIFD) Keep a portion of tax increment California transition from Redevelopment to Sustainability Leverage other infrastructure financing tools Property Assessed Clean Energy Financing (PACE) Federal funds (EDA, DOT) make local match possible Tax Rebate, Expedited Permitting, Fee Deferment Create “Small City Dynamism” to attract private sector investment 24 24 12 FEASIBILITY STUDY DELIVERABLES Study will include Identification of infrastructure improvements needed for economic development aero-hub region Analysis of revenue potential for each district EIFD Concept Development Conceptual Mapping of Target Areas Phasing Plan/Engineering Estimate EIFD Boundaries/Sphere of Influence Designation Estimated Completion Time 8-9 Months 25 25 EIFDS HOW DO THEY WORK? • Enable tax increment generated from the growth in property taxes collected from the affected territory • Provides financing for local/regional projects – – – • • • • • • • Created by SB 628 in Sept 2014 Purchase, construction, expansion, improvement, seismic retrofit, rehabilitation, etc Acquisition of any property with an estimated useful life of 15+ years and that is of community-wide significance Managed by a newly created Public Facilities Authority (PFA) which is led by a City or County EIFD activities are directed by the PFA adopted Infrastructure Financing Plan (IFP) District Lifespan is limited to 45 years to collect/spend property tax increment No public vote required to create a district 55% landowner or registered voter election needed for tax increment bonds if required No school district increment allowed Does not increase property taxes http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140SB628&search_keywords=Enable tax increment financing for local/regional projects 26 26 13 Questions? 27 27 EIFD Case Study: City of La Verne Proposed EIFD (TOD focus) 28 14 Case Study: La Verne TOD EIFD • EIFD Status • • EIFD under evaluation by City of La Verne as lead public agency La Verne’s EIFD Goals: • Induce private development around future gold line station • Access to Statewide sustainable funding sources such as Greenhouse Gas Reduction Fund (GGRF) • The Proposed District • • Proximate to Univ La Verne, Fairplex properties & future Gold Line Station 388+ acres adjacent to La Verne’s Old Town Specific Plan Area • Projects (pubic and private) • • • Station area improvements, circulation infrastructure next to Foothill station Development of mixed-use housing, potential hotel, retail and event space Sustainable improvements to commercial and industrial structures 29 La Verne Preliminary Potential EIFD Map 30 15 La Verne EIFD: Partnerships • City of La Verne EIFD may include partnerships with: • • • • Purpose of District/Premise of Partnership: • • • • • Los Angeles County University of La Verne Fairplex – LA County Fairgrounds Serve regional support system including infrastructure around future Gold Line station Connect Old Town, Brackett Field Airport, Univ of La Verne and LA County Fairgrounds Recently Approved LA County E.D Resolution prioritizes: • Use of “Boomerang Funds” to fund infrastructure improvements • Support of EIFD creation La Verne Pitch to County for EIFD Participation: • Goals of La Verne EIFD are consistent with goals of County • Projects funded by EIFD are regionally beneficial • EIFD induces private investment, which increases tax increment for LA County Tax Increment Potential for La Verne with LA County Participation: • LA County receives ~30 cents on the dollar in property tax increment • City of La Verne receives ~22 cents • With LA County participation, EIFD district could increase tax increment above La Verne’s share, increasing/accelerating infrastructure funding capacity for district 31 31 La Verne EIFD: Infrastructure Around Gold Line Station Parking Infrastructure Rail Station Improvements Improvements for increased Pedestrian Access to Rail Station • Parking: 600-space structure at the Gold Line Station, four future parking structures at buildout • Gold Line Improvements (Sub-Area 1): Platforms, bicycle racks and improved streetscape at station • Pedestrian Access: New bike lanes, pedestrian sidewalks, and a footbridge across Arrow Hwy to connect proposed Fairplex development to Gold Line station Source: Old Town La Verne Specific Plan 32 32 16 Potential Partners Potential Core Public Agencies Potential Public/Private Partnerships 33 Initial Infrastructure Cost Estimates • City provided Kosmont with cost infrastructure estimates within Fairplex TOD, North TOD and ULV Campus West • Total infrastructure cost estimates are as follows: City of La Verne Total Estimated Infrastructure Costs Subtotals Estimated Cost Subtotal Water Infrastructure Subtotal Sewer and Storm Drain Subtotal Street Improvements $15.7 Million $2.1 Million $8.1-$10.1 Million Total Infrastructure Cost Estimates $25.9-$27.9 Million 34 17 La Verne EIFD Tax Increment Projections Assumptions: • Kosmont used initial 5, 10 and 20 year development projections and infrastructure needs to estimate tax increment revenues City of La Verne Preliminary Assessed Value Projections Development Type Units Hotel 150 Keys Retail 110,000 SF Business Park 60,000 SF Apartments 920 Units Condominiums 915 Units Total Projected AV New Development Projected Projected Total AV/Unit/SF Assessed Value $100,000 $15,000,000 $250 $27,500,000 $100 $6,000,000 $175,000 $161,000,000 $300,000 $274,500,000 $484,000,000 Key Initial Findings: • Project Area current assessed value ~$63 million • At year 10, EIFD will generate over $700,000 in annual TI revenue based on addition of 725 residential units & 300,000 sq ft comm.; 10 yr projected AV of ~$351M • With estimated development projections, assessed value of new development could increase to ~$484 million at projected buildout (year 20) 35 District Revenue Potential and Bonding Capacity Kosmont ran two baseline scenarios to determine district revenue potential Scenario A: La Verne and LA County each pledge 22 cents of increment to District Scenario B: La Verne contributes 22 cents and LA County contributes 11 cents to District Tables below show summary of annual increment and potential bonding capacity for each scenario: La Verne Tax Increment Analysis Scenario A Contribution % Annual Increment @ Year 15 La Verne LA County 22% 22% 44% $785,000 $785,000 $1,570,000 Bonding Capacity in 1st 15 Years* Total EIFD $26,000,000 La Verne Tax Increment Analysis Scenario B Contribution % Annual Increment @ Year 15 Bonding Capacity in 1st 15 Years* La Verne LA County 22% 11% Total EIFD 33% $785,000 $393,000 $1,178,000 $19,500,000 36 18 Residual County Revenue Projections • In each hypothetical scenario, LA County will not contribute all of its tax increment to the EIFD • For each scenario, table below shows net residual property tax revenue from project area that County is projected to retain after EIFD contributions La Verne EIFD County net Residual Revenue After EIFD Contributions Assumes 30% LA County Property Tax Capture Rate Scenario A Scenario B Tax Increment % that County Retains 8% 19% Year Residual Annual Revenue $ 130,000 $ 310,000 Year 10 Residual Annual Revenue $ 245,000 $ 590,000 Year 15 Residual Annual Revenue $ 345,000 $ 820,000 Year 20 Residual Annual Revenue $ 590,000 $ 1,360,000 • If County did not contribute increment and the $63M base AV grew at 2% per year, the County would receive: County Revenue in Baseline Case (No T.I contribution) Year Annual Revenue $16,000 Year 10 Annual Revenue $37,000 Year 15 Annual Revenue $60,000 Year 20 Annual Revenue $87,000 37 La Verne Annual EIFD Tax Increment by (based on La Verne TI estimates) $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 County Share City Share 38 19 La Verne: Next Steps for EIFD Implementation Year 16 2017 Quarter 4 City to make final determination of EIFD boundaries / PFA composition / TI contributions City/ County adopts Resolution of Intention to establish EIFD & creates PFA (can include Special District) PFA drafts IFP (in process) PFA drafts / updates / processes necessary CEQA documents PFA distributes IFP to property owners & affected taxing entities along with CEQA documentation PFA conducts public hearing to review IFP & approves IFP after modifications (if any) PFA ratifies resolution “proposing” adoption of IFP and formation of EIFD PFA adopts IFP and resolution of formation creating EIFD; IFP takes effect File Change of Jurisdictional Boundaries with BOE for FY 2018 implementation 39 Special Districts & EIFDs: Should You Join the Party? • EIFDs based on partnerships which prioritize regional collaboration, energy efficiency, sustainability & infrastructure • Formed through new “districts” such as City of La Verne EIFD and Aerotropolis EIFD • Can use tax increment; private sector investment needed • If Special Districts join, they can benefit from funded capital improvement projects that are mission critical • Funding for these projects come from a broader base of sources (public and private) • Cap-and-trade grant funds (GRGF) reward projects that reduce GHG emissions with billions in potential funds • Prop contains over $7.5 billion in water infrastructure project funds 40 20 Contact Us Kosmont Companies 1601 N Sepulveda Blvd., #382 Manhattan Beach, CA 90266 Phone: (424)-456-3088 Dan Massiello Senior Vice President, Public Finance dmassiello@Kosmont.com Cell: (858) 220-3445 Larry J Kosmont Jo Marie Diamond East County EDC President & CEO Office: 619-258-3670 Jo-marie.diamond@eastcountyedc.org President & CEO lkosmont@Kosmont.com Office: (424)-456-3080 Cell: (213)-507-9000 41 42 21