Enhanced Tools and New Rules:

Transcription

1 Presentation to the Imperial Valley Economic Summit Enhanced Tools and New Rules: Economic Development in a Post-RDA Era May 1, 2015 by: Dan Massiello, Senior Vice President of Public Finance, Kosmont Companies 865 S. Figueroa Street, Suite 3500, Los Angeles, CA

2 How do the Pieces Fit Together? The Problems: Greenhouse Gas Emissions (GHGs) Drought Climate Change Insufficient regional transportation Aging Infrastructure Water transportation infrastructure Sewer infrastructure Electric & utility plants New Infrastructure Needed For shift to multifamily housing Transit-Oriented Development in designated high-quality transit areas (HQTAs) 2

3 Economic Development and Sustainable Public Policy How does the new Legislation provide Opportunity? Economic Development New Revenues and Jobs SB 628 (Beall) Enhanced Infrastructure Financing Districts SB 614 (Wolk) Jurisdictional Changes for Special District/Annexed area for Infrastructure Financing AB 229 (Perez) Infrastructure and Revitalization Financing Districts on Former Military Bases 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 and Infrastructure Improvement: Bond Issuance AB 2660 (Aguiar) Infrastructure Financing Act: User Fees and P3s Local & Regional Infrastructure Successful Post-RDA Projects Sustainable Policy Compliance AB 32 (Perez) Cap and Trade: Community Development Investment Tax Credits SB 375 (Steinberg) GHG Emissions Reductions: Sustainable Communities Strategy AB 1739 (Dickinson) Groundwater Management: Sustainability Plan & Extraction Reporting SB 1168 (Pavley) Groundwater Sustainability Agency & Plan: High- and Medium-Priority Basins SB 1319 (Pavley) Sustainable Groundwater Management Act SB 535 (De Leon) Greenhouse Gas Reduction Fund: Benefits to Disadvantaged Communities Regional Sustainability 3

4 Post-RDA Economic Development Cities have 7 BASIC TOOLS for Public/Private Projects Real Estate & Property Joint Powers Authorities (JPAs) Enhanced Infr. Financing Districts (EIFDs) Economic Development Real Estate Project Special Districts (Tourism, BIDs, etc.) Pledge of Taxes / Revenues P3 / Project Delivery Methods Land Use / Zoning (Higher Density; Parking) These tools often work best when used together 4

6 RDA Property: New Rules & Unique Opportunity 427 former Agencies must complete Property Management Plans by mid-2014 Economic development can materialize by strategically managing PMP tasks & disposition of former RDA properties One-time opportunity to use PUBLIC PROPERTY and ZONING tools together: PMP can produce private investment for a City Over 3,000 former RDA properties must be disposed of starting in Q1 To sell property, SAs need OB and DOF approval of a Purchase & Sale Agreement. However, SAs can sell without OB/DOF approval via auction Some properties need remediation - achievable per SB 470 (Wright) which extends Polanco to cities Economic Development can materialize by strategically managing PMP asset sales 6

7 Property Management Plans (PMPs) Update Current Status as of April 2015 PMP* STOPLIGHT DOF Approvals: 427 Successor Agencies 100 Successor Agencies waiting for a FOC* (includes approximately 80 lawsuits) 327 FOCs issued between February 2013 April 2015 (Of those, 318 PMPs are submitted and/or due by April 30, 2015) 215 PMPs Approved by the Department of Finance 1 Based on Kosmont Companies research *DOF = Department of Finance, FOC = Finding of Completion, PMP = Property Management Plan DISCLAIMER: This information was compiled by Kosmont Companies based on best information available and is preliminary in nature. Kosmont Companies makes no representations regarding the accuracy or suitability for use of this information. 865 South Figueroa Street 35 th Floor Los Angeles CA I ph I 7

9 Post RDA: Basic Tax & Financing Tools FINANCING TOOL Site Specific Tax Revenue Pledge (SSTR) THE BASICS New Tax revenues (sales, property, TOT) generated by a specific project and applied to reduce gap. Contributes amount calculated each year based on actual increment of public revenues produced that year by project. Example: TOT Pledge for Hotel in Redondo Beach; Sales Tax Pledge for Retail Mall in Victorville Lease-Leaseback Lease/sublease of asset between two public agencies enables lease payments to be leveraged (borrowed) Example: Existing building facility, lease payments can start immediately without the need to fund capitalized interest Lease Revenue Bonds Public agency income stream (utility, parking) set up in long-term lease obligation & leveraged Example: Lease of City Utility to Utility Authority; lease payments fund bond payments for public infrastructure improvements for major retail center in South Gate 9

11 Land Use & Zoning can be E.D. Tools 1. Expedited Processing of Entitlements and Permits: For the private sector time is money. Reduced processing time is a win-win Shorter timeframes for CEQA and other local Permitting requirements 2. Development Agreement (DA): Think prenuptial agreement DAs lock in benefits for public & private sector: e.g. infrastructure/public amenities 3. Specific Plans: Incorporate ED priorities and convert them to zoning policy objectives 4. Development Opportunity Reserve (DOR): Assign density for preferred uses (mixed use, retail, tax and job generators); Reward the Buyer/investor not the owner 5. Transfer of Development Rights (TDR): Specific Plans with an Economic Development kicker. 6. Post Construction Operating Covenants: Valuable for financing improvements made by a developer and/or tenant 11

12 Land Use/Zoning Options- Density as E.D. Tool Development Opportunity Reserve ( DOR ): Problem: Upzoning used to stimulate economic development often results in a windfall to existing landowners, not targeted end users or uses Bright Idea: Combine Specific Plans (SP) with Econ. Development Kicker Zoning/Density should protect/advance community desires as per the SP Place Added density into a Reserve Account but do not distribute per parcel Higher density to new projects that comply with pre- set community objectives Economic value of DOR density goes to desired projects vs. existing owners Successful Example of DOR: Burbank Media District Specific Plan Burbank Media Overlay District Zone (1991- present) allows more density through CUP process for projects that meet community goals (e.g. infrastructure) 12

13 Post-RDA Economic Development Cities have 7 BASIC TOOLS for Public/Private Projects Real Estate & Property Joint Powers Authorities (JPAs) Enhanced Infr. Financing Districts (EIFDs) Economic Development Real Estate Project Special Districts (Tourism, BIDs, etc.) Pledgeof Taxes / Revenues P3 / Project Delivery Methods Land Use / Zoning (Higher Density; Parking) These tools often work best when used together 13

14 What is Infrastructure P3? P3 Infrastructure Overview Contractual Agreement between a public agency and a private sector entity to deliver facility for the use of the general public P3s offer government agencies in CA an alternative mechanism for financing vital infrastructure projects AB Authorizes local government agencies to use P3s to design, finance, and maintain fee-producing infrastructure facilities Most Infrastructure P3 are State / Fed / Regional Projects Transportation: roads, bridges, tunnels, rail Defense: Military housing, Utilities, Reuse of Military Base Health: Hospitals, Schools, Prisons Water: Collection, Desalinization and Distribution Social: Civic Houses, Court Houses 23 14

15 City of Oxnard P3 Infrastructure Delivery The Challenge City looked to find a financing source and a project delivery method to build a much needed fire station on vacant 2.49 acre parcel The Post-RDA Tools Employed P3 Infrastructure Delivery Lease Revenue Bonds The Outcome Established a California Municipal Finance Authority to issue two bonds to fund project Bonds financed design, acquisition, construction and equipping of a turn-key fire station to be transferred to the City of Oxnard after 24 months Revenue bonds earned an A+ rating from S&P despite the bonds assuming construction risk 24 15

17 New Tool: Enhanced Infrastructure Financing Districts New legislation push cities to create local/regional infrastructure projects that conserve water & reduce GHG emissions SB 375 sets baseline for streamlined environmental review for projects that improve local and regional sustainability Cap-and-trade grant funds (GRGF) reward projects that reduce GHG emissions with billions in potential funds Prop 1 contains over $7.5 billion in water infrastructure project funds EIFDs can finance implementation of regional infrastructure via Public Financing Authority which uses property tax increment in tandem with a variety of funding sources for project incentives 17

18 EIFD - Summary of Key Terms 1. 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 2. Public Financing Authority (PFA) Legislative body that governs the EIFD Composed of participating governments and members of the public The Team 3. 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 18

19 EIFDs Diverse Funding Approach Can use multiple funding sources with tax increment: If Bond Issuance then 55% voter approval required 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 Private investment Potential to apply State funding sources: Proposition 1 bond funds Cap-and-trade proceeds Federal & State Grants Greenhouse Gas Reduction Funds Federal DOT/EPA/DOE funding programs EIFD Fund 19

20 Types of Projects EIFDs Can Fund Industrial Structures Aff. Housing / Mixed Use TOD Projects Wastewater/Groundwater Light / High Speed Rail Civic Infrastructure Parks & Open Space Childcare Facilities Brownfield Remediation Source: SB 628 Bill Text 20

21 Successful Post-RDA Case Studies 2 21

22 Case Study: South Gate azalea Retail Center The Challenge Formerly a pipe mfg plant, the 32-acre site lay fallow & blighted for years City purchased the land in 2006 to revitalize community with a quality regional retail & entertainment center not an RDA Project Demographics: Highest population density in LA County, had a 16% unemployment rate at project approval South Gate lost sales tax to neighboring cities before azalea was built The Post-RDA Tools Used Utility Authority Bonds for off-sites Infrastructure & Fee Waiver Agreement New Market Tax Credits (NMTC) EDA Grant Local Hiring Program Required 22

23 Case Study: South Gate azalea Retail Center The Process Kosmont worked closely with City of South Gate & Primestor (developer) to fulfill City s objectives while minimizing project gap Negotiated an Infrastructure Financing Agreement to fund public off-site improvements, thereby reducing developer risk Despite deteriorating credit market, sold AA- rated Utility Bonds with new funds ($8.4MM) for public improvements needed to implement the City s #1 E.D. priority 23

24 Case Study: South Gate azalea Retail Center The Outcome Opened August 2014: 98% leased Project will generate $2.6M per year in sales tax revenues (2% sales tax rate) Created over 600 jobs; over 50% of jobs to locals (target was 30%) Public Plaza & Events Center, City Services Annex delivered Current Tenants Include: 24

25 Case Study: City of Redondo Beach Marine Ave. Hotels The Challenge City desired to utilize area near Metro station Odd lot size & shape; multiple ownership; and vacant condition had deterred private development Developer proposed 147-room Hilton Garden Inn, 172-room Marriott Residence Inn and 180 Room Extended Stay Hotel located adjacent to the Metro station The Post-RDA Tools Used Metro Station Ground Lease / Lease- Leaseback Site-Specific Tax Revenue Pledge (Prop & TOT) Mezzanine Reserve Fund 25

26 Case Study: City of Redondo Beach Marine Ave. Hotels The Outcome- Opened May 2014 Without Site Specific Tax Revenue project does get financed Will add over $3.5 million/year in TOT & create ~150 jobs Brings quality hotel operations to the City s front door Hilton Garden Inn rooms Marriott Residence Inn TOD project across street from Metro Green Line station 3rd Hotel; Homestead Suites

27 Implementing YOUR Economic Development Strategy Steps for E.D. Strategy & Implementation: Review Basic Tool Kit: Real Estate, Zoning, Districts, Revenue/Tax, P3, EFID Determine which tools City is willing to use Create E.D. Inventory of potential projects / review initial opportunities Post RDA Properties Potential to create districts and/or use zoning & DORs P3 Projects Cities need well conceived strategy prior to implementation Pick priority projects from E.D. Inventory, confirm feasibility, and implement E.D. Projects w/o RDAs are more challenging but achievable Econ Dev & public finance complexities demand a highly skilled team; work with recognized professionals Cities need well conceived strategy prior to implementation 27

28 Thank You Any Questions? 28