Economic Development 2.0 The Power of Partnerships June 15, 2016 - - PowerPoint PPT Presentation

Presentation to South Bay Infrastructure Working Group

Economic Development 2.0

The Power of Partnerships

June 15, 2016

by:

1230 Rosecrans Avenue, Suite 300, Manhattan Beach, CA 90266 (424) 456-3088 www.kosmont.com

New Deal Making Paradigm in CA

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• State has approved new “districts” (EIFDs, CRIAs, 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

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Sustainable Policy

Compliance

Economic Development

New Revenues and Jobs

Enhanced Infrastructure Financing Districts Special Districts Annex Area and Former Military Bases for Infrastructure Financing & Revitalization Infrastructure and Revitalization Financing Districts

• n Former Military Bases

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 Successful Post-RDA Projects

E.D. 2.0 Supports Partnerships – Legislative Direction

AB 32 (Perez)

Cap and Trade: Community Development Investment Tax Credits

SB 375 (Steinberg)

GHG Emissions Reductions: Sustainable Communities Strategy

SB 1168 (Pavley)

Groundwater Sustainability Agency & Plan: High- and Medium-Priority Basins

AB 1739 (Dickinson)

Groundwater Management: 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)

Statewide GHG emission limits accelerated

Regional Sustainability

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Economic Development 2.0

Today, use partnerships to accomplish:

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Sustainability Infrastructure Energy/Resource Efficiency GHG Reduction Regional Cooperation PLACEMAKING

Economic Development Real Estate Project

Post-RDA Economic Development

New tools require collaboration

Real Estate & Property Joint Powers Authorities (JPAs) Special Districts (Tourism, BIDs, etc.) Rebate of Taxes / Revenues Land Use / Zoning (Higher Density; Parking)

Cities have 9 BASIC TOOLS for Public/Private Projects

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Property Assessed Clean Energy Finance Program (PACE) Enhanced Infr. Financing Districts (EIFDs) P3 / Project Delivery Methods Community Revitalization &

• Inv. Authority

(CRIA)

Pubic Public Ventures Mean More $$$$ for Projects

• EIFD/CRIA 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 1 contains over $7.5 billion in water infrastructure project funds

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EIFD: New Economic Development Tool

• Can be used as a replacement to redevelopment
• City can revitalize an area through Tax Increment Financing (TIF);
• City allowed to use County or Special District property tax share as well as

revenues pledged by special districts, if mutually agreed

• Catalyzes projects in development driven scenarios
• 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 1 or more public agencies

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Types of Projects EIFDs Can Fund

• Aff. Housing / Mixed Use

Civic Infrastructure Brownfield Remediation Wastewater/Groundwater Light / High Speed Rail Parks & Open Space Industrial Structures Childcare Facilities

Source: SB 628 – Bill Text

TOD Projects

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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

• 2. Public Financing Authority (PFA)
• Legislative body that governs the EIFD
• Composed of participating governments

and members of the public

• 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 Area The Team The Strategy

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How is an EIFD Formed?

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• 1. Adopt Resolution of Intention
• 2. Prepare & Adopt Infrastructure Financing Plan
• 3. Enter into tax sharing agreements with other

public entities/special districts

• 4. Approve IFP and form EIFD
• 5. PFA implements Infrastructure Plan

Source: Board of Equalization & California State Controller

EIFD - Property Tax is Primary $$$ Source

Property Tax: How Much Goes to Your City?

City Special Districts Local Schools County

27% 45% 7% 21%

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EIFDs – Uses 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 1 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
• Private investment

EIFD Fund

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EIFD Case Study: City of La Verne Proposed EIFD (TOD focus)

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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 development around future gold line station via development

agreements that advance City Specific Plan , capitalize on TOD demand

• Access to Statewide sustainable funding sources such as Greenhouse

Gas Reduction Fund (GGRF) & commercial PACE to increase property tax increment for District & sustainability compliance

• 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,

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La Verne Preliminary Potential EIFD Map

Fairplex TOD (SA 1) Campus West (SA 2) North Area TOD (SA 3) Old Town SP Area Future Gold Line Station

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La Verne EIFD: Infrastructure Around Gold Line Station

Parking Infrastructure Rail Station Improvements Improvements for increased Pedestrian Access to Rail Station

Source: Old Town La Verne Specific Plan

• Parking: The Old Town La Verne Specific Plan parking needs assessment identifies average

need for approximately 1,225 parking spaces in Arrow Corridor on a Saturday in a typical

• month. Potential demand could peak at about 1,760 spaces per day during peak holiday season.
• Plan calls for four future parking structures at buildout, including a 600-space structure at the

Gold Line Station. If built out, these parking structures could provide up to 2,015 spaces.

• Gold Line Improvements (Sub-Area 1): Improvements around the Gold Line extension may

include platforms, bicycle racks for commuters and improved streetscape around the stop.

• Pedestrian Access: The TOD may need new bike lanes, pedestrian sidewalks, and a footbridge

across Arrow Route to connect proposed Fairplex development to the Gold Line station.

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La Verne EIFD: Partnerships

• City of La Verne EIFD may include partnerships with:
• Los Angeles County
• University of La Verne
• Fairplex – LA County Fairgrounds
• Purpose of District/Premise of Partnership:
• 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/CRIA creation
• La Verne Pitch to County for EIFD Participation:
• Goals of La Verne EIFD/CRIA are consistent with goals of County
• Projects funded by EIFD/CRIA are regionally beneficial
• EIFD/CRIA 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

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The analyses, projections, assumptions, rates of return, and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Project pro forma and tax analyses are projections only. Actual results may differ materially from those expressed in this analysis.

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 $15.7 Million Subtotal Sewer and Storm Drain $2.1 Million Subtotal Street Improvements $6.1-$8.1 Million Total Infrastructure Cost Estimates $23.9-$25.9 Million

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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

• Baseline projections assume that La Verne will pursue EIFD formation alone (capturing

~24 cents of increment)

City of La Verne Preliminary Assessed Value Projections Development Type Units / SF Projected AV/Unit/SF Projected Total Assessed Value Hotel 150 Keys $ 100,000 $15,000,000 Retail 110,000 SF $ 250 $27,500,000 Business Park 600,000 SF $ 100 $60,000,000 Apartments 750 Units $ 175,000 $131,250,000 Condominiums 750 Units $ 300,000 $225,000,000 Total Projected AV New Development $458,750,000 La Verne EIFD Preliminary Tax Increment Projections (45 years) City Tax Share Contribution $ 0.244 Total TI to EIFD $ 67,495,139 Supportable Bond Debt Service* $ 42,727,500 Reserve Fund $ 24,767,639 TI NPV at 6% $ 5,380,069

Key Initial Findings:

• Project Area current assessed value ~$63 million
• At year 10, EIFD will generate ~$703,000 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 ~$458 million at projected buildout (year 20)

* Serial bond issuance possible.

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La Verne EIFD Cumulative Tax Increment by (based on La Verne TI estimates)

$0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 $50,000,000 1 2 3 4 5 6 7 8 9 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

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Potential EIFD Public Facilities Authority?

+2 Public Members

Potential Core Public Agencies

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EIFD Startup Funding Sources

Start-up Capital – an important component of EIFD formation

• At formation, EIFDs have zero revenues and tax increment is minimal
• La Verne may consider the following primary funding sources to provide

initial capital for needed infrastructure in Project Area:

• 1. Grant funding from the Greenhouse Gas Reduction Fund (Cap and

Trade monies)

• 2. Initial developer loan or pledge to be paid back through credit and

reimbursement agreement

• 3. Development impact fee levies

4. Other public agency allocations (e.g., Property tax in lieu of VLF, RPTTF)

Creating partnerships with public/private entities can help alleviate initial EIFD funding issues

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Economic Development Real Estate Project

Post-RDA Economic Development

These tools often work best when used together

Real Estate & Property Enhanced Infr. Financing Districts (EIFDs) Joint Powers Authorities (JPAs)

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P3 / Project Delivery Methods Property Assessed Clean Energy Finance Program (PACE) Special Districts (Tourism, BIDs, etc.) Rebate of Taxes / Revenues Land Use / Zoning (Higher Density; Parking)

Cities have 9 BASIC TOOLS for Public/Private Projects

Community Revitalization &

• Inv. Authority

(CRIA)

New Tool: CRIAs

• AB 2 (Alejo) “Community Revitalization Investment Authority (CRIA)”
• Signed into Law by Governor Brown in September, 2015
• Goes into effect on January 1, 2015
• Restores redevelopment authorities to disadvantaged communities
• Carries out provisions of Community Redevelopment Law
• Authorizes establishment of Community Revitalization & Investment Authorities

as long as project area meets 4 necessary conditions

• Allows projects to be financed by bonds serviced by tax increment
• 30 years to issue debt; 45 years to repay indebtedness
• Can fund projects for economic revitalization in disadvantaged communities
• Powers of eminent domain granted to CRIAs for first 12 years of district

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AB 2 Eligibility

• Conditions of a Community Revitalization Area:
• 80% of land (calculated by census tracts) must have median household

income less than 80% of statewide annual median income average

• Must exhibit at least three of the following conditions:

1. Non-seasonal unemployment rate 3% higher than statewide median 2. Crime rates are 5% higher than statewide median 3. Deteriorated or inadequate infrastructure 4. Deteriorated commercial or residential structures

• 25% affordable housing requirement

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Who Can Form a CRIA?

• Two ways to form a CRIA:
• (1) a city, county, or city and county; administered by a five-member

board; or

• (2) a city, county, or special district, or any combination of those local

governments (joint powers agreement); administered by members of the public agencies that created the authority.

• In both cases, the body must include at least two members of the

public who live or work in the area.

• A city, county, or city and county that has received a Finding of

Completion from DOF and whose successor agency has complied with all orders of the Controller may form the CRIA

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Types of Projects CRIAs Can Fund

Generally CRIAs can fund economic revitalization in disadvantaged communities

Roads / Circulatory Inf. Civic Infrastructure Brownfield Remediation Wastewater/Groundwater Assist Businesses Affordable Housing

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CRIA Cleanup Legislation – AB 2492

• AB 2492 (Alejo):
• Clarifies data sources and methods for district formation
• Can include “any combination” of census tracts/block groups
• Countywide or citywide annual median income can be used in

addition to statewide annual median income

• Clarifies source of unemployment data / crime data
• Expands available funding sources
• Can leverage RPTTF in addition to property tax revenue
• Property taxes in lieu of former vehicle license fee funds
• Funds derived from assessments imposed by special districts
• Under legislative review

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Economic Development Real Estate Project

Post-RDA Economic Development

These tools often work best when used together

Real Estate & Property Joint Powers Authorities (JPAs) Special Districts (Tourism, BIDs, etc.) Rebate of Taxes / Revenues Land Use / Zoning (Higher Density; Parking)

Cities have 9 BASIC TOOLS for Public/Private Projects

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Community Revitalization &

• Inv. Authority

(CRIA) Property Assessed Clean Energy Finance Program (PACE) Enhanced Infr. Financing Districts (EIFDs) P3 / Project Delivery Methods

P3 Infrastructure Overview

• What is Infrastructure P3?
• 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 164 - 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

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E.D. 2.0 Successful Post-RDA Case Studies

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City of Oxnard – P3 Infrastructure Delivery

The Challenge

• The City of Oxnard struggled to find a financing

source and a project delivery method to build a much needed fire station on vacant 2.49 acre parcel in the Southeastern area of the City

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

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City of Oxnard Fire Station – Before

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Case Study: Oxnard Fire Station No. 8

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The “azalea” Project – The Challenge

• The Site
• Formerly a pipe manufacturing plant, the 32-acre site lay fallow & blighted for years
• Located on the City’s main thoroughfare (Firestone Boulevard and Atlantic Avenue)
• Regional Challenges / Demographics
• Project unfolded during a crushing recessionary cycle
• Other Southern California cities filing for bankruptcy / wading through financial

debacles

• City’s general fund in a deficit situation
• City losing sales tax to neighboring cities before azalea
• City had unemployment rate of 16% at project approval
• City Strategy
• Not an RDA project. City purchased land from LACCD in 2006 to revitalize the

community with a quality regional retail & entertainment center –

• City initiated final clean up and sought a private sector development partner
• Initial developer lost property in downturn. Primestor saw opportunity & purchased the

property, despite lack of entitlements

• Kosmont repped the City. Negotiated public private & secured infrastructure

financing

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Case Study – The “azalea” Project

• City of South Gate, CA
• Population ~95,000 - most dense community in County
• 95% Hispanic or Latino
• The Project
• 370,000 SF regional shopping center on 32-acres
• 37 retailers and restaurants
• 98% currently leased
• Groundbreaking September 16, 2012
• Grand opening August 23, 2014
• Accomplishments
• Created 1,400 jobs with ~50% jobs filled by South Gate residents
• Local hiring and apprenticeship program
• Delivered public amenities which include: 1.5-acre public event space and plaza, self

sufficient vertical gardens, recycled water features, electric car chargers & free Wi-Fi

• Economic Development results
• Over $2.5 Million in sales tax per year to South Gate
• Over $10 Million in infrastructure improvements to Firestone & Atlantic

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before: 32-acre brownfield site

The “azalea” Project – The Outcome

• The Outcome
• azalea celebrated its formal grand opening in August 2014
• Center remains over 98% leased and performs above expectations
• Over $2.5 Million to South Gate General Fund annually.
• Created 1,400 jobs with ~50% jobs filled by South Gate residents
• Public Amenities
• Local hiring and apprenticeship program
• 1.5-acre public event space
• Public plaza
• Numerous community events (fitness, arts, film showing, concert, mariachi,

Halloween)

• Over 35 national credit tenants and retails
• Over 900 square feet of green “living walls” (largest installation on the west

coast)

• Recycled water features
• Electric car chargers
• Free Wi-Fi

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after: retail and community amenities

example: azalea design and living wall

example: tenant mix

The Post-RDA Tools Used

 Ground Lease / Lease- Leaseback  Site-Specific Tax Revenue Pledge (Prop & TOT)  Mezzanine Reserve Fund

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

Metro Station

Case Study: City of Redondo Beach – Marine Ave. Hotels

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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 - 147 rooms
• Marriott Residence Inn - 172
• TOD project across street from

Metro Green Line station

• 3rd Hotel; Homestead Suites- 2015

Case Study: City of Redondo Beach – Marine Ave. Hotels

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The Challenge

• Redondo Beach’s aging waterfront increasingly struggles to compete

in SoCal, especially with neighboring South Bay cities

• Cost of deferred maintenance could be paid for by private investment;

needed control of sub-leases on ~15 prime waterfront acres

• City acquired waterfront assets; used as collateral via lease/leaseback

Case Study: Redondo Beach Waterfront Revitalization

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International Boardwalk Pier Plaza Marina Properties Add’l Properties in RFQ

• Kosmont structured Lease-leaseback financing for 15 acres of

land acquisition to be paid back from tenant lease cash flow

• RFQ issued for 15+ Acres of Waterfront development
• CenterCal Development (w/ CalSTRS as JV) selected
• MOU executed & CEQA Documentation in process

The Post-RDA Tools Used & The Outcome

Case Study: Redondo Beach Waterfront Revitalization

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Waterfront Hotel Rendering

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Economic Development 2.0 - Next Gen

• Basis of E.D. 2.0 is partnerships which prioritize regional

collaboration, energy efficiency, sustainability & infrastructure

• Partnerships formed through new “districts” & P3s such as City of

La Verne EIFD and City of Oxnard Fire Station

• Uses tax increment; private sector investment/participation needed
• Can result in substantial funding for districts via private investment,

yields taxes, jobs and infrastructure improvements

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