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Infrastructure Finance Districts (IFDs) – Infrastructure Finance Districts (IFDs) – The California Case StudyThe California Case Study
Tuesday - August 7, 2012
12:30 pm to 1:45 pm
2012 ADC ANNUAL CONFERENCE| PAGE 3
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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
2012 ADC ANNUAL CONFERENCE| PAGE 4
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Background 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.
2012 ADC ANNUAL CONFERENCE| PAGE 5
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Focus of the Panel This session will provide details on IFDs, their applicability and potential
benefits to BRAC sites.
Various perspectives will be presented: Local Reuse Authority viewpoint and realities Legal interpretations and aspects Developer experience and outlook
Session Outline 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
2012 ADC ANNUAL CONFERENCE| PAGE 6
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Impact from Loss of Redevelopment Loss of tax increment for infrastructure +
affordable housing contribution by 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
2012 ADC ANNUAL CONFERENCE| PAGE 7
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IFDs
What are they? What can they do? Are they a substitute for RDAs?
2012 ADC ANNUAL CONFERENCE| PAGE 8
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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.
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).
2012 ADC ANNUAL CONFERENCE| PAGE 9
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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.
2012 ADC ANNUAL CONFERENCE| PAGE 10
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Formation of IFDs(Like a CFD)
IFDs CFDs
Resolution of Intention (ROI) (to form IFD and to authorize issuance of bonds)
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
2012 ADC ANNUAL CONFERENCE| PAGE 11
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Formation of IFDs(Like a CFD)
IFDs CFDs
Waiver of Election Time and Formalities?
100% of Qualified Electors 100% of Qualified Electors
Qualified ElectorsRegistered 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)
2/3 Vote of Qualified Electors
Voting
Same
Ordinance Yes (to create IFD) Yes (to levy special taxes)
2012 ADC ANNUAL CONFERENCE| PAGE 12
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Financing Method(Like an RDA)
IFDs RDAs
Revenue Source Tax Increment
(of Issuer and Consenting Taxing Entities Only)
Tax Increment
(of All Taxing Entities and ERAF)
Term of Tax Increment 30 years Up to 45 Years
Location 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%)
2012 ADC ANNUAL CONFERENCE| PAGE 13
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IFDs(Unlike an RDA)
Participation in an IFD is 100% voluntary: 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.
2012 ADC ANNUAL CONFERENCE| PAGE 14
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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.
2012 ADC ANNUAL CONFERENCE| PAGE 15
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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.
2012 ADC ANNUAL CONFERENCE| PAGE 16
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So Why Aren’t IFDs More Popular? IFDs can’t be formed in a former RDA
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.
2012 ADC ANNUAL CONFERENCE| PAGE 17
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Infrastructure Financing Districts Alternative to Redevelopment Existing sections of California Government Code and Health
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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2012 ADC ANNUAL CONFERENCE| PAGE 18
Redevelopment/IFD Comparison
Redevelopment
780,000,000
IFD Scenario 1City share only
84,420,000
IFD Scenario 2City + County
335,000,000
IFD Scenario 3City/County/ERAF
387,920,000
2012 ADC ANNUAL CONFERENCE| PAGE 19
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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.
2012 ADC ANNUAL CONFERENCE| PAGE 20
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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.
2012 ADC ANNUAL CONFERENCE| PAGE 21
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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).