Infrastructure Finance Districts (IFDs) – The California Case Study

2. Infrastructure Finance Districts (IFDs) – The California Case Study Tuesday - August 7, 2012 12:30 pm to 1:45 pm

3. Panelists • Mr. Michael Wright, Director, Community Reuse Planning, City of Concord, CA • Robert M. Haight, Jr., Partner, Goodwin Procter, Los Angeles, CA • SuheilTotah, Executive Vice President, Lennar Urban Development, San Francisco, CA Moderator • Ms. Kristie Reimer – Associate Vice President, ARCADIS–US, Marina, CA

4. 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.

5. 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

6. 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

7. IFDs • What are they? • What can they do? • Are they a substitute for RDAs?

8. IFDs: The Drew Barrymore of Public Finance

9. 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.

10. Formation of IFDs(Like a CFD)

11. Formation of IFDs(Like a CFD)

12. Financing Method(Like an RDA)

13. 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.

14. 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.

15. 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.

16. 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.

17. 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

18. Redevelopment/IFD Comparison

19. 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.

20. 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.

21. 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).