Prepared by:
Kosmont Companies
Infrastructure Financing District
Analysis Summary
March 2025
Background
2 • The City of Fortuna is evaluating the use of a special purpose financing district such as an Enhanced Infrastructure Financing Districts (EIFD) to capture value from potential new development to fund critical infrastructure and community investment priorities • EIFD tax increment financing (TIF) capacity is estimated to range of up to $80M on a presentvalue basis • While a City-only financing district strategy would likely achieve favorable “return on investment” for the City, a broader partnership including the County of Humboldt would further improve financial feasibility
• In addition to the EIFD funding capacity, the EIFD would elevate the City’s ability to attract other public funding, particularly state and federal grants
• Subject to feedback from City staff and City Council, immediate next steps could include outreach to the County to discuss potential EIFD partnership Presentation Outline
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3 1. Overview of Tax Increment Financing (TIF) and EIFD
2. District Boundary Considerations for Fortuna
3. Funding and Financing Analysis
4. Potential Next Steps and Timing
4 $0M
$100M
$200M
$300M
$400M
$500M
$600M
0 5 10 15 20 25 30 35 40 45 50 55
Years from District Formation
Note: Illustrative. Conservative 2% growth of existing assessed value (A/V) shown; does not include mark-to-market increases associated with property sales.
What is Tax Increment Financing (TIF) –Not a New Tax
Baseline Property Value at District Formation
All Property Tax Stays with General Fund
New Property Value from
New Development / Rehabilitation
Some Portion of Property Tax Available to TIF District, Remainder Stays with General Fund
Assessed
Property Value
within District
Boundaries
New Total
Value After
TIF District
All Property
Tax Goes to
General Fund
5 Mechanics of TIF / EIFD
Private property
investment or new
development
Increased property
tax revenue from
new property value
Deposited in
separate EIFD
fund
Funds pay for public
improvements
TIF Alternatives in California Today
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6 Affordable
Housing
Authorities
(AHA)
Community
Revitalization &
Inv. Authority
(CRIA)
Enhanced
Infrastructure
Financing
District
(EIFD)
Neighborhood
Infill Finance &
Transit
Improvements
Act
(NIFTI)
NIFTI-2
Coterminous requirement and other
requirements have made NIFTI &
NIFTI-2 infeasible in other communities
Restriction to fund ONLY
affordable housing (and
not infrastructure) has
been deemed to
restrictive to be feasible
in other communities
Infrastructure
& Revitalization
Financing
District
(IRFD)
Most flexible,
most widely
used
More emphasis on
affordable housing
(25% set-aside)
Climate
Resilience
District
(CRD)
NEW, focus on
climate resilience
related infrastructure
Flexible, voter-approval still
required
EIFD Fundamentals
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7 45 years from first bond issuance Long Term
Districts
Governance Public Financing Authority (PFA) implements Infrastructure Financing Plan (IFP) Approvals Mandatory public hearings for formation with protest opportunity; no public vote Any property with useful life of 15+ years & of communitywide significance; purchase, construction, expansion, improvement, seismic retrofit, rehabilitation, and maintenance Eligible
Projects
Types of Projects EIFD Can Fund
Partial List
8 Roadway / Parking / Transit
Brownfield Remediation
Storm / Flood / Public Facilities Parks / Open Space / Recreation Libraries & Childcare Facilities Affordable Housing
Broadband Small Business /
Nonprofit Facilities
Wildfire Prevention / Other
Climate Change Response
9 TIF Today versus Former Redevelopment Agencies
Sample of Differences
Former RDAs EIFDs / CRDs / CRIAs
Eligible Use of Funds • Infrastructure and affordable
housing
• Mixed-income housing
• Land clearing and parcel assembly
• Tax and other private business /
developer subsidies
• Public infrastructure (e.g., roads, flood
control, open space, utilities)
• Public facilities
• Affordable housing
Eminent Domain /
Condemnation
• Allowed • Not allowed
Eligible Areas • Must qualify as “blighted” • No “blight” finding required Governance • City Council or County Board
• School entity participation
• Public Financing Authority including
Public Members (no school entities)
Formation • Vote of governing body • 3 public hearings, majority protest opportunity from landowners and
registered voters within district
Why are Public Agencies Authorizing Financing Districts? Communicating in a Digital World
10 1. Return on Investment: Private sector investment induced by district commitment accelerates growth of net fiscal revenues, job creation, housing production, essential infrastructure improvements
2. Ability to attract additional funds / other public money (“OPM”) – tax increment from other entities (county, special districts), federal / state grants / loans (e.g., for transit-oriented development, water, housing, parks, remediation)
Districts in Progress Statewide
(Partial List of EIFDs/CRDs/CRIAs)
Fully Formed In Formation Process Under Evaluation
Jurisdiction Purpose
Apple Valley Industrial and housing supportive infrastructure Banning (CRIA) Downtown revitalization, industrial infrastructure Barstow Industrial and housing supportive infrastructure Brentwood Housing, employment, and transit-supportive infrastructure Buena Park Mall reimagination, tourism-supportive infrastructure Calipatria (CRD) Economic and climate resilience infrastructure Carson + L.A. County Remediation, affordable housing, recreation Citrus Heights Mall reimagination
Covina Downtown housing and blended use supportive infrastructure Fairfield Downtown, housing, and transit-supportive infrastructure Fresno Downtown, housing and transit-supportive infrastructure Fresno County Industrial and commercial supportive infrastructure Humboldt County Coastal mixed-use and energy supportive infrastructure Inglewood (CRD) Transportation and affordable housing
Imperial County Renewable energy, housing and infrastructure La Verne + L.A. County Housing and transit-supportive infrastructure Lakewood + L.A. County Mall reimagination, smart streets, affordable housing Long Beach Economic empowerment and affordable housing
Los Angeles (Downtown, San Pedro, other) Affordable housing and transit-supportive infrastructure Los Angeles County West Carson Housing / bio-science / tech infrastructure Madera County (3 Districts) Water, sewer, roads and other housing infrastructure Modesto + Stanislaus County Downtown, housing, and recreation infrastructure Mount Shasta Rural brownfield mixed-use infrastructure
Napa Downtown, housing, tourism supportive infrastructure Norwalk + L.A. County Affordable housing and infrastructure Ontario Airport-related, blended use, infrastructure
Palmdale + L.A. County Housing, blended use, transit infrastructure Pittsburg Housing, commercial, and tech park infrastructure Placentia + Orange County Housing and TOD infrastructure Rancho Cucamonga Blended use and connectivity infrastructure Redlands Education related blended use, mall reimagination Redondo Beach + L.A. County Parks / open space, recreation infrastructure Riverside County Thousand Palms Housing, hospitality, medical supportive infrastructure Sacramento County (Unincorporated) Industrial / commercial supportive infrastructure Salinas Water, sewer, and other housing supportive infrastructure San Rafael (EIFD + CRD) Blended-use and climate resilience infrastructure Sanger Commercial, hospitality, supportive infrastructure Santa Cruz (EIFD + CRD) Downtown, blended use, and climate resilience infrastructure Santa Rosa + County of Sonoma Downtown investment, affordable housing, aging infrastructure Vacaville Housing and business park infrastructure
Yucaipa Housing and commercial infrastructure
Comparison of TIF and Other Tools
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12 District Type Description Revenue
Source
Approval
Structure
Use of
Funds
TIF (e.g., EIFD, CRIA,
IFD, IRFD)
Incremental property tax
revenues from new
development used to fund
local infrastructure.
Max term is 45 years from
approval to issue debt.
Incremental (new
development) property tax
revenues (incl. VLF) – does not
increase taxes
District formation – No vote,
but majority protest
opportunity by landowners
and registered voters
Bond issuance – None
• Infrastructure of regional or
communitywide significance
• Maintenance
• Affordable housing
Mello-Roos Community
Facilities District (CFD)
and/or Assessment
District
Additional assessment or
“special tax” used to fund
infrastructure / services that
benefit property.
Max term is 40 years from
date of debt issuance.
New property assessment or
tax – appears as separate line
item on tax bill
District formation – 2/3 vote of
landowners or registered
voters in district*
Bond issuance – vote of elected
body (City)
• Infrastructure capital
expenditures of benefit to
landowners
• Maintenance
• Public services (e.g., safety,
programs)
General Obligation Voter-approved debt that is
repaid with “override” to 1%
tax levy; City-wide
Direct property tax levied on
all properties at same millage
rate
2/3 vote of registered voters in
entire City
• In accordance with bond
plebiscite
Lease Revenue / COPs General Fund-supported
borrowing, generally utilizing
City-owned assets to be
leased and leased back
General Fund (or other legally
available revenues as
determined by City)
Vote of elected body (City) • In accordance with bond
authorization
Potential funding strategy can utilize MULTIPLE mechanisms * For CFD formation, a vote of registered voters within the district boundary is required if 12 or more registered voters live therein (otherwise a vote of landowners prorated by acreage).
Potential EIFD Boundary
Alternative #1:
Specific Plan + Other Sites
13 • Focus on Mill Site Specific Plan area
and certain other opportunity site
areas along major corridors
• Approx. 372 acres (12% of City)
• Approx. $178M in existing assessed
value (13% of City)
Source: Humboldt County Auditor-Controller (2025)
Potential EIFD Boundary
Alternative #2:
Entire City
14 • Entire City limits
• Approx. 3,000 acres
• Approx. $1.33B in existing assessed
value
Source: Humboldt County Auditor-Controller (2025)
15 a) Roadway interchange improvements
b) Pedestrian access to Eel River
c) Downtown improvements (e.g., streetscape, beautification) d) Other multimodal improvements
e) Trails
f) Parks and open space
g) Affordable housing
Example Potential Investments to Receive EIFD Funding
16 Example Development Assumptions with Specific Plan Area Absorption Assumed over ~20 Years
Note: AV at buildout values in current 2025 dollars
Sources: Mill District Specific Plan (October 2024 Draft); CoStar (2025) Area # SF or Units Estimated
AV Factor
Estimated
Total AV at Buildout
Residential 100 units $250K per unit $25.0 million
Hotel 125 units $250K per unit $31.3 million
Commercial / Retail / Flex 171,100 SF $300 PSF $51.3 million Industrial / Flex 693,400 SF $170 PSF $117.9 million
Total New Development Assumed within EIFD Study Area $194.2 million 17 • Primary non-school recipients and potential
contributors of property tax are City and County
• City share varies by area and averages ~4.5%
each of every $1 collected in property taxes
City additionally receives equivalent of ~11.4% of
property tax in lieu of motor vehicle license fees
(MVLF), also available to EIFD
• County General Fund share varies by area and
averages ~15.5%
County additionally receives property tax in lieu of
MVLF, also available to EIFD, but not incorporated
into this analysis to be conservative
• School-related entities cannot participate
As counties tend to rely more heavily on property tax revenue sources generated by new development within incorporated jurisdictions, it is Kosmont’s experience that it is not reasonable to assume allocation of property tax in lieu of MVLF by the County. As cities benefit from additional non-property tax revenue sources (e.g., sales tax, transient occupancy tax) from new development, it is Kosmont’s experience that it is reasonable for cities to consider contributing property tax in lieu of MVLF.
Tax Rate Area (TRA) weighted average distributions for EIFD Study Area shown. Post-ERAF (Education Revenue Augmentation Fund) distribution.
Parcels within former Redevelopment Agency Project Areas are subject to RPTTF revenue flow until expiration of ROPS obligations.
Source: Humboldt County Auditor Controller (2025)
Property Tax Revenues Available to EIFD
Property Tax Distribution
City
4.5% County
15.5%
Other / School
Entities (not eligible)
80.0%
+ MVLF ~11.4% = 15.9%
18 City allocation includes allocation from both AB8 + MVLF in-lieu. County allocation does not include MVLF in-lieu. * Bonding capacity assumes Year 5 is first bond issuance for EIFD. “Year 5 means fifth year of revenue following district formation. Net proceeds shown. Bondable revenue assumes $25,000 admin charge, 150% debt service coverage. 6.0% interest rate; 30-year term. Proceeds net of 2% underwriter's discount, estimated reserve fund (maximum annual debt service), costs of issuance estimated at $350,000.Source: Kosmont Financial Services (KFS), registered municipal advisor.
EIFD Revenue and Bonding Capacity Scenarios
Boundary Scenario #1 – Specific Plan + Other Corridor Sites EIFD Revenue
Allocation Scenario
Year 5
Accumulated
Revenue +
Bonding
Capacity*
Year 10
Accumulated
Revenue +
Bonding
Capacity*
50-Year
Present-Value
@ 3%
Discount Rate
50-Year
Nominal
Total
A) City 25% $67,200 $273,500 $3,905,300 $10,728,200
B) City 35% $94,000 $382,900 $5,467,400 $15,019,500
C) City 50% $134,300 $791,800 $7,810,600 $21,456,400
D) City 75% $201,500 $1,518,800 $11,715,800 $32,184,700 E) City 25% + County 25% $110,000 $528,300 $7,602,100 $21,030,100 F) City 35% + County 35% $154,000 $1,004,500 $10,643,000 $29,442,100 G) City 50% + County 50% $220,000 $1,718,800 $15,204,200 $42,060,200 H) City 75% + County 75% $620,600 $2,909,400 $22,806,400 $63,090,300 19 City allocation includes allocation from both AB8 + MVLF in-lieu. County allocation does not include MVLF in-lieu. * Bonding capacity assumes Year 5 is first bond issuance for EIFD. “Year 5 means fifth year of revenue following district formation. Net proceeds shown. Bondable revenue assumes $25,000 admin charge, 150% debt service coverage. 6.0% interest rate; 30-year term. Proceeds net of 2% underwriter's discount, estimated reserve fund (maximum annual debt service), costs of issuance estimated at $350,000.Source: Kosmont Financial Services (KFS), registered municipal advisor.
EIFD Revenue and Bonding Capacity Scenarios
Boundary Scenario #2 – Citywide
EIFD Revenue
Allocation Scenario
Year 5
Accumulated
Revenue +
Bonding
Capacity*
Year 10
Accumulated
Revenue +
Bonding
Capacity*
50-Year
Present-Value
@ 3%
Discount Rate
50-Year
Nominal
Total
A) City 15% $544,300 $2,697,000 $17,472,200 $47,928,700 B) City 25% $1,348,600 $4,936,500 $29,120,300 $79,881,200 C) City 35% $2,153,000 $7,176,000 $40,768,400 $111,833,600 D) City 15% + County 15% $1,530,400 $5,442,600 $34,251,100 $94,268,300 E) City 25% + County 25% $2,992,100 $9,512,500 $57,085,200 $157,113,900 F) City 35% + County 35% $4,453,900 $13,582,400 $79,919,300 $219,959,400 20 Potential Cash Flow / Debt Issuance Approaches
• Kosmont Financial Services is in active discussions with public finance underwriters regarding TIF debt issuances in other jurisdictions
• Underwriters have proposed several approaches for the leverage of tax increment for accelerated debt issuance (e.g., 2-3 years from district formation), for example:
a) Tax increment only
b) Overlapping TIF and CFD (CFD Backstop) – landowners / developers must be willing to pay CFD special taxes in the short term (e.g., 5-10 years) until tax increment reaches a level to cover debt service
c) Tax increment with City or County general fund backstop • There are advantages and disadvantages with each approach (e.g., upfront proceeds available, public agency risk, cost of capital)
• Additional alternatives are available if private sector partners (e.g., landowners / developers are willing to advance infrastructure funding in exchange for reimbursement from TIF proceeds)
21 Financing Districts work better with a Multi-Agency Partnership & Attract Other Funding
Other Public Sources
Cap-and-Trade / HCD grant & loan
programs (AHSC, IIG, TCC,CERF)
Prop 68 parks & open space grants
Prop 1 water/sewer funds
Caltrans ATP / HSIP grants
Federal EDA / DOT / EPA funding
Federal ARPA, Invest Act, IIJ Act
Other Private Sources
Development Agreement / impact fees
Benefit assessments (e.g., contribution from CFD)
Statewide Community Infrastructure Program (SCIP)
pooled financing
Private investment
• Ideal strategy includes City and County partnership
• District which involve a City / County joint effort are more likely to win state grant funding sources • Districts explicitly increase scoring for CA state housing grants (e.g., IIG, AHSC, TCC) Report Card on City/County Financing District Partnerships 22 A growing number of cities are partnering with counties to fund infrastructure through financing districts:
1. Placentia + Orange County
2. La Verne + Los Angeles County
3. Palmdale + Los Angeles County
4. Carson + Los Angeles County
5. Lakewood + Los Angeles County
6. Stockton + Lathrop + Manteca + San Joaquin County
7. Gonzales + Monterey County
Public Agency and Community “Return on Investment”
23 • Housing: 500+ units, including 100+ affordable units • Economic revitalization, climate resilience, quality of life • Sustainable infrastructure investment
• Job creation and wages
• Acceleration of development and related fiscal revenues for City and County general funds • Attract other funding not otherwise available for City projects 24 Illustrative EIFD Formation Schedule
Tax increment allocation begins fiscal year following district formation Debt issuance, if desired, would occur after a stabilized level of tax increment has been established (may be 3-5 years) Target Date Task
Q1 2025
a) Conduct outreach/discussion among City staff and Council, County staff and Board of Supervisors, other relevant stakeholders
b) Final determination of EIFD boundaries, targeted projects, governing Public Financing Authority (PFA) Board composition
Q3 2025 c) Participating taxing agencies adopt Resolution(s) of Intention (ROI) and formally establish PFA Q3 2025 d) PFA directs the drafting of the Infrastructure Financing Plan (IFP) Q3 2025 e) Distribute draft IFP to property owners, affected taxing entities, City Council, County Board of Supervisors Q4 2025 f) PFA holds an initial public meeting to present the draft IFP to the public and property owners Q4 2025 g) City Council/legislative bodies of other affected taxing entity contributing increment adopt resolution(s) approving IFP
Q4 2025 h) PFA holds first public hearing to hear additional comments and take action to modify or reject IFP (at least 30 days after “f”)
Q4 2025 / Q1 2026 i) PFA holds second public hearing to consider oral and written protests and take action to terminate proceedings or adopt IFP and form the district by resolution (at least 30 days after “h”) 25 Potential Next Steps
• Address questions, receive and incorporate feedback from City staff • Present findings to City Council
• Conduct stakeholder outreach and approach County to discuss potential EIFD partnership • Based on City/County feedback, pursue district formation as soon as feasible (first action would be City Council consideration of a Resolution of Intention as lead agency) 26 THANK YOU
Questions?
Kosmont Companies
1601 N. Sepulveda Blvd. #382 Manhattan Beach, CA 90266
Ph: (424) 297-1070 | Fax: (424) 286-4632
www.kosmont.com
Disclaimer
27 The high-level 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 from those expressed in this analysis.
Discussions or descriptions of potential financial tools that may be available to the Client and public agencies are included for informational purposes only and are not intended to be to be “advice” within the context of this Analysis.
Municipal Advisory activities are conducted through Kosmont Companies’ affiliate, Kosmont Financial Services, which is Registered as a Municipal Advisor with the SEC and MSRB.