Prepared by:
Kosmont Companies
Enhanced Infrastructure
Financing District (EIFD)
Preliminary Feasibility Analysis
April 2022
Executive Summary
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2 • The City of Oakland Rules and Legislation Committee introduced a motion in December 2021 to conduct a citywide Enhanced Infrastructure Financing District (EIFD) feasibility analysis with emphasis on funding for affordable housing and related infrastructure improvements* • Utilizing publicly available information related to current and historical property value and property tax revenue growth, Kosmont Companies has evaluated several scenarios of potential EIFD implementation for such purposes
• Scenarios were identified based on Kosmont experience with EIFD implementation in other jurisdictions across the State and do not yet represent input and feedback from City staff or elected official personnel • It is Kosmont’s recommendation that if an EIFD is ultimately implemented in this context, the appropriate tax increment contribution scenario should balance EIFD funding capacity for targeted uses on one hand, with City general fund solvency and funding support for day-to-day operations on the other hand • Subject to feedback from City Council and staff, next steps could include refinement of EIFD boundaries, tax increment revenue contribution assumptions, identification of projects to be funded, and ultimately a formal resolution of intention to form the EIFD by the City Council * Additionally identified as potential strategy to increase resources for new housing in “Oakland at Home Recommendations for Implementing a Roadmap Toward Equity” from the Oakland Housing Cabinet (Strategy #6.E) – City of Oakland & Enterprise Community Partners (2016) Outline
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3 1. Overview of TIF / EIFD
2. District Boundary and Strategic Considerations
3. Targeted Infrastructure
4. Potential Financing and Funding Plan
5. Next Steps
4 $0M
$100M
$200M
$300M
$400M
$500M
$600M
$700M
0 5 10 15 20 25 30 35 40 45
Baseline A/V
Incremental Growth
of Existing A/V
Incremental A/V from
New Development
Y ears from District Formation
Assessed Value
(A/V) within
TIF District
Boundaries
Increment
Available to
TIF District
Period of New
Development
Note: Illustrative. Conservative 2% growth of existing assessed value (A/V) shown; does not include mark-to-market increases associated with property sales.
Tax Increment Mechanics – NOT A NEW TAX
Illustrative
EIFD Fundamentals
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5 45 years from first bond issuance; long-term committed revenues; districts can be formed in 12-18 months
Long T erm
Districts
Public Financing Authority (PFA) led by city or county implements Infrastructure Financing Plan (IFP) – IFP is the investment plan of the EIFD, managed by the PFA* Governance
Mandatory public hearings for formation (includes protest opportunity); no public vote to issue debt
Approvals
EIFD project areas do not have to be contiguous,allowing them to target specific sites / areas and making them compatible with other zoning / entitlement strategies Non
-
contiguous
Areas
Any property with useful life of 15+ years & of communitywide significance; purchase, construction, expansion, improvement, seismic retrofit, rehabilitation, and maintenance Eligible
Projects
* Note: Some communities are evaluating the formation of an EIFD advisory commission to provide input to the PFA. The appointment of the public members is subject to the provisions of Government Code Sections 54970 and 54972. The process (e.g., applications, interviews) has varied among established EIFDs/PFAs.
Types of Projects EIFD Can Fund
Partial List
6 Roadway / Parking / Transit
Brownfield Remediation
Water / Sewer / Storm / Flood Parks / Open Space / Recreation Childcare Facilities & Libraries
Affordable Housing
Broadband Small Business /
Nonprofit Facilities
Wildfire Prevention / Other
Climate Change Response
Why are Public Agencies Authorizing EIFDs?
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7 1. Return on Investment: Private sector investment induced by district commitment accelerates growth of fiscal revenues, job creation, housing production, essential infrastructure improvements
2. Ability to attract additional funds (“OPM”) – tax increment from other entities (county, special districts), federal / state grants / loans (e.g. for TOD, water, housing, parks, remediation)
3. Commitment of future revenues (versus existing revenues) to catalyze economic development that would not occur as quickly or intensely but for the TIF commitment EIFDs as a Component of the Oakland Economic
Development and Public Financing Toolkit
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8 • There are advantages / disadvantages to EIFD compared to other mechanisms, such as general obligation (GO) bonds, lease revenue bonds / COPs, Mello-Roos Community Facilities District (CFD) financing, assessment districts, and other tools
• Advantages of EIFD include no encumbrance of existing city/county resources, can attract tax increment contributions from other taxing entities, increased priority for grant funding, ability to demonstrate commitment to multiple infrastructure (and/or affordable housing) projects to catalyze private sector development, capacity to fund maintenance, no additional taxes to property owners / residents / businesses, and ease of voter approval • Disadvantages of EIFD include lack of comparable financings thus far, statutory vs. constitutional authority to issue debt, and subordination to redevelopment successor agency obligations, • Advantages of EIFD vs. Other CA TIF Tools (e.g. CRIA, IFD, IRFD, AHA, SIFD) include flexibility in delineating project areas, capacity to dedicate property tax in lieu of MVLF, district duration, and governing board composition and corresponding implications for taxing entity partnership • Complementary Tool: EIFD should not be considered a replacement for other useful financing mechanisms, but rather a complementary tool; other jurisdictions have been successful in utilizing EIFD as well as other tools for
different projects within the same community
Comparison of TIF/EIFD and Other Tools
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9 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 for Oakland 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).
Districts in Progress Statewide
(Partial List)
10 Fully Formed In Formation Process Under Evaluation
Jurisdiction Purpose
Azusa Housing and transit-supportive infrastructure
Brentwood Housing and transit-supportive infrastructure Buena Park Mall reimagination, housing-supportive infrastructure Carson + L.A. County Remediation, housing infrastructure, recreation Coachella Valley Association of Govts (CVAG) Cities Housing and transit-supportive infrastructure Covina Housing and transit-supportive infrastructure
El Cajon Housing and transit-supportive infrastructure
El Segundo + L.A. County Various infrastructure, regional connectivity Fairfield Housing and transit-supportive infrastructure Fresno Housing and transit-supportive infrastructure
Fresno County Industrial and commercial supportive infrastructure Humboldt County Coastal mixed-use & energy supportive infrastructure Indian Wells Housing and tourism-supportive infrastructure Imperial County Housing and greenfield infrastructure
La Verne + L.A. County Housing and transit-supportive infrastructure Long Beach (Multiple Districts) Housing and transit-supportive infrastructure Los Angeles (Downtown, San Pedro) Housing and transit-supportive infrastructure Los Angeles County Uninc. West Carson Housing / bio-science / tech infrastructure Madera County (Two Districts) Greenfield infrastructure (water / sewer) Modesto + Stanislaus County Housing, transit, recreation-supportive infrastructure Mount Shasta + Siskoyou County Rural Brownfield site mixed-use infrastructure Napa Housing and transit-supportive infrastructure
Ontario Housing and transit-supportive infrastructure
Palmdale + L.A. County Housing and transit-supportive infrastructure Pittsburg Housing and transit-supportive infrastructure Placentia + Orange County Housing and transit-supportive infrastructure Rancho Cucamonga Housing and transit-supportive infrastructure Redondo Beach + L.A. County Parks / open space, recreation infrastructure Riverside Housing and transit-supportive infrastructure Sacramento County (Unincorporated) Industrial / commercial supportive infrastructure San Bernardino County (Unincorporated) Transit-supportive infrastructure San Jose Housing and transit-supportive infrastructure
Sanger Housing and commercial supportive infrastructure Santa Ana Housing and transit-supportive infrastructure South Gate Housing and transit-supportive infrastructure West Santa Ana Branch Transit Corridor Cities Housing and transit-supportive infrastructure Yucaipa Housing and transit-supportive infrastructure
11 Boundary and Strategic Considerations
Feasibility Analysis Approach for Oakland
1. Define district boundary alternatives based on “citywide” guidance from Rules & Legislation Committee
2. Estimate future growth of assessed value based on review of historical growth within the City and Kosmont staff experience with property tax revenue projections
3. Focus on the City general fund as the primary affected taxing entity participating in the EIFD with its share of future property tax increment, considering significant overlap with parcels in former redevelopment agency project areas and related residual revenue distribution from the Redevelopment Property Tax Trust Fund (RPTTF) through expiration of Recognized Obligation Payment Schedule (ROPS) payments
4. Evaluate scenarios of EIFD revenue contribution based on factors above, also balancing need to reserve future property tax revenues for general fund solvency / day-to-day municipal services (different levels of contribution evaluated)
5. Identify additional complementary funding sources, such as and grants on a project-specific basis (City and local partners have experience with Housing Accelerator, MHP, AHSC - $215M awarded in most recent cycle) Citywide EIFD Study Area
12 • Citywide boundary evaluated based
on R&L Committee guidance
• West Oakland focus area additionally
evaluated
• Howard Terminal specifically
excluded from the evaluation
West
Oakland
Howard
Terminal
13 Assessed Value Growth Assumptions for Analysis
Over 50-Year Potential District Lifetime
Note: AV at buildout values in current 2022 dollars.
Source: City of Oakland, Alameda County Auditor-Controller, Kosmont (2022)
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 Y ear-Over-Y ear Assessed Property Value Growth in Oakland 2019-2020 2020-2021 2021-2022 EIFD Scenario 1 EIFD Scenario 2 Actual 2020-2021 YoY Growth @ 10.20%
Actual 2019-2020 YoY Growth @ 7.93%
Actual 2021-2022 YoY Growth @ 5.96%
EIFD Scenario 1 @ 6.0% down to 2.5% through EIFD Year 50 EIFD Scenario 2 @ 8.0% down to 2.5% through EIFD Year 50 14 Property Tax Revenues Available to EIFD
Tax Rate Area and RPTTF Distribution
• Primary non-school recipients and potential
contributors of property tax are City of Oakland and
County of Alameda
• City receives approx. 28-29% of every $1 collected in property taxes within the EIFD Study Area
City additionally receives equivalent of approx. 7-8% of property tax in lieu of MVLF , also available to EIFD, but not incorporated into this analysis to be conservative
• School-related entities cannot participate (e.g.,
Oakland USD, Community Colleges)
• While the County and other non-school taxing entities (e.g., AC Transit, BART, EB Regional Park, EBMUD,
Flood Control) could elect to participate, this analysis focuses on a City contribution
Tax Rate Area (TRA) weighted average distributions post-ERAF (Education Revenue Augmentation Fund) distribution, in close alignment with Redevelopment Property Tax Trust Fund (RPTTF) residential revenue distribution breakdown.
Parcels within former Redevelopment Agency Project Areas are subject to RPTTF revenue flow until expiration of ROPS obligations of ~$500.6M anticipated in 2040 (potentially through 2071).
Source: Alameda County Auditor Controller, City of Oakland, California Department of Finance (2022) City
28.7%
County
16.0%Other
33.6%
School Entities (not
eligible)
21.7%
Weighted Average Property Tax Distribution
within EIFD Study Area
15 Revenue and Bonding Capacity by
Revenue Contribution Scenario –Citywide
EIFD Revenue
Contribution Scenario
(City as only Taxing Entity Contributing)
Ye a r 5
Annual
Revenue
Ye a r 5
Accumulated
Revenue +
Bonding
Capacity*
Y ear 10
Annual
Revenue
Y ear 10
Accumulated
Revenue +
Bonding
Capacity*
50-Ye a r
Present Value
@ 6%
50-Ye a r
Nominal Total
Citywide Contribution @ 2.5% - LOW $1,334,000 $16,836,000 $2,242,000 $35,325,000 $55,848,000 $322,553,000 Citywide Contribution @ 2.5% - HIGH $1,788,000 $22,947,000 $2,837,000 $45,566,000 $66,020,000 $367,929,000 Citywide Contribution @ 5.0% - LOW $2,669,000 $34,334,000 $4,485,000 $71,312,000 $111,696,000 $645,105,000 Citywide Contribution @ 5.0% - HIGH $3,576,000 $46,556,000 $5,674,000 $91,795,000 $132,039,000 $735,858,000 Citywide Contribution @ 7.5% - LOW $4,003,000 $51,832,000 $6,727,000 $107,298,000 $167,543,000 $967,658,000 Citywide Contribution @ 7.5% - HIGH $5,364,000 $70,165,000 $8,511,000 $138,024,000 $198,059,000 $1,103,786,000 City contribution includes contribution from General Fund AB8 (no property tax in lieu of MVLF) * 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, 125% 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 Transactions Services (KTS), registered municipal advisor. 16 City contribution includes contribution from General Fund AB8 (no property tax in lieu of MVLF) * 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, 125% 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 Transactions Services (KTS), registered municipal advisor.
Revenue and Bonding Capacity by
Revenue Contribution Scenario –West Oakland Only
EIFD Revenue
Contribution Scenario
(City as only Taxing Entity Contributing)
Ye a r 5
Annual
Revenue
Ye a r 5
Accumulated
Revenue +
Bonding
Capacity*
Y ear 10
Annual
Revenue
Y ear 10
Accumulated
Revenue +
Bonding
Capacity*
50-Ye a r
Present Value
@ 6%
50-Ye a r
Nominal Total
W . Oakland Contribution @ 25% - LOW $496,000 $5,841,000 $833,000 $12,710,000 $20,753,000 $119,860,000 W . Oakland Contribution @ 25% - HIGH $665,000 $8,111,000 $1,054,000 $16,517,000 $24,533,000 $136,721,000 W . Oakland Contribution @ 33% - LOW $655,000 $7,922,000 $1,100,000 $16,989,000 $27,394,000 $158,215,000 W . Oakland Contribution @ 33% - HIGH $877,000 $10,919,000 $1,392,000 $22,014,000 $32,383,000 $180,472,000 W . Oakland Contribution @ 50% - LOW $992,000 $12,344,000 $1,667,000 $26,083,000 $41,506,000 $239,719,000 W . Oakland Contribution @ 50% - HIGH $1,329,000 $16,885,000 $2,109,000 $33,696,000 $49,065,000 $273,442,000 17 Potential Cash Flow / Debt Issuance Approaches
• Kosmont Transactions Services is in active discussions with public finance underwriters regarding EIFD debt issuances in other jurisdictions
• Underwriters have proposed several approaches for the leverage of EIFD tax increment for accelerated debt issuance (e.g., 2-3 years from EIFD formation), for example:
a) EIFD increment only, based on completed (or nearly completed) improvements b) EIFD increment only, based on completed improvements PLUS near-term growth c) Overlapping EIFD and CFD (CFD Backstop) – landowners / developers must be willing to pay CFD special taxes in the short term (e.g., 5-10 years) until EIFD increment reaches a level to cover debt service d) EIFD 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 EIFD proceeds) 18 EIFDs Achieve Priority for Third Party Funding
Federal & State 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 Infrastructure Grant Program
Other Potential Funding Sources
Development Agreement / impact fees
Benefit assessments (e.g. contribution from CFD)
Private investment
• Ideal strategy includes EIFD and complementary funding sources • EIFDs explicitly increase scoring for CA state housing grants (e.g., IIG, AHSC, TCC) 19 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 Target Date Task
Q2-Q3 2022 a) Conduct outreach / discussion among City staff and Council, relevant stakeholder related to potential projects Q3 2022 b) Final determination of EIFD boundaries, tax increment contributions, targeted projects, PFA composition Q3 2022 c) Participating taxing agencies adopt Resolution(s) of Intent (ROI) to form EIFD and establish PFA Q3-Q4 2022 d) PFA drafts Infrastructure Financing Plan (IFP) Q4 2022 e) Distribute draft IFP to property owners, affected taxing entities, PFA,City Council, and planning commission with corresponding project-related CEQA documentation
Q1 2023 f) PFA holds an initial public meeting to present the draft IFP to the public and property owners Q1 2023 g) PFA holds first “official” public hearing to hear written and oral comments but take no action (noticing must occur at least 30 days after “f”)
Q1 2023 h) PFA holds second public hearing to hear additional comments and take action to modify or reject IFP (at least 30 days after “g”)
Q2 2023 i) City Council / legislative bodies of other affected taxing entity contributing increment adopt resolution(s) approving IFP
Q2 2023 j) PFA holds third public hearing to consider oral and written protests and take action to terminate proceedings or adopt IFP by resolution (at least 30 days after “h” – target completion before August 9th prior to roll equalization) 20 Next Steps
• Receive and incorporate feedback from City Council / Subcommittee(s) • Refinement of EIFD boundaries, tax increment revenue contribution assumptions • Identification of projects to be funded, e.g., through stakeholder outreach • Pursue district formation – first action would be City Council adoption of a Resolution of Intent • Pursue opportunities for external funding sources (e.g., IIG and AHSC grants), ideally with EIFD platform for greater priority
21 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
22 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 from those expressed in this analysis.
Discussions or descriptions of potential financial tools that may be available to the City 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 Transaction Services, which is Registered as a Municipal Advisor with the SEC and MSRB.