Finance & Management Committee
December 13, 2022
AGENDA REPORT
TO: Edward D. Reiskin
City Administrator
FROM: Erin Roseman
Director of Finance
SUBJECT:
Enhanced Infrastructure District
Timeline & Procedural Recommendation
DATE: November 29, 2022
City Administrator Approval Date
RECOMMENDATION
Staff Recommends That the City Council Receive An Informational Report From The City Administrator Outlining The Timeline And Process For A Proposal To Establish An Enhanced Infrastructure Financing District (EIFD) Exclusively For East Oakland, Exclusively For West Oakland, and For East And West Oakland Combined
EXECUTIVE SUMMARY
This informational report responds to the City Council directives adopted on November 1, 2022 via Resolution No. 89480 C.M.S, expressing the City’s interest in establishing one or more enhanced infrastructure financing districts to fund affordable housing. The City Administrator was directed to return to Council with a report and recommendation outlining the timeline and process for a proposal to establish an enhanced infrastructure financing district exclusively for East Oakland, exclusively for West Oakland, and exclusively for East and West Oakland combined. The process outlined below is the same for all proposed district areas.
BACKGROUND/LEGISLATIVE HISTORY
On November 1, 2022, the Oakland City Council adopted Resolution No. 89480 C.M.S, that expressed the City’s interest in establishing one or more enhanced infrastructure financing districts to fund affordable housing.
Kosmont Companies, through a nonprofit, has provided the City with presentations and some basic analysis of generalized areas and made recommendations that an EIFD may be viable under certain circumstances.
Dec 7, 2022
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 2
Finance & Management Committee
December 13, 2022
ANALYSIS AND POLICY ALTERNATIVES
An Enhanced Infrastructure Financing District (EIFD) is a form of tax increment financing. Tax Increment financing (TIF) is an economic development mechanism where an area is geographically targeted to capture the increase in property taxes resulting from new development and is then used to subsidize the development in that established area. TIF works in such a way that the current property taxes for the designated area are considered the baseline property value. Once new development begins, it will provide greater property value resulting in new property taxes. The difference between the baseline property value and the new property value to be taxed is called “tax increment”. This increment, rather than flow to the City and County general revenues, will flow to the targeted district in which the new property value was obtained. The revenues are then dedicated to the targeted area for specific infrastructure that is in support of the new development basically, keeping it in the neighborhood. California Government code allows a maximum of 45 years from the first bond issuance, for the increment to be collected and pledged. At the end of the timespan, the tax increment will then flow to the City and County like general property taxes.
Process and Timeline To Implement An Enhanced Infrastructure Financing District The timeline to establish and implement an EIFD can take anywhere from 3 to 5 years under optimal conditions. The more complexity an EIFD contains, i.e., governmental contributors, overlap with previous Redevelopment Areas, development needs, and greater geography, the longer the timeline. The timeline can expand upwards to seven years when taking these into consideration. The statutory requirements alone set the baseline timeline at 18 months.
However, prior to undertaking the statutory requirements, a detailed analysis of the efficacy of an EIFD is warranted based on the amount of time and potential cost to its legal creation.
A baseline study of the particular areas identified for an EIFD should focus in on the exact geography that has the most potential to produce the desired outcome of maximized tax increment, greatest policy effect, most positive economic indicators to support long-term financing and public infrastructure, produces the greatest residual economic outcomes such as a positive outcome on general revenues to the taxing entities and to the residents of the community.
The basic components that need to be studied are a specific geography on a parcel level, to include existing and future real estate values, specific ideal developments to produce the desired outcome, revenue, and expenditure impact on government finances, and determine the public infrastructure needed to produce and support the ideal development. The market conditions for financing, development activity, cost of opportunity, multiple government participation must be factored in the analysis. The specific legal constraints of governmental activity must also be taken to account as several disciplines of law and California government code converge, i.e., taxation, municipal debt, redevelopment, economic development, and appraisal. This baseline study will then inform and be the starting point for the statutory requirements of the Resolution of Intent, Public Financing Authority, Infrastructure Financing Plan, and Community Facilities Districts.
The ability to establish an EIFD is found in California Gov. Code §§ 53398.50 – 53398.88 Enhanced Infrastructure Financing District. Outlined below in high-level detail are 23 steps to that must be completed before an EIFD is fully established. Implied in the process, is the requirement of a determination of the exact geography in which the EIFD will encompass. The Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 3
Finance & Management Committee
December 13, 2022
exact geography defined by specific parcel data of the EIFD is critical in all aspects of the foregoing processes.
Table 1. Enhanced Infrastructure Financing District Timeline, as of 4.2021
Step Action Estimated Timeframe Statutory
Reference
1 Former Redevelopment Agency and
Redevelopment Project Areas.
• Ensure compliance with applicable
conditions if City created a
redevelopment agency or wishes to
include a former redevelopment project
area in the EIFD
1-2 months
Gov. Code §§
53398.54,
53398.55
2 Affected Taxing Entities Preliminary Action
• Affected Taxing Entities designate
members of Public Financing PFA
described below.
2-4 months
Gov. Code §
53398.51
3 Resolution of Intention (ROI).
• Oakland City Council (“City Council”)
adopts resolution of intention to
establish the EIFD.
• Resolution shall:
o Set boundaries of EIFD (may
refer to map).
o State type of
facilities/development to be
financed/assisted by EIFD.
o State that property tax
increment of City may be used,
if applicable.
o State that City may allocate
sales and use tax to EIFD.1
o Set time for public hearing.
o Direct mailing of ROI (or
notice)
12-24 months
Gov. Code §§
53398.59,
53398.60
1 This schedule assumes that the City is not establishing a district under the Neighborhood Infill Finance and Transit Improvements Act (NIFTI) under Gov. Code § 53398.75.5 or the Second Neighborhood Infill Finance and Transit Improvements Act (NIFTI -2) under Gov. Code § 53398.75.7.
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 4
Finance & Management Committee
December 13, 2022
Step
Action
Estimated Timeframe Statutory
Reference
4 Formation of Public Financing Authority
(“PFA”).2
• City Council adopts resolution forming
PFA.
• If City is only affected taxing entity,
PFA membership consists of 3
members of City Council, plus 2
members of public chosen by the City
Council.
• If other affected taxing entities are
involved, PFA membership consists of
a majority of members from the
legislative bodies of the participating
entities, plus 2 members of public.
12-24 months
(Must occur at the same
time as ROI)
Gov. Code §
53398.51.1
5 Mailing of Resolution of Intention or Notice.
• City official designated by City Council
must mail:
o Copy of Resolution of Intention
to each affected taxing entity
and the PFA.
o Alternative to mailing
Resolution of Intention: mail
one-page notice of intention or
copy of Resolution of Intention
to each owner of land within
EIFD.
1-2 months
Gov. Code §§
53398.60-62
6 PFA Resolution Directing Infrastructure
Financing Plan.
• PFA must adopt a resolution directing
the City engineer or “other appropriate
official” to prepare an Infrastructure
Financing Plan (“IFP”).
1-2 months
Gov. Code §
53398.62
2 Affected taxing entities are not limited to those agencies that allocate revenues to the EIFD. “Affected taxing entity” means any governmental taxing agency which levied or had levied on its behalf a property tax on all or a portion of the property located in the proposed district in the fiscal year prior to the designation of the district, but not including any county office of education, school district, or community college district. An “affected taxing entity” may include a special district if the special district is providing any portion of the funding included in the infrastructure financing plan adopted pursuant to Section 53398.63. For the purposes of this section, “special district” means an agency of the state formed for the performance of governmental or proprietary functions within limited geographic boundaries and shall not include a school district or community college district. Gov. Code § 53398.51(a).
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 5
Finance & Management Committee
December 13, 2022
Step
Action
Estimated Timeframe Statutory
Reference
7 Consultation and Meeting with Affected Taxing
Entity.
• Designated official consults with each
affected taxing entity.
• Upon request, meets with
representatives of affected taxing
entity.
1-2 months
Gov. Code §
5398.65
8 Preparation of IFP.
• IFP must include, among others:
o Map and legal description of EIFD.
o Description of proposed public
facilities.
o Finding that development and
financial assistance are of
communitywide significance.
o Financing section:
Specification of maximum
portion of tax increment
allocated to the EIFD (may be
different for affected taxing
entities and may change over
time)
Projection of tax increment
revenue
Plan for financing facilities,
including intention to incur
debt
Date on which EIFD will cease
to exist, which cannot be more
than 45 years after issuance
of bonds is approved.
Analysis of costs to City of
providing facilities and
services to EIFD and
projected revenues from
development in EIFD
Analysis of projected fiscal
impact of the EIFD and
associated development upon
each affected taxing entity
12-24 months
Gov. Code §
53398.63
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 6
Finance & Management Committee
December 13, 2022
Step
Action
Estimated Timeframe Statutory
Reference
9 Mailing of IFP or Notice.
• IFP and CEQA report, if required for to
the public facilities or proposed
development project for which the
public facilities are needed, must be
mailed to each owner of land within the
EIFD and to each affected taxing entity.
• IFP must also be mailed to the PFA,
the City planning commission, and the
City Council.
• IFP must also be made available for
public inspection
• Alternative to mailing IFP/CEQA
Report: notice mail be mailed to each
landowner, resident and affected taxing
entity.
1-2 months
Gov. Code §
53398.64
10 Provide Notice of Meeting to Present IFP.
• Post notice of meeting on EIFD’s
website at least 10 days before the
meeting.
• Mail notice to each landowner, each
resident, and each taxing entity at least
10 days before the meeting.
1-2 months
Gov. Code §§
53398.66(c)(1)
and 53398.66(i)
11 Meeting to Present IFP.
• PFA must hold a meeting at which the
draft IFP is made available to the public
and each landowner within the EIFD.
• Purposes are to present IFP, answer
questions, and consider comments.
Gov. Code §
53398.66(b)
12 Provide Notice of First Public Hearing.
• Publish at least once a week for four
successive weeks before the hearing in
newspaper of general circulation.
• Post notice of meeting on EIFD’s
website at least 10 days before the
meeting.
• Mail notice to each landowner, each
resident, and each taxing entity at least
10 days before the meeting.
1-2 months
Gov. Code §
53398.66(i)(1)
13 First Public Hearing.
• PFA shall hear all written and oral
comments about the proposed
adoption of the IFP and the regularity
of proceedings but take no action.
Gov. Code §
53398.66(a)(2)
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 7
Finance & Management Committee
December 13, 2022
Step
Action
Estimated Timeframe Statutory
Reference
14 Provide Notice of Second Public Hearing.
• Publish at least 10 days before hearing
in newspaper of general circulation.
• Post notice of meeting on EIFD’s
website at least 10 days before the
meeting.
• Mail notice to each landowner, each
resident, and each taxing entity at least
10 days before the meeting.
• Notice shall include summary of
changes made to IFP as a result of the
first hearing and identify accessible
location where public can review the
IFP.
2-6 months
Gov. Code §§
53398.66(c)(1)(D)
and
53398.66(i)(2)
15 Second Public Hearing.
• PFA shall consider any additional
written and oral comments about the
proposed adoption of the IFP and the
regularity of proceedings and act to
modify or reject the IFP.
Gov. Code §
53398.66(a)(3)
16 Resolution Approving Division of Taxes with
EIFD.
• Each affected taxing entity that will be
subject to division of taxes (i.e., City
and County) must adopt a resolution
approving the IFP.
Note: City Council must hold a public
hearing before it adopts this resolution.
Gov. Code §53398.59(f)
2-6 months
Gov. Code §
53398.68
17 Provide Notice of Third Public Hearing.
• Publish at least 10 days before hearing
in newspaper of general circulation.
• Post notice of meeting on EIFD’s
website at least 10 days before the
meeting.
• Mail notice to each landowner, each
resident, and each taxing entity at least
10 days before the meeting.
• Notice shall include copy of IFP and
inform landowner or reside of right to
submit oral or written protest before the
close of the public hearing.
2-6 months
Gov. Code §§
53398.66(c)(1)(E)
and
53398.66(i)(3)
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 8
Finance & Management Committee
December 13, 2022
Step
Action
Estimated Timeframe Statutory
Reference
18 Third Public Hearing.
• PFA shall consider all written and oral
protests and recommendations of
affected taxing entities.
• PFA shall conduct a protest hearing.
• PFA shall terminate proceedings if
there is a majority protest.3
• PFA shall call an election if 25-50% of
combined number of landowners and
residents file a protest.
• No election required if less than 25% of
combined number of landowners and
residents protest.
Gov. Code §
53398.66(c)(2)-
(g)
19 Election (if Needed After Third Public Hearing).
• Following majority protest, PFA holds
mail ballot election of landowners and
residents.
• PFA must first adopt election
procedures at a duly noticed public
hearing
Within 90 days of third
public hearing
Gov. Code §§
53398.66,
53398.70,
53398.71
20 Resolution Finding No Majority Protest,
Proposing Adoption of IFP and Formation of
the EIFD
• After third public hearing, assuming no
protest sufficient to require an election,
PFA may adopt resolution proposing
adoption of the IFP and formation of
the EIFD.
1-2 months
(After third public
hearing)
Gov. Code §
53398.69
21 Resolution Authorizing Issuance of Bonds. Date Consideration:
Adoption of this
resolution may trigger
45-year allocation
period (see §
53398.63).
Gov. Code §
53398.77
3 A majority protest exists if protests have been filed representing over 50 percent of the combined number of landowners and residents in the area who are at least 18 years of age. Gov.
Code § 53398.66(c)(2).
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 9
Finance & Management Committee
December 13, 2022
Step
Action
Estimated Timeframe Statutory
Reference
23 Expiration of Statute of Limitations.
• Any action to attack the adoption of the
IFP or formation of the EIFD must be
commenced within 30 days of the
resolution adopting the IFP.
• Any action to determine the validity of
the issuance of bonds must be
commenced within 30 days after
adoption of the Resolution Authorizing
Issuance of Bonds
Date Consideration:
Adoption of § 53398.77
resolution may trigger
45-year allocation
period (see §
53398.63).
Gov. Code §§
53398.57 and
53398.69 (IFP
and formation of
EIFD)
Gov. Code §
53398.58 (bonds)
Recommendation
Receive this report and provide for continued exploration for EIFD’s in East Oakland, West Oakland, and East and West Oakland Combined with more robust analysis. Due to the enormous complexity of establishing an EIFD and the various analyses needed, it is recommended that a more thorough analysis be conducted by the City with the assistance of an economic consultant with an expertise in EIFD development, financial advisors, real estate economists, and specialized legal counsel to determine if an EIFD would be beneficial to the City and the residents of the proposed areas.
To facilitate the study of the various EIFD’s, the Department of Finance has released an informal request for proposals (IRFP) to bring on an economic consultant to comprehensively review the reports provided to the City from Kosmont Companies and outline the next appropriate steps for dedicated review of each possible district. The IRFP responses were due back to the Finance Department on November 30th. The Department is in the process of reviewing, awarding, and contract execution. The department expects that a consultant can be on-board at the beginning of the next year. Following the engagement of the consultant, Department of Finance would expect to bring back additional recommendations and budgetary considerations for fully engaging in detailed EIFD analysis using the Kosmont Company analysis and reports as the starting point.
This report advances the citywide priority of being a responsive, trustworthy government by returning to the Finance and Management Committee timely as requested by the City Council.
FISCAL IMPACT
There is no fiscal impact to receive this informational report, however, the implementation of any EIFD is a great undertaking and can cost in excess of $2 million annually in consultant fees, inclusive of real estate, economic, financial, and legal counsel for the exploration and formation phase.
PUBLIC OUTREACH / INTEREST
No outreach was deemed necessary for this informational report beyond the standard City Council agenda noticing procedures.
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 10
Finance & Management Committee
December 13, 2022
COORDINATION
This report was coordinated by the following departments: City Administrator’s Office, City Attorney’s Office, and Finance Department.
SUSTAINABLE OPPORTUNITIES
Economic: There are no economic opportunities associated with the receiving of this informational report. However, the economic opportunities that will arise from the establishment of an EIFD are undetermined at this time.
Environmental: There are no environmental opportunities associated with the receiving of this report.
Race and Equity: A racial equity analysis has not been conducted. The racial equity impacts that may arise from the establishment of an EIFD are undetermined at this time.
Edward D. Reiskin, City Administrator
Subject: Enhanced Infrastructure District Timeline & Procedural Recommendation Date: November 29, 2022 Page 11
Finance & Management Committee
December 13, 2022
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That the City Council Receive An Informational Report From The City Administrator Outlining The Timeline And Process For A Proposal To Establish An Enhanced Infrastructure Financing District (EIFD) Exclusively For East Oakland, Exclusively For West Oakland, and For East And West Oakland Combined.
For questions regarding this report, please contact Brittany Hines, Assistant to the Director, at (510) 238-7078.
Respectfully submitted,
ERIN ROSEMAN
Director of Finance