Prepared by:
Kosmont Companies
Enhanced Infrastructure Financing District
(EIFD) Feasibility Analysis Summary
March 12, 2024
Introduction and Background
2 Several corridors within the City of Orange (e.g., Tustin, Chapman, Katella, Lincoln) have potential for reinvestment with potential to generate significant economic impacts and community benefits Revitalization will require infrastructure investment, which will require creative funding and financing strategies
A public/private financing strategy that includes Tax Increment Financing (“TIF”) (not a new tax) is well-suited to capture value from new development to fund critical infrastructure Tax increment funding capacity is estimated in the range of $48M to $109M on a present-value basis While a City-only special district strategy would likely achieve favorable “return on investment” for the City, a broader partnership including the private sector and the County of Orange would further enhance financial feasibility
Subject to feedback from the City, immediate next steps could include outreach to the County to discuss potential partnership, and refinement of an infrastructure financing strategy accordingly 3 $0M
$100M
$200M
$300M
$400M
$500M
$600M
0 5 10 15 20 25 30 35 40 45 50 55
Baseline Property Value
Property taxes continue to flow to City / County / Schools / Other Taxing Entities as normal New Property Value from
New Development / Rehabilitation
Available to TIF District
Years from District Formation
Assessed
Property Value
(A/V) within
TIF District
Boundaries
New Total
Value After
TIF District
Benefits all
Taxing Entities
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.
What is Tax Increment Financing (TIF) – Not a New Tax
EIFD Fundamentals
Communicating in a Digital W orld
4 45 years from first bond issuanceLong T erm
Districts
Public Financing Authority (PFA) implements Infrastructure Financing Plan (IFP)Governance Mandatory public hearings for formation with protest opportunity; no public voteApprovals Any property with useful life of 15+ years & of communitywide significance; purchase, construction, expansion, improvement, seismic retrofit, rehabilitation, andmaintenance Eligible
Projects
TIF Districts in Progress
Statewide
(Partial List)
Under EvaluationIn Formation ProcessFully Formed
PurposeJurisdiction
Industrial and housing supportive infrastructureApple Valley Downtown revitalization, industrial infrastructureBanning Industrial and housing supportive infrastructureBarstow Housing, employment, and transit-supportive infrastructureBrentwood Mall reimagination, housing-supportive infrastructureBuena Park Remediation, affordable housing, recreationCarson + L.A. County Mall reimaginationCitrus Heights
Downtown housing and blended use supportive infrastructureCovina Downtown, housing, and transit-supportive infrastructureFairfield Downtown, housing and transit-supportive infrastructureFresno Industrial and commercial supportive infrastructureFresno County Coastal mixed-use and energy supportive infrastructureHumboldt County Housing and tourism-supportive infrastructureIndian Wells Industrial, renewable energy, and housing and infrastructureImperial County Housing and transit-supportive infrastructureLa Verne + L.A. County Economic empowerment and affordable housingLong Beach
Affordable housing and transit-supportive infrastructureLos Angeles (Downtown, San Pedro, other) Housing / bio-science / tech infrastructureLos Angeles County Uninc. West Carson Water, sewer, roads and other housing infrastructureMadera County (3 Districts) Downtown, housing, and recreation infrastructureModesto + Stanislaus County Rural brownfield mixed-use infrastructureMount Shasta + Siskiyou County Downtown, housing, tourism supportive infrastructureNapa Affordable housing and infrastructureOakland
Industrial and housing infrastructureOntario
Housing and commercial infrastructurePalmdale + L.A. County Housing, commercial, and tech park infrastructurePittsburg Housing and TOD infrastructurePlacentia + Orange County Blended use and connectivity infrastructureRancho Cucamonga Education related and blended use infrastructureRedlands Parks / open space, recreation infrastructureRedondo Beach + L.A. County Affordable housing and infrastructureRiverside
Industrial / commercial supportive infrastructureSacramento County (Unincorporated) Affordable housing and TOD infrastructureSan Jose
Housing and commercial supportive infrastructureSanger
Downtown and blended use infrastructureSanta Cruz
Blended use infrastructureSanta Fe Springs
Water, sewer, and other housing supportive infrastructureSelma Housing and business park infrastructureVacaville
Housing and commercial infrastructureYucaipa
66 Potential EIFD Boundaries Evaluated
~824 acres (approx.
5.0% of Citywide
acreage)
Approx $2.99B in
existing assessed
value (AV) (approx.
11.3% of Citywide AV)
7 Examples of Potential Infrastructure to be Funded
Estimated CostTargeted Infrastructure
$2.5M1) Replacement of Plaza Spoke Streets Concrete Street Light with Old Towne Steel Pole lights
$1.5M2) Plaza spoke street concrete sidewalk replacement per Old Towne standard $4.0M3) Steel pole streetlights replacement on Tustin Street and Katella Ave $4.0M4) Landscape median construction on Tustin Street and Katella Ave $12.0MEstimated Total
Source: City of Orange Public Works (2024)
8 Example EIFD Revenue and
Bonding Capacity Scenarios
City and County allocations do not include property tax in lieu of MVLF. * Bonding capacity assumes Year 10 is first bond issuance for EIFD. “Year 10 means fifth year of revenue following district formation. Net proceeds shown. Bondable revenue assumes $25,000 admin charge, 150% debt service coverage. 6.5% 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. 50-Y ear
Present-Value
@ 3%
Discount Rate
Y ear 10
Accumulated
Revenue +
Bonding
Capacity*
EIFD Revenue
Allocation Scenario
$48,319,000$13,108,000A) City 25%
$96,638,000$26,860,000B) City 50%
$54,393,000$17,525,000C) City 25% + County 25%
$108,787,000$35,695,000D) City 50% + County 50%
Why Pursue EIFD?
Communicating in a Digital W orld
9 Return on Investment: Private sector investment induced by district commitment accelerates growth of net fiscal revenues, job creation, essential infrastructure improvements + Ability to attract additional funds (“OPM”) – tax increment from other entities, federal / state grants / loans
Property Tax
Sales Tax
Utility Users Tax
Franchise Fees
Business License Tax
Jobs
Wages
Economic Output
Critical infrastructure to
promote private sector
investment
10 Next Steps
Address questions, receive and incorporate feedback from City Council If there is City support, approach County to discuss potential EIFD partnership Based on City/County feedback, City and County staff to pursue district formation as soon as feasible (first action would be City/County adoption of a Resolution of Intention) Public meetings and hearings required for district formation ~6 months thereafter, potential to complete formation by Q4 2024 / Q1 2025
11 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
12 APPENDIX
Types of Projects EIFD Can Fund
Partial List
13 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
14 EIFD versus Former Redevelopment Agencies
Sample of Differences
EIFDsFormer RDAs
Public infrastructure (e.g., roads, flood
control, open space, utilities)
Public facilities
Affordable housing
Infrastructure and affordable
housing
Mixed-income housing
Land clearing and parcel assembly
Tax and other private business /
developer subsidies
Eligible Use of Funds
Not allowed AllowedEminent Domain /
Condemnation
No “blight” finding required Must qualify as “blighted”Eligible Areas Public Financing Authority including
Public Members (no school entities)
City Council or County Board
School entity participation
Governance
3 public hearings, majority protest
opportunity from landowners and
registered voters within EIFD
Vote of governing bodyFormation
15 Example Future Development within Study Area
Absorption Assumed over 5-20 Years
Note: AV at buildout values in current 2024 dollars
Sources: City of Orange Economic Development (2024)
Estimated
Total AV at Buildout
Estimated
AV Factor# SF or UnitsArea
$1.12 billion$950K per unit1,180 unitsFor-sale Residential $290 million$495K per unit585 unitsRental Residential
$190 million$475K per room400 roomsHotel
$4 million$400 PSF9,000 SFCommercial / Retail / Office / Other $1.60 billionTotal New Development Assumed within Study Area 16 Primary non-school recipients and potential
contributors of property tax are City of Orange and
County of Orange
City share is approx.13.6% each of every $1 collected in property taxes within the EIFD Study Area
City additionally receives equivalent of approx.6.3% of property tax in lieu of MVLF , also available to EIFD
County share is approx. ~6.3% of every $1
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) average allocations. Post-ERAF (Education Revenue Augmentation Fund) distribution.
Source: Orange County Auditor Controller (Accessed December 2023) City
14% County
6%
OC Sanitation
3%
OC Flood
2%
OC Parks
2%
Other / School Entities
(not eligible)
73%
Sample Average Property Tax Distribution
within EIFD Study Area
Property Tax Revenues Available to EIFD
17 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) TaskTarget Date
a) Conduct outreach / discussion among City staff and Council, County staff and Board of Supervisors, other relevant stakeholders
b) Final determination of TIF district boundaries, targeted projects, governing Public Financing Authority (PFA) Board composition
Q2 2024
c) Participating taxing agencies adopt Resolution(s) of Intention (ROI) to form EIFD and formally establish PFA BoardQ2/Q3 2024 d) PFA directs the drafting of the Infrastructure Financing Plan (IFP)Q3 2024 e) Distribute draft IFP to property owners, affected taxing entities, City Council, County Board of Supervisors, planning commission, with corresponding project-related CEQA documentationQ3 2024 f) PFA holds an initial public meeting to present the draft IFP to the public and property ownersQ3/Q4 2024 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”)Q4 2024
h) City Council / legislative bodies of other affected taxing entity contributing increment adopt resolution(s) approving IFPQ4 2024
i) PFA holds second public hearing to hear additional comments and take action to modify or reject IFP or CRIA Plan (at least 30 days after “g”)Q4 2024
j) PFA holds third public hearing to consider oral and written protests and take action to terminate proceedings or adopt IFP and form the EIFD by resolution (at least 30 days after “j”)Q4 2024 / Q1 2025