Placentia Enhanced Infrastructure Financing District (EIFD) Infrastructure Financing Plan (IFP) Proposed Amendments
PLACENTIA
Rich Heritage, Bright Future
CITY OF PLACENTIA
COUNTY OF ORANGE
APRIL 18, 2023
ko smon
financial services
1601 N. Sepulveda Blvd., #382
Manhattan Beach, CA 90266
TEL: 424-297-1070 1 URL: www.KosmontFinancial.com
BACKGROUND: FIRST CITY/COUNTY EIFD IN THE STATE
■ In 2019, the City of Placentia (City) and County of Orange (County) established the Placentia Enhanced Infrastructure Financing District (EIFD) to fund infrastructure improvements within the City's Old Town and Packinghouse District to facilitate transit -oriented development (TOD) of regional significance ■ Base year is 2020-2021; —$73,000 in increment collected ■ A nascent EIFD bond market, the COVID pandemic, inflation, and related current economic conditions have contributed to delayed EIFD implementation and cost increases Original Streetscape Project cost estimate of -$8 million is now $10.05 million, an increase of 25.6% Interest rates have risen, increasing cost of debt service (particularly to "first-time" debt issuer) Impact: Multiple debt issuances over 7-8 years would be needed to fund key projects (only $3-5M available up -front) ■ Goal: Install all aspects of the Old Town Streetscape Master Plan at one time (instead of in phases), which will:
Better induce private investment to fulfil Tax Increment ("TI") and economic benefit projections Accelerate timetable to meet regional housing needs, including affordable housing Save the EIFD on construction costs
■ Existing financing structure will not facilitate private investment and will fall short of expected rate of TI growth kosmon
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RECAP OF TAX INCREMENT FINANCING (TIF)
Assessed
Property Value
(A/V) within TIF
District
Boundaries
$600M
$500M
$400M
$300M
$200.
$100M///r
Period of New
Development
$OM
0 Note: Illustrative
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5 4141; 44 ; ► .
rrf
f r
,,,fes///I /74F ` frf; /
New Property Value from
4 . New Development / Rehabilitation • �.
/; Available to TIF District;
_moi •'sar••aavr•••••••••ar••.• 4. iifaa4L 4eraaert•r411rra;riae6.6ri. �f\ ; e•• r/41.iis a-•-•• fof 410/.
10 15 20 25
30 35
40 45
50 55
Years from District Formation
Kosmont Financial Services 1 Proprietary Do Not Duplicate 3 Long Term
Districts
Governance
Approvals
Non-contiguous
Areas
EIFD FUNDAMENTALS
Eligible
Projects
45 years from first bond issuance
Public Financing Authority (PFA) implements Infrastructure Financing Plan (IFP)A Mandatory public hearings for formation with protest opportunity; no public vot 7 EIFD project areas do not have to be contiguous
ii
Any property with useful life of 15+ years & of communitywide significance; purchase, construction, expansion, improvement, seismic retrofit, rehabilitation, and maintenance kosmon
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Does NOT increase property taxes
Kosmont Financial Services 1 Proprietary Do Not Duplicate 4 PLACENTIA
EIFD MAP
300+ ACRES
j
Proposed
Metrolink Station
TOD P g House
11111.11111111
ti
trLegend
Placentia City Boundary
In EIFD Sul -Aree 1
EIFD Sub -Area 2
▪ EIFD Sub -Area 3
F-1 EIFD Sub-Aree 4
EIFD Sub -Area 5
▪ EIFD Sub -Area 6
EIFD Sub -Area 7
Parcel Lines Within Placentia
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5 EXAMPLE EXISTING CONDITIONS VS.
POTENTIAL NEW DEVELOPM NT
• EIFD will fund Streetscape Master Plan
improvements serving the properties of the EIFD
• Will incentivize $460M+ expected in new
development assessed value from residential,
commercial, and hotel development
• Reduce traffic on 91 Freeway
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6 ESTIMATED ECONOMIC BENEFITS AT STAKE
UPDATED ANALYSIS JANUARY 2023
■ 1,600+ housing units
■ 5,024 construction jobs and 1,178 permanent jobs (direct, indirect, and induced)
■ $695 million in economic output from construction and $196 million in annual ongoing economic output (direct, indirect, and induced) ■ $59M in positive net fiscal impact to City general fund over 50 years ■ $50M in positive net fiscal impact to County general fund over 50 years ■ Greenhouse gas reduction/vehicle miles traveled reduction; improved and convenient transit to local universities and other destinations kosmon
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Kosmont Financial Services 1 Proprietary Do Not Duplicate 3 PROPOSED EIFD IFP AMENDMENTS
a) Recalibrate duration (term) of TI allocation to reflect full payment of contributions — Increase City maximum term from 20 to 40 years
• Could end earlier if interest rates level out prior to bond issuance — Increase County maximum term from 20 to 25 years, with option to extend to 30 only if needed • Provides adequate time for County to contribute its full share of TI (i.e., $3.547 million) • Additional 5 years only triggered if TI receipt levels perform worse than suboptimal projections — EIFD to terminate upon extinguishment of all EIFD debt, even if repaid early b) Increase City's maximum dollar allocation from $9,100,000 in tax increment up to $24,000,000 in increment (more likely $17-19M over 33-35 years needed), could be as low as $12M over 30 years in best -case interest rate scenarios
— Amount projected to enable full repayment of various financing structures evaluated, even under severely adverse issuance conditions
c) Limitation / focus on use of funds: EIFD TI limited to repayment of IFP projects costs & associated debt; xcess amount would flow to General Fund
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SUMMARY OF CASHFLOW PROJECTIONS
PROPOSED AMENDMENTS TO T1 ALLOCATION/COLLECTION
PARAMETERS
STRUCTURE
REPAY
CITY
$AMT.
UN -REPAID
CITY
"EFFECTIVE"
TI COLL.
CAP
COUNTY
TI COLL.
CAP
COUNTY
YRS.
NEEDED
Proposed Amendments
Original TI Estimates, Market as of Jan '23
33y
n/a
$17.443MM*
$3.547MM
20 Proposed Amendments
Original TI Estimates, +50bps
34y
n/a
$18.926MM* $3.547MM
20 Proposed Amendments
Original TI Estimates, +100bps
36y n/a $20.475MM* $3.547MM 20
Proposed Amendments
Original TI Estimates, +150bps
38y n/a $22.707MM* $3.547MM 20
Proposed Amendments
Original TI Estimates, +200bps
39y n/a $23.783MM* $3.547MM 20
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*Estimated; assumes excess TI is sequestered or refunded for cap credit while LRBs are outstanding Kosmont Financial Services 1 Proprietary Do Not Duplicate 9 SUMMARY OF CASHFLOW PROJECTIONS
PROPOSED AMENDMENTS TO T1 ALLOCATION/COLLECTION
PARAMETERS
STRUCTURE
REPAY
CITY
$AMT.
UN -REPAID*
CITY
"EFFECTIVE"
TI COLL.
CAP**
COUNTY
TI COLL.
CAP
COUNTY
YRS.
NEEDED
Proposed Amendments
Suboptimal TI Estimates, Market as of Jan
'23
39y
$0
$18.535MM
$3.547MM
25 Proposed Amendments
Suboptimal TI Estimates, +50bps
41y $0.617MM $20.168MM $3.547MM 25
Proposed Amendments
Suboptimal TI Estimates, +100bps
43y $2.236MM $21.864MM $3.547MM 25
Proposed Amendments
Suboptimal TI Estimates, +150bps
45y $3.960MM $23.658MM $3.547MM 25
Proposed Amendment
Suboptim lllas i
E mates, +200bps
>45y $5.679MM $24.090MM $3.547MM 25
*Estimated; assumes excess TI is sequestered or refunded for cap credit while LRBs are outstanding kosmon Kosmont Financial Services 1 Proprietary Do Not Duplicate 1 10 firumcial w —,
RECOMMENDED DEBT ISSUANCE STRUCTURE
TO IMPLEMENT NECESSARY CHANGES
• City to loan $1M from reserves to EIFD to accelerate Project financing (reduces bond issue size, debt service, improves security)
• City to issue its own 30 -year lease revenue bonds ("LRBs") (in lieu of EIFD) — City would provide property/building collateral for underlying LRB lease in this scenario — To further ensure security, City General Fund would be available to loan monies to EIFD in the unlikely event of an insufficient TI scenario
• Potential benefits include:
— City LRBs should qualify for bond insurance, producing lower interest rates and no need for a cash - funded debt service reserve fund
Able to raise $6.4 million more in proceeds; $1.2 million in interest savings if sizing were the same Eliminates need for a Capitalized Interest fund to carry LRB interest payments while TI grows Eliminates need to provide "debt service coverage", enabling more bond proceeds to be raised up front Loan provided to EIFD would accrue interest to City General Fund at City's LAIF rate (2.07% as of Q4 2022)
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RETURN ON INVESTMENT
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
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Annual Net New Fiscal Revenue to City and County General Funds increased property tax to City General Fund
i General Fund
County EIFD Allocation Cap Reached;
increased property tax to General Fund
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 Kosmont Financial Services 1 Proprietary Do Not Duplicate $59M in positive
net fiscal impact
to City general
fund over 50
years
12 MARKET MOMENTUM
• Placentia has demonstrated ability
to attract high-quality private
sector investment (e.g., Herald
sale at OC record $605k/unit)
• Purpose of accelerating EIFD
Streetscape improvements is to
take advantage of market
momentum, catalyze further
growth, then capture value via
EIFD in turn
• Current investment marketplace is
very selective; public investment
can accelerate interest
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Na, eJIt
Placentia's Transit Development Dreams Take Shape
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• Construction costs and interest rates have risen significantly since EIFD was originally formed • Building public improvements over multiple years/phases will not likely entice private sector investment sufficiently to fulfill original economic development goals and will delay increase to assessed valuation • Construction of public improvements in one phase is key to incentivizing timely private investment to revitalize and improve the City's Old Town and Packinghouse Districts and fulfill AV goals • Amendment will result in -$10M in proceeds to fulfill completion of project • EIFD bond market is new, and the Placentia EIFD specifically has no credit history as a new issuer - Successful implementation of full project more likely with City financing support via LRB • City staff and County staff have met multiple times to work out a mutually beneficial set of amendments to adapt to current economic circumstances while maintaining goals - County staff have agreed to extend their term, amenable to extending further if needed koson
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NEXT STEPS
Target Date
1 Task
Today / April 18,
2023
April 2023
May 2023
June 2023
June 2023
July 2023
August 2023
Q2 -Q4 2023
Q2 2024
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a) City Council consideration and approval of Infrastructure Financing Plan (IFP) amendment terms
b) Award of EIFD Streetscape Master Plan design and engineering contract c) Prepare noticing and hold initial Public Financing Authority (PFA) public meeting to present revised IFP
d) Prepare noticing and hold first PFA public hearing on revised IFP e) Independent City Council and County BOS consideration of approval of revised IFP f) Prepare noticing and hold second PFA public hearing on revised IFP (also present Annual Report to PFA)
g) Prepare noticing and hold third PFA public hearing on revised IFP h) Prepare materials to solicit construction bids on EIFD Streetscape Master Plan i) Prepare debt issuance / enter bond markets
Kosmont Financial Services 1 Proprietary Do Not Duplicate 1 11
THANK YOU -QUESTIONS?
1 LA E N `l' IA
Rich Heritage, Bright Future
kosmon
financial services
1601 N. Sepulveda Blvd., #382
Manhattan Beach, CA 90266
TEL: 424-297-1070 1 URL: www.KosmontFinancial.com
Kosmont Transactions Services, Inc., doing business
as Kosmont Financial Services (KFS) is an
Independent Registered Municipal Advisor with the
SEC and the MSRB. KFS does not provide accounting,
tax or legal advice. Information included in this
presentation is provided for discussion purposes only
and should not be construed as advice under any
circumstance. Such information reflects KFS's views as
of the date hereof (unless otherwise noted) and is
subject to change without notice. Any terms and