DATE: OCTOBER 10, 2023
DEPARTMENT: COMMUNITY DEVELOMENT DEPARTMENT
FROM: LISA bRINTON, DIRECTOR
TITLE: CONSIDERATION OF AN ENHANCED INFRASTRUTURE FINANCING dISTRICT TO FUND Salinas Ag InduStrial center Backbone infrastructure RECOMMENDED MOTION:
A motion to recommend the City Council direct staff to prepare a Resolution of Intention to Form an Enhanced Infrastructure Financing District (EIFD) to fund backbone infrastructure at the Salinas Ag Industrial Center and to authorize the execution of an Agreement for Professional Services with Kosmont Companies to support the EIFD formation process.
DISCUSSION:
Background
In 2010, the Salinas City Council adopted the Salinas Ag-Industrial Center Specific Plan (SAIC). Primary SAIC objectives are establishing opportunity sites for new and relocating existing ag related industries in Salinas and to promote associated industrial job creation and retention. The SAIC provides 257 acres for agricultural industry expansion and cluster development with focus on food storage, warehousing, food processing, packaging suppliers and other ag support uses. Thirteen (13) years later, the SAIC remains undeveloped largely due to costs associated with building necessary backbone infrastructure. 2022 estimates calculate the cost of infrastructure required to support both Phase 1 and Phase 2 SAIC development to be over $69 million dollars, making any future development of the SAIC financially infeasible for developers or the property owner. Attachment 1 is an aerial photo of the undeveloped SAIC.
Over the past year, staff have prioritized the development of the SAIC with focus on addressing the lack of backbone infrastructure. As a first step, staff engaged economic development consultants to revisit the use of an Enhanced Infrastructure Financing District (EIFD) as a potential funding source. EIFDs can be used on both large-scale projects and smaller urban/rural in-fill projects with a focus on infrastructure improvements including:
roads, highways, and bridges,
parking facilities,
transit stations,
sewage and water facilities,
flood control and drainage projects, and
solid waste disposal.
How do EIFDs Work?
EIFDs are a “re-boot” of former redevelopment project areas and use the same funding tool, the gain in an identified area’s assessed value and resulting increase in property tax collected, to fund project area improvements. This gain is referred to as tax increment. Because development and the resulting increase in assessed property value occurs overtime, tax increment revenue is not immediately available. Therefore, EIFD projects tend to be layered with several financial instruments such as bond issuance, other district/benefit assessments, development fees, and private investment to jump start the EIFD.
EIFD bonding capacity is based on 1) the projected tax increment in the District over time; and 2) the percentage of tax increment the City and County commit to the EIFD. The tax increment collected over time is used to pay bond debt service. A City and County partnership committing 100% of tax increment collected maximizes the bonding capacity of an EIFD to ensure sufficient funds to cover SAIC infrastructure cost. Another benefit of EIFD formation is the leveraging of private sector investment to facilitate needed infrastructure improvements. Therefore, should the Council direct staff to return with a ROI to form an EIFD, it is recommended that a potential EIFD boundary expansion to ag industrial areas beyond the SAIC be analyzed based on private stakeholder interest. A Community Facilities District (CFD) would continue to be evaluated for potential implementation, subject to private sector landowner/developer support.
EIFD Analysis
Preliminary financial analysis confirms that that an EIFD is the most viable funding source to fund backbone infrastructure at the SAIC. At the October 24, 2023 City Council Meeting Kosmont Companies will present the following information.
EIFD Overview
Salinas Ag-Industrial Center Specific Plan Overview
Previous EIFD Financing Analysis
Public Agency “Return on Investment”
Potential Next Steps
Potential next steps include the recommendation that Council direct staff to prepare a Resolution of Intention (ROI) to Form an EIFD and authorizing the execution of an Agreement for Professional Services with Kosmont to prepare the analysis and documents required for Council consideration of EIFD formation. The scope of work includes assistance with the evaluation and formation of a potential CFD in parallel to the EIFD, if there is private sector landowner/developer support. Attachment 2 is an EIFD Formation Process Flow Chart.
FISCAL AND SUSTAINABILITY IMPACT:
There is no fiscal impact associated with this report. Should the Council direct staff to return with a ROI to form an EIFD, professional services would be required to support formation. Kosmont Companies has provided a scope of work and budget for a not to exceed amount of $129,000. The cost of EIFD formation support is included in the approved FY 2023-24 Budget under the Community Development Department’s Economic Development Division.
ATTACHMENTS:
Aerial Photo of Salinas Ag-Industrial Specific Plan Project Area EIFD Formation Process Flow Chart
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