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HomeMy WebLinkAboutD-3 Staff Report - Tax Increment Financity Feasibility Study Presentation & Next StepsSCHEDULED ITEM D-3 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: MATT MARQUEZ, ECONOMIC AND COMMUNITY DEVELOPMENT DIRECTOR DATE: JULY 19, 2021 SUBJECT: RECEIVE PRESENTATION ON TAX INCREMENT FEASIBILITY (TIF) STUDY OUTCOME AND PROVIDE STAFF DIRECTION ON NEXT STEPS BACKGROUND: The Los Angeles County Metropolitan Transportation Authority (Metro) has a vested interested in creating an environment that promotes, encourages and supports transit riders. As a result, Metro created the Transit Oriented Development (TOD) Planning Grant Program that funds local governments to develop and promote equitable, sustainable, transit-supportive planning. Round 5 of the program offered two grant opportunity categories: (1) Transit Supportive Regulatory Documents and (2) Tax Increment Financing (TIF) Feasibility Studies. The City was a successful applicant and on March 1, 2018 the Metro Board of Directors approved a grant award of $141,000 for a Tax Increment Feasibility Study. On May 7, 2018, the City Council approved a resolution accepting the award and authorizing the execution of a Grant Agreement with Metro. On February 19, 2019, the City Council approved a Professional Service Agreement with Kosmont Companies to conduct a feasibility analysis. Since then, Tasks 1-4 required by the Grant Agreement have been completed. At this time, Task 5 Next Steps for Implementation, the final Task required by the Grant Agreement requires a final presentation to the City Council. Staff recommends the City Council, receive a presentation on the outcome of the feasibility of forming a TIF District and provide Staff with direction on next steps. RECOMMENDATION: Staff recommends that the City Council take the following actions: 1)Receive a presentation on the outcome of the feasibility of forming a Tax Increment Financing (TIF) District; and 2)Direct Staff to release a Request for Proposal to retain a consultant to assist the City in the formation of a financing district. APPROVED CITY COUNCIL 7/19/2021 Tax Increment Financing Feasibility Study Presentation and Next Steps July 19, 2021 Page 2 ANALYSIS: With the State’s dissolution of Redevelopment Agencies in 2011, municipalities were left without tax increment financing for critical infrastructure improvements, community revitalization and development of affordable housing. As a result, new forms of tax increment financing have become available to provide municipalities with options to continue financing such projects. Enhanced Infrastructure Finance Districts (EIFDs) and Community Revitalization and Investment Authorities (CRIAs) are two examples of key economic development finance tools in California. The Grant allowed the City to conduct an analysis to determine the feasibility of forming a financing district. The study included: engaging with the community, determining boundary alternatives, preparing a potential project list, determining TIF revenue potential, identifying eligible public agencies that receive property tax increment within the district and evaluating complementary revenue capacity. Three potential district boundaries were evaluated. They included the Transit Oriented Development (TOD) Specific Plan, ¼ Mile Radii around the Azusa Downtown and APU/Citrus College Stations and a Citywide District. Future development assumptions through 2040 were evaluated. The table below summarizes the total TIF funding capacity over the District lifetime on a present-value basis for each boundary alternative and revenue contribution scenario. Community Facility District Special Tax scenarios were evaluated as an example of complementary funding source to a TIF district. An ideal strategy would include the County’s partnership and contribution. TIF districts which involve a City/County partnership are more likely to win state grant funding sources. Scenario Analysis Summary Matrix – Kosmont Companies Advantages of pursuing a TIF District include: • Private sector investment induced by district commitment accelerates growth of net fiscal revenues, job creation, housing production and essential infrastructure improvements • Ability to attract additional funds (“Other Public Money”) – Tax increment from other entities such as Los Angeles County as well as State and Federal Grants, and loans. • Long-term committed revenues support investor confidence Tax Increment Financing Feasibility Study Presentation and Next Steps July 19, 2021 Page 3 • No new taxes. While a complimentary funding source such as a CFD would create a new tax, an EIFD or CRIA would NOT increase property taxes. Rather, the City would elect to set funds aside to fund future potential projects. In our community engagement several areas of potential projects were identified including projects around: • Transit and mobility • Bicycle and pedestrian • Roadways • Parks and open space • Beautification • Library expansion and renovation • Affordable and senior housing • Public safety A TIF district would provide the potential of funding projects that would otherwise go unfunded and/or would be delayed. TIF districts are an effective economic development tool to attract additional public funding. While preliminary conversations have been held with County Staff, further conversations will be required to assess the County’s interest in their partnership. If the City elected to pursue formation of a TIF district, the City would need to adopt a Resolution of Intent to form an EIFD and establish a Public Financing Authority (PFA). Thereafter, an Infrastructure Financing Plan (IFP) would be prepared to serve as the business plan for carrying out the work of the district. FISCAL IMPACT: Funds in the amount of $100,000 have been included in the adopted FY21-22 operating budget account number 10-35-630-0000-6399 should the Council direct staff to secure a consultant to assist in the formation of a TIF district. Prepared by: Reviewed and Approved: Carina Campos Matt Marquez Economic Development Specialist Economic and Community Development Director Reviewed and Approved: Sergio Gonzalez City Manager Attachments: 1) Tax Increment Financing (TIF) Feasibility Study Presentation Tax Increment Financing (TIF) Feasibility Study Prepared by: Kosmont Companies & Consensus Inc. Analysis Summary and Potential Next Steps July 2021 Executive Summary Communicating in a Digital World 2 •City of Azusa adopted the Transit-Oriented Development Specific Plan (TOD SP) in November 2015, enabling significant TOD and blended-use growth potential in the Downtown and APU/Citrus Gold Line Station areas •Tax Increment Financing (TIF) was identified in the TOD SP as a potential funding source to fund housing and transit-supportive infrastructure, community amenities, and affordable housing in the City •Accordingly, City applied and was awarded a grant from Los Angeles County Metro to evaluate the feasibility of TIF districts in Azusa, such as Enhanced Infrastructure Financing Districts (EIFD) and Community Revitalization and Investment Authorities (CRIA) •Kosmont and Consensus were selected via RFP process as consultant for TIF Feasibility Analysis •This presentation provides a summary of community outreach, potential boundary screening, revenue capacity analysis, potential public improvement projects to be funded, and a roadmap for implementation •Next steps include discussion of the analysis with City Council, and if desired by the City, future implementation of a TIF District in 2021/2022 (not a part of current scope of work) 3 $0M $200M $400M $600M $800M $1,000M $1,200M 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 Years 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 Illustrative EIFD Fundamentals Communicating in a Digital World 4 45 years from first bond issuanceTerm 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 PFAGovernance City, County, Special District; school district increment prohibitedEligibility Mandatory public hearings for formation (includes protest opportunity); no public vote to issue debtApprovals Any property with useful life of 15+ years & of communitywide significance; purchase, construction, expansion, improvement, seismic retrofit, rehabilitation, and maintenance Eligible Projects Does NOT increase property taxes Districts in Progress Statewide Partial List 5 Source: Kosmont EIFD/CRIA website (https://www.kosmont.com/services/eifd-cria/) West Sacramento EIFD (approved) La Verne TOD EIFD (approved) San Diego Otay Mesa EIFD (approved) Placentia TOD EIFD (approved) Madera County EIFD x 2 (approved) City of Sacramento EIFD (approved) Fresno EIFD (approved) 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-based infrastructure, recreation El Cajon Housing and transit-supportive infrastructure El Segundo + L.A. County Various infrastructure, regional connectivity Fresno Housing and transit-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, other)Housing and transit-supportive infrastructure Los Angeles County West Carson Housing / bio-science / tech infrastructure Los Angeles County -Uninc. East L.A.Housing -supportive infrastructure, public amenities Madera County Greenfield infrastructure (water / sewer) Napa Housing and transit-supportive infrastructure Ontario Housing and transit-supportive infrastructure Palmdale Housing and transit-supportive infrastructure Pittsburg Housing and transit-supportive infrastructure Placentia + Orange County Housing and transit-supportive infrastructure Redondo Beach + L.A. County Parks / open space, recreation infrastructure Riverside Housing and transit-supportive infrastructure Riverside County -Uninc. Salton Sea Water and housing-infrastructure Sacramento County Industrial / commercial supportive infrastructure San Jose Housing and transit-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 LA County West Carson EIFD (approved) Fully Formed In Formation Process Under Evaluation Red markers are EIFDs/CRIAs under evaluation Communicating in a Digital World 6 •Station area first-mile / last-mile improvements (e.g.crosswalks, medians, bicycle connectivity, civic center / senior center accessibility) •Pedestrian Master Plan improvements (e.g.wayfinding signage, trees / shading, street furniture, sidewalk widening) •Parks and open space improvements (e.g.landscaping, irrigation) •ADA improvements •Affordable housing and housing-supportive infrastructure (e.g.Atlantis Gardens) •Library expansion •Bus shelter improvements •Preliminary estimates totaling $13 -$19 million Summary of Potential Targeted Public Improvements Preliminary List –To Be Refined Further 7 Map of TIF Study Areas Preliminary District Boundary Alternatives (1) TOD SP Boundary (2) 0.25 Mile Radii Around Stations (Within TOD SP) (3) City Limits Preliminary District Boundary Alternative Approx. Acreage Total Approx. Existing A/V % of Citywide A/V #1: TOD SP Boundary 350 AC $353 million 6.8% #2: 0.25 Mile Radii 135 AC $175 million 3.4% #3: Citywide District 6,195 AC $5.186 billion 100.0% Multiple EIFD boundary scenarios analyzed Focus on Specific Plan growth and transit station areas 8 Scenario Analysis Summary Matrix •The table below summarizes the total TIF funding capacity over the District lifetime on a present-value basis, for each Boundary Alternative and revenue contribution scenario •CFD Special Tax scenarios were evaluated as an example complementary funding source to TIF Note: Present value discounted at 3%. EIFD and CRIA funding are identical; however 25% of funding must be dedicated to affordable housing uses in a CRIA. District Boundary Alternative Revenue Contribution Scenario 1) TOD SP 2) Station Radii 3) Citywide 1) City 25%$8.6M $7.0M $56.1M 2) City 50%$17.1M $14.0M $112.1M 3) City 100%$34.2M $27.9M $224.3M 4) City 25% + County Match $17.1M $14.0M $112.1M 5) City 50% + County Match $34.2M $27.9M $224.3M 6) City 100% + County Match $68.4M $55.8M $448.5M CFD @ 0.2%$28.6M $19.4M $287.7M CFD @ 0.4%$57.2M $38.7M $575.5M Los Angeles EIFD/CRIA County Policy 9 Property Tax Increment: •Minimum $0.15 City share (Azusa ~$0.26 with MVLF, not including other sources) •City share contributed ≥County share contributed •County contributes less than 100% of its share  Fiscal Analysis: Positive net impact to County General Fund  Board Priorities: Supports affordable housing, homeless prevention, workforce development, or sustainability  Regional and Community Significance:As related to Board priorities above, job creation, blight removal,or improvements to regional transportation  Affordable Housing: 20% of rental housing must be affordable TBD “But for…” Test: Contribution of County property tax increment is necessary precondition for targeted projects  Potential Azusa “Return on Investment” from TIF District Implementation 10 •Azusa “Return on Investment”: Implement essential infrastructure and public improvements, including transit connectivity Social impacts: Quality of life improvement, environmental sustainability Housing at various income levels Economic benefits (e.g.jobs, wage income) Positive City general fund net fiscal impact Attract other funding (e.g., grants) 11 Next Steps •Receive and incorporate feedback from City Council •Proceed with Metro Grant scope of work for Feasibility Study through Fall 2021 •If desired by the City, Give direction to staff to pursue District formation (separate from Metro Grant scope of work) –RFQ/P for consultant assistance –Engage County in potential partnership discussion 12 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 13 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.