HomeMy WebLinkAboutSan Bernardino CC Workshop 07.19.23City of San Bernardino
Presentation on Economic Development Tools
July 19, 2023
S.B. and Other Communities at Crossroads:
A Unique Opportunity for a Vital Future
To move communities forward in a sustainable way, we must identify where private
investment is going – and leverage that investment with public agency funding and tools.
Timely opportunity to access new funding sources and economic development tools that
have emerged in a post-COVID digital world:
New Economic Toolkit with new / expanded tools such as special districts, zoning
strategies, and low-cost financing.
New Funding Sources from federal and state government
Leverage private sector momentum to improve services & quality of life
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What is the Reconfigured Economy?
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The New Consumer / Investor / Policymaker Mindset.
Consumers driven by quality of
life, cost of living and housing,
amenities, essentials, and experiences
Want it all in a 15-Minute Community
Investors driven by new
technology, shifting demand,
supply chain anomalies, and
new live / work patterns
Seeking value from new demand drivers
City Hall driven by resident and
employer needs & new state policies
which seek to install housing
Tension: Comply with state priorities
vs.achieving community priorities in a
post covid digital world
(RHNA, Density Bonus, SLA)
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The Ongoing Land Use Revolution
Everything’s Changing – What We’re Likely to See Over the Next 10 Years
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Residential
Renaissance
Industrial
Redistribution
Hotel
Resetting
Retail
Reimagining
Office
Reconfiguring
…Nothing Is as it Was (a short while ago)
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Housing is Not a Loss Leader, it’s a Growth Driver
Retail is Not Just Retail Anymore Telework is Reconfiguring Office
Industrial / Distribution is Essential for a Robust Economy
Housing Creation as Economic Development Retail Reimagination as Economic Development Office Conversions as Economic Development Industrial & Fulfillment as Economic Development
New housing can generate significant new tax revenues and support local jobs
Housing is not necessarily a net negative fiscal impact, especially at current property values
Housing is a big driver of project value
U.S. retail over-built and needs “right sizing;” Covid accelerated trends; today its about essentials, experience & e-commerce
Blended/mixed use projects integrate multiple uses (housing, retail, open space, creative office, hotel) onto one site
Telework and work from home options are reshaping the needs for office space and business districts
Job redistribution tied to housing
Vacancies and foreclosures expanding can lead to fiscal impact pressure
Must be buffered and designed to minimize environmental impact.
In a digital economy retail can’t thrive without distribution
Booming demand for distribution, e-commerce, and data centers, blending for fulfillment/delivery, job creators
Today’s Economic Development Prescription
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BEFORE NOW
Create new sales tax revenue via new large retail
centers with Big Boxes
Create new sales tax revenue by creating a
neighborhood and curating retail to serve it
“Right sizing, right zoning, and right next to residential”
Create local jobs by zoning for large office parks filled
with regional commuters
Create local jobs and teleworkers with amenities that
attracts people to your community
whose “wallets” don’t leave everyday
Avoid industrial because it’s noisy and dirty;
put it far away from other uses
Infill industrial / distribution is essential for
online delivery and job creation – Workforce, training,
project design and mitigation are key considerations
Residential development is a loss – costly service
support and infrastructure with negative fiscal impact
High residential demand & high property values means
local businesses and public sector will rely on capture
of housing projects taxes and local spend
New Community Investment & Financing Tools
It’s about Capturing Value and Creating Currency!!
Partial Toolkit 3 Revenue
Replacement Tools
1 Special Districts / Tax Exempt
Financing 4 Techonomic Development
2 Surplus Land Act as
Asset Management Strategy 5 Other Public Money
(OPM)
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Civic Center
Area
Industrial
Area
University
Area
Technology
Area
Regional Mall
Area
Downtown
Plan Area
Affordable Housing
Transit Projects
Broadband Brownfield Remediation
Parks / Open Space
Water / Sewer / Storm / Flood
Civic Infrastructure Small Business / Nonprofit
EIFDs, CRIAs, CRDs:State approved Tax Increment Financing (TIF)districtsCities can use these districts to motivate private investment, fund infrastructure, and attract grant funds.
Tool #1: Capture Value with DistrictsSpecial Districts for Infrastructure Investments
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Potential S.B. Opportunity Sites
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Downtown
What is Tax Increment Financing (TIF)?Not a New Tax
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$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
California’s Tax Increment Financing (TIF) Toolkit
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Affordable
Housing
Authorities
(AHA)
Community
Revitalization &
Inv. Authority
(CRIA)
Enhanced
Infrastructure
Financing
District
(EIFD)
Neighborhood
Infill Finance &
Transit
Improvements
Act
(NIFTI)
NIFTI-2
Coterminous requirement and other
requirements have made NIFTI &
NIFTI-2 infeasible in other communities
Restriction to fund ONLY affordable housing (and not
infrastructure) has been deemed to restrictive to be feasible in
other communities
Infrastructure
& Revitalization
Financing
District
(IRFD)
Most flexible,
most widely used
More emphasis on
affordable housing
(25% set-aside)
Climate
Resilience
District
(CRD)
NEW, limited focus on
certain infrastructure
Flexible, voter-approval still
required
TIF Districts: Here, There, Everywhere
Statewide Partial List
Source: Kosmont EIFD/CRIA website (https://www.kosmont.com/services/eifd-cria/)Fully Formed In Formation Process Under Evaluation
Jurisdiction Purpose
Azusa Housing and transit-supportive infrastructure
Banning Housing and industrial infrastructure
Barstow Housing and commercial infrastructure
Brentwood Housing and transit-supportive infrastructure
Buena Park Mall reimagination, housing-supportive infrastructure
Carson + L.A. County Remediation, housing infrastructure, recreation
Coachella Valley Association of Govts (CVAG) Cities Housing and transit-supportive infrastructure
Covina Housing and transit-supportive infrastructure
El Cajon Housing and transit-supportive infrastructure
El Segundo + L.A. County Various infrastructure, regional connectivity
Fairfield Housing and transit-supportive infrastructure
Fontana Housing, mixed-use and industrial infrastructure
Fresno Housing and transit-supportive infrastructure
Fresno County Industrial and commercial supportive infrastructure
Humboldt County Coastal mixed-use & energy 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 Areas)Housing and transit-supportive infrastructure
Los Angeles (Downtown, San Pedro, LACUSC Med Center)Housing and transit-supportive infrastructure
Los Angeles County Uninc. West Carson Housing / bio-science / tech infrastructure
Madera County (3 Districts)Greenfield infrastructure (water / sewer)
Modesto + Stanislaus County Housing, transit, recreation-supportive infrastructure
Mount Shasta + Siskiyou County Rural Brownfield site mixed-use infrastructure
Napa Housing and transit-supportive infrastructure
Oakland Affordable housing and housing-supportive infrastructure
Ontario Housing and transit-supportive infrastructure
Palmdale + L.A. County Housing and transit-supportive infrastructure
Pittsburg Housing and transit-supportive infrastructure
Placentia + Orange County Housing and transit-supportive infrastructure
Rancho Cucamonga Housing and transit-supportive infrastructure
Redlands Housing and mixed-use supportive infrastructure
Redondo Beach + L.A. County Parks / open space, recreation infrastructure
Riverside Housing and transit-supportive infrastructure
Sacramento County (Unincorporated)Industrial / commercial supportive infrastructure
San Bernardino County (Unincorporated)Transit-supportive infrastructure
San Jose Housing and transit-supportive infrastructure
Sanger Housing and commercial supportive infrastructure
Santa Ana Housing and transit-supportive infrastructure
South Gate Housing and transit-supportive infrastructure
Vacaville Housing and transit-supportive infrastructure
Yucaipa Housing and transit-supportive infrastructure
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Partnership with Other Taxing Entities
EIFDs are more powerful as city / county /district partnerships
County Activity
Six counties have started their own
Four counties have forged city partnerships
Many ready for county partnership consideration
Golden Rule Counties want to see fiscal impact analysis – general
fund impact and ROI
Navigating Politics
Your supervisor can be your friend and advocate;
CAO typically neutral, needs to see fiscal return on
investment
County Priorities Most effective arguments tie local projects with county
goals and priorities
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Kickstarting TIF with Other Tools & Funding
TIF can Integrate with Other Economic Development Tools and Strategies
Grants / Funding Sources
REAP funding for
evaluation and
formation
State/Fed grants for
projects
Layer Other Tools
Community Facility
Districts (CFDs) for early
funding, econ. dev.
strategies to advance
projects
Private Sector Funds
Developer partnerships
for early project funding
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Tax Increment District Case Study
Placentia Case Study - formed in 2019
Placentia / Orange County EIFD Partnership
•300+ acres: Old Town Placentia Revitalization Plan, Metrolink
Station, TOD Packing House Area
•Infrastructure Financing Plan (IFP) will fund $13 million in
public infrastructure improvements for those areas
•Water, sewer, streets, parking, transit connectivity
•$460M+ expected in new AV from residential, retail,
restaurant development
•Net Fiscal Benefit: $22M to City, $15M to County
BEFORE
AFTERImplementation
•EIFD feasibility analysis & formation process
•Led education/outreach meetings with County BOS
•Developed County EIFD Policy for City/County EIFD
•Completed first EIFD TIF Court Validation in the state
•Working on TIF Bond – expected by end of 2023
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Tool #2: Capture Value with City PropertySurplus Land Act as Asset Management Strategy
The Old Days:
Want to sell / lease a City property? Just put out an RFP/Q
The New World Order:
The SLA requires public agencies to first go through a process
of offering property to affordable housing developers before
pursuing other opportunities.
Value Add Opportunity:
Public agencies should look at SLA as a “Value Capture”
Opportunity to productively use public properties:
•Performance-based leases / ground leases
•Monetizing assets (such as civic centers, parking garages, etc.)
•Selling property to private sector – includes lease-back,
continued operation of existing use, redevelopment to new uses
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SLA Here to Stay
New rules being used for property
disposition and housing creation
New Processes
Cities navigating evolving
procedures and compliance
New Strategies
Time to be strategic: use property
assets to pursue priorities
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Sooner better than later. Cities should start NOW to review/evaluate property portfolio in alignment with econ. development goals/objectives
SLA is nuanced and circumstantial. Engaging HCD early in process is important to determination of compliance
Transparency is key. Promote the City’s repositioned asset program to community to achieve HCD compliance
Surplus Land Act: New Rules & Strategies for Public Real Estate
Primary Steps to Comply with SLA & Pursue Projects
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1
2
3
Property Inventory (Start Early)
Identify priority properties and/or projects now that may be impacted by SLA & can be
put into productive use.
Prioritize, Screen, & Select an Approach
Confirm value, SLA applicability, Preferred Disposition Strategy/Use (e.g., asset monetization,
sale or lease, public use, housing, etc.), Econ Dev Tools, & Financing Mechanisms.
Implementation (Transparency is Key)
Execute preferred disposition (sale, lease, etc.) strategy that’s done openly & fulfills
community goals and objectives (job creation, tax revenues, housing)
Project would result in
a loss in retail sales
tax revenues resulting
from non-sales tax
generating uses
(e.g. industrial)
Analyze sales tax
revenue loss potential of
opportunity sites &
zoning designations to
understand scale
Create equivalent General
Fund revenue through
entitlement document /
development agreement
Or operating covenant agmt.
(Tax Equivalency as currency)
STAR* Case Study: Jurupa Valley –Agua Mansa Commerce Park Site•~280-acre site (originally planned for retail)
•Proposed 3.6 million SF industrial development project
•STAR analysis estimated annual sales tax in-lieu payment of ~$362,500
Replace Revenue with Sales Tax Assessment Revenue (STAR*)®
Tool #3: Create Currency with Revenue ReplacementReplacing Tax Revenues via DAs & P3s
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Opportunity to generate savings and create general fund resources for community reinvestment.
Revenue Bonds to fund vital projects (tax exempt, vote needed)
EIFD / TIF Bonds to fund infrastructure and housing (tax exempt, no vote needed); TIF value capture
Lease – Leaseback (P3) Structures can cut costs and deliver public projects (tax exempt, no vote needed)
Pension Obligation Bonds/Other Pension Strategies (BLAST); pension cashflow savings strategies &
refinancing structures that can generate savings (taxable, no vote needed or tax-exempt exchange)
Reducing debt payments can create capacity to pursue programs to reset local economy.
Tool #4: Tax Exempt FinancingPursue Investment Opportunities
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Case Study
La Verne EIFD issued a $3.6m TIF-based lease financing (3.65% rate, 20-year term) to fund transportation
improvements; combined with Proposition C transportation funding
Tool #5: Create Currency with OPMUsing “Other Public Money”
$8.2 Billion in ARPA Funds, $45.5 Billion in Federal Infrastructure Funds and Congressional Direct Spending,
Millions More in State Programs and Member Requests
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Federal Programs + Earmarks State Programs + Earmarks
American Rescue Plan Act
(ARPA)
Congressional
Infrastructure Bills
(INVEST Act, IIJ Act)
Affordable Housing
and Sustainability
Communities
Program (AHSC)
Infill Infrastructure
Grants (IIG)
Multifamily Housing
Program (MHP)
ARPA direct relief to cities is
not just for COVID relief:
Funds for water, sewer, and
broadband, upgrading
facilities and distribution
systems, climate change
upgrades, lead pipe
replacement and more
In process, likely to
include:
Funds for roads, bridges,
railroads, broadband,
water, cyber
security, climate resiliency,
transit, brownfield cleanup,
electric vehicles, affordable
housing
CA Program:
EIFD Preference
$1 - $30 million awards
for affordable housing,
housing infrastructure,
transportation, related
amenities, program
costs
CA Program:
EIFD Preference
$1 - $7.5 million grants
for infill projects / areas,
gap funding for
infrastructure for
residential / mixed-use )
with some affordability
requirements
CA Program:
Funding for rental
housing; includes land
lease payments,
construction / rehab,
offsite infrastructure
improvements
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Kosmont Scope of Work fo r S.B.
1.Evaluation of Financing District Boundary and Strategic Considerations
2.Preliminary Funding and Financing Analysis, Layering Other Tools
3.Fiscal and Economic Impact Analysis
4.Governance and Implementation Roadmap
5.Taxing Entity Stakeholder Outreach for Potential Partnerships (Fire, County, State)
6.City Meeting / Workshop
7.*Potential Future Implementation*
City of San Bernardino
Presentation on Economic Development Tools
July 19, 2023
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Steady
growth
Moves in
cycles,
generally
trends
upward
$3.5 million
35%25%
$2.5 million
13%
$1.3 million
Cost Recovery
Indexed to
Wage/Salary
Growth
Volatile
Revenues
Stable
Revenues
20%
$2.0 million
Utility-based,
consistent
FRANCHISE FEES
(UUT)COST RECOVERY
(user fees)
SALES TAX & TOT DEVELOPMENT-
RELATED FEESPROPERTY TAX
7%
Slower
growth
$700,000
Variable
Cyclical
Volatile
Revenues
Diversity & Stability provides
Economic Resiliency
5 Major Revenue Categories = Majority of General Fund Total
Revenues based on Volatility
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San Bernardino Major General Fund Revenues
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
2020 2021 2022 2023 2024
Sales and Use Tax Measure S Sales Tax Utility Users Tax Property Taxes Franchise Tax Transient Occupancy Tax
<< actuals projections >>
Sales and Use Tax
Utility Users Tax
Measure S Sales Tax
Property Taxes
Franchise Tax
Transient Occupancy Tax
Source: City of San Bernardino 2023-2024 Proposed Budget
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The New TIF District in Town – CRDs
SB 852 Creates Climate Resilience Districts
Purpose Allows city, county, special district, or combination of entities to form a Climate Resilience District, which
can fund projects to mitigate climate change.
Powers
Broad financing powers, including the power to tax, with voter approval (and use of property tax share,
with affected agency consent)
•Taxing power – can levy a benefit assessment, special tax, property-related fee, or other service
charge / fee
•Other funds – can apply for and receive federal / state grants, receive gifts / grants / allocations from
public and private entities
•Bonds – TIF, can issue revenue bonds, incur general obligation bonds
•Administration – powers needed to administer district, like hiring staff
Eligible
Projects
Wide range of eligible projects, including:
•Seal Level Rise / Flooding – sea level rise, sea walls, wetlands restoration, erosion control, levies,
structure elevation / relocation, flood easements
•Extreme Weather – facilities / improvements for extreme heat, extreme cold, rain / snow
•Wildfire – fire breaks, prescribed burning, structure hardening, vegetation control
•Drought – land repurposing, groundwater replenishment, groundwater storage
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Comparison of Financing Districts
AD CFD EIFD CRD CRIA
Revenue Sources Assessments Special Taxes Tax Increment Tax Increment, Other
Taxes, Assessments
Tax Increment
Authorized
Facilities
Public improvements
with benefit nexus
Public
Improvements –
5+ years useful life
Capital facilities /Projects
w/ communitywide
significance
Climate mitigation/
adaptation projects
Specified projects
Services Yes Yes No Yes No
Maximum Terms 39 years 40 years 45 years 45 years 45 years
Voter Approval No majority protest 2/3rds vote No majority protest;
election if 25-50%
protest
No majority protest;
election if 25-50%
protest
No majority protest;
election if 25-50%
protest
Governance Governing body of
public agency
Governing body of
public agency
Taxing Entity rep + two
public members
Taxing Entity rep +
two public members
Taxing Entity rep +
two public members
Improvement
Areas/Zones
Yes Yes Yes Yes No
Other
Limitations
Prop 218
Limited Interest
Payment Dates
Additional Services
Requires election
Validation Action
Independent Audit
No Services
Validation Action
Independent Audit
Limited to certain areas
Validation Action
No improvement areas