Public-Private Partnerships –

Techniques That Work

WILLIAM S. DAHLSTROM, AICP, JD

JACKSON WALKER, LLP

SCOTT POLIKOV, AICP, JDGATEWAY PLANNING GROUP

FOCUS NORTH TEXAS

PLANNING SYMPOSIUM

January 28, 2011

Economic Development can be nerve racking.Economic Development can be nerve racking.

THE TOOLBOX

Chapter 380

Type A/ Type B

TIF/ TIRZ

PID

Bonds/ CO’s

Tax Abatement

Nonmonetary Incentives

The “Deal”Available ProgramsProcessMunicipality’s limitationsMunicipality’s Policies

Official ProgramComprehensive PlanDevelopment Standards

General Considerations

Municipality’s recordConsultantsOther taxing jurisdictionsFinancial ImpactIncentive “Package”Effect of other regulationsAuthorization/ legal and enforceable

General Considerations

“establish and provide for the administration of one or more programs, including programs for making loans and grants of public money and providing personnel and services of the municipality, to promote state or local economic development and to stimulate business and commercial activity in the municipality”. TEX. LOC. GOVT CODE §380.001 (a) (Vernon’s 2010). [emphasis added]

CHAPTER 380 GRANTS

380 Considerations“Program”Promote state or local economic development and to stimulate business and commercial activityBusiness termsLimitations or conditions of city

CHAPTER 380 GRANTS

ProcessReinvestment ZoneFindingsNotice

TAX ABATEMENT

Differences PurposesCreationTaxing Authority

ECONOMIC DEVELOPMENT CORPORATIONS- Type A/ Type B

TAX INCREMENT FINANCING

Tax Increment Financing is a funding tool used to attract development or redevelopment to areas that are currently not benefiting from private-sector investment or will otherwise be underdeveloped.

Texas law allows cities to use tax increment financing in Tax Increment Reinvestment Zones (TIRZ), also called “TIF Districts”.

TAX INCREMENT FINANCING

Courtesy City of San Antonio

TAX INCREMENT FINANCING

Tax Increment Financing is traditionally used to finance new and/or enhanced public improvements and infrastructure. These improvements and infrastructure, in turn, attract additional private investment in surrounding areas.

TAX INCREMENT FINANCING

Property owners pay taxes at the normal rate; there is no “extra charge” of any kind.

Funding is accomplished by pledging tax revenues that will be realized from increases in property value due in large part from improvements in the District.

TAX INCREMENT FINANCING

Other taxing units -- City, County, School District, College District, Hospital District, etc. may also participate by pledging all or a portion of their tax increment.

TAX INCREMENT FINANCING

In addition to public infrastructure, eligible TIF project costs can include the following items not tied to public property or public easements:

Historic preservationDemolitionEnvironmental remediationEconomic development grants

TAX INCREMENT FINANCING

Projects can be funded:as funds accumulate

by developer advance and reimbursementby the issuance of bonds or notes backed by the pledge of increment.

TAX INCREMENT FINANCING

What’s New?

Municipal TIF districts no longer need be contiguousTIF Districts can now extend beyond the city limitsCalculation of Increment can be based on taxes assessed or collectedCities may now offer tax exemptions in a TIF

TAX INCREMENT FINANCING

Process“Projects”Taxing jurisdictionsLevel of participationSpecial conditions/policies

TAX INCREMENT FINANCING

CO may be used to fund the design and CO may be used to fund the design and construction a public works type project (e.g. construction a public works type project (e.g. building and land for fire station, police station or building and land for fire station, police station or for other public purpose). for other public purpose). CO may not be used for economic development CO may not be used for economic development purposes. purposes. CO may not be used for purchase of CO may not be used for purchase of land/improvements for subsequent resale to the land/improvements for subsequent resale to the private sector for development or redevelopment. private sector for development or redevelopment. However CO may be used to finance the However CO may be used to finance the demolition of substandard structures and the demolition of substandard structures and the underlying land.underlying land.

CERTIFICATES OF OBLIGATION

City could have developer/agent get property City could have developer/agent get property under contract and assign the contract to the city. under contract and assign the contract to the city. City may take down dangerous structures City may take down dangerous structures (apartment complexes that are unsafe, dangerous, (apartment complexes that are unsafe, dangerous, uninhabitable vacant, crime a foot) and issue uninhabitable vacant, crime a foot) and issue certificates of obligation for the acquisition of the certificates of obligation for the acquisition of the site and demolition of the structure. site and demolition of the structure. No specific time period for which a City must No specific time period for which a City must own the land or improvements acquired through a own the land or improvements acquired through a CO. CO.

CERTIFICATES OF OBLIGATION

City created.City created. Includes Type A & B projects, convention Includes Type A & B projects, convention facility, civic center, civic center hotel, facility, civic center, civic center hotel, auditorium, parking structures.auditorium, parking structures. Superior to sales tax corporation – projects are Superior to sales tax corporation – projects are broader than Type A and Type B projects, not broader than Type A and Type B projects, not subject to the Type A and B restrictions, can be subject to the Type A and B restrictions, can be imposed on all or portion of the city.imposed on all or portion of the city.

MUNICIPAL MANAGEMENT DISTRICTS

Every expenditure of local hotel tax revenue must: must directly enhance and promote tourism and the convention and hotel industry. Expenditure must be likely to attract visitors from outside the city into the city or its vicinity and must have some impact on convention and hotel activity. Second, every expenditure must fall within one of the statutory categories.

HOTEL OCCUPANCY TAX

HOTEL OCCUPANCY TAX

Funding establishment, improvement or maintenance of a convention center, civic center, or visitor information center. City uses hotel tax to pay annual rent for use of hotel conference space as a “convention center” and long term rent commitment funds the hotel developer’s cost of construction of the conference space. Allen did this with Hilton Garden Inn to get a conference facility in the City. After the Hilton other hotels have come.

HOTEL OCCUPANCY TAX

Funding transportation systems for tourists Funding transportation systems for tourists owned and operated by the city, or financed in owned and operated by the city, or financed in part by the city. part by the city. City may use hotel tax to cover the costs for City may use hotel tax to cover the costs for transporting tourists from hotels in and near transporting tourists from hotels in and near the city to: commercial center of the city; the city to: commercial center of the city; convention center in the city; other hotels in convention center in the city; other hotels in or near the city; and tourist attractions in or or near the city; and tourist attractions in or near the city.near the city. City could support retail through local City could support retail through local transportation of customers among the retail transportation of customers among the retail and hotel spots. and hotel spots.

City/County initiated after property owner petition (owners of 50% of taxable real property or 50% of the owners of the proposed area). After notice and public hearing governing body levies and collects assessments against property within defined contiguous area for certain public improvements. Not property tax but collected like tax and lien subordinate to tax lien – may be deducted like tax. Not favorable since an additional tax

PUBLIC IMPROVEMENT DISTRICT (“PID”)

Funding for design, construction, installation, Funding for design, construction, installation, maintenance of public facilities and maintenance of public facilities and infrastructure streetscape and other public infrastructure streetscape and other public amenities.amenities. Maintain common areas in developments.Maintain common areas in developments.

PUBLIC IMPROVEMENT DISTRICT (“PID”)

Cons: Additional tax limited to public improvements PID bonds not marketable – city/county issues the debt Statutory notice and public hearing procedure with annual assessments Pros: Collected like property taxes Deductible if based on value

PUBLIC IMPROVEMENT DISTRICT (“PID”)

NONMONETARY INCENTIVES

Density bonuses Modified Design Standards

Reduction in lot size, Relaxation of setbacksModified street standards

Expedited permit and incentive approvals

Fee rebates or waivers where permitted under law

SECTION 212.171, et seq, TEXAS LOCAL GOVERNMENT CODEExtraterritorial jurisdiction

ControlDevelopment rights

PREANNEXATION DEVELOPMENT AGREEMENTS

Preannexation Development Agreement Requirements

be in writing;contain an adequate legal description of the land;be approved by the governing body of the municipality and the landowner; andbe recorded in the real property records of each county in which any part of the land that is subject to the agreement is located. Id. at §212.172 (c)

PREANNEXATION DEVELOPMENT AGREEMENTS

Montgomery Farm History: Artistic Heritage

WATTERS CREEK AT MONTGOMERY FARM

Taking advantage of regional markets

Leveraging the transportation network

Verano Plan by Gateway Planning Groupand Pate Engineering

Campus Plan courtesy of Marmon Mok/Sasaki

Working with the City to fund and design a major anchor Boulevard

Verano’s projected $2 Billion tax base supports $265 Million 30-Year TIF, providing Infrastructure finance for Austin-San Antonio Rail

www.jw.comwww.gatewayplanning.com

Public-Private Partnerships –

Techniques That Work

WILLIAM S. DAHLSTROM

JACKSON WALKER, LLP

SCOTT POLIKOVGATEWAY PLANNING GROUP

FOCUS NORTH TEXAS

PLANNING SYMPOSIUM

January 28, 2011