Replacing Redevelopment Funding & Implementation Tools with PBIDs & IFDs

Michael Yarne Executive Director, UP Urban and Partner, Build, Inc.

Mary McCue CEO, MJM Management Group

Jim Chappell MJM Management Group and Union Square BID

AGENDA Michael Yarne

Alternative Financing Tools (CFDs, IFDs & Others) Opportunities Limitations Green Benefit Districts (Dogpatch/Protero Hill)

Jim Chappell BID Formation Process (Rincon Hill)

Mary McCue Successes (Union Square) Challenges Pitfalls

Discussion and Q+A

Michael Yarne Executive Director, UP Urban Partner, Build, Inc.

UP Overview A non-profit venture that designs & creates non-

governmental solutions to traditional redevelopment activities.

We don’t advocate; we implement.

Our Mission: Improve urban neighborhoods for the long-

term public benefit through public-private partnerships & a creative mix of finance tools & land use strategies.

www.upurban.org

The Post-Redevelopment Toolshed

• Community Facilities Districts (CFDs) • Infrastructure Financing Districts (IFDs) • Development Agreements (DAs) • Public Development Rights (PDRs) • Transfer Fees • Business Improvement Districts (BIDs & CBDs) • NEW: Green Benefit Districts (GBDs)

CFDs • Mello-Roos Community Facilities Act of 1982 • Allows a “Special Tax” on property to: pay debt service on bonds issued to finance

physical improvements pay-as-you-go financing of physical improvements,

and/or pay-as-you-go financing of certain public services

CFD Financing of Public & Private Facilities • Public Facilities:

Design, engineering, architecture & other soft costs Development Impact Fees for public capital facilities Public agency must own facilities when completed

• Options for Construction of Public Facilities Public agency constructs with bond proceeds, or Developer constructs & conveys to agency; purchase price paid from

bond proceeds • Private Facilities:

Renewable energy or energy & water efficiency improvements (PACE) Compliance with seismic safety standards & earthquake repairs Repair & abate damage caused by soil deterioration Brownfield remediation

Nature of CFD Financing • Land-Secured Financing Bonds secured by Special Taxes; not general debt Levied & collected with ordinary property taxes Non-recourse to property owner; lien runs with the land Property subject to foreclosure in event taxes not paid

• Special Tax Formula • Tax-Exempt Bonds? Capital costs for public facilities Must spend proceeds in 3 years Limited “private use”

CFD Formation

• Typically initiated by Developer petition • 2/3rds approval of “qualified electors” If 12 or more registered resident voters in CFD, vote is by

registered voters; OR Vote by fee title owner: 1 vote per acre or portion of an

acre owned Sometimes public agency can vote

CFD Financing of Services • May not supplant services already available in the

CFD when it is created. • Only specified services & maintenance activities can

be funded, and only on a pay-as-you-go basis: Police protection services Fire prevention & suppression Ambulance & paramedic services Maintenance & lighting of parks, roads and open space Flood & storm protection services Environmental remediation

Mint Plaza CFD + BID

Mint Plaza CFD Bonds Issued by ABAG to fund conversion of public alley into a 20,000-SF landscaped pedestrian plaza adjacent to the Old US Mint in downtown San Francisco.

• 5 renovated historic buildings with mix of residential condominium, rental apartments, commercial space and retail uses

• Properties partially leased or sold at time of sale

• Developer responsible for 66% of initial special tax burden

• Initial tax rates range from $1.02 to $1.785 per square foot

Project Peripherals:

Bond par: $3,270,000

Overview of IFDs • “Voluntary redevelopment” or “redevelopment light” • Substantially lower share of each property tax dollar. • CFD-style 2/3 vote; formed by cities/counties • Diversion of future tax increment • NOT a net new tax assessment (like CFDs or BIDs) • IFDs may finance: Debt service on TIF bonds issued to finance public facilities or Pay-as-you-go financing of public facilities NO maintenance or services NO privately-owned improvements

IFD Financing of Public Facilities • Public facilities with a useful life of 15 years or more • Projects of “communitywide significance, which

provide… significant benefits to an area larger than the IFD”

• May not supplant facilities already available within the IFD

• May cover soft & hard costs of public facilities

Nature of IFD Financing • Bonds payable only from tax increment allocated to the IFD

Measured by increase in assessed value above base year value • Infrastructure Financing Plan

Identifies taxing entities contributing increment to IFD (no schools) Specifies specific projects, budgets & portion of increment allocated to

the IFD (may vary by entity and time) Sets a cumulative tax increment limit Time limit on increment: 30 years from ordinance forming IFD

• Tax-Exempt? May only finance capital improvements and related soft costs Public agency must expect to spend Bond proceeds within 3 years May include “private use”

Changes in IFD Law?

• Pending Bills propose the following changes Broader list of facilities eligible for funds Eliminate 2/3 voter requirement Extend period for increment receipt from 30 to 40 years. Allow IFDs in former redevelopment project area Require 20% housing set-aside

Rincon Hill IFD Formed in 2011. BID/CBD in Progress

Rincon Hill Infrastructure Financing District

Parkmerced: DA + IFD + CFD?

Transfer Fees • WHAT:

A “contractual transfer tax” Legal instrument recorded against title that requires that a certain

percentage of future sale price be dedicated to a public or private purpose.

FHA guidelines restrict use of fees to activities that directly benefit the property subject to fees.

• USES: Maintenance, repair and/or capital improvements to infrastructure. May be used citywide or on a case-by-case basis, depending on need.

• EXAMPLE:

Dublin-Pleasanton BART station parking lots sold to private condo developer; transfer fee generates revenue to maintain station area.

Public Development Rights (PDRs) • PDRs = FAR (developable air rights above a building, measured by

floor area)

• New PDR created when a significant “up-zoning” occurs on property above existing “base” height & FAR.

• Air Bonds: Agency sells PDRs by auction or otherwise to raise funds for density-supportive infrastructure improvements.

• 30-year-old precedent (San Francisco’s 1985 Downtown Plan).

• Exploring wider application of legally proven approach

• PDR captures future incremental value without need for TIF

• Limited application: high-value, high-density environments

Green Benefit Districts (GBD) • Minor Modification to BID Law: Same legal structure, different goals & geography

• Green Maintenance & Operations for neighborhood parks & green spaces commensurate with increased density, but at a strategic neighborhood scale—close to the impact.

• A Neighborhood-Based NGO Right-Sized for Accountability & Innovation: An organizational (and democratic) platform for neighborhood-based innovation. Unfettered by many rules that restrict city agencies, GBDs deliver more bang for the buck.

• Stimulates Capital Investment: Because GBD provides a reliable M&O funding, local government is more willing to make neighborhood-based capital investments. In addition, some GBDs may include their own “seed capital” fund to leverage larger capital investments.

• Replication & Education: Once the SF Beta project is successfully launched, UP will develop a statewide “open-source toolkit” for forming new GBDs.

Potrero Hill-Dogpatch GBD

Goals: 1. Improve daily

maintenance of key neighborhood parks, gardens and green spaces.

2. Catalyze new green spaces & improve existing with “seed capital”.

3. Leverage M&O capacity to fund larger scale park & infrastructure investment.

Jim Chappell Strategic Planning, Government and Community Relations MJM Management Group

MJM Management Group: Turning Public Space into Community Value We connect people to public spaces. Our goal is to provide a positive and memorable experience for all who visit and use the parks, plazas, and public thoroughfares we manage. • Form and Manage BIDs/CBDs • Plan, design, manage, and program public spaces

BID | CBD Business Improvement Districts | Community Benefit Districts

Where did they come from? • Response to anti-tax movements • Government’s decreased ability to provide services • Began in Canada 1970

– ± 2,000 in N. America

• CA Legislation to enable/govern BIDs: – Property and Business Improvement District Law of 1994 – San Francisco: Community Benefit Ordinance of 2004

• Lifespan: 5-15 years

BIDs/CBDs in SF

BID | CBD Business Improvement Districts | Community Benefit Districts

What do they do? • Grassroots democracy • Supports neighborhood stewardship

– Provide neighborhood services – Similar to HOA

• Mandatory assessments, not a tax – Replacing voluntary Business Associations

• Strengthen Neighborhood

BID | CBD Business Improvement Districts | Community Benefit Districts

Key Factors • Management Plan

– sets forth budget and spending priorities; serves as the “constitution” for the CBD

• Assessments – General vs. Specific Benefit – Money stays within neighborhood – Maximum annual increase of 3% or cost of living

(whichever is lower)

BID | CBD Business Improvement Districts | Community Benefit Districts

Key Factors • Services

– Clean – Safe – Economic development – Beautification – Advocacy – Marketing

BID | CBD Business Improvement Districts | Community Benefit Districts

How are they formed? • Takes approximately 1 year

– Public/private partnership • Community Organization

– Steering Committee – Property owners determine boundaries, services, budget

• Management Plan and Technical Studies • Multi-Stage Approval Process and Political Campaign

– Petitions – Ballots

• Formation of nonprofit, Board of Directors

Rincon Hill

Rincon Hill Infrastructure Financing District

Challenges

Rincon Hill Streetscaping Plan

Mary J. McCue President and CEO, MJM Management Group

Union Square BID • First special assessment

district in San Francisco history

• Established in 1999; renewed and expanded in 2009

• Daily services include Community Ambassador Program, Cleaning, Maintenance and Safety

Challenge: Building consensus with a wide range of stakeholders

• City agencies • Law enforcement • Nonprofit groups • Local businesses • Community

organizations • Parking garage

(beneath park)

Union Square: Before the Business Improvement District

Before and after

Before Union Square BID (1998) After Union Square BID was formed

Before and after

Before Union Square BID After Union Square BID was formed

A more inviting pedestrian environment

Before Union Square BID After Union Square BID was formed

Once property owners saw the effectiveness of the BID, they began to

invest in their own properties.

A new, vibrant district paves the way for park revitalization

Photo credit: ralphman, Flickr

Union Square Park: Challenges

• Transform an iconic, but blighted space avoided by locals and tourists

• Identify ways to activate the district and park through redesign, programming and ongoing management

• Address issues of safety, security and cleanliness

• Create a new public-private management structure and qualified provider to operate and staff Union Square Park

Union Square Park: Results • Events and leases generate more

than $600,000 a year in revenue • More than 4.6 million annual visits

per year. • Union Square Live events program:

music, dance, art, speech, more. • Park renovation and activation has

lowered crime, brought a new demographic and raised adjacent property values

• BID expanded and renewed in 2009

Questions?