Idaho infrastructure financing opportunities with community infrastructure districts
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Transcript of Idaho infrastructure financing opportunities with community infrastructure districts
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DPFG 2015
Infrastructure Financing Opportunities with Community Infrastructure Districts
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About UsDevelopment Planning & Financing Group, Inc.
Organization
Founded in 1991
Business Purpose• Financing public improvements
• Reducing public infrastructure costs
• Mitigating Risk
• Enhancing project profitability
Personnel• Grown to 60 team members in 9 states
Performance• Established over 2,000 special taxing districts
• 100% of all Idaho CIDs
• Approximately $15+ billion in bonds issued
Affiliates
AXIS Business Advisory Services
Advisory services, real estate turnaround and restructuring firm
Katalyst, Inc.
Planning and urban design firm
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DPFG Offices
Denver
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Spink Butler, LLP is a dynamic, innovative, and results-oriented
law firm, serving clients in a variety of areas including:
Real Estate LawLand Use Law and Planning
Title Insurance LawConstruction Law
We cultivate relationships within our communities, the legal profession, and the clients we serve to find a meaningful pattern in the many factors that create today’s constantly changing world and impact our clients and their businesses.
When you connect with one of us, you connect with all of us – a group of people with extensive training, focused on providing exceptional client service with an emphasis on value. By working together cooperatively, Spink Butler achieves the important common goal of providing excellent legal representation for our clients.
The strategies we propose are tailored to align with our clients’ overall business needs, their risk tolerance and their budget.Spink Butler has a rich history and culture of community involvement. We are especially proud of our many employees who contribute their time, enthusiasm, leadership, support and fundraising skills to numerous community and charitable activities.
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Development Challenges
� Developers are required to provide public Developers are required to provide public infrastructure, even if infrastructure serves an infrastructure, even if infrastructure serves an area outside of their development.area outside of their development.
� Jurisdictional requirements for infrastructure Jurisdictional requirements for infrastructure remains high, often requiring developers to remains high, often requiring developers to pay for additional offsite infrastructure.pay for additional offsite infrastructure.
� Impact fees continue to rise.Impact fees continue to rise.
� Construction loans can be difficult to obtain.Construction loans can be difficult to obtain.
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Financing Options
A.A. Status QuoStatus Quo
Third Third partyparty loans, parent advances, partners loans, parent advances, partnersi.i. Financial reporting as a liabilityFinancial reporting as a liability
ii.ii. High interest ratesHigh interest rates
iii.iii. Short term payback periods (2 to 3 years)Short term payback periods (2 to 3 years)
iv.iv. Principal and interest repayment to lenderPrincipal and interest repayment to lender
B.B. Community Infrastructure District FinancingCommunity Infrastructure District Financingi.i. Possible off-balance sheet treatmentPossible off-balance sheet treatment
ii.ii. Tax exempt interest ratesTax exempt interest rates
iii.iii. 30 year amortization period30 year amortization period
iv.iv. Payback obligation passed on to end usersPayback obligation passed on to end users
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Developm
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Urban Renewal District
Local Improvement
District
Community Infrastructure District
Purpose Encouraging Redevelopment of decaying or blighted urban areas
Financing installation, repair or updating local infrastructure in existing or new areas
Financing installation of regional infrastructure in new or existing areas
Location City or County City or County City or City’s Comprehensive Planning Area
Governing board: Entirely in City
City Council or appointees
City Council 3 members of City Council
Entirely in County County Commission or appointees
County Commission County Commission
Overlapping
2 members from each governing board plus 1 from the jurisdiction with most land in District.
Eligible Costs X = Reimbursement AvailablePlanning X X XDesign X X XEngineering X X XConstruction X X XInstallation X X XApplication Costs X X XImpact Fees XOther construction costs X X XUtilities X X XIrrigation systems X Roads & bridges X X XParks & Pathways X X XLandscaping X X XRecreational facilities (i.e. playgrounds)
X X X
Parking facilities X X XPublic safety facilities XDemolition & removal of buildings X X Land acquisition X X XTIF bonds allowed X Special assessment bonds allowed X XRevenue bonds allowed XGeneral obligation bonds allowed XVote required?
TIF bonds No
Special assessment bonds Hearing only Hearing only
Revenue bonds No
General obligation bonds Yes
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CID Background
� What is a CID?What is a CID?– Legislation passed in 2008Legislation passed in 2008– Special purpose district distinct from a general purpose Special purpose district distinct from a general purpose
municipalitymunicipality– Used to acquire/construct public infrastructureUsed to acquire/construct public infrastructure– Project financed with tax exempt bondsProject financed with tax exempt bonds– Bond obligations are passed on to property owners that Bond obligations are passed on to property owners that
benefit from infrastructurebenefit from infrastructure
� Additional FactsAdditional Facts– District can be in an incorporated City District can be in an incorporated City oror a City’s a City’s
comprehensive planning area within a County with the City’s comprehensive planning area within a County with the City’s consent, consent, oror both. both.
– City/County is not responsible for debt of the CIDCity/County is not responsible for debt of the CID– Requires public bidding of CID public infrastructureRequires public bidding of CID public infrastructure
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Eligible CID Infrastructure
Public infrastructure that directly or indirectly benefit Public infrastructure that directly or indirectly benefit the CID, and are of the type defined by the Idaho the CID, and are of the type defined by the Idaho Impact Fee Statute, including:Impact Fee Statute, including:
1.1. Roadways (including rights of way)Roadways (including rights of way)
2.2. Water, sewer and storm water projectsWater, sewer and storm water projects
3.3. Flood control and drainage projectsFlood control and drainage projects
4.4. Lighting and traffic control Lighting and traffic control
5.5. Landscaping and lakes Landscaping and lakes
6.6. Parks and recreational facilities (and sites)Parks and recreational facilities (and sites)
7.7. TrailsTrails
8.8. Public safety facilities (and sites)Public safety facilities (and sites)
9.9. Public parking facilitiesPublic parking facilities
10.10. Real property for eligible improvementsReal property for eligible improvements
11.11. Financing costsFinancing costs
12.12. Impact feesImpact fees
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Mechanics of District Formation
� Petition by 2/3 of Proposed District Residents or All Land Petition by 2/3 of Proposed District Residents or All Land Owners in Proposed DistrictOwners in Proposed District
– Map and Legal Description of Proposed DistrictMap and Legal Description of Proposed District– General PlanGeneral Plan– District Development AgreementDistrict Development Agreement
� General Plan General Plan
– Type of InfrastructureType of Infrastructure– Location of InfrastructureLocation of Infrastructure– Estimated Cost of InfrastructureEstimated Cost of Infrastructure– Proposed Financing MethodsProposed Financing Methods– Anticipated Assessments/Taxes/ChargesAnticipated Assessments/Taxes/Charges
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Mechanics of District Formation (Cont.)
� District Development AgreementDistrict Development Agreement
– Obligations of the PartiesObligations of the Parties– Administration of the District; Payment of District Administration of the District; Payment of District
Administrative ExpensesAdministrative Expenses– Total Amount of Financing Available: GO Bonds; Revenue Total Amount of Financing Available: GO Bonds; Revenue
Bonds; Special AssessmentsBonds; Special Assessments– Public Bidding RequirementsPublic Bidding Requirements– Developer-Constructed Infrastructure – Conveyance to Developer-Constructed Infrastructure – Conveyance to
Applicable Public AgencyApplicable Public Agency– District-Constructed Infrastructure District-Constructed Infrastructure –– Conveyance to Conveyance to
Applicable Public AgencyApplicable Public Agency– Cost-Sharing Mechanism for Oversized Infrastructure Used Cost-Sharing Mechanism for Oversized Infrastructure Used
Outside of District BoundariesOutside of District Boundaries– Disclosure NoticeDisclosure Notice
� Notice and HearingNotice and Hearing
� Resolution of Local Government(s) Forming DistrictResolution of Local Government(s) Forming District
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CASE LAWCOMMUNITY INFRASTRUCTURE DISTRICT
� Judicial ConfirmationJudicial Confirmation– Judge Greenwood - Judge Greenwood -
District Court of Ada District Court of Ada CountyCounty
– Opinion issued March 24, Opinion issued March 24, 20142014
– In the Matter of: Spring In the Matter of: Spring Valley Community Valley Community Infrastructure District No. Infrastructure District No. 1 Eagle, Ada County, 1 Eagle, Ada County, Idaho Idaho
– Case No: CV-OC-2013-Case No: CV-OC-2013-158882158882
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CASE LAWCOMMUNITY INFRASTRUCTURE DISTRICT
� Questions Questions Considered by CourtConsidered by Court– Does landowner limitation Does landowner limitation
on right to petition for CID on right to petition for CID violate Idaho or U.S. violate Idaho or U.S. Constitutions?Constitutions?
– Does allowing land Does allowing land owners, whether resident owners, whether resident or not, to vote on CID or not, to vote on CID violate Idaho or U.S. violate Idaho or U.S. Constitution? Constitution?
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– Did the special election Did the special election comply with the CID Act comply with the CID Act and other Idaho statutes?and other Idaho statutes?
– Are debts issued by a Are debts issued by a CID an unconstitutional CID an unconstitutional delegation of taxing delegation of taxing authority? authority?
– Do proportional voting Do proportional voting qualification of the Act qualification of the Act violation Idaho or U.S. violation Idaho or U.S. Constitution? Constitution?
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CASE LAWCOMMUNITY INFRASTRUCTURE DISTRICT
Does landowner limitation Does landowner limitation on right to petition for a CID on right to petition for a CID violate Idaho or U.S. violate Idaho or U.S. Constitutions?Constitutions?–Not entirely accurate Not entirely accurate question. Landowners question. Landowners (including nonresident (including nonresident landowners) or 2/3rds of landowners) or 2/3rds of residents can petition for residents can petition for forming a CID.forming a CID.–Filing petition is not an Filing petition is not an election and is therefore election and is therefore allowable under both allowable under both Constitutions.Constitutions.
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CASE LAWCOMMUNITY INFRASTRUCTURE DISTRICT
Does providing landowners, Does providing landowners, including nonresident including nonresident landowners, the ability to landowners, the ability to vote in a CID election vote in a CID election violate the Idaho or U.S. violate the Idaho or U.S. Constitution? Constitution? –Yes.Yes.–Must be either a resident Must be either a resident within the district or a within the district or a resident landowner within resident landowner within the the countycounty where CID where CID located.located.–Implications for corporate Implications for corporate landholders.landholders.
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CID Bond Types
Description Revenue Bond
General Obligation Bond Special Assessment Bond
Responsible for Repayment
Users of the facilities
Land owners within the boundaries of the District. (Note: If land owners default, remaining land owners pick up additional tax.)
Land owners benefiting from constructed infrastructure Land owners are only responsible for their special assessment lien
Ability to prepay?
Yes No Yes
Tax Billing Municipality or District
County – Passed through on the County tax bill
County – Passed through on the County tax bill
Superiority of lien
No lien on property
First position behind existing property taxes
First position behind existing property taxes
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Comparison of CID Bond Types
Description Revenue Bond General Obligation Bond*
Special Assessment Bond
Typical Use Existing asset Raw land Raw land
Funds Used to Acquire or Construct
Acquisition (Typically)
Construction or Acquisition
Construction or Acquisition
Security for Bonds
Revenue stream
Ad valorem property tax • Specific lien on a specific property• 10% reserve fund
Bond Sizing Revenue stream
Assessed value of property
The fair market value of the property
Timing of Funds
• Slower – need for election• Over build-out of project• Reimbursement (typically)
• Faster – establish up front• Phase by phase• Construction and/or reimbursement
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* Requires an election in May or November.
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Non-Contiguous CID Overview
� Multiple property owners come Multiple property owners come together within a jurisdiction to together within a jurisdiction to establish a single non-establish a single non-contiguous CID.contiguous CID.– Projects anticipated to be Projects anticipated to be
smaller;smaller;– Projects may include raw, semi-Projects may include raw, semi-
improved improved or finished lotsor finished lots;;– Eligible expenditures may be Eligible expenditures may be
public infrastructure and/or public infrastructure and/or development impact fees.development impact fees.
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Overview (cont.)
Special Assessment BondsSpecial Assessment Bonds
– Land only required as security;Land only required as security;� Value to lien requirementValue to lien requirement� Non-recourseNon-recourse
– Bond issue based on FMV of property;Bond issue based on FMV of property;
– Bond issuances may be phased with construction Bond issuances may be phased with construction activity; activity;
– Builder parcels are Builder parcels are NOT CROSS NOT CROSS COLLATERALIZEDCOLLATERALIZED with one another. with one another.
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Overview (cont.)
Developer A
Developer C
Developer BDeveloper D
Jurisdictional Boundary
Bond Issue #1 Bond Issue #2
Semi-Improved(Impact Fees)
Raw Land (Regional Infrastructure
& impact Fees)
Raw Land (Regional Public
Infrastructure)
Finished Lots (Impact Fees)
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Within District- not included in Bond Issuance
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Comparative One-time Fees
Sample CitySample City
Sewer hookupSewer hookup $2,749$2,749
Water hookupWater hookup $2,075$2,075
Impact feeImpact fee $1,846$1,846
Highway Highway District impact District impact feefee
$3,047$3,047
Total feesTotal fees $9,717$9,717
Number of Number of lots lots
10001000
Fees by CIDFees by CID $9,717,000$9,717,000
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Example of Non-Contiguous CID
Number of LotsNumber of Lots 1,0001,000
Fees per Lot Fees per Lot $9,717$9,717
Total Fees FundedTotal Fees Funded $9,717,000$9,717,000
District Cost of Issuance (COI)District Cost of Issuance (COI) Costs Reimbursed (23%)Costs Reimbursed (23%)
COI / Underwriter (6%) COI / Underwriter (6%) $583,000$583,000 Reserve Fund (10 %)Reserve Fund (10 %) $972,000$972,000 1 Year of Capitalized Interest (7%)1 Year of Capitalized Interest (7%) $680,000$680,000
$2,235,000$2,235,000
Estimated Bond Amount (Rounded)Estimated Bond Amount (Rounded) $11,952,000$11,952,000
Assessment per LotAssessment per Lot $11,952$11,952
Interest Rate Interest Rate (May vary at time of issuance)(May vary at time of issuance) 7.0%7.0%
Annual Debt Service per LotAnnual Debt Service per Lot (29 years)(29 years) $974$974
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Overview (cont.)
� Benefits to Developers Benefits to Developers (assuming $9,717 in fees (assuming $9,717 in fees per lot funded)per lot funded)
– Reduce lot costs / home price by approximately Reduce lot costs / home price by approximately $10,000 to $15,000;$10,000 to $15,000;
– Reduce equity contribution and/or 3Reduce equity contribution and/or 3 rdrd party party borrowing;borrowing;
– Utilize tax exempt Utilize tax exempt borrowingborrowing rates; rates;
– Up to 3 years of capitalized interest;Up to 3 years of capitalized interest;– CID obligations passed on to homeowners.CID obligations passed on to homeowners.
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Overview (cont.)
� Benefits to JurisdictionBenefits to Jurisdiction
– Jump start construction activity;Jump start construction activity;
– Accelerate receipt of development impact fees;Accelerate receipt of development impact fees;
– Maintain home prices at “affordable” levels;Maintain home prices at “affordable” levels;– Create jobs within the community.Create jobs within the community.
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Next Steps
1.1. Identify jurisdiction, developers and projects Identify jurisdiction, developers and projects to be included in a CID.to be included in a CID.
2.2. Determine bonding capacity & eligible Determine bonding capacity & eligible infrastructure/fees.infrastructure/fees.
3.3. Prepare finance plan.Prepare finance plan.
4.4. Discuss finance plan with jurisdiction.Discuss finance plan with jurisdiction.
5.5. Establish district / issue bonds.Establish district / issue bonds.
6.6. Timing: 9 to 12 months.Timing: 9 to 12 months.
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Contact
Kent RockDPFG950 W. Bannock, 11th FloorBoise, ID 83702(208) [email protected]
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JoAnn C. ButlerSpink Butler, LLP251 E. Front Street, Suite 200Boise, ID 83702(208) [email protected]
Chad W. LamerSpink Butler, LLP251 E. Front Street, Suite 200Boise, ID 83702(208) [email protected]
Follow on Twitter @ChadLamerContributor to http://idaholandlaw.com/
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