Staff Presentation to the Arlington County Board

July 19, 2016

Ballston Quarter RedevelopmentAdoption of Ordinances to EstablishCommunity Development Authority

Ballston Quarter Timeline

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• Board action requested would be the first step in legal

establishment of the Ballston Quarter Community

Development Authority (CDA)

• Follows on multiple actions by the County Board, with

several more actions in coming months

July 2015

County Board Direction

November 2015 County Board Approval

of Site Plan Amendments & Letter

of Intent

June 2016

Request to Advertise Community

Development Authority

July 2016

CDA Establishment

Construction begins

Fall 2016Bond Issuance

Spring 2018Ballston Quarter

Opens

Background on Ballston Quarter & Need for Public-Private Partnership

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How do we define a public-private partnership (PPP)?

A formal partnership between the County and

private entity that utilizes strategic public

investments in a private development project

that benefits the community as a whole.

The Project Must Be Unique and Catalytic, and

Advance Plans and Policies in an Exceptional Way.

The Public Investment Must Be Strategic, Mitigate

Risk, And Result in A Net Positive Fiscal Impact That

Would Not Exist “But For” That Strategic Public

Investment.

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Objective & Criteria for a the Proposed Ballston Quarter PPP

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Objective: A redeveloped Ballston

Quarter that is transformative, catalytic and positively impacts

fiscal health of the Ballston neighborhood

and Arlington as a whole.

Advances long-range

plans & policies

Risk is appropriately

mitigated

Broader & measurable economic and fiscal

impact

Public investments are strategic and benefit the publicPrivate

investment alone cannot

achieve vision

The cost of inaction

Unique nature of project

Placemakingbenefits

The Project

Must Be Unique

and Catalytic,

and Advance

Plans and

Policies in an

Exceptional

Way.

The Public

Investment Must

Be Strategic,

Mitigate Risk, And

Result in A Net

Positive Fiscal

Impact That Would

Not Exist “But For”

That Strategic

Public Investment.

The BQ site as cornerstone of Ballston development

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Consistency with long-

range plans & policies

“Study and identify zoning and

other tools to facilitate

opportunities to reposition and

redevelop Arlington’s aging

regional shopping centers.”

- Arlington County Retail Plan

Legacy of Public-Private Partnerships at Ballston Mall

• 1986 – Public-Private

Partnership to

Transform Site from

Parkington into an

Urban Regional Mall

• County Support of

Above-Grade Parking

Structure, Entitlement

Support

• 1999 & 2004: Office

and Retail Expansions

Introduced Mixed-Use

Element

• 2006: Public-Private

Partnership to Deliver

Kettler Ice Plex

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Unique nature of project

The Future of the BCM is Bleak

Shifts in Consumer Behavior

Lose Ground to

Competition

Drops in Sales

Volumes

Key/Anchor Retailers Close or

Negatively Reposition

Vacancies & Substandard

Retailers

Co-Tenancy

Require-

ments

Triggered

Repositioning

Efforts Fail or

Have Only

Temporary

Impacts

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The anatomy of the regional retail

center “death spiral”

Increased Regional Competition

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Broader Fiscal and Economic Impacts

18.2 % office

vacancy rate

1.45M SF of

vacant office

space

32.2% office

space listed

as available

-324,000 net office

space absorption

since 1Q09

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A Fiscal Base Under Threat

Project Development Update

Development process on

track:

– Soft demolition underway

– Forest City has secured

financing

– Construction drawings at

100%

•Guaranteed maximum

price

– Pre-leasing activities

going well (May 2016

ICSC)

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The Financial Development Gap

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The financial gap was determined utilizing an

incremental return on costs model

Total Project Cost

$328M

Financial Gap

up to $55M, per LOI

• Related public

infrastructure projects

• Transformative nature

of project

• Complicated

construction

techniques

Investments to Make up the Redevelopment Gap

Garage Improvements $9.2M

Wilson Streetwork $3.7M

Plaza/Mews $6.2M

Publicly Accessible Improvements

Public Infrastructure

Streetscapes $1.8M

Investment in County-Owned

Assets

Pedestrian Bridge $3.0MVertical Improvements $15.1M

Internal Circulation $7.5M

Buildings/Development

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Public investments are strategic and benefit the public

Circulations/Connections $6.0M

Improvements & estimated costs generally consistent with LOI

Proposed Plan of Finance

Direct Investment Garage $3.5M

Direct Investment Transportation $5.5M

INCLUDED IN PROPOSED CIP

Community Development Authority Bond $44-45M

Incremental Property Taxes

Incremental Sales & Use Taxes

Incremental Meals Taxes

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Public investments are strategic and benefit the public

• Par amount of bond issue will

be closer to $60 million due to

investor requirements on

reserves & capitalized interest

Plan of Finance Tools Consistent with LOI

• Per the County Board approved

TIF policy, no more than 40% of

the total incremental taxes

generated can be pledged.• Includes use of parking garage

revenues to reimburse for garage

improvements financed with CDA

bonds

Comparison of County vs. CDA Bonds

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County GO Bonds

•On County balance sheet & obligation of General Fund

•Typically 20 year term

•No reserves

•Carry Aaa bond rating

•Lower interest rates

CDA Bonds

•Non-recourse to County; investors take full risk

•25-30 year term

• Includes reserves

•Unrated

•Higher interest rates

Proposed Structure of Ballston Quarter CDA Bonds

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Senior Lien

•First pledge on incremental tax revenues

•Tax-exempt (lower interest rate)

•$32.1M in project costs

Subordinate Lien

•Second pledge on incremental tax revenues

•Taxable (higher interest rate)

•$11.7M in project costs

• Includes backup special assessment from landowner

Two Tranches of Bonds Proposed to Be Issued

• Both include investor-required reserves & capitalized

interest through project stabilization

• Both will have 30 year term

CDA Background

• CDAs are special development authorities authorized

by state statute

– Facilitate redevelopment projects & public-private

partnerships

• Ability to issue bonds if allowed by local government

• Ability to impose special assessment or tax

• Powers limited by local governing body

• CDA Board will be County Board (similar to Solid Waste Authority)

• CDAs widely used across the Commonwealth

– Other triple-Aaa rated jurisdictions that have used include

Fairfax, Stafford, Loudoun, Prince William and Henrico

Counties

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Examples of other PPP projects in VA

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17.5% of Total Project Costs

20.7% of Total Project Costs

10.9% of Total Project Costs

5.2% of Total Project Costs

2.3% of Total Project Costs3.7% of Total Project Costs

13.2% of Total Project Costs

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

-50 0 50 100 150 200 250

Tota

l Pro

jct

Squ

are

Foo

tage

Public Finance Dollars (Millions)

Ballston Quarter Mosaic (Fairfax) w/density

Mosaic (Fairfax) w/o density Short Pump (Henrico)

Reynold's Crossing (Henrico) The Shops at White Oak (Henrico)

SW Waterfront (DC)

Flow of Incremental Taxes Under Proposed Redevelopment

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Broader & measurable economic and fiscal

impact

Projections are current estimates only for three pledged tax sources:Sales and Use, Meals and Real Property

Source: Municap; PFM; Arlington County

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Cumulative Distribution of Tax Increment Towards Debt Service and

to the County’s General Fund

Cumulative Debt Service Cumulative Increment to the County

County Manager Recommendation

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1. Adopt an ordinance to assume the power to

consider petitions for the creation of community

development authorities in Arlington County

2. Adopt an ordinance to create the Ballston Quarter

Community Development Authority