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Enhanced Infrastructure Financing DistrictsA New Power Tool for Growth in California

Doug Prawdoug.praw@hklaw.com213-896-2588

Principles behind the design of the Enhanced Infrastructure Financing District

Maximum flexibility in all design features of the legislation• Creation of districts• Creation of Public Finance Authorities• Design of Business Plans• Design of Investment Schedules

Goal orientated approach encourages multiple investments to be integrated

• Investment are problem orientated not program or stovepipe driven• Lifecycle costs can be integrated into the financing • Creates the possibilities of multiple revenues streams

Planning, financing and decision-making are integrated• Benefits of investments to people and land can be captured and related to

Investments (the Nexus test)• Linkage of benefits and expenditures will assist in public acceptance

Create Opportunity to address the Two California’s dilemma• PFA investments will create employment opportunities • Will regenerate older and underperforming areas of the state

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New Model for local and regional infrastructure investment in CaliforniaAuthorizes the creation of a Public Finance Authority (PFA) with comprehensive authority to address all local and regional needs

• All infrastructure except school facilities• Economic Development including industrial, commercial, housing-broader

eligibility than redevelopment• Environmental clean up

Single or multijurisdictional authority focused on the geography of the problem to be solved

• The size of the district is dependent on the public goals and needed investment-Governing Board(s) decide

• Can put multiple jurisdictions together

Creates a way to put multiple organizations needed to address goals and problems to be solved

• City or Country initiates but all taxing entities are eligible to be on the Board includingspecial districts

• Partnerships with private and non-profits can developed with streamlined procurement procedures

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EIFDs: Process, Powers and Prerequisites

Process• All taxing entities adopt resolution to join EIFD and approve plan• PFA, representing all stakeholders and the public, governs EIFD

Powers• Tax-increment financing from a wide range of revenue sources• Wide range of potential infrastructure investments• Lower threshold for voter approval (one 55% vote, no 2/3)• Longevity in bonding (45 years)• Brownfield remediation authority / Polanco Act revival

Prerequisites• Redevelopment wind-down: Dept. of Finance & Controller signoff• Familiar procedural and public notice requirements• Affordable housing requirements if housing is destroyed

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Funding Strategies

1. All Property Tax revenue (except for money for schools)• Tax increment within the district of the amount pledged by the consenting

taxing agencies• Revenues from the growth on the property tax attributed to backfill from

the VLF received by the city or county.

2. Other sources in the statute:• Property tax revenue distributed to a city, county or special district after

payment of a redevelopment agency’s debts by the successor entity.• Fees or assessment revenues derived from one of 10 specified existing

sources, including assessments for benefits and developer fees.• Loans from a city, county or special district.

3. Other sources:• User Fees and Public-Private Partnerships derived from the use of the

Infrastructure Finance Act.• Federal and State grants, - e.g., California’s Cap and Trade auction proceeds,

if benefitting a disadvantaged community under SB 535.

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EIFD - Summary of Key Terms

1. Enhanced Infrastructure Financing District• Governmental entity established by a city or county

that carries out a plan within a defined area to construct, improve and rehabilitate infrastructure

2. Public Financing Authority (PFA)• Legislative body that governs the EIFD

3. Infrastructure Financing Plan• Plan adopted by city or county. Describes public

facilities & development to be financed by the EIFD• Implemented by Public Financing Authority (PFA)

The Area

The Team

The Strategy

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Opportunities for Investment

• Purchase/construction/improvement of real or tangibleproperty with estimated useful life of 15+ years, or relatedplanning & design work

• “Public capital facilities” OR other “projects ofcommunitywide significance” – need not be within district aslong as the project has a “tangible connection” to the work of thedistrict

• Examples include (but are not limited to):

– Transportation facilities including highways, parking and transitfacilities

– Community parks, open space and recreational facilities– Brownfield restoration and other environmental mitigation– Construction or repair of industrial structures for private use– Projects which implement a Sustainable Community Strategy, and

Transit Priority Projects.– Affordable units within mixed-income housing developments.

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EIFDs – Diverse Funding Approach

Can use multiple funding sources with tax increment:• If Bond Issuance then 55% voter approval required

Local Funding Sources:• Private investment• Redevelopment Property Tax Trust Fund (RPTTF)• Development Agreement / Impact Fees• User fees• City / county / special district loans• Hotel TOT• Benefit assessments

– Contribution from Special District– Levied by EIFD

• Vehicle License Fee (VLF) prop. tax backfill increment

Potential to apply State funding sources:• Proposition 1 bond funds• Cap-and-trade proceeds

Federal & State Grants:• Greenhouse Gas Reduction Funds• Federal DOT/EPA/DOE funding programs

EIFDFund

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Forming an EIFD

Successor Agency

Prerequisite

Receive Finding of Completion (FOC)Certify no SA assets under litigation will benefitComply with State Controller’s asset transfer review

CreatePublic

Financing Authority

(PFA)

CreateInfrastructure

Financing Plan (IFP)

Identify District Members

Appoint PFA Members

Choose official to prepare plan

Distribute to property owners and affected taxing entities

Participating legislative bodies adopt resolution of intention to

establish EIFD

Identify infrastructure projectsDefine project areaSchedule public hearing for IFP

Conduct public hearing

Approve the IFP

Establish PFA

Adopt resolution proposing

adoption of IFP and formation of

EIFD

Adopt IFP and resolution of

formation creating the

EIFD

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What Types of Projects Could an EIFD Fund?

Affordable Housing

Public Light Rail Inf.

Public BRT Inf.

Sustainable Communities

Wastewater Treatment

Stormwater Recharge

Parks & Open Space

Industrial Structures

Childcare Facilities10

Infrastructure Development Tools Compared

Areas Mello-Roos/CFDs “Classic” IFDs EIFDs

Voter Approval Multiple 2/3 approvals Multiple 2/3 approvals One 55% approval for bond issuance

Revenue Sources Revenue from new special tax

Only increment of tax levied on taxable property

Broad authority to capture “net available revenue” (other than school funds)

Investment Options Certain enumerated “services” (police/fire, recreation, maintenance, etc.) and construction of capital facilities

Only “public capital facilities of communitywide significance”

Any “public capital facilities OR other specified projects of community significance” (brownfields restoration, transit priority projects, etc.)

Collaboration among Taxing Entities

Possible, but requires creation of Joint Powers Authority

IFD law allows other taxing entities to contribute taxes, but law has no procedure for joint governance (Joint Powers Authority presumably possible)

EIFD Governed by “Public Financing Authority” representing participating governments and members of the public

Longevity of Bonds/District

40 years from bond issuance

30 years from creation of district

45 years from Bond Issuance

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Promising Opportunities

» Well-Developed Idea for Infrastructure Improvement

» Multiple overlapping taxing entities

» Area Where Planning Work is Needed or Underway

» Small Discrete Area with Few Property Owners

» Your Situation?

Scenarios Where Establishing an EIFD is Worth Considering

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Contact

Douglas Praw

Holland & KnightPartner | Los Angeles Office400 South Hope Street8th Floor Los Angeles CA 90071 Phone 213.896.2588 Fax 213.896.2450doug.praw@hklaw.comwww.hklaw.com

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