Public Infrastructure: New Tools, New Opportunities Eric M.
Braun Partner K&L Gates Slide 2 2 Overview I.Introduction
II.Special Assessment Districts III.Tax Increment Financing
IV.Development Agreements Slide 3 3 I. Introduction Public
infrastructure continues to deteriorate Citizens demand higher
levels of service, amenities and improved infrastructure Tax
revenues continue to decline In order to: deliver higher levels of
service; meet citizen demands improve existing infrastructure, all
with less tax revenue, Must use of new financing techniques Slide 4
4 http://www.ncruralcenter.org/water2030/index.html Slide 5 5 Slide
6 6 II.SAD Background On August 3, 2008, Session Law 2008-165 was
signed into law authorizing Special Assessment Districts. Langtree
at the Lake in Mooresville SADs are initiated by a petition of at
least a majority of owners constituting 66% of the assessed value
of the proposed district and created by a Town, City, or County to
finance public improvements benefitting the district. Assessments
are paid in annual installments, and the installments are used to
pay debt service on assessment bonds. The following types of
facilities are eligible to be financed through an SAD: Sanitary
sewer systems Storm sewers and flood control facilities Water
Systems Public transportation facilities School facilities Streets
and sidewalks Legislative effort to expand potential uses of SADs
Slide 7 7 SAD bonds are non rated, land secured debt often referred
to as dirt bonds. Debt service on the bonds is paid by the owners
of benefited property within the SAD. Bondholders look to the
underlying value of the land as security for the bonds. Up to two
years of capitalized interest can be funded from bond proceeds.
During the capitalized interest period, no debt service payments
are made by owners of property within the SAD. A reserve fund is
funded from bond proceeds. The reserve fund is used to ensure
timely payments to bondholders in the case of delinquent
installments. SAD Bond Structure Overview Slide 8 8 SAD Bond
Structure Overview (continued) The cost of district formation and
issuance of bonds is payable from bond proceeds. All administrative
expenses related to the SAD are included in the assessment
installments paid by property owners within the SAD. Therefore, the
SAD is fiscally neutral to the Town. Prior to the issuance of
bonds, a market study will be performed. Prior to the issuance of
bonds, an appraisal will be performed. Municipality is not
responsible for the debt of the SAD. Slide 9 SAD Bond Security Jon
Snyder Managing Principal Development Planning & Financing
Group (512)732-0295 [email protected] Slide 10 10 Impact of SADs
on Local Governments No obligation to repay SAD bonds under any
circumstances. The SAD is fiscally neutral to issuing government.
Potential up-front funding of facilities accelerates absorption and
tax collections by local government. Slide 11 11 III.Tax Increment
Financing Means of creating a revenue stream to finance public
infrastructure Process of issuing bonds without a referendum In NC,
called project development financing or self- financing bonds
Typically used to attract new business or industry Slide 12 12 Tax
Increment Financing (continued) When a district is created, a base
property valuation is established This base value is used for
general tax revenue purposes New public investment is then made,
creating new value This incremental increase in assessed value is
used to finance bonds used for additional public improvements Slide
13 13 Tax Increment Financing (continued) May be used for: Any use
authorized for General Obligation Bonds Any purpose for which a
municipal service district may be established in N.C.G.S. 160A-536
Beach erosion control, flood, hurricane protection, utilities,
water resources, drainage and control, Streets, streetscapes,
sidewalks, transit-oriented development, parking, healthcare,
civic, cultural, entertainment, affordable housing, industrial
development, historic preservation, and redevelopment Slide 14 14
Approval Process Required By Statute Define Development Financing
District Total land area may not exceed 5% of the total land area
of the local government Property must be comprised of either:
Blighted, deteriorating or underdeveloped; Appropriate for
rehabilitation or conservation activities; or Appropriate for
economic development of the community Slide 15 15 Statutory
Approval Process (continued) Establish a Development Financing Plan
Apply to Local Government Commission Determination of Incremental
Valuation Owners may agree to a Voluntary Minimum Assessed Value
Minimizes risk that no increment will be created Revenue Increment
Fund Used to finance bonds or pay for new infrastructure Slide 16
16 Statutory Approval Process (continued) Local Government
Commission Guidelines for Approval of a Project Proposal is
necessary to secure significant new project development for
district The amount of the bond issuance is adequate and not
excessive The proposed project is feasible The local governments
debt management policies and procedures are good Slide 17 17
Statutory Approval Process (continued) The proposed private
development would likely not occur without the proposed public
projects The proposed bond issue can be marketed at a reasonable
cost to the local government A development financing plan has been
adopted Slide 18 18 Recent TIF Projects Carolina Crossroads Music
& Entertainment District - Roanoke Rapids, NC This was the
first project development financing project approved in North
Carolina. Roanoke Rapids issued $21.5 million to purchase a
newly-constructed 1500-seat theater intended as a centerpiece for a
future entertainment complex at the intersection of Interstate 95
and NC Highway 125.
http://www.carolinacrossroads.com/contact/index.php Slide 19 19
Recent TIF Projects North Carolina Research Campus - Kannapolis, NC
The Local Government Commission approved over $160 million in
project development financing bonds for projects associated with
the North Carolina Research Center in Kannapolis, NC. This project
is supported by the City of Kannapolis and Cabarrus County, and is
a joint venture between Dole Foods, Duke University, and the
University of North Carolina system. The NC Research Campus
encompasses a 350-acre site, that will include research facilities,
office space, retail uses and town homes. Infrastructure
improvements in the TIF district include roadway, streetscape,
stormwater, utility, and waterline improvements.
http://www.ncresearchcampus.net / Slide 20 20 Recent TIF Projects
Woodfin Downtown Corridor - Woodfin, NC In August 2008, Buncombe
County issued $12.6 million in project development revenue bonds to
finance public improvements in order to create a town center for
Woodfin, NC. The county is authorized to issue up to $25 million
total in TIF bonds. The TIF district is 205 acres along Interstate
26, near Asheville, NC. The infrastructure improvements to be paid
with bond proceeds include streets, water/sewer extensions,
pedestrian walkways and bike trails, and possibly a parking
facility. http://www.buncombecounty.org/news_Detail.asp?newsID=4043
Slide 21 21 IV. Development Agreements Many states have used
Development Agreements (DAs) for years Arizona California Colorado
Florida Hawaii Idaho Maryland Nevada New Jersey Oregon South
Carolina Virginia Washington Slide 22 22 Evolution of Development
Agreements Emerging Trends in Real Estate Development More complex
projects (i.e., vertical and horizontal mixed-use) Larger tract
development especially in coastal and mountain regions (1,000 acre
developments more common) Facilitates installation of
infrastructure-more certainty Slide 23 23 Evolution of Development
Agreements Need for more certainty Demands on public infrastructure
Citizen demand for services and amenities Limitations on vested
rights Common Law Statutory Slide 24 24 To Take Advantage of the
Statute Authorizing DAs: The property must contain 25 acres
(exclusive of wetlands, mandatory buffers, unbuildable slopes, and
other undevelopable portions of the property) So, may need
substantially more than 25 acres to utilize statute Slide 25 25
Legal description of property and the names of its owners; Duration
of the agreement (up to a maximum of 20 years); Uses permitted on
the property, including population densities and building types,
intensities, site layout, and design; Description of developer
provided public facilities that will serve the property along with
construction schedule; The DA must contain the following: Slide 26
26 The DA must contain the following: If the agreement calls for
the local government to provide public facilities, then agreement
must specify that providing the facilities will be tied to
successful implementation by the developer of the proposed
development; Description of land to be dedicated and provisions to
protect environmentally sensitive areas of property; Description of
all local permits approved or needed to be approved for the
development; Slide 27 27 The DA must contain the following
(continued): Description of conditions of approval to protect
public health, safety, and welfare; and Where applicable,
provisions related to historic structures Slide 28 28 Why Use a
Development Agreement? Nature and complexity of development
necessitates more certainty over time Lack of predictability costs
developers and local governments alike Helps coordinate funding and
installation of private and public infrastructure Encourages
creativity Slide 29 29 Benefits of Development Agreement Provides
certainty to government and development Allocates risk and
responsibility May encourage better planning May encourage more
effective large scale planned communities May foster more creative
projects and development styles Slide 30 30 Specific items that may
be addressed in DAs: Affordable housing Water and sewer capacity
reservations School sites and construction Off-site improvements
(otherwise, generally prohibited by Statute) Public safety (i.e.,
police, fire & rescue) Parks, open space & greenways Public
water and sewer infrastructure Streets Lock-in impact fees Public
parking Land banking Protection of sensitive environmental areas
Slide 31 31 Questions?? Slide 32 32 For More Information Contact:
Eric M. Braun Partner K&L Gates 430 Davis Drive, Suite 400
Morrisville, NC 27560 Tel. 919-466-1263 or 919-743-7315 Email:
[email protected]@klgates.com
