Minnesota NAHRO Redevelopment Resource Tools September 26, 2003 Kathleen Aho, CIPFA President

Top Ten Reasons Redevelopment is so hard to do 10. Planning 9. Public Opinion 8. Land Acquisition 7. Demolition 6. Environmental Clean-up 5. Construction of Water and Sewer Lines 4. Construction of Roads 3. Creation of Public Areas 2. Provision of Adequate Parking and…..

No Money

Redevelopment Reality It is capital-intensive and funds need to be available for these purposes long before a revenue stream will exist to pay for them, much less to provide a return on the investment. The majority of tools available to address the needs are not new.

Tool Review – oldies but goodies Tax Increment Financing Delay in collection of revenues requires a financing bridge Credit backing from a known source private party general obligation pledge annual appropriation pledge Real dollars secured from a separate source Fairly easy to use, despite its complexities

Tool Review – oldies but goodies Tax Abatement Delay in collection similar to tax increment Requires same bridging mechanisms Alternatively, could divert general revenues to development if applied to an existing, related property Process is more streamlined and flexible than TIF Usually more politically sensitive than TIF Full revenue capture requires consent of school and county

Tool Review – oldies but goodies Local Effort TIF A pledge of new taxes generated by a new development City financial commitment to the project An expense in the operating budget Annual appropriation, future councils could deny it Subject to levy limits, when applicable Support for a portion of a debt issue Must be a separate statutory authority for the debt, such as improvement bonds, or tax increment bonds Currently debt is outside of levy limits

Tool Review – oldies but goodies Special Service Districts Special service district may be created to provide extra services/improvements within a discreet area of a City Can be used to finance capital improvements benefiting the district Example – Minneapolis’ Nicollet Mall renovation

Special Service District (cont.) District must be initiated by a petition representing both 25% of property in the district, and 25% of the value of the district District may be vetoed by a petition representing 35% of the property in the district, and 35% of the value of the district Similar provisions for Housing Improvement Districts

Tool Review – oldies but goodies Borrowing at Tax Exempt Rates Usually available for general governmental purpose such as roads, water and sewer, sidewalks, etc. Available for most purposes if unsecured TIF or Tax Abatement is the source of repayment Available to certain private developers that receive a bonding allocation for complying projects: IDBs Certain housing bonds Powerful in reducing costs

Tool Review – oldies but goodies Revolving (Development) Loan Funds Can be used to leverage private sector investment and other financing tools Requires an identified revenue source for capitalization: Recycling of grant/loan repayments partnerships with local banks, companies City or Authority excess reserves (yeah, right!) Very important to develop policies for its use Standards for loan size, term, rates, etc. Guidelines for other loan requirements Outcome in event of delinquency or default

Tool Review – oldies but goodies Special Benefits Tax Special tax available to HRAs and EDAs Can be pledged as a stand alone credit vehicle Condemnation State and Federal Programs where available

So what are communities doing? Approaches that employ collaboration Land assembly Waiver of fees Cash contributions Low interest loans Credit commitments that bridge front-end credit shortfalls Cost reductions through joint use projects – building up

So what are communities doing? Seeking out Strong Partners A strong partner can shelter you from risk and provide upfront financing capability in exchange for future benefits like TIF revenues Example – Centex in Saint Paul

So what are communities doing? Assuming a Different Risk Profile Up fronting costs Providing guarantees Acting as developer Example – North Branch land acquisition Example – Saint Paul land acquisition/development

Springsted Incorporated 85 E. 7th Place, Suite 100 Saint Paul, MN 55101 Kathleen A. Aho, CIPFA President (651) 223-3048 kaho@springsted.com