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

2. 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…..

3. No Money

4. 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.

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. Springsted Incorporated
85 E. 7th Place, Suite 100
Saint Paul, MN
Kathleen A. Aho, CIPFA
President
(651)