Minnesota NAHRO Redevelopment Resource Tools September 26, 2003

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Minnesota NAHRORedevelopment Resource
ToolsSeptember 26, 2003
Kathleen Aho, CIPFA President
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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..

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• No Money

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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.

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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

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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

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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

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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

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• 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

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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

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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

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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

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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

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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

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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

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• Springsted Incorporated
• 85 E. 7th Place, Suite 100
• Saint Paul, MN 55101
• Kathleen A. Aho, CIPFA
• President
• [phone]
• kaho_at_springsted.com