CID Financing Infrastructure Projects

DevelopmentPlanning&FinancingGroup,Inc.
DPFG 2015
Infrastructure Financing Opportunities with
Community Infrastructure Districts

About Us
Development Planning & Financing Group, Inc.
Organization
Founded in 1991
Business Purpose
• Financing public improvements
• Reducing public infrastructure costs
• Mitigating Risk
• Enhancing project profitability
Personnel
• Grown to 60 team members in 9 states
Performance
• Established over 2,000 special taxing
districts
• 100% of all Idaho CIDs
• Approximately $15+ billion in bonds issued
Affiliates
AXIS Business
Advisory Services
Advisory services, real
estate turnaround and
restructuring firm
Katalyst, Inc.
Planning and urban
design firm
2

DPFG Offices
Denver
3

DevelopmentPlanning&FinancingGroup,Inc.DevelopmentPlanning&FinancingGroup,Inc.
4
Spink Butler, LLP is a dynamic,
innovative, and results-oriented
law firm, serving clients in a
variety of areas including:
Real Estate Law
Land Use Law and Planning
Title Insurance Law
Construction Law
We cultivate relationships within our communities, the legal
profession, and the clients we serve to find a meaningful
pattern in the many factors that create today’s constantly
changing world and impact our clients and their businesses.
When you connect with one of us, you connect with all of us –
a group of people with extensive training, focused on providing
exceptional client service with an emphasis on value. By
working together cooperatively, Spink Butler achieves the
important common goal of providing excellent legal
representation for our clients.
The strategies we propose are tailored to align with our clients’
overall business needs, their risk tolerance and their budget.
Spink Butler has a rich history and culture of community
involvement. We are especially proud of our many employees
who contribute their time, enthusiasm, leadership, support and
fundraising skills to numerous community and charitable
activities.

Development Challenges
Developers are required to provide publicDevelopers are required to provide public
infrastructure, even if infrastructure serves aninfrastructure, even if infrastructure serves an
area outside of their development.area outside of their development.
Jurisdictional requirements for infrastructureJurisdictional requirements for infrastructure
remains high, often requiring developers toremains high, often requiring developers to
pay for additional offsite infrastructure.pay for additional offsite infrastructure.
Impact fees continue to rise.Impact fees continue to rise.
Construction loans can be difficult to obtain.Construction loans can be difficult to obtain.
5

Financing Options
A.A. Status QuoStatus Quo
ThirdThird partyparty loans, parent advances, partnersloans, parent advances, partners
i.i. Financial reporting as a liabilityFinancial reporting as a liability
ii.ii. High interest ratesHigh interest rates
iii.iii. Short term payback periods (2 to 3 years)Short term payback periods (2 to 3 years)
iv.iv. Principal and interest repayment to lenderPrincipal and interest repayment to lender
B.B. Community Infrastructure District FinancingCommunity Infrastructure District Financing
i.i. Possible off-balance sheet treatmentPossible off-balance sheet treatment
ii.ii. Tax exempt interest ratesTax exempt interest rates
iii.iii. 30 year amortization period30 year amortization period
iv.iv. Payback obligation passed on to end usersPayback obligation passed on to end users
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DevelopmentPlanning&FinancingGroup,Inc.DevelopmentPlanning&FinancingGroup,Inc.
Idaho District Type Comparison Matrix
Urban Renewal
District
Local
Improvement
District
Community
Infrastructure District
Purpose Encouraging
Redevelopment of
decaying or blighted
urban areas
Financing installation,
repair or updating local
infrastructure in
existing or new areas
Financing installation of
regional infrastructure in
new or existing areas
Location City or County City or County City or City’s
Comprehensive Planning
Area
Governing board: Entirely in
City
City Council or
appointees
City Council 3 members of City Council
Entirely in County County Commission or
appointees
County Commission County Commission
Overlapping
2 members from each
governing board plus 1
from the jurisdiction with
most land in District.
Eligible Costs X = Reimbursement Available
Planning X X X
Design X X X
Engineering X X X
Construction X X X
Installation X X X
Application Costs X X X
Impact Fees X
Other construction costs X X X
Utilities X X X
Irrigation systems X
Roads & bridges X X X
Parks & Pathways X X X
Landscaping X X X
Recreational facilities (i.e. playgrounds)
X X X
Parking facilities X X X
Public safety facilities X
Demolition & removal of buildings X X
Land acquisition X X X
TIF bonds allowed X
Special assessment bonds allowed X X
Revenue bonds allowed X
General obligation bonds allowed X
Vote required?
TIF bonds No
Special assessment bonds Hearing only Hearing only
Revenue bonds No
General obligation bonds Yes
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CID Background
What is a CID?What is a CID?
– Legislation passed in 2008Legislation passed in 2008
– Special purpose district distinct from a general purposeSpecial purpose district distinct from a general purpose
municipalitymunicipality
– Used to acquire/construct public infrastructureUsed to acquire/construct public infrastructure
– Project financed with tax exempt bondsProject financed with tax exempt bonds
– Bond obligations are passed on to property owners thatBond obligations are passed on to property owners that
benefit from infrastructurebenefit from infrastructure
Additional FactsAdditional Facts
– District can be in an incorporated CityDistrict can be in an incorporated City oror a City’sa City’s
comprehensive planning area within a County with the City’scomprehensive planning area within a County with the City’s
consent,consent, oror both.both.
– City/County is not responsible for debt of the CIDCity/County is not responsible for debt of the CID
– Requires public bidding of CID public infrastructureRequires public bidding of CID public infrastructure
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Eligible CID Infrastructure
Public infrastructure that directly or indirectly benefitPublic infrastructure that directly or indirectly benefit
the CID, and are of the type defined by the Idahothe CID, and are of the type defined by the Idaho
Impact Fee Statute, including:Impact Fee Statute, including:
1.1. Roadways (including rights of way)Roadways (including rights of way)
2.2. Water, sewer and storm water projectsWater, sewer and storm water projects
3.3. Flood control and drainage projectsFlood control and drainage projects
4.4. Lighting and traffic controlLighting and traffic control
5.5. Landscaping and lakesLandscaping and lakes
6.6. Parks and recreational facilities (and sites)Parks and recreational facilities (and sites)
7.7. TrailsTrails
8.8. Public safety facilities (and sites)Public safety facilities (and sites)
9.9. Public parking facilitiesPublic parking facilities
10.10. Real property for eligible improvementsReal property for eligible improvements
11.11. Financing costsFinancing costs
12.12. Impact feesImpact fees
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Mechanics of District Formation
Petition by 2/3 of Proposed District Residents or All LandPetition by 2/3 of Proposed District Residents or All Land
Owners in Proposed DistrictOwners in Proposed District
– Map and Legal Description of Proposed DistrictMap and Legal Description of Proposed District
– General PlanGeneral Plan
– District Development AgreementDistrict Development Agreement
General PlanGeneral Plan
– Type of InfrastructureType of Infrastructure
– Location of InfrastructureLocation of Infrastructure
– Estimated Cost of InfrastructureEstimated Cost of Infrastructure
– Proposed Financing MethodsProposed Financing Methods
– Anticipated Assessments/Taxes/ChargesAnticipated Assessments/Taxes/Charges
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Mechanics of District Formation (Cont.)
District Development AgreementDistrict Development Agreement
– Obligations of the PartiesObligations of the Parties
– Administration of the District; Payment of DistrictAdministration of the District; Payment of District
Administrative ExpensesAdministrative Expenses
– Total Amount of Financing Available: GO Bonds; RevenueTotal Amount of Financing Available: GO Bonds; Revenue
Bonds; Special AssessmentsBonds; Special Assessments
– Public Bidding RequirementsPublic Bidding Requirements
– Developer-Constructed Infrastructure – Conveyance toDeveloper-Constructed Infrastructure – Conveyance to
Applicable Public AgencyApplicable Public Agency
– District-Constructed InfrastructureDistrict-Constructed Infrastructure –– Conveyance toConveyance to
Applicable Public AgencyApplicable Public Agency
– Cost-Sharing Mechanism for Oversized Infrastructure UsedCost-Sharing Mechanism for Oversized Infrastructure Used
Outside of District BoundariesOutside of District Boundaries
– Disclosure NoticeDisclosure Notice
Notice and HearingNotice and Hearing
Resolution of Local Government(s) Forming DistrictResolution of Local Government(s) Forming District
11

CASE LAW
COMMUNITY INFRASTRUCTURE DISTRICT
Judicial ConfirmationJudicial Confirmation
– Judge Greenwood -Judge Greenwood -
District Court of AdaDistrict Court of Ada
CountyCounty
– Opinion issued March 24,Opinion issued March 24,
20142014
– In the Matter of: SpringIn the Matter of: Spring
Valley CommunityValley Community
Infrastructure District No.Infrastructure District No.
1 Eagle, Ada County,1 Eagle, Ada County,
IdahoIdaho
– Case No: CV-OC-2013-Case No: CV-OC-2013-
158882158882
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CASE LAW
QuestionsQuestions
Considered by CourtConsidered by Court
– Does landowner limitationDoes landowner limitation
on right to petition for CIDon right to petition for CID
violate Idaho or U.S.violate Idaho or U.S.
Constitutions?Constitutions?
– Does allowing landDoes allowing land
owners, whether residentowners, whether resident
or not, to vote on CIDor not, to vote on CID
Constitution?Constitution?
– Did the special electionDid the special election
comply with the CID Actcomply with the CID Act
and other Idaho statutes?and other Idaho statutes?
– Are debts issued by aAre debts issued by a
CID an unconstitutionalCID an unconstitutional
delegation of taxingdelegation of taxing
authority?authority?
– Do proportional votingDo proportional voting
qualification of the Actqualification of the Act
violation Idaho or U.S.violation Idaho or U.S.
13

CASE LAW
Does landowner limitationDoes landowner limitation
on right to petition for a CIDon right to petition for a CID
Constitutions?Constitutions?
–Not entirely accurateNot entirely accurate
question. Landownersquestion. Landowners
(including nonresident(including nonresident
landowners) or 2/3rds oflandowners) or 2/3rds of
residents can petition forresidents can petition for
forming a CID.forming a CID.
–Filing petition is not anFiling petition is not an
election and is thereforeelection and is therefore
allowable under bothallowable under both
Constitutions.Constitutions.
14

CASE LAW
Does providing landowners,Does providing landowners,
including nonresidentincluding nonresident
landowners, the ability tolandowners, the ability to
vote in a CID electionvote in a CID election
violate the Idaho or U.S.violate the Idaho or U.S.
–Yes.Yes.
–Must be either a residentMust be either a resident
within the district or awithin the district or a
resident landowner withinresident landowner within
thethe countycounty where CIDwhere CID
located.located.
–Implications for corporateImplications for corporate
landholders.landholders.
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CID Bond Types
Description Revenue
Bond
General Obligation Bond Special Assessment Bond
Responsible for
Repayment
Users of the
facilities
Land owners within the
boundaries of the District.
(Note: If land owners
default, remaining land
owners pick up additional
tax.)
 Land owners benefiting from
constructed infrastructure
 Land owners are only
responsible for their special
assessment lien
Ability to
prepay?
Yes No Yes
Tax Billing Municipality
or District
County – Passed through
on the County tax bill
County – Passed through on
the County tax bill
Superiority of
lien
No lien on
property
First position behind
existing property taxes
First position behind existing
property taxes
16

Comparison of CID Bond Types
Description Revenue Bond General Obligation
Bond*
Special Assessment Bond
Typical Use Existing asset Raw land Raw land
Funds Used
to Acquire or
Construct
Acquisition
(Typically)
Construction or
Acquisition
Construction or Acquisition
Security for
Bonds
Revenue
stream
Ad valorem property tax • Specific lien on a specific
property
• 10% reserve fund
Bond Sizing Revenue
stream
Assessed value of
property
The fair market value of the
property
Timing of
Funds
• Slower – need for
election
• Over build-out of project
• Reimbursement
(typically)
• Faster – establish up front
• Phase by phase
• Construction and/or
reimbursement
* Requires an election in May or November.
17

Non-Contiguous CID Overview
Multiple property owners comeMultiple property owners come
together within a jurisdiction totogether within a jurisdiction to
establish a single non-establish a single non-
contiguous CID.contiguous CID.
– Projects anticipated to beProjects anticipated to be
smaller;smaller;
– Projects may include raw, semi-Projects may include raw, semi-
improvedimproved or finished lotsor finished lots;;
– Eligible expenditures may beEligible expenditures may be
public infrastructure and/orpublic infrastructure and/or
development impact fees.development impact fees.
18

Overview (cont.)
Special Assessment BondsSpecial Assessment Bonds
– Land only required as security;Land only required as security;
Value to lien requirementValue to lien requirement
Non-recourseNon-recourse
– Bond issue based on FMV of property;Bond issue based on FMV of property;
– Bond issuances may be phased with constructionBond issuances may be phased with construction
activity;activity;
– Builder parcels areBuilder parcels are NOT CROSSNOT CROSS
COLLATERALIZEDCOLLATERALIZED with one another.with one another.
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Overview (cont.)
Developer A
Developer C
Developer B
Developer D
Jurisdictional Boundary
Bond Issue #1 Bond Issue #2
Semi-Improved
(Impact Fees)
Raw Land
(Regional Infrastructure
& impact Fees)
Raw Land
(Regional Public
Infrastructure)
Finished Lots
(Impact Fees)
Within District-
not included in
Bond Issuance
20

Comparative One-time Fees
Sample CitySample City
Sewer hookupSewer hookup $2,749$2,749
Water hookupWater hookup $2,075$2,075
Impact feeImpact fee $1,846$1,846
HighwayHighway
District impactDistrict impact
feefee
$3,047$3,047
Total feesTotal fees $9,717$9,717
Number ofNumber of
lotslots
10001000
Fees by CIDFees by CID $9,717,000$9,717,000
21

Example of Non-Contiguous CID
Number of LotsNumber of Lots 1,0001,000
Fees per LotFees per Lot $9,717$9,717
Total Fees FundedTotal Fees Funded $9,717,000$9,717,000
District Cost of Issuance (COI)District Cost of Issuance (COI)
Costs Reimbursed (23%)Costs Reimbursed (23%)
 COI / Underwriter (6%)COI / Underwriter (6%) $583,000$583,000
 Reserve Fund (10 %)Reserve Fund (10 %) $972,000$972,000
 1 Year of Capitalized Interest (7%)1 Year of Capitalized Interest (7%) $680,000$680,000
$2,235,000$2,235,000
Estimated Bond Amount (Rounded)Estimated Bond Amount (Rounded) $11,952,000$11,952,000
Assessment per LotAssessment per Lot $11,952$11,952
Interest RateInterest Rate (May vary at time of issuance)(May vary at time of issuance) 7.0%7.0%
Annual Debt Service per LotAnnual Debt Service per Lot (29 years)(29 years) $974$974
22

Overview (cont.)
Benefits to DevelopersBenefits to Developers (assuming $9,717 in fees(assuming $9,717 in fees
per lot funded)per lot funded)
– Reduce lot costs / home price by approximatelyReduce lot costs / home price by approximately
$10,000 to $15,000;$10,000 to $15,000;
– Reduce equity contribution and/or 3Reduce equity contribution and/or 3rdrd
partyparty
borrowing;borrowing;
– Utilize tax exemptUtilize tax exempt borrowingborrowing rates;rates;
– Up to 3 years of capitalized interest;Up to 3 years of capitalized interest;
– CID obligations passed on to homeowners.CID obligations passed on to homeowners.
23

Overview (cont.)
Benefits to JurisdictionBenefits to Jurisdiction
– Jump start construction activity;Jump start construction activity;
– Accelerate receipt of development impact fees;Accelerate receipt of development impact fees;
– Maintain home prices at “affordable” levels;Maintain home prices at “affordable” levels;
– Create jobs within the community.Create jobs within the community.
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Next Steps
1.1. Identify jurisdiction, developers and projectsIdentify jurisdiction, developers and projects
to be included in a CID.to be included in a CID.
2.2. Determine bonding capacity & eligibleDetermine bonding capacity & eligible
infrastructure/fees.infrastructure/fees.
3.3. Prepare finance plan.Prepare finance plan.
4.4. Discuss finance plan with jurisdiction.Discuss finance plan with jurisdiction.
5.5. Establish district / issue bonds.Establish district / issue bonds.
6.6. Timing: 9 to 12 months.Timing: 9 to 12 months.
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Contact
Kent Rock
DPFG
950 W. Bannock, 11th
Floor
Boise, ID 83702
(208) 340-5146
kent.rock@dpfg.com
JoAnn C. Butler
Spink Butler, LLP
251 E. Front Street, Suite 200
Boise, ID 83702
(208) 388-1000
jbutler@spinkbutler.com
Chad W. Lamer
Spink Butler, LLP
251 E. Front Street, Suite 200
Boise, ID 83702
(208) 388-0245
clamer@spinkbutler.com
Follow on Twitter @ChadLamer
Contributor to http://idaholandlaw.com/
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CID Financing Infrastructure Projects

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