Financing Your CIP

…and Planning Ahead for New O&M

Disclaimer

• Discussion will be in general terms

• Implementing these ideas will require legal assistance

Opportunities

• State Budget Crisis

• Revenue Sharing May Drop

• Local Revenue Growth is Slowing, at best

• LGIP takes a Significant Loss

Options for Funding Infrastructure

• Cash

• Grants or New Revenue Streams

• Dedicated Revenues

• Debt Repaid from Existing Revenues

• Debt Repaid from New Revenues

• Debt Repaid by Beneficiaries

Impact Fees-What are they?

• Premise: Development should pay for facility costs of growth

• “A municipality may assess development fees to offset costs to the municipality associated with providing necessary public services to a development” (ARS 9-463.05)

• Cost of growth element in general plan• Revenue or Liability?

Impact Fees-What they aren’t

• Revenue source for operating expenses

• Revenue source for existing capital shortfalls

• A quick fix for next year’s budget

Impact Fees-Examples

• Roads

• Water

• Sewer

• Parks

• Public Safety Facilities

• Libraries

• Public Facilities

Impact Fees-Hints

• Prepare an in-depth written report to start the process

• Include groups with strong feelings (Builders, HOA’s, activists)

• Implement full fees for less components, rather than reducing them all

• Avoid unfunded level of service liabilities

Impact Fees-Hints (cont.)

• Stay involved-don’t let other departments do this alone

• Keep a separate fund for each fee.

Debt Repaid from Existing Revenues

• Revenue Bonds

• HURF Bonds

• Municipal Property Corporations

Revenue Bonds

• Generally used for water or sewer infrastructure

• Repaid from user fees of system funded

• Require voter approval

HURF Bonds

• Used for street improvements or ROW acquisition

• Repaid from HURF revenues and/or other pledged revenues

• Requires voter approval

• Consider ongoing street maintenance and improvement costs

Municipal Property Corporations

• Used for infrastructure or public facilities

• Secured by property vital for municipal operations

• Often includes additional revenue pledge

• Structure could be compared to lease purchase

• Consider future General Fund needs

Debt Repaid from New Revenue

• General Obligation Bonds

• Used for Infrastructure and Public Facilities

• Requires Voter Approval

• Select Projects based upon Public Appeal

• Consider cafeteria approach

Debt Repaid by Beneficiaries

• Special Assessment Districts

• Community Facilities Districts

Special Assessment Districts

• Used to fund infrastructure

• Costs are assessed to property owners based upon benefit received from the improvements

• Available for new or existing development

• Initiated by Council or property owners

• Property owners can block with protests

SAD’s-Process

• Formal process starts with engineered plans

• Assessment methodology report

• Public hearing and protest period

• Formal bid process

• Property owners can pay cash or bond

• Bonds are sold and construction begins

SAD’s-Examples

• Raw Land Developments

• Sewer for areas on septic systems

• Paved roads in older subdivisions

• Off-street parking facilities

• Water system acquisition

• Pedestrian malls

Infrastructure Extension Agreements

• Used when an SAD is not practical

• Developer funded or public/private partnership

• Payment required when extension is used

• Difficult to administer

• Normally sunset after 10 or 15 years

Community Facilities Districts

• Generally used for raw land developments

• Ideal for master planned communities

• Initiated by property owners

• Distinct entity

• Should be self sustaining financially

What Can CFD’s Do?

• Issue General Obligation Bonds

• Issue Special Assessment Bonds

• Issue Revenue Bonds

• Levy a Property Tax for O & M

• Charge User Fees for Infrastructure or Services

CFD’s-Process

• Petition from Property Owners

• General Plan for the Proposed Improvements

• Hold formation election if necessary

• Hold GO bond election in formation stages

• SAD process is generally the same

O&M Considerations

• Include Property Tax for O & M on CFD’s

• Consider formation of other Districts

• Street Lighting District

• Protect your HURF revenues

• Enhanced Municipal Services Districts

Summary

• Development Fees to Fund Growth Related Capital

• Debt to be Repaid from Existing Resources Requires Long-Term Planning

• General Obligation Bonds for Projects Demanded by Public

• Special Assessment Districts to Address Specific Area Needs

Summary (continued)

• Community Facilities Districts for Master Planned Communities

• Include O&M in Planning Projects

Final Thoughts

• Consult with your Financial Advisor or Underwriter for Innovative Solutions (Refundings, WIFA, GADA)

• Review Investments to Optimize Fund Balance Earnings in line with Arbitrage Limitations

• Seize the Opportunity

Presented by: Larry Lange1717 W. Northern Ave., Suite 112

Phoenix, AZ 85021-76001.602.870.7600

MuniFinancial Provides Comprehensive Services in the Following Areas: 

     Arbitrage Rebate     CFD & Assessment District Formation

     City Consulting Services     Cost of Service & Utility Rate Studies

     Development Impact Fees     District Administration: Taxes, Assessments,

Fees & Standby Charges     Municipal Disclosure

One of the Willdan Group of Companies