De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

DPFG 2015

Infrastructure Financing Opportunities with Community Infrastructure Districts

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

About UsDevelopment 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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

2

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

DPFG Offices

Denver

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

3

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

4

Spink Butler, LLP is a dynamic, innovative, and results-oriented

law firm, serving clients in a variety of areas including:

Real Estate LawLand Use Law and Planning

Title Insurance LawConstruction 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.

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Development Challenges

� Developers are required to provide public Developers are required to provide public infrastructure, even if infrastructure serves an infrastructure, even if infrastructure serves an area outside of their development.area outside of their development.

� Jurisdictional requirements for infrastructure Jurisdictional requirements for infrastructure remains high, often requiring developers to remains 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.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

5

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Financing Options

A.A. Status QuoStatus Quo

Third Third partyparty loans, parent advances, partners loans, parent advances, partnersi.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 Financingi.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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

6

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Developm

ent Plan ning &

Fin ancing G

roup, 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 AvailablePlanning X X XDesign X X XEngineering X X XConstruction X X XInstallation X X XApplication Costs X X XImpact Fees XOther construction costs X X XUtilities X X XIrrigation systems X Roads & bridges X X XParks & Pathways X X XLandscaping X X XRecreational facilities (i.e. playgrounds)

X X X

Parking facilities X X XPublic safety facilities XDemolition & removal of buildings X X Land acquisition X X XTIF bonds allowed X Special assessment bonds allowed X XRevenue bonds allowed XGeneral obligation bonds allowed XVote required?

TIF bonds No

Special assessment bonds Hearing only Hearing only

Revenue bonds No

General obligation bonds Yes

7

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

CID Background

� What is a CID?What is a CID?– Legislation passed in 2008Legislation passed in 2008– Special purpose district distinct from a general purpose Special 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 that Bond obligations are passed on to property owners that

benefit from infrastructurebenefit from infrastructure

� Additional FactsAdditional Facts– District can be in an incorporated City District can be in an incorporated City oror a City’s a City’s

comprehensive planning area within a County with the City’s comprehensive 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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

8

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Eligible CID Infrastructure

Public infrastructure that directly or indirectly benefit Public infrastructure that directly or indirectly benefit the CID, and are of the type defined by the Idaho the 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 control Lighting and traffic control

5.5. Landscaping and lakes Landscaping 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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

9

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Mechanics of District Formation

� Petition by 2/3 of Proposed District Residents or All Land Petition 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 Plan General 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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

10

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Mechanics of District Formation (Cont.)

� District Development AgreementDistrict Development Agreement

– Obligations of the PartiesObligations of the Parties– Administration of the District; Payment of District Administration of the District; Payment of District

Administrative ExpensesAdministrative Expenses– Total Amount of Financing Available: GO Bonds; Revenue Total Amount of Financing Available: GO Bonds; Revenue

Bonds; Special AssessmentsBonds; Special Assessments– Public Bidding RequirementsPublic Bidding Requirements– Developer-Constructed Infrastructure – Conveyance to Developer-Constructed Infrastructure – Conveyance to

Applicable Public AgencyApplicable Public Agency– District-Constructed Infrastructure District-Constructed Infrastructure –– Conveyance to Conveyance to

Applicable Public AgencyApplicable Public Agency– Cost-Sharing Mechanism for Oversized Infrastructure Used Cost-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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

11

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

CASE LAWCOMMUNITY INFRASTRUCTURE DISTRICT

� Judicial ConfirmationJudicial Confirmation– Judge Greenwood - Judge Greenwood -

District Court of Ada District Court of Ada CountyCounty

– Opinion issued March 24, Opinion issued March 24, 20142014

– In the Matter of: Spring In the Matter of: Spring Valley Community Valley Community Infrastructure District No. Infrastructure District No. 1 Eagle, Ada County, 1 Eagle, Ada County, Idaho Idaho

– Case No: CV-OC-2013-Case No: CV-OC-2013-158882158882

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

12

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

CASE LAWCOMMUNITY INFRASTRUCTURE DISTRICT

� Questions Questions Considered by CourtConsidered by Court– Does landowner limitation Does landowner limitation

on right to petition for CID on right to petition for CID violate Idaho or U.S. violate Idaho or U.S. Constitutions?Constitutions?

– Does allowing land Does allowing land owners, whether resident owners, whether resident or not, to vote on CID or not, to vote on CID violate Idaho or U.S. violate Idaho or U.S. Constitution? Constitution?

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

– Did the special election Did the special election comply with the CID Act comply with the CID Act and other Idaho statutes?and other Idaho statutes?

– Are debts issued by a Are debts issued by a CID an unconstitutional CID an unconstitutional delegation of taxing delegation of taxing authority? authority?

– Do proportional voting Do proportional voting qualification of the Act qualification of the Act violation Idaho or U.S. violation Idaho or U.S. Constitution? Constitution?

13

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

CASE LAWCOMMUNITY INFRASTRUCTURE DISTRICT

Does landowner limitation Does landowner limitation on right to petition for a CID on right to petition for a CID violate Idaho or U.S. violate Idaho or U.S. Constitutions?Constitutions?–Not entirely accurate Not entirely accurate question. Landowners question. Landowners (including nonresident (including nonresident landowners) or 2/3rds of landowners) or 2/3rds of residents can petition for residents can petition for forming a CID.forming a CID.–Filing petition is not an Filing petition is not an election and is therefore election and is therefore allowable under both allowable under both Constitutions.Constitutions.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

14

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

CASE LAWCOMMUNITY INFRASTRUCTURE DISTRICT

Does providing landowners, Does providing landowners, including nonresident including nonresident landowners, the ability to landowners, the ability to vote in a CID election vote in a CID election violate the Idaho or U.S. violate the Idaho or U.S. Constitution? Constitution? –Yes.Yes.–Must be either a resident Must be either a resident within the district or a within the district or a resident landowner within resident landowner within the the countycounty where CID where CID located.located.–Implications for corporate Implications for corporate landholders.landholders.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

15

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

16

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

* Requires an election in May or November.

17

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Non-Contiguous CID Overview

� Multiple property owners come Multiple property owners come together within a jurisdiction to together within a jurisdiction to establish a single non-establish a single non-contiguous CID.contiguous CID.– Projects anticipated to be Projects anticipated to be

smaller;smaller;– Projects may include raw, semi-Projects may include raw, semi-

improved improved or finished lotsor finished lots;;– Eligible expenditures may be Eligible expenditures may be

public infrastructure and/or public infrastructure and/or development impact fees.development impact fees.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

18

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

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 construction Bond issuances may be phased with construction activity; activity;

– Builder parcels are Builder parcels are NOT CROSS NOT CROSS COLLATERALIZEDCOLLATERALIZED with one another. with one another.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

19

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Overview (cont.)

Developer A

Developer C

Developer BDeveloper 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)

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

Within District- not included in Bond Issuance

20

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

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

Highway Highway District impact District impact feefee

$3,047$3,047

Total feesTotal fees $9,717$9,717

Number of Number of lots lots

10001000

Fees by CIDFees by CID $9,717,000$9,717,000

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

21

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Example of Non-Contiguous CID

Number of LotsNumber of Lots 1,0001,000

Fees per Lot Fees 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 Rate Interest 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

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

22

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Overview (cont.)

� Benefits to Developers Benefits to Developers (assuming $9,717 in fees (assuming $9,717 in fees per lot funded)per lot funded)

– Reduce lot costs / home price by approximately Reduce 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 3 rdrd party party borrowing;borrowing;

– Utilize tax exempt Utilize 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.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

23

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

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.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

24

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Next Steps

1.1. Identify jurisdiction, developers and projects Identify jurisdiction, developers and projects to be included in a CID.to be included in a CID.

2.2. Determine bonding capacity & eligible Determine 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.

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

25

De

velop

me

nt P

lann

ing &

Fina

ncing

Gro

up, Inc.

Contact

Kent RockDPFG950 W. Bannock, 11th FloorBoise, ID 83702(208) 340-5146kent.rock@dpfg.com

Developm

ent Plan ning &

Fin ancing G

roup, Inc .

JoAnn C. ButlerSpink Butler, LLP251 E. Front Street, Suite 200Boise, ID 83702(208) 388-1000jbutler@spinkbutler.com

Chad W. LamerSpink Butler, LLP251 E. Front Street, Suite 200Boise, ID 83702(208) 388-0245clamer@spinkbutler.com

Follow on Twitter @ChadLamerContributor to http://idaholandlaw.com/

26