Item 2C_AEDC Updates for SCWAB Meeting 3.15.21 — original pdf

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AEDC South Central Waterfront Update TIF Overview and Analysis Questions MARCH 2021 Agenda TIRZ Timeline & Next Steps TIF Framework & Precedents Infrastructure Scenarios Update Affordability Scenarios TIRZ Board Requirements TIRZ Timeline & Next Steps HR&A Advisors, Inc. PANYNJ Advertising | 3 AEDC Organizational Responsibilities SCW TIRZ designation & implementation Public pipeline asset management AEDC Cultural Trust design & management Supporting City in negotiating certain real estate transactions Austin EDC South Central Waterfront | 4 AEDC Organizational and Executive Update AEDC Board Activity AEDC Board • Interim Board monthly meetings: o Dec. 14, 2020 o Jan. 14, 2021 o Feb. 8, 2021 o Mar. 8, 2021 • April 8 | Board meeting to approve Interlocal Agreement (ILA) • April | Final Board designated Austin EDC Legal Counsel Executive Search • ILA is in final state and being reviewed by City Manager and EDD • Winstead has reviewed TIRZ and Cultural Trust considerations and proposed path forward (included as attachment to ILA) • Korn Ferry retained as Executive Search Firm • March | Posting openings for COO, CXO • April | Interviews for COO, CXO Gov’t & and Community Relations Jan + Feb | ULI hosted public mtgs • Stakeholder mtgs • • Dec 16, 2020 Feb 10, 2021 • • March 17 |AEDC Stakeholder mtg • March 18 | CTAC meeting • Council one on ones to continue monthly • April | Council Action to approve ILA South Central Waterfront | 5 SCW History | Recent SCWAB Efforts As recommended by SCWAB, Finance Department hires CMR to conduct TIF financial analysis, including revenue projections. 2018 City updates SCW Modified Physical Framework and ECONorthwest development feasibility analysis. Austin voters approve Project Connect bond, which will fund two light-rail transit stations in the district. May-Sep. 2020 Nov. 2020 2018 Oct. 2020 Ongoing SCWAB recommends the creation of an economic development entity to implement the Vision Plan. City Council establishes the Austin Economic Development Corporation to help manage the district. AEDC regularly briefs the SCWAB on strategy for implementing the Vision Plan, including a potential TIRZ. 2016-Today: the South Central Waterfront Advisory Board oversees Vision Plan implementation. Austin EDC South Central Waterfront | 6 AEDC South Central Waterfront Efforts To Date Dec.-Nov. 2020 January February March Council/City Staff Commenced SCW working group with EDD, HPD staff; Engaged Council members in initial 1:1s Continued Council 1:1s on TIRZ and SCW working group AEDC/SCWAB AEDC Board Meetings AEDC Board Meeting Engaged Finance to conduct required analysis; Continued Council 1:1s AEDC commenced search process for C-suite positions TIRZ Ordinance Reviewed TIRZ statutes, City policy, and precedents districts Outlined ordinance, project plan, and financing plan Addressed key questions on project costs, affordable housing, etc. TIRZ Analysis Austin EDC Reviewed prior analysis and SCW Framework Plan Modeled development scenarios with and without TIRZ investment Refined infrastructure & affordable housing scenarios Engaged CMR & ECONorthwest on analysis updates South Central Waterfront | 7 AEDC Board Meeting 1/15: AEDC presented initial findings and strategy to SCWAB Retained Winstead as outside legal counsel Key Steps for TIRZ Designation & Implementation Step 1 Step 2 Step 3 City Council Forms TIRZ • • Prepare preliminary financing plan • Accept but-for analysis • Host public hearing on TIRZ Approve ordinance establishing TIRZ Board of Directors Freeze tax increment base City Council Votes on Final Project & Financing Plans • Finance to review/approve final Financing Plan • Housing & Planning to review/approve final Regulating Plan • AEDC to approve final Project Plan and explore partnership(s) with other taxing units via Real Estate Committee City Council & TIRZ Board Implement Plans • Contracts with AEDC to administer TIRZ • AEDC & TIRZ Board • negotiate development agreements Bonds issuance to fund infrastructure & affordable housing (requires City Council approval) Austin EDC South Central Waterfront | 8 TIF Framework & Precedents HR&A Advisors, Inc. PANYNJ Advertising | 9 TIF Summary Designating the TIRZ district enables City Council to… Freeze the tax increment base in the current year Establish the TIRZ Board and delegate implementation to AEDC Direct drafting of final project plan, including timing of investments Authorize AEDC to negotiate agreements with developers on behalf of TIRZ Board* *Final agreements likely require approval of City Council Austin EDC South Central Waterfront | 10 TIF Summary A TIRZ can capture the tax increment created by: 1) Existing property value increases (orange) 2) New development that would have occurred without TIRZ (orange) 3) New development that would not have occurred “but for” the TIRZ (yellow) Source: https://www.austintexas.gov/edims/document.cfm?id=325495 Memo to Council Austin EDC South Central Waterfront | 11 Austin TIF Policy Requirements Total value of the City’s TIF zones cannot exceed 10% of the City’s tax base 20% of units must be affordable at or below 60% AMI for rental housing (80% AMI for for-sale units) TIRZ plan must include participation by private sector and/or other taxing entities A rigorous “but-for” analysis must show redevelopment would not occur solely through private investment TIF bonds must meet key criteria to comply with City’s debt service and reserve requirements Austin EDC South Central Waterfront | 12 TIF Examples $50M Mueller Airport AUSTIN PRECEDENTS (size of TIF investment) NATIONAL PRECEDENTS (size of TIF investment) $257M Capitol Riverfront (Washington, DC) $20M Seaholm $229M Waller Creek $48M 9th & Colorado (Denver) $168M Cortex District (St. Louis) Austin EDC South Central Waterfront | 13 Local TIF Examples | Mueller • • • TIF Approved: 2004 Total Development Cost: $1.4B TIF Investment: $50M ($212M project costs) *2020 City Audit Report Austin EDC • • • CHALLENGE: The costs to remove obsolete structures at former Robert Mueller Airport and lack of infrastructure required public funding were great enough that public investment was required to enable redevelopment. INVESTMENT: TIF funded infrastructure necessary for mixed-use redevelopment, including utilities, roadways, and landscaping. Developer contributed to both infrastructure and private improvements as part of a Master Development Agreement. DEVELOPMENT: $1.4B* in assessed value increment generated to enable repayment of TIF expenditures, driven by: • • • • • 4,900 Housing Units (25% affordable) 1.1 M SF of Office 790 K SF of Retail 1.2 M SF institutional uses 20% dedication to open space & parks South Central Waterfront | 14 Local TIF Examples | Waller Creek • • • CHALLENGE: Nearby flooding created unsafe conditions and rendered existing structures obsolete (Phase 1). Former floodplain space limited new development (Phase 2). Investment was required on public land to facilitate development in the surrounding area. INVESTMENT: Phase 1) TIF funded construction and maintenance of Waller Creek Tunnel to restore 1.5 miles of the creek. Travis County provided 50% of increment. Phase 2) TIF funded development of 35-acre “Chain of Parks” along the former floodplain. Developers, the Conservancy, and CIP shared the costs of the new parks, trail connections, and the ongoing operations. DEVELOPMENT: $1.1B* in assessed value increment that supported repayment of TIF expenditures, driven by: TIF Approved: 2007 Total Development Cost: $1.1B • • • *2020 City Audit Report Austin EDC TIF Investment: Phase I > $109M ($128M project costs), Phase II > $110M ($354M project costs) • • 1.6M SF Office 6,055 Housing Units South Central Waterfront | 15 Local TIF Examples | Seaholm • • • TIF Approved: 2008 Total Development Cost: $300M TIF Investment: $20M ($136M project costs) *2020 City Audit Report Austin EDC • • • CHALLENGE: The city’s desire to redevelop the Historic Seaholm Power Plant was impeded by deteriorating structures, inadequate street layout, and lack of utilities and roadways. The costs of remedying these were prohibitive to attractive to private development on the site. INVESTMENT: The TIF funded repairs to the power plant generator building. In addition, it invested in a public plaza and other infrastructure improvements to streets and utilities that enable private development. Developers shared these infrastructure costs, including plant repairs. DEVELOPMENT: $334M* in assessed value increment that supported repayment of TIF expenditures, driven by: • • • 143K SF Office 48K SF Retail 280 Residential Units South Central Waterfront | 16 National TIF Examples | Capitol Riverfront, D.C. • • • CHALLENGE: Vacant city industrial land lacked the infrastructure to support private development interest and the planned Department of Transportation HQ in the area. INVESTMENT: TIF funded infrastructure, roadways, and open space to create a walkable neighborhood that supported dense, mixed-use development along the waterfront. The neighborhood has attracted substantial new development, funding an entirely new tax base supporting payment of TIF bond obligations. DEVELOPMENT ENABLED: 300-acre district surrounding the Washington Navy Yard, including: • • • • 12.6 M SF Office 14,600 Residential Units 1,270 Hotel Rooms 1,150K SF Retail • • • TIF Approved: 2005 Total Development Cost: $3.3B TIF Investment: $257M Austin EDC South Central Waterfront | 17 National TIF Examples | Cortex Innovation, St. Louis • • • CHALLENGE: The area, which had high vacancy rates, was significantly underutilized, and qualified as a “blighted area,” had failed to attract private development. INVESTMENT: TIF funded subsidized new office space that attracted private development and supported the creation of an innovation district. DEVELOPMENT: 168-acre site, including: • • • • • 3.8M SF of office/research space 700K sf of retail space Around 1,000 residential units 350 hotel rooms Shriners Hospital for Children healthcare facility • • • TIF Approved: 2014 Total Development Costs: $2.1B TIF Investment: $168M Austin EDC South Central Waterfront | 18 National TIF Examples | 9th & Colorado, Denver • • CHALLENGE: The area was not suitable for private development due to existing blight, environmental contamination, and a lack of supportive infrastructure. PLAN: The TIF funded public space, environmental remediation, and facilitation of a high-density, transit supportive environment to attract development. The plan included creation of parking, demolition of blighted buildings, and streetscape improvements. • DEVELOPMENT ENABLED: 26-acre site, including: • • • 100k – 200k SF of office 235k –300k SF retail, 900 - 1,100 units with 11% affordable South Central Waterfront | 19 TIF Approved: 2014 Total Development Costs: $419M Total Public Investment: $49M ($48 M TIF + $1M grants) • • • Austin EDC South Central Waterfront TIF (As Considered) Precedent TIF Challenge: why subsidy required for development Investment: infrastructure costs funded by TIF Development: private investment enabled by TIF South Central Waterfront Inadequate lot layout and insufficient street layout New & upgraded streets, utilities, and open space 2.8M sf office, 3,000+ resi units, 352K sf retail Obsolete structures and improvements from airport Demolition, utilities, roadways, and landscaping 4,900 units, 1.1M sf office, 1.2M institution, 790K retail Unsafe conditions and obsolete structures from flooding Phase 1: Waller Creek Tunnel Phase 2: 35-acre chain of parks 1.6M sf office and over 6,000 housing units Inadequate street layout and obsolete power plan structures Power plant repairs, public plaza, streets, and utilities 280 resi units, 143K sf office, and 48K sf retail Capital Riverfront Lack of infrastructure on former industrial waterfront Roadways, infrastructure, and waterfront open space 12.6M sf office, 15K resi units, 1,270 hotel rooms, 1M sf retail Cortex Innovation District Underutilized “blighted area” with high vacancies New office space as locus of innovation district 3.0M sf office, 700K sf retail, 1,000 resi units Environmental contamination, blight, lack of infrastructure Remediation, public space, parking, streetscapes 100-200K office, 235-300K sf retail, 900-1,100 units South Central Waterfront | 20 Mueller Waller Creek Seaholm 9th & Colorado Austin EDC Infrastructure Scenario Updates HR&A Advisors, Inc. PANYNJ Advertising | 21 Two Infrastructure Scenarios Based on prior City and ECONorthwest analysis 1 2 Baseline Infrastructure TIF funds infrastructure costs (streets, utilities, etc.) required to enable private development across the district Adopted SCW Plan TIF funds the open space and infrastructure envisioned by the SCW Framework Plan to unlock full value potential in district Austin EDC South Central Waterfront | 22 Scenario 1 Infrastructure Baseline improvements to enable feasible new development PROJECT COSTS (USES) BY SCENARIO Project Cost TOTALS Existing Streets & Utilities New Streets & Utilities Parks & Open Space Baseline Infrastructure $175M $49M $112M $14M Austin EDC South Central Waterfront | 23 Scenario 2 Infrastructure Public investments to achieve the full SCW Vision Plan and potential district value PROJECT COSTS (USES) BY SCENARIO Project Cost TOTALS Existing Streets & Utilities New Streets & Utilities Parks & Open Space Baseline Infrastructure $175M $49M $112M $14M Adopted SCW Plan $77M $3M $3M $71M TOTAL COSTS $252M $52M $115M $85M Austin EDC South Central Waterfront | 24 SCW Plan: Value Creation from New Plazas & Trails Rain Gardens Nightwing Plaza East Bouldin Creek Trail SCW Plan: Value Creation from Enhanced Public Spaces Waterfront Park – Great Lawn Crockett Square Baseline Infrastructure | Sources & Uses ESTIMATED USES ESTIMATED SOURCES Project Cost Amount Funding Sources Amount Existing Streets & Utilities $49M Private Developers New Streets & Utilities Parks & Open Space TOTALS Austin EDC $112M $14M CIP Funding Utilities Reimbursement TIRZ + Other Sources* $175M TOTALS $25M $60M $17M $73M $175M *2018 CMR analysis estimated $217M in nominal 20-yr. tax increment. South Central Waterfront | 27 Adopted SCW Plan | Sources & Uses ESTIMATED USES ESTIMATED SOURCES Project Cost Amount Funding Sources Existing Streets & Utilities $52M Private Developers Amount $25M $60M $17M $150M $252M $115M $85M CIP Funding Utilities Reimbursement TIRZ + Other Sources* $252M TOTALS *2018 CMR analysis estimated $217M in nominal 20-yr. tax increment. South Central Waterfront | 28 New Streets & Utilities Parks & Open Space TOTALS Austin EDC How may AEDC reduce the TIRZ funding commitment? Negotiate development agreements to ensure responsible use of public funds Pursue external funding sources for public infrastructure Prioritize funding for catalytic investments to enhance value across district Implement cohesive district strategy that identifies priorities for each site Austin EDC South Central Waterfront | 29 Affordability Scenarios HR&A Advisors, Inc. PANYNJ Advertising | 30 Affordable Scenarios SCW Vision Plan targeted 20% affordability across the district. City TIRZ policy requires 20% affordability for all developments funded by TIF revenues. Austin EDC TIRZ statute specifically enables funding affordable housing with TIRZ revenues. Prior City analysis assumed different allocations of onsite affordable units and in-lieu payments. AEDC modeled different affordability scenarios to understand the cost implications for the TIRZ. South Central Waterfront | 31 Affordable Scenarios Less Public Investment Baseline More Public Investment District Threshold 10% (remaining TIRZ) 20% Statesman Condo Buildings 4.15% from PUD District threshold (10-20%) In-lieu fees Onsite rentals (or for-sale) Rental Buildings In-lieu fees Onsite rentals OTC Mixed income, stick built 100% affordable, stick-built High-rise affordable/ mixed-income In-Lieu Fees Units outside of district (stick) Units within district (high-rise) Austin EDC South Central Waterfront | 32 Affordable Scenario Assumptions 10% Onsite/In-Lieu Baseline In-Lieu W/in District 20% Onsite District Threshold 10% onsite/in-lieu + 10% TIRZ-paid in-lieu Rental Buildings 10% onsite rentals Condo Buildings 10% developer in-lieu fees (w/in district) 20% (exc. Statesman) 20% onsite rentals 20% developer in-lieu fees (w/in district) Statesman OTC In-Lieu Fees 4.15% onsite/in-lieu 20% onsite/in-lieu 100%: 142 units Units outside of district Units within district Units outside of district Incremental Gap % Affordable Onsite ($57M) 9.9% ($85M) 13.31% ($119 M) 5% ($140M) 18.2% 1.8% % Affordable In-Lieu *ECONorthwest model does not support scenarios with in-lieu fees paid by rental building developers; the model assumes that rental developers provide units onsite. **15% in-lieu refers to the district wide affordability gap 15%** 10.1% 6.7% Austin EDC South Central Waterfront | 33 Impact of Cultural Venues in SCW Developing two cultural venues in place of ground-floor retail space would require up to $3.0M in additional public investment. Annual Rent PSF RLV/SF Typical Size (SF) Incremental RLV Decrease by Venue Austin EDC Retail $50 $360 Music Venue Cultural Arts Venue $32 $131 5,000 $18 ($44) 4,500 ($1.2M) ($1.8M) South Central Waterfront | 34 TIRZ Board Responsibilities HR&A Advisors, Inc. PANYNJ Advertising | 35 Board Composition 5-15 members Taxing units can join at any time CITY OF AUSTIN Each participating taxing unit may appoint 1 member City appoints remainder (up to 15 total) 15-MEMBER BOARD EXAMPLE 1 6 11 2 7 3 8 12 13 4 9 14 5 10 15 ADDITIONAL TAXING ENTITIES Austin EDC South Central Waterfront | 36 City Council TIRZ Powers Approve final project & financing plans Acquire or sell property Issue bonds Implement project & financing plans Enter into 3rd-party agreements Impose taxes or fees Austin EDC South Central Waterfront | 37 Exercise eminent domain Construct public works TIRZ Board Powers (with Council authorization) Approve final project & financing plans Acquire or sell property Issue bonds Implement project & financing plans Impose taxes or fees Requires consent from City Council Enter into 3rd-party agreements May dedicate TIF revenues and/or restrict land uses Contract w/ local corp. (AEDC) to manage zone Exercise eminent domain Construct public works Austin EDC South Central Waterfront | 38 Questions? HR&A Advisors, Inc. PANYNJ Advertising | 39