TIRZ Presentation Prepared By Chair Franco — original pdf

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South Central Waterfront Advisory Board Meeting Item 3B: Discussion and Possible action on Tax Increment Reinvestment Zone No. 19 (South Central Waterfront) Prepared by Samuel Franco, Chair, South Central Waterfront Advisory Board What we will discuss: ● Why are we here ● What is a TIRZ ● What people are saying ● What the TIRZ will pay for and where have ● Why do we need to fund the TIRZ now and they been used next steps Why we are here Why are we here § 2-1-172 - SOUTH CENTRAL WATERFRONT ADVISORY BOARD. The South Central Waterfront Advisory Board is established to provide continuity and communication among stakeholders and advocates as the South Central Waterfront Plan moves toward implementation and to provide recommendations to the city council regarding plan implementation. ➔ Governance Structure Made recommendation to council regarding the creation of an Economic Development Corporation Wrote recommendation letter to AEDC and Council calling for creation of subcommittee ➔ Regulating Plan Council directed staff to return in 9 months with a Regulating Plan that should include increased development entitlements, bonuses, and regulations (We provided feedback to council on this topic) ➔ Funding/Financing Sources Council implemented the TIRZ in Dec. 2021 - Set recapture rate O% Note: SCWAB Board utilized the “Next Steps” identified on pg. 110 of the Vision Plan to determine priorities. Regulating Plan will outline built environment based on community benefits TIRZ dollars can be used now for planning and community benefits Logistically not tied together What is a TIRZ TIRZ - Tax Increment Reinvestment Zone Just what is it exactly? “Is a method local governments can use to pay for improvements that will draw private investment to an area. Tax increment financing isn’t a new tax; instead, it redirects some of the ad valorem tax from property in a geographic area designated as a Tax Increment Reinvestment Zone (TIRZ) to pay for improvements in the zone.” “Each taxing unit may dedicate all, a portion of, or none of the tax revenue that is attributable to increased property values brought about by improvements within the reinvestment zone. The additional tax revenue received from the affected properties is referred to as the tax increment.” Source: Comptroller of Texas Website - https://comptroller.texas.gov/economy/local/ch311/ TIRZ - How it is applied to the South Central Waterfront The City of Austin performs a rigorous “but- for” analysis Only takes into account the amount of taxable value that is attributable due to TIRZ investment. Any organic growth is not included in the TIRZ calculation and hence not included in TIRZ fund - holds General Fund harmless Kimberly Olivares - City of Austin Deputy CFO (Council Work Session 8/20/22) “HOW MIGHT A REVENUE INCREASE SOUTH CENTRAL WATERFRONT TIRZ IMPACT THE PROPERTY TAX RATE IN BURDEN FOR THE TYPICAL HOMEOWNER TAXPAYER? IF THE TIRZ IS SET UP TO ONLY BE RESULTING IN THE NEW VALUE THAT WOULD NOT HAVE OCCURRED, BUT FOR THE PUBLIC INVESTMENT, DURING THE EXISTENCE OF THAT TIRZ, THEN THERE'S NO NEGATIVE IMPACT OF THE TAX RATE.” “SO EACH OF THESE PERCENTAGES, THESE, CONTRIBUTION RATES ARE THE INCREMENT THAT WOULD ONLY BE ASSOCIATED WITH THAT, BUT FOR VALUE GROWTH. SO AS A RESULT, IT WOULD HOLD THE GENERAL FUND HARMLESS, IN TERMS OF WHAT THE GROWTH THAT YOU WOULD SEE IN PROPERTY VALUES AND THE ASSOCIATED TAX REVENUE, BECAUSE OF JUST NORMAL, ORGANIC GROWTH OUTSIDE OF SOUTH CENTRAL WATERFRONT, EFFORTS.” What people are saying What people are saying - misleading information What people are saying - misleading information TAG Info vs SCW Vision Plan TAG Website - Understanding the TIRZ Information currently on TAG Website - Source TAG “Understanding the TIRZ” Actual information in the SCW Vision Plan: “The results of the scenario models are compared with existing conditions in the table below. The Theoretical Baseline scenario revealed that while current zoning and urban design regulations would legally allow a full buildout of approximately 5 million square feet, much of this is not economically feasible.“ Source: Pg. 103 SCW Vision Plan - Financial Implications of the Scenarios TAG Info vs SCW Vision Plan TAG Website - Understanding the TIRZ Information currently on TAG Website - Source TAG “Understanding the TIRZ” Actual information in the SCW Vision Plan: “The project team evaluated possible funding tools based on a set of evaluation criteria developed specifically to fit the South Central Waterfront context… The primary toolkit identifies local funding tools that can fund public realm and infrastructure improvements in the area. “ Source: Pg. 95 SCW Vision Plan - Funding Toolkit TAG Info vs SCW Vision Plan TAG Website - Understanding the TIRZ Information currently on TAG Website - Source TAG “Understanding the TIRZ” Pg. 16 of SCW Vision Plan Appendix - SCW Preliminary Estimate of Probable Cost - total $99M July 2020 - Regular Called Meeting of the SCWAB - Item 2A: Staff Presentation on 2020 MODIFIED PHYSICAL FRAMEWORK COSTS - $252M December 2021 - Staff presented TIRZ Plan to council with Physical Framework costs updated to account for escalation in construction costs (verify this) TAG Info vs SCW Vision Plan TAG Website - Understanding the TIRZ Information currently on TAG Website - Source TAG “Understanding the TIRZ” Actual information in the SCW Vision Plan: “Legality: Yes. The South Central Waterfront appears to met the statutory definition of blight and the type of infrastructure improvements needed in the area are eligible to TIF. “ Source: Pg. 31 of SCW Vision Plan Appendix TIRZ - Texas Attorney General Opinion Summary: A city may not designate an area as a tax increment financing reinvestment zone, including an area subject to a petition under section 311,005(a)(5) of the Tax Code, unless the area is “unproductive, underdeveloped, or blighted” within the meaning of article VIII, section l-g(b) of the Texas Constitution. An area that satisfies the criteria of section 311.005(a)(l), (a)(2), or (a)(3) comports with this constitutional requirement. TIRZ - Texas Attorney General Opinion Section 3 11.005(a) establishes criteria for tax increment finance zones by providing that to be designated as a reinvestment zone, an area must: (1) substantially arrest or impair the sound growth of the municipality creating the zone, retard the provision of housing accommodations, or constitute an economic or social liability and be a menace to the public health, safety, morals, or welfare in its present condition and use because of the presence of: (see next slide) (2) be predominantly open and, because of obsolete platting, deterioration of structures or site improvements, or other factors, substantially impair or arrest the sound growth of the municipality; TIRZ - Texas Attorney General Opinion Section 3 11.005(a)(1) continued (A) a substantial number of substandard, slum, deteriorated, or deteriorating structures; (B) the predominance of defective or inadequate sidewalk or street layout; (C) faulty lot layout in relation to size, adequacy, accessibility, or usefulness; (D) unsanitary or unsafe conditions; (E) the deterioration of site or other improvements; (F) tax or special assessment delinquency exceeding the fair value of the land; (G) defective or unusual conditions of title; (H) conditions that endanger life or property by fire or other cause TAG Info vs SCW Vision Plan TAG Website - Understanding the TIRZ Information currently on TAG Website - Source TAG “Understanding the TIRZ” Actual information in the SCW Vision Plan: A Public Improvement District (PID) is a special assessment district where property owners voluntarily commit to assess themselves a fee to fund capital improvements and affordable housing assistance Programs. The revenue capacity for PIDs is dependent upon property owners’ willingness to self-assess to cover infrastructure and other project/program costs, and the size of the PID boundary. Source: Pg. 97 SCW Vision Plan - Funding Toolkit What the TIRZ will pay for and where have they been used What can the TIRZ ACTUALLY FUND, what is in the TIRZ Plan and where they have been used in Austin. TIRZ - Chapter 311 of Texas Tax Code Sec. 311.002. DEFINITIONS. In this chapter: (1) "Project costs" means the expenditures made or estimated to be made and monetary obligations incurred or estimated to be incurred by the municipality or county designating a reinvestment zone that are listed in the project plan as costs of public works, public improvements, programs, or other projects benefiting the zone, plus other costs incidental to those expenditures and obligations. Sec. 311.010. POWERS AND DUTIES OF BOARD OF DIRECTORS. (b) The board of directors of a reinvestment zone and the governing body of the municipality or county that creates a reinvestment zone may each enter into agreements as the board or the governing body considers necessary or convenient to implement the project plan and reinvestment zone financing plan and achieve their purposes…… An agreement may dedicate revenue from the tax increment fund to pay the costs of providing affordable housing or areas of public assembly in or out of the zone. What is in the TIRZ plan for the South Central Waterfront 6.1 Categories of Public Improvements The proposed public improvements to be financed by the Zone include roadway and drainage improvements, streetscapes, open spaces (parks, trails, plazas), utilities, green infrastructure, and reclaimed water and other miscellaneous and soft costs, as further described in Exhibit D (the “Public Improvements/Project Costs”). Source: City of Austin South Central Waterfront Tax Increment Reinvestment Zone 19 - Preliminary Project and Financing Plan Where have they been used in Austin - Mueller TIRZ Number 16 Mueller Redevelopment Project Paid for “all infrastructure and related costs necessary to redevelop the site” Currently on track to meet its 25% affordable housing goal Source: Mueller Semi-Annual Report / Affordable Housing update through June 1st, 2022 https://www.austintexas.gov/department/mueller-redevelopment Why do we need to fund the TIRZ now and next steps Why do we need to fund the TIRZ? ● Incentivise the sustainable and equitable redevelopment of the area ○ Provide more housing ○ Adequate density to fund community benefits ○ Provide for affordable housing funds - generally ● Help ensure long term success of ALL transit investments our community is making ○ SCW is the confluence of all major forms of urban transit ● Do our part to help make a dent in housing Austin’s housing crisis, today ○ Development of One Texas Center to aide in reaching our district goal for housing Where our housing goal fits into the larger picture The South Central Waterfront Vision Plan Outlined a goal of making 20 percent of future housing units developed in the area affordable to households at 60 to 80 percent of Area Median Income for rental. Is consistent with COA adopted TIRZ policy. Source: Housing Works Austin - Who Needs Affordable Housing https://housingworksaustin.org/the-issue-of-affordability/ The risk of not doing anything Source: Housing Works Austin - Strategic Housing Blueprint Scorecard https://housingworksaustin.org/ The risk of not doing anything - Austin Area Displacement Map Source: Urban Displacement Project https://www.urbandisplacement.org/maps/austin-gentrification-and-displacement/ The risk of not doing anything - SCW Board Contributing Neighborhoods Map Source: Urban Displacement Project https://www.urbandisplacement.org/maps/austin-gentrification-and-displacement/ What we have learned and next steps ➔ The TIRZ is legal and will hold the General Fund harmless ➔ TIRZ dollars are only paid by property owner ➔ TIRZ dollars will be used for community benefits outlined in Vision Plan ➔ TIRZ dollars can be used to help solve housing crisis ➔ We have a project and perhaps more that can start to utilize affordable housing funds - now ➔ Make recommendation to Council regarding TIRZ recapture rate