HomeMy WebLinkAboutAgenda Packet - 1995-05-25 PM• AGENDA
CITY OF LAKE OSWEGO
CITIZENS' BUDGET COMMITTEE
Council Chambers
380 A Avenue
Lake Oswego, Oregon 97034
May 25, 1995
5:30 P.M.
I. Call to Order
II. Roll Call
III. Approval of Minutes
-- May 4, 1995
-- May 11, 1995
IV. Citizen Comment
V. Issues and Options Papers
--No. 5 Transportation Improvement Financing
VI. Other Issues Regarding 1995-97 Budget
-- Concert Series Information
-- Other Issues
VII. Adoption of 1995-97 Budget
VIII. Adjournment
111
1995 PROPOSED PROGRAM BUDGET
SUMMER CONCERT SERIES
0 (Based on 8 concerts)
o I
o' 'o
N U
O.
LL if)
w
o d y
U h c c
a a
o x W
o ILo
` e c 3
d
II c c i
ITEM 0 a cc
Revenues
Sponsors(8 @$900,deposited In 95/96 budget) $7,200
Hotel/Motel Tax(assume 4%increase over 94-95) $31,019
Expenses
Contractual Services:
Entertainment(8 acts @$950) $7,600 $6,650 $950
Promoter Salary(5%Increase over 94/95) $7,935 $3,860 $4,075
Sound (8 @$400) $3,200 $2,800 $400
Materials&Services
Publicity:
S
Poster Design $300 $0 $300
Poster Printing $550 $0 $550
Banner Update $850 $0 $850
Rentals-
Canopy(8 @$300) $2,400 $2,100 $300
Piano(6 @$300) $1,800 $1,500 $300
Shuttle Service (8 @$140) $1,120 $980 $140
Miscellaneous:
Decorations $100 $80 $20
Framing (10 @$40) $400 $280 $120
Photographic Supplies $100 $85 $15
ASCAP Licensing $150 $0 $150
Staffing: (10 staff, $322/concert) $2,578 $2,256 $322
Contingency(assumed 10%) $3,314 $2,629 $685
TOTAL $32,397 $23,220 $9,177 $38,219
*Total Program Costs=total expenses anticipated
during FY 1995-96 ,
**Includes cost of conducting 1995 concerts(July
28-August 16, 1995)
111
***Includes expenses associated with planning for
1996 concerts,plus conducting the first concert in
June, 1996
956prbdt.xcl (Summer Concerts) Page 1
• MEMORANDUM
May 23, 1995
TO: Budget Committee
FROM: Tom Coffee, Assistant City Manager
SUBJECT: Street Maintenance and Improvement Funding - The Regional Context
Just as the City of Lake Oswego is addressing the issue of the increasing funding shortfall
for street maintenance, other levels of government are considering how and when to
generate additional funding for street repair and improvements.
Metro
Metro has just completed and will be adopting the Interim Federal Regional
Transportation Plan (RTP). This plan is a requirement of the Federal Government to
maintain the regions eligibility for Federal funding. The Interim RTP is the first RTP to
• comply with the new Federal requirement that the plan be "fiscally constrained."This
means that the RTP can only include improvement projects for which there is a reasonable
assumption that funding will be available.
This planning effort has resulted in a"Preferred Network" list of improvements and a
"Constrained Network" list of improvements. These two networks are visually represented
on the attached map which dramatically illustrates the funding shortfall the region is facing
in financing the road improvements that will be needed over the next 20 years.The total
funding available to the region for improvement projects is summarized in the attached
table and is based on the assumptions that there will be gas tax increases over the 20 year
period and that federal funding will continue to be available.
Because of the limited funding, Metro is considering presenting a measure to the voters in
the Spring of 1996 that would request authorization to issue up to$600,000,000 in bonds
to finance needed arterial road improvements. Metro has requested that local governments
submit a list of needed improvements for possible inclusion in the bond measure, The
process would be similar to the Open Space Measure that just passed in that local
governments would receive a share of the funding. Staff has been advised, on a
preliminary basis, that Lake Oswego's share could be between three and five million
dollars.
At the regional level Metro is focusing on the issue of how to fund needed improvements
• to the arterial system that will be needed to implement the 2040 Plan. Maintenance of
existing streets is a concern at the County and local levels of government.
•
County
Clackamas County has identified the need to generate additional revenue to finance the
repair of existing streets. (See attached materials provided by Clackamas County.)The
situation in Clackamas County is similar to the City's in that maintenance is being
postponed due to a lack of funding with the result that roads are deteriorating at an
increasing rate and the cost of repairs is increasing. In response to this situation,
Clackamas is considering presenting a gas tax measure to the voters in November 1996.
As proposed the additional money raised would be shared with the cities for their street
maintenance programs.
Summary
Each of the funding proposals outlined above are in the preliminary stages of
development. Until the State Legislature adjourns, neither Metro nor Clackamas County
will be able to finalize their proposals because of what the Legislature may or may not do
with respect to any gas tax increase, the preemption of local options, or the placement of
limits on increases in gas taxes or license and registration fees.
Given the preliminary nature of what other jurisdictions might do to fund needed street
maintenance and improvements, and given the existing and predicted funding shortfalls at
all levels of government; Lake Oswego has the opportunity to act decisively to protect its
11)
investment in its street system before its voters are asked to support the County and
regional street system.
''
s REGIONAL TRANSPORTATION PLAN REGION BOUNDARY I
EXISTING RTP NEEDS
II �" PREFERRED NETWORK IMPROVEMENTS ® OTHER IDENTIFIED NEEDS
CITY uMrr
r--, URBAN GROWTH BOUNDARY
I t.:nr V CO�U�oO i', i i, O �J
•
F�'%;1'r13 y 120 ', , ., fir
1
11 .6 7 /iIii (v i 0 •..T-, ` 72 River
or. Al ..lililiHas., •_, ,,,
10.. v‘td a!e
.. .":%"'""*.yr3"1,1 P, ... ii ing Vg � � II 2 2
0 Wood 'Hap
pie
,:,rC;;F� olr.Ali,�. ` ,,,,r !• 'C LI I ! N O V A !1
)1
M P r
J BE,�VERTON � GRESHAM r-
TON
144 • ' 2131%-1
jii/Or--
� 1. ., �
0
•
'/' ohnsnn iry •Happy alley
OM TIUARD 1.. . ,I. IVV. . N. '
2w •
1. 143 "" LAKE dp
• a0®
Kirlrl X,ity 0 _ p 174
f 1 • Durham ,.. �` ® 213171 1.. •
O _ o • Gladktone �,
t j w „.` West inn ~'*,.,y M
O Shti::Odd , ' 0
" O 31i' Eagle.
i L
r Off!
2 .
•,, A Rivergr;ve '" / C� - Creel,.
V 0 r
151 T. ...F,'i t
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No:.�-��,rg ,> CLACK AM AS
r,
• ! -� E J Estacada o ;
Dundee�y/ 4.i.-.., . ()s �, Of , t
;t. 213
N.
�I'l� 1 /' 'rnl inn Mn,l
SOURCE: OA.O.T.
1' REGIONAL TRANSPORTATION PLAN _ REGION INED P RY
sour ® CONSTRAINED PROJECTS
• tJ11LL_Jw CONSTRAINED NETWORK IMPROVEMENTS C, URBAN GROWTH BOUNDARY
., I° Plains , ... CD t 120 �/U�4� it S II I tJ 1• `:� I'J .
• 11a - • +�
\ 1E
.. Ii Rid@r: 1, 11 ► rt e T CI !1 , .\ ~ .. � r. I
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1 - � �
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lk
f '1rn,:i.''^/..-' I, ` ��� 64 �A L ! i" U I! 100
•
rY• a► BEA ERTON .,. !•`.'••:I I GRESHAIvt
29
cir
•
41
10 Y i s; � ; t< j
Gaston '`a 1,.. '�� P�1ilv.aukie o o .
•
�j Johlnsc City Happ/ Valley
• �o tIGARD �,.. , ,..., , , ma ,F: l)), I,..
14
3 +4yt 'i' 22/ CP�
o r. „•. , ® LAK SW' .0 �4',:,,R, .r K;na `C�i�+ 141174
F 1 �urham l� ,� .® 171 � ` ..z
•
�. . 0 • ualalin • a o Glads one ��
�. ` Wiest j-ifn,•,, _ ' a71 /,y
' 1 O Sherwood Gq '�� •
.•. �i �ti
�,„ , °.. ,,,...,,gro„,„, .., % i LOON Eagle
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�V2 q 4 a 1, �! s �. I
Newberg �. , ,.4,. . t_. •; . K �� , I
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Dunce 44,
'''''s �9 `' r. I , �3
Estacada o
, 1 2ti
Canb�t O '3
/ souncE: OD.O.T.
Targets Preliminary Targets for RTP Finanhly Constrained Revenues 5•5
(Totals are in 1995 $M and cover the period 1999-2015)
Share of Locally- Total
Regional generated Constrained
Jurisdiction Allocation Revenues RTP Target
City of Portland $29.505 $9.228 $38.734
Clackamas County $29.505 $11.844 $41.349
Multnomah County (excluding major bridges set-aside) $29.505 $6.907 $36.412_
Washington County $29.505 $146.150 $175.655
Tri-Met $29.505 $0.000 $29.505
Port $14.753 $0.000 $14.753
Metro/Shared $14.753 $0.000 $14.753
Totals for Non-State Facilities (w/o Major Bridges) $177.031 $174.129 $351.160
Major Non-State Bridges (HBR and Local - dedicated to bridges) $89.368 $25.500 $114.868
Totals for Non-State Facilities $266.399 $199.629 $466.028
ODOT (includes roadways and bridges) $435.736 $0.000 $435.736
Totals for Regional Transportation System $702.135 $199.629 $901.764
Page 1
I-Lht_r.•. LJ I LJ `; J=;-r`,ll-_;:.11: f`'11a it : lb fJ . CI::5 P . 02 ..—..._
Clackamas County
1995 Transportation Funding Strategy
NEEDS
• Maintain county arterials, collectors and local streets $ 10 million per year
• Improvements to county arterials and collectors $500 million over next 20 years
• Construct South/North Light Rail Transit $ 2.8 billion over 30 years
FUNDING STRATEGY:
1995 STATE LEGISLATURE
• Gas tax/weight mile increase of 4q:for 2 years,
• Veh:cic Registration Fee increase of$20 for roads or transit operating assistance,
• Increased share of new gas tax revenues to counties.
• South/North LH"l.match from lottery.
• Constitutional amendment - Vehicle Registration Fee for transit operating.
• Gas tax increase dedicated to seismic retrofitting of bridges of 4c for 2 years.
REGIONAL
• Regional arterial program /gas tax increase.
• Establish special capital fund (in response to 2040),
• Earmarking of$15 million I-205 bus way funds,
• Urban balance "equity' program.
• Regional freight mobility study(include Clackamas County projects).
COUNTY
• Gas tax increase with city participation.
• "Urban" road district formation with general obligation bond for maintenance.
49
(`)is chart oomparesTiistoric and projected trends of Population, Vehicle Registration, Vehicle Miles Traveled with Clackamas County Road Revenues. From 4111
1995 to 2005 Road Revenues will be declining if there are no tax increases to offset inflation and declines in key revenues such as Federal Forest and Urban =
Renewal dollars. From 1980 to 1994 Population increased by 26%,Vehicle Registation by 44%, and Vehicle Miles Traveled by 93%. 7
Comparison of County Road Revenues C
with County Population &Vehicle Registration, and Metro Vehicle Miles Traveled (VMT)
375,000 - ___ _ . _ --_— �-
r
350,000 --_ - - - 26,000,000 i
i
325,000 r---- - - - s •
i Lf
C
300,000 -.0' - - 2
I
21,0ee,000 -
u 275,000 - a c
r c�
m ,: o � I
7 i
et
ar o t �r
00.
a. 225,000 ! 16,000,000 i v
i- � o
v 200,000 r — 1 U �>,
i s 47-
rY > >
175,000
11
U
I. / -I- 11,000,000
150,000 r /r -- - I
125,000 1- - a
cc
100,000 l a + t + 4- I + t t 6,D00,000 l r:cs,
1980 1982 1984 1986 1988 1990 1992 1994 2000 2000 2000 2000 2000 cc
A 'Population - -Motor Vehicle Registration -�Vehicle Miles Traveled -If- Road Revenues I o-
--
„
1-
Revenues from 1995 to 2005 were adjusted for inflation based on the projected Construction Cost Index(CCl). The steep decline in revenues in 1999 is due to
e termination of the Clackamas Town Center and Industrial Area Urban Renewal Districts (S2,127,389 Average annual revenues dedicated to Roads from =,
ception in 1981 to termination in 1999). Vehicle Miles Traveled (VMT)is a measure of traffic estimated by the sampling of vehicle courts multiplied by the total
les of roadway. For example, if the traffic system was 10 miles long and the traffic count on the section was 5 vehicles, the VMT would be 50 vehicle miles r
wveled. The VMT on this&art was estimated by Metro for the whole urban area within the Urban Growth Boundary. T
c:
4/1 0195 VMTGRO3.XLS
( i
TEN YEAR FORECAST OF REVENUES VERSUS NEEDS
Clackamas County Road Program
S70,000.000 1 - !i
$60,000,000 -
1
:I
$50,000,000 - - — --
E4o,000,000 f - - : --- --
a .
0 -
s30,000,000 4---- -
-
•
1
r:
tl
520,000,000 ';I
.- !.
_ v �•Mto il.,: ..,,..,:.,....
j,.:
, .
. t:
,:,-t-0
Iliti -_
:' .. am,.::
s r t FFS 1 }s1 L'.. ice-. :-f3 •I
s
!4c;h4 1T ks-*., ..: rti
ig
1995 1996 1997 1998 19W 2000 2001 2002 2003 2004 2005
®REVENUES:NO NEW FUEL TAX OREVENUES:2X2 FUEL TAX IN CAPITAL NEEDS DMAINTENANCENEEDS UTOTAL ROAD NEEDS
F
Forecast Revenues consist of State Highway fund, Federal Forest Reserve, Urban Renewal, and System Development Charges(SOCs)
Costs have been adjusted for inflation based on the forecast Construction cost Index(CC°)
WHERE DO ROAD FUNDS COME FROM?
1993-94 CLACKAMAS COUNTY ROAD REVENUES 1994-95 CLACKAMAS COUNTY ROAD REVENUES
Other
Fees Oilier
2% FP.s
95'. Improvement 29�
S436,000 S1.9M District& 5500,000 11%
Development S2.4/11 improvement
- Charges
District&
=+i _:= 0,2%saaloao 1 =c'= Development
-- - -:.„- ` Charges
"-.ter_.- Wi- ' ar G%
>r _a1. Federal -c . `
.�,3;�v � ..:u:c Million
es,TI ,, . ` 20% *':3iri- ' a:..ai-5.. 51.3Mil
`�- sia`ef< r- '.,�-': °�:fr, "i -• Federal
*-�t 15�;' • : + - Sd.8 Million
Slate .rya - a yt 3 State - ; .k
68 ti .4. 'r r ' - �Q :-�, S66,000 60% a cur+ i
$13.4 Million ' 1. •`sr4 l__ S13.8 Million "rry .. `-
�'y - - t,A.Wzti j,. ' -J'' thn `a y}^ Local
_,c K
NOTE: Beginning Fund Balances are not included•
}� S82,000
WHERE ARE ROAD FUNDS SPENT?
1993-94 CLACKAMAS COUNTY ROAD EXPENDITURES I 1994-95 CLACKAMAS COUNTY ROAD EXPENDITURES
Indirect Costs
Indirect Costs Equipment (Overhead)
Equipment (Overhead) Purchases 4%
Purchases 7% 3%
51.1 Million
5% $1.4 Million i $900,000
5900,000
Roadway .-. i. Roadway °; .. ;-..tea ;:
Construction ' ':`` Corsi a' : 4' ��<1 internal Stet!
• improvements '=_¢ Internal Start C ,:��,� .�� 4�r
• P 14% "%a •4- yh 36'/, Improvements �t f:,' x X k,�F x�e x 32%
1 $2.7 M �x r • �`,,, " i �5.9 Million :,- 1i� f 3 � r. S8 6�illioR
i,e ..,a. X.cam S6.2 M •iii 4 -x?' rtt- s • „k c ':r cic?*--,
a {. >: I
Road
Maintenance ��' Road ``' Contracted/
• Contracted , Maintenance
Materials/ Maintenance
Malntenance j
Services&Office 2% I Materials/ 7!.
•
Supplies I Services& $l.ti Million5350,000
36% Office Supplies I
$7 Million I 309'.
57.6 Million
Lake Oswego 1995:
Our Targets for Action
To
p Priority
1. Downtown Development
• Determine Outcomes
• Work with Community to Focus Options
• Decision: Direction
2. Lake Oswego's Regional Role/ 2040 Plan
• Identify Areas of Concern/Interest
• Define City's Role and Participation
• Land Use Issue
• Transportation
3. Street Maintenance Program: Direction
• Review Existing/Future Needs -
Based Upon Street Condition
• Determine Funding Approach-
Bond Issue for Street Maintenance
4. Commuter Trolley: Direction
• Review Options including Technological Innovations
• Decision: City Role and Funding
High Priority
9. Infrastructure/C.LP. Funding: Direction
• Review and Decide On Utility Rates: Water/Sewer
• Explore Bond Issue
• Decision
10. School - City Relations
• Define Expectations and Relationship
• Identify Issues
• Address Funding Issues
• Address School-City Agreement
11. InfiIl Development: Direction.
• Determine Future Direction
• Establish Guidelines
12. Land Acquisition: Future Direction
• Complete Purchases with Bond Dollars
• Identify Future Areas for Possible Acquisition
• Develop Funding Strategy
13. Waluga Triangle Plan: Completion
• Work with County
Local Gas Tax $ 280,000
Street Utility $ 125,000
50% Hotel Tax $ 117,000
Beginning 1997-98, County funds $ (250,000)
Net effect $ 272,000
Bancroft (one time) $ 916,000
STREET FUND 1995-96 BUDGET
Total Resources $ 2,489,762
Repairs, Materials $ 391,664
. Public Works, Maintenance
Support 977,670
Capital Projects 710,008
Other Capital Items 122,425
Contingency 287,995
Total Uses $ 2,489,762
o�tAu oJ►v
.`co
•
v�.
04.00
DECLARATION OF THE VOTE
FOR SEPTEMBER 20, 1994 SPECIAL ELECTION
I, Kristi Hitchcock, City Elections Officer for the City of Lake Oswego,
having examined the abstract of the votes cast at the city election held
September 20, 1994 pursuant to Lake Oswego Code 11.04.370, find the
votes cast for Measures 3-24 and 3-25 to be as follows:
MEASURE H COUNTY 11 # VOTES
OYES NO
Measure 3-24, Wash in gto1L 0 2
Street Bonds Clackamas 4,217 4,859
Multnomah 339 310
TOTAL 04.116 5.171
•
Transportation Projects
(Delayed in CIP due to funding)
Project When Caal
Intersections
Westlake/Kruse Way 1998-99 $ 120,000
Roadways
NTAB Traffic Mgmt 1995-2000 $ 275,000
A Avenue 1997-98 2.700.000
$ 2,975,000
Overl4vs
Kruse 1995-96 $ 1,305,000
. Kerr Parkway 1995-96 600,000
Lakeview 1997-98 836,000
Bryant 1997-98 260,000
Lake Forest 1998-99 117,000
North Shore 1998-99 195,000
Durham Street 1998-99 48,000
Bickner 1998-99 26,000
Childs Road 1998-99 308,000
Pilkington 1998-99 183,000
Chapin 1998-99 88,000
Oak 1998-99 396,000
Douglas 1998-99 118,000
Twin Fir 1999-2000 484,000
Carmen 1999-2000 140.000
$ 5,104,000
TOTAL $ 8,199,000
•
1986 ELECTION DATES
Per ORS 255.345
Fourth Tuesday in March March 26
Third Tuesday in May May 21
Third Tuesday in September 17
September
First Tuesday after First November 5
Monday in November
}
0
Local Gas Tax Street Utility 59%Motel Tax Bancroft
0 e VIM I
1 ,
: t
$280,000 $125,000 $117,O00 $916,000
Annually Annually Ably One-time
•
STREET SYSTEM EXPENDITURES
PROJECTED
1988 Report Total Budgeted
(Inflation and Projected
• Adjusted) * Expenditures Percentage
1995-96 $ 1,686,000 $ 710,008 ** 42%
1996-97 $ 1,737,000 $ 402,362 ** 23%
1997-98 $ 1,789,000 $ 224,000 *** 13%
1998-99 $ 1,843,000 $ 201,000 *** 11%
1999-00 $ 1,898,000 $ 207,000 *** 11%
$ 8,953,000 $ 1,744,370 19%
* Adjusted according to CPI values during June of each year.
** Proposed Budget, 1995-97.
*** Capital Improvement Plan estimates plus State Revenue Sharing.
STREET SYSTEM EXPENDITURES
HISTORICAL
1988 Report
Requirement Total
(Inflation Actual
Adjusted) * Expenditures Percentage
1987-88 $ 1,268,000 $ 110,480 9%
1988-89 $ 1,333,000 $ 542,953 41%
1989-90 $ 1,395,000 $ 539,196 39%
1990-91 $ 1,460,000 $ 73,150 5%
1991-92 $ 1,505,000 $ 316,054 21%
1992-93 $ 1,550,000 $ 878,194 57%
1993-94 $ 1,589,000 $ 1,086,251 68%
1994-95 $ 1,637,000 $ 929,000 ** 57%
$ 11,737,000 $ 4,475,278 38%
* Adjusted according to CPI values during June of each year.
** Estimated
I
GENERAL OBLIGATIION, o
TRANSPORTATION.PROJECTS
Option 1 -- $6.9 Million, $.19/$1,000 Real Market Value
11)
Option 2 -- $5.8 Million, $.16/$1,000 Real Market Value
1
•
0
{•L (
A!*l \�U
MEMORANDUM
/ , r\r„)
OREGO c� }`�
TO: ErO' ke Meadors, Chair
380"A"AVENUE Me of the Citizens Budget Committee
POST OFFICE BOX 369 Mik derson,President
LAKE OSWEGO, Members of the City Co cil
OREGON 97034
(503)635-0213 FROM: Alice L. Schlenk yor
FAX(503)697-6594
SUBJECT: Redevelopment Agencies -Tax Increment Financing
ALICE L.SCHLENKER, DATE: May 25, 1995
MAYOR
:HARLES C.(MIKE)ANDERSON,
COUNCILOR Attached is an article regarding redevelopment agencies and tax increment
financing. It is very well written.
BILL ATHERTON,
COUNCILOR Attachment
S HEATHER CHRISMAN,
COUNCILOR
BILL KLAMMER,
COUNCILOR
CRAIG PROSSER,
COUNCILOR
MARY PUSKAS,
COUNCILOR
• • PUBLIC
FINANCE
•
CreaTIF1ty Helps Cities
Find Development
lopme Dollars
These tax-sensitive times have made one unique method of financing projects from
low-income housing to malls especially valuable to planners and city managers.
By David Hitchcock
ountain View, Calif., created a broad term that encompasses not just
regional park, complete with areas like South Central Los Angeles
. Mgolf course, clubhouse, lake, but parts of high-fashion havens like
amphitheater and restaurant.Downtown Palm Springs. Still, according to the leg-
Los Angeles created Skid Row housing. islation, 20 percent of any bond pro-
Two vastly different projects with one ceeds or tax increment revenues must be
major thing in common — they would set aside for low- and moderate-income
not have been possible without tax housing.
increment financing. In L.A., proceeds from tax increment
Tax increment financing (TIF), also financings have helped build low- to
called tax allocation financing, can pro- moderate-income housing, supporting
vide city managers with a tool to target infrastructure, utility lines and commer-
city borrowing for specific redevelop- cial projects. But they also support a
T ment purposes. More than 35 states cur- number of social programs, including
1 here's no rently authorize tax increment financ- child care in project areas. "We think
ing, although the majority of the activi- that's what tax increment financing was
magic about it. ty has been in California,where munici- intended to do," says Pierre Lorenger,
It's just a palities have issued TIF bonds for 40 executive director of the Los Angeles
years. Many other states with authoriz- Community Redevelopment Agency.
revenue stream. ing legislation, such as New York, have "There's no magic about it. It's just a
We're basically yet to see their first tax increment bond. revenue stream. We're basically just tak-
But recent trends suggest that tax ing a mortgage on our cash flow stream."
taking a increment financing is spreading to first- No state has effective restrictions that
mortgage on time states and that TIF bond issuance would preclude the proceeds from being
in other states, like Michigan and Illi- used to bring in, say, a mall, and in fact, •
our cash flow nois,seems to be increasing. malls are one common result of tax
stream.' Tax increment financing was original- increment financings (California is try-
ly seen as a targeted financing mecha- ing to clean up the abuses inherent in
nism to help rundown areas and inner the system). Additionally, a number of
cities. In fact, the language in Califor- high-income communities prefer to sit
nia's legislation demands that the on bond proceeds rather than use them
financing be aimed at"blighted areas." to build low-income housing. Nation-
"Blighted," however, appears to be a wide, a number of law suits are challeng-
40 May 1995 AMERICAN CITY &COUNTY
e
ing cities on just that issue. Many of pledged. Third, taxpayers' rates do not Prop 13 and its progeny have
those are frivolous, but they can result change. Tax increment financing is a placed severe limitations on the abili-
in delays that effectively kill antici- reallocation of tax revenue at existing ty of local governments to issue bonds.
pated projects. tax rates, not an additional tax. In California, cities cannot issue
Despite all that, tax increment The fourth advantage, and the one bonds without a two-thirds vote of the •
financing offers city managers a num- that accounts for much of TIFs recent residents.
ber of advantages. First, it reallocates a popularity, is a result of the spread of In Oregon, Measure 5, a property ,
portion of tax revenues normally flow- tax limitation movements like Cali- tax limitation measure, has helped
ing to other overlapping jurisdictions, fomia's Proposition 13. prompt a number of cities into look-
such as counties and school districts, "Proposition 13 cut back many of ing at tax increment financing. Keizer,
and puts those revenues into the the resources this agency had counted for example, is using TIF bonds to
hands of a city or city-controlled rede- on,"'says Lorenger, whose redevelop- finance major infrastructure improve-
velopment agency. Overlapping tax- ment agency is one of the country's ments aimed at providing its down-
..,.w-«.,.... ..� .,-., ..,... .......,..,.« ._ ter:�...... _' _. . _ - -
a.
,,,,e4,,,;...,r'`�;-.4,- `. .... . _ ^ , '1/4**� r' The Shoreline Park district,the.-''
--x •.` �.,;-.:.4 . ----i 1 •- ti. - onlyh Fdistrictof its kind in the
•.' ` — r United States has been •�s ` `\ •.fit i. r, -c \v a- - - •' .-
-31}-�. `A -'�`�' '' ` A'..�,:s - ",, _ ' - developed largely through tax •
A. s 'ap o - . 4 f� •' increment financing.'"We could
`�` j - %1 , . `=.c.,,a...... .- - :;�y:a�yt 44.. �", not have done it[otherwise.]The -
t ).• - a '• • 4•-� a ''°4- `} .. t A\ * ..._,- city did not have the means to finance . ,.
. $ -. •r, 1 E e Rh a Z, • these projects,'says Patty Kong,
t 'e y j t•-77* -'-;;C' Z '' y assistant finance and administrative services
e • .4. --�aC ,';:' , '' director for the Mountain View Shoreline ---
.J.
c . : -.:.-> ' Regional Park Community.• . .
v e�m .r. - 710 t :gig* ' r�� s*a 'a v'r- .t; .'-see 171,7,41%.ma.t a xr':':-'
r � � k -
r4"" '•'qw-�- 'i .'- .' '- -. :, , ii•"i+° ,GaOAW • ;, n - ' . SW -` '`Sy"i"'�n°ty •
T r' F" e x v}.u'- d .;ti i+i'-4,-,..q. '}'^..«.Y -1 -'.. -£*'•'s x5 '.�mod.
-r...F,.. y.,�yr -*• cr��..�^+ee�.y- :��'tUvtsre�,x;'� -�• �.. '��.; ,e'a�' :-s- �;� �'`,-t-�'+g
�,.. Y - f-- ,y .,' per.
g r.
T" '.. -' .. � _ -
_ .............................................. 1 �ryl�.
a7a. . "+ar. � ...'^i.•r +,i -- t ,K 's++vim`•.rCI- w F� ,y $ w.F�:r,c,r.x:,�o•"'s•y'.r. - , --. " i -4 Y• 7
7. 1
-.........,...fir -.a .. Fem3 „,*-, „t„_a' .- , ---7'4i '_ yx t ,. .k, s,- r tl'i s _ -- r'--'..t'-';'-'._
` " '' a ,vfi ,. r § -r ' ` c4,'trs--",- )-7.- ,-- +. slF ° i- :-,; . x 7.7: •-•:;- --"F5i 1 o,?xz;rg'i't` aJ'.. ram. `'^"-.s��..•yz ti x- y ¢2 !•,-,5-•w.-. -...r �-r-) at•- ,,-w.,r a.
CC A�4
ing entities do not immediately lose most active with 25 project areas. town area with an identity. "We've
any tax revenue from the formation of "Revenue was cut back more than 60 built a major storm drain, and we're
a TIF district, yet the revenue pro- percent. But we already had made now in the process of undergrounding
duced in the future from tax base plans and raised expectations, so we utility wires," says Keizer City Manag-
growth goes to the city. had to find some way to meet those er Dottie Tryk. "We have a strip
Second, the city's general obliga- expectations." development in the middle of down-
tion is not pledged. A default by a tax Lorenger, who has worked for the town, so we're trying to do some aes-
increment district will not affect a agency for 17 years, has seen a boom thetic things to create a downtown
city's bond rating unless it stems from in tax increment bonds, partly identity." ID
common economic causes. because of Prop 13. He estimates that Tryk notes that the rehabilitation
Tax increment bonds are the oblig- had it not passed, the agency would of Kei:er's downtown without tax
ation of a specific tax increment dis- have been able to put off issuing increment financing would have been
trict except when other security is bonds for nearly a decade. "very difficult because of the political,
42 May 1995 AMERICAN CITY &COUNTY
• d r_ .'.:.« ' u - after rehabilitation)is being developed
t- ' '--- ,.:.� as a Single Room Occupancy dwelling
'', IIC _ — ; by the Skid Row Housing Trust and the
Church and Temple Housing Corp.,a
*if f` +��"' _ — 1"' - joint venture of All Saints Episcopal
a. ^ �: tr �':"*3° '• " Church in Pasadena and the Leo Baeck
. s- -_ _ - ..•• Temple in West Los Angeles.One of
,. *- several revitalization projects along a re-
emerging Main Street,the building's
Ill
•4__ '= rehab was made possible b tax
aigli
__� _` BARS Q # �� /,'�NARDS ! u UDG� increment financing.
0.
•b„_� .. ,..�.��,�.`_ where our revenues come from now.
y ,t-,..,; r._''. )i Y. r- � .T- _ • ... - : We could not have done it without
�. ►• _ � _. tax increment financing. The city did
-;�.,,w�.- ,�` - • . nothavethe means to finance these
y.
projects
- There is, of course, a down side to
tax increment financing. Few
investors looking for investment grade
debt are likely to buy bonds for a dis-
' trict unless already existing revenues
_.,, -. _.-_-_.__-_ -;._: 4:. -__�r. --. , •can support debt service. Problems in
- . three large Colorado TIF districts,
* ,- _.,.- Englewood, Littleton and Arvada,
�'-- 1, have helped bring home the risks of
• stand-alone TIFs dependent on specu-
lative future growth.
Q '� _ =—" _ _ Arvada, for instance, attempted to
- - 1 j rehabilitate an old historic district but
i ; - E= g
,� failed to lure enough retail merchants
.< � ,� — 4 -" - o .M! to the area.
,, i _ :a�� . _ _ „ � When the developer pulled out of
111
y— _ _ is the project, Arvada was left with $54
E 9� -"�' < .:��t a». --M , ,_.t :t ' million worth of tax increment bonds
Ea',:, ' _ -- it was struggling to pay.
r [` Tax increment financing works bet-
'--r i� - I" `' �. cZ `'.. ' . - ter, from an investors point of view,
� � � - ongoingareawithtax
��.. 1 1 -� as an project
��r ,. .....` �:e�. II increment revenue already in place.
a. _ _ Thus, to the extent tax increment
districts provide ongoing support for
no-tax climate here." View, for instance, tax increment redevelopment activity over a period
Because most TIF bonds do not fall financing in the Shoreline Regional of time,TIFs work fine.
under the same bonding restrictions as Park special district has prompted They can also provide project take-
general obligation debt, many cities construction of a vast recreational out financing after a private develop-
have started to issue them in lieu of area that has spawned impressive resi- ment is complete or allow a city to
GO bonds for general obligation-like dential development that subsequent- take off its GO pledge from a TIF
purposes. ly helped the area lure several high- once a TIF district has developed suf-
This trend in turn has produced tech businesses. ficiently.
increasingly restrictive state limita- The Shoreline Park district, the TIFs are also attractive because of
tions on the use of bond proceeds in only TIF district of its kind in the the special powers of eminent domain
states like California with its long his- United States, has about $50 million - that state law often gives redevelo -
tory of using tax increment financing. in outstanding debt, according to Pat- ment ajencies, allowing t em to
Finally, tax increment bonds are ty Kong, assistant finance and admin- assemble scattered private parcels for
attra a because they "pay for them- istrative services director for the redevelopment purposes. TIFs may
selves." In other words, the infrastruc- Mountain View Shoreline Regional grant a city special abilities to enter
ture finance y t e on proceeds Park Community. "The TIF was for into contracts with private developers
helps attract new private develop infrastructure support," she notes. or enter into development partner
ment, which in turn generates addi- "We have closed landfills and built ships with other governmental or qua-
the tax revenues. In Mountain the development, and that is primarily si-governmental entities. For example,
44 May 1995 AMERICAN CITY &COUNTY
.
•TIFs may allow a city the right to con- other jurisdictions has led to tempo- area that had seen more than $377
tract with schools for joint develop- rary problems in states like California, million in recent development —
ments or flood control districts to help where voter initiatives limit tax rates, including the downtown Renaissance •
build flood mitigation projects. and in Michigan, which drastically Center — and thus had an already
reduced local property taxes for impressive tax base.
V
CREATING A TIF DISTRICT schools. Historicallv,_such sweeping Occasionally, a TIF district encom-
A TIF district is mapped out in a revisions to tax laws have caused passes a single taxpayer, posing special
redevelopment plan. The current selected bond rating is o all below challenges. A single-taxpayer district
assessed valuation of the district is investment grade, although additional may have a difficult time receiving an
recorded, and underlying taxing enti-private development or su�seciueat investment grade rating without an
ties, such as school districts and coun- changes to state law have usually existing rating on the sole taxpayer.
ties, levy their normal tax rates upon restore e IF credit quality,., Yet a rating on the taxpayer does not
_
this base assessed valuation and --The ie most resilient TIF districts automatically translate into the same
receive tax revenues from it. have plenty of open land where new rating on the TIF bond for a number
When the district's assessed valua- development can grow the district out of reasons.
Lion grows above the base, the differ- of its problems. The taxpayer may sell its property
ence between total district assessed Roads and utility lines in industrial to a lower rated entity if the facility is
valuation and the base valuation is parks, low- and moderate-income not essential to its operation. Its
called the incremental valuation. The housing in urban areas, street re-rout- assessed valuation may drop because
same tax rates apply to the incremen- ing in congested districts, landscaping of economic changes or legal disputes,
tal valuation as to the base assessed along deteriorated boulevards and and agreements with an assessor set-
valuation; however, tax revenues pro- land acquisition for new development Ling minimum valuations may not be
duced by the incremental assessed val- sites are frequent uses for TIFs. enforceable. Tax rates also may
uation are remitted to the city's rede- In general, TIF bond ratings fall change.
velopment agency to be used for its below a city's GO bond rating, reflect- Rating criteria at Standard& Poor's
purposes and pledged to bond debt ing the more limited nature of a small for TIF bonds follow a number of fac-
service1 district within a larger municipality. tors, including the economic trends of
Incremental tax rates are outside This is not always the case, howev- the TIF district. As a general guide-
the city's control, a key feature of the er. Detroit, for instance, has a tax line, existing taxpayers should provide
TIF process. The city is dependent on increment bond rated higher than its enough revenue to meet all future
the tax rates of all the overlapping GO rating. That is because the TIF debt service in order to receive an •
taxing jurisdictions in the TIF district. district, which included a new office investment grade rating. No set cover-
The dependence on the tax rates of development, was carved out of an age ratio of revenues-to-debt service,
.' *1 "+' 'p4.10,A V4."?'t • „r+84idNry-,. K hs.,c y^e {� - 4 �. 4 .r..ti• ,.�.
�-
/IIIIIII
.P t *\ j 1 %.
t4 " w..':t3r ' �f . a.r f'' *tt' 1'''t ti %1i fi06i:::..aM f4": a4. 8r.. :- - . � 3 �� 0011101.111saaaa■aaaIN c d�;- . . '' , ,. 0%...11 Csaaaaaaayl P -• �_\y .
:;iuuaaaoaaaaaaouaa■samiessamignamm R_"�-i -,
�•' 1 .gg �,.{s,. .i }(llf� 1I•mSHI aaainwiri Eanliii ` 1 - _____ — ,, ,
1.. /r 1111■ ,.1 1. ; ! • iIaaltaaltaaapal.al I -- � •.r + r
,1 N is:..r .. •+t�i�ul = • ' i l s aafassia1I I _
s a. t-��fAi1 �}•� �� F -' �1taa7• p IE11 I. :_-��-----
E pt., C -�;.k. L„ei . i. :44:rl.ii' m Tr' ev Ill I. `--` a_•a -•,•••c 1 �"..t�. k.�
. Iris .+ h„ 1�� ■i 'J' 'r 1= Y .•,� _s. .. dirt.J. _ts-I I T II, .._1' 1l 9 - ..�•t''1.1.I J► e. 1 . ` _L_
i —�j : ;ill , •""�t,lr ai it. = �:7�'i'i--- — T •o' •f ,t', i _ /•. ^t.l-,--- '
r+ . t „• tot � =wSr ��i"'` *,�Ty a; s �.pv x d tie ,_� � .s ., ;... x .4 . .'.;0a ;,:-: X�� . ` _4 �y�
, :, "k-0 r }
•
u ..;, V.wis gin^ J, aG lh.,_ F. '` 'y' -,i4 -_a-.. .:,�.sfi..•s,+�-�-.{_.".."��....7. ----,,,r.r�"va`' ._
-'
` , � rv+F �. - ';''''IT C3_ oeY - `�5 —= "" "'- ,yam - - ..Y a"., = .1. 1,01:i si " . r `~�i-xk-tit-'�t-47
� >" t g' : � c.
r. , .; _
. a- Ai,w.w.i; i
5,,�
The expansion of the Los Angeles Convention Center was the product of an agreement between the city and the Community
Redevelopment Agency,which invested S126 million in the project.As part of the agreement,the CRA built 1,101 affordable
housing units to replace the 410 units demolished during the expansion.
46 May 1995 AMERICAN CITY &COUNTY
•
however, will determine a given bond
rating. Rather the level of debt service
coverage is examined in relation to
the diversity of the tax base.
Bond analysts examine whether (�
maximum annual debt service can still J�/f J
be covered if the top taxpayer suf-
fered, for example, a complete fire �
loss. Could debt service still be coy- - -
ered if the top three taxpayers Q - —' u f✓
declared bankruptcy and no longer CITY HALL_ 7
paid taxes? The top five? In this
respect, the true diversity of a tax base
is measured by the assessed valuation
of the top taxpayers divided by district a il, /�
incremental assessed valuation as ' °J,
opposed to total district valuation. \ 11
Thus, more than one taxpayer can �— —
potentially account for more than 100
percent of the incremental tax base; _If.
i.e., if any one of several taxpayers
CD
goes bankrupt, the redevelopment
agency loses all tax increment. Bank-
ruptcy of a taxpayer causes particular ._
concern, as federal bankruptcy law
forestalls local tax foreclosure action.
If coverage of debt service is suffi-
cient for a given rating category, it "I'm sorry,your Honor.
should be locked in with an additional *' We had to put the new fire engine
il bonds test prohibiting additional debt in next year's budget!"
issuance without a minimum covera e
ratio. on ana ysts ten to focus on
the additional bonds coverage test
rather than on a high level of current
coverage.
The incentive to issue additional
debt always exists, since tax rates will
not go up, and the city is essentially
taking revenue that would have gone
to the overlapping jurisdictions.
Additional bonds tests vary widely,
but they typically require 1.25 times
coverage of future maximum annual
debt service by revenues to be pro-
duced from the current assessed v Now you can purchase vital equipment when
tion roll. you need it. All it takes is a municipal
Sometimes a portion of bond pro- lease/purchase plan from The Associates.
ceeds can be escrowed separately out- With this plan, you can eliminate large, up-front
side the additional bonds test, if the cash outlays and general obligation debt. Even
portion is backed by U.S. government better, payments are applied toward purchase.
obligations or investments of a quality So when vital equipment can't wait, call
equal to the bond rating of the dis- The Associates. We've got the experience
trict. Bond proceeds are then drawn to customize a municipal lease/purchase
plan that's just right for you. (�
down into parity debt only when they 1.8U0.421-4779
can be supported by current revenues. 1
.t
lo Additional bonds tests that include ,.,tee`
projected revenues from construction .
We listen. We respond. ASSOCIATES
not currently on the assessor's roll
severely weaken the test.
Even buildings waiting to be placed
Circle No.27 on Reader Service Card
AMERICAN CITY 6t COUNTY May 1995 47
on the assessor's roll may fall far under can occupy a single shopping mall, dependency on timely payment by a •
expected valuations when actually presenting similar fire or economic major taxpayer by guaranteeing, under
finalized on the tax roll after tax risk. A particular type of property, like selected conditions, payment of levies •
appeals. Sometimes credit can be giv- computer equipment, may be depre- on a timely basis.
en for the scheduled roll-off of known ciable. Another — cars at an auto Furthermore, litigation is always a •
. tax abatements. Most bond issues cre- dealership, for example — might be possibility, particularly for a state's
ate a debt service reserve equal to moveable. And stave tax laws may first TIF bond. The reallocation of
maximum annual debt service. affect just one type of property at the taxes creates winners and losers and,
Except for tax collection costs, no expense of other types. thus, an incentive to attack the con-
Pf "operating expenses" should come In general, the larger and more. stitutionality of authorizing legisla-
before payment of debt service in the. diverse the district's economic funda-_ tion. Failing that, litigation has
flow of funds. - mentals, the better the rating. Some- addressed the legality of hearing pro-
Concentrated tax bases can occur times county tax collection and remis- cedures, the process of eminent
in different guises. Many taxpayers sion practices can help mitigate domain and legislation establishing
the TIF district.
—i While not often successful and
occasionally frivolous, litigation does
• h •G cillan e; have the effect of delaying develop
$ j�9 no as
se of b,� .'__ ment. Salt Lake County, Utah, for
'�",- example, refused to hand over tax,./ increment revenues to Salt Lake City
❑❑ for several years, until litigation over
'Do
VI
the state authorizing law ended. Ideal
00authorizing legislation would specify
penalties for non-payment of funds.
as These kinds of lawsuits are so com-
�,! 1 �,__i mori in California that many redevel-
opment agencies willingly enter into
Untangle the Conflicts of Interest! tax sharing agreements with overlap
ping taxing jurisdictions to forestall •
With too many arms latching on co all sides of the public financing
potential delays.
transaction,underwriters can never avoid the potential of a conflict
of interest. One side will inevitably ger the squeeze. Avoidrill4:414.:'-- - FACTORS AFFECTING RATINGS
becoming prey to a conflict of interest,safeguard your voyage Numerous factors, from upcoming
and your agency by having an independent voter initiatives and changing state
public finance advisor on board your ship. `j taxation laws to concern over haz-
Members of the NATIONAL ASSOCIATION OF 144 ` ardous waste sites and floodplains, can
affect a TIF bond rating. The most
INDEPENDENT PUBLIC FINANCE ADVISORS .'? ,•q 3
v -
important rating factors, for most
include the most knowledgeable and ; ' r
experienced advisors in the country. 4.�-* bond issues, include the size of the dis-
Unaffiliated with underwriting, ,,- r if trict, current coverage of maximum
�l �dr r,'- annual debt service, concentration of
members have no conflict of `;° l�) �.` J //
l Vif taxpayers, the additional bonds test,
interest,serving only the �� r �l, .
public agency. �' � historical growth trends and the
} 1 k i ''-,- ii. acreage available for new develop-
�� ment or redevelopment.
_I � Still, tax increment financinghas
SAFELY NAVIGATE THE
SEAS OF PUBLIC FINANCE, _.: �_ �- been growing in the United States.
CALL.aoo-NAIPFAI TIFs have not experienced the default
FOR MORE INFORMATION rates of other types of Ca ifo- spe-
AND A LIST OF MEMBER FIRMS. cial district debt during the state's c,-
rent economic downturn, mainly
1 t` because most bond issues already had
1�O�P`AS=�q� '"' .- ��P, "coverage in the ground," a term
�i �1, p meaning that enough assessed valua-
•,��� • j , 4 1
-, i tion is already built to support tax
0„ ' . ���, increment debt service.
AoygN`DVSOQ.S ' ' �" --�+ Previously, TIFs in California had
�` been strained by Prop 13, which Bras-
' , i` ' Q ' tically reduced tax rates and rolled
Circle No.28 on Reader Service Card
48 May 1995 AMERICAN CITY &COUNTY
back assessment years. However, of
•
the 55 TIFs rated by S&P before Prop
13, none has ever defaulted, although
a few dropped below investment grade .
III for a time.
Similarly, TIFs in other western -\ -
states experiencing recent tax limita- :,,, 4 it
Lion initiatives appear to have sur-
vived, albeit under stress. Ironically, !. !
states that passed tax limitation initia-
tives now find that TIFs that survived
with adequate debt service coverage
gained creditworthiness because of the
creates i.on of a more stable tax rate at a • ri
mandated"floor." !!
n areas experiencing rapid devel- -j - ....., �
opment, TIFs may quickly gain strong _
creditworthiness, as well as serve city '�r;;,.;..✓�'J,
T r AMPHITF ATREArMOUNTAIN VIEN r
managers as a useful tool for directing T f~'
new growth or ameliorating previous Imo_ . ___. ._ _a 46--
i. SEE YOU SOON CHEERS **� z
blighted conditions. ' - y -
David Hitchcock is director of public = ®y ' ��_- —• = -. f"�"
finance, Western Region, Standard t _ ' -."�. _:` •"
Poor's, New York. 1 _.
s`"
Mountain View's amphitheater,part of ay1+-� ^ �
the city's TIF district,seats 25,000 and - � " ', a
hosts major concerts. r.z. F � '" "'f^S s
III ,____
..
. .
. . .:
...
IT'SA cI NANCIAL CIRCUS AND}_„:
r . ._
. _ . .,. . .,._ ,
f U 11 [1 IC0NTlU III IlU YOU'RE IN THE SPOTLIGHT.' ..
. ....._.
7
„,....,,,..„, _
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Circle No.29 on Reader Service Card
AMERICAN CITY & COUNTY May 1995 49