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Description
  
ProjectFocus
  
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Tax increment financing (TIF) works by freezing the property tax revenues that flow from a designated project area to the city, county, school district, and other taxing entities at the “base level” in the current year. Additional tax revenue in future years (the “increment”) is diverted into a separate pool of money, which can be used either to pay for improvements directly or to pay back bonds issued against the anticipated TIF revenue.
 
In California, TIF has historically been used by redevelopment agencies to raise funding for infrastructure improvements, land assembly, housing, and other projects in redevelopment areas. However, redevelopment agencies in California were required by state law to dissolve as of February 1, 2012. Unless the state legislature takes further action, TIF can no longer be used in its traditional form to fund new projects (i.e., by redevelopment agencies). However, cities may still be able to use infrastructure finance districts (IFDs), a more limited form of tax increment financing, in some situations.
 
Value Capture
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Development impact fees are a one-time charge to new development imposed under the Mitigation Fee Act. These fees are charged to new development to mitigate impacts resulting from the development activity and cannot be used to fund existing deficiencies. This means that for improvements that benefit existing as well as new development, impact fees can only pay for the portion of the improvement that benefits the new uses. Cities must find other funding sources to cover the costs that benefit existing uses. Impact fees must be adopted based on findings of a reasonable relationship between the development paying the fee, the size of the fee, and the use of fee revenues. Development impact fees do not require voter approval and are commonly used by California cities to address the impact of new development on schools, parks, transportation, etc. However, because impact fees are dependent on new development projects, they are not usually consistent or predictable enough to serve as security for the issuance of bonds.
 
Value CaptureBike/ped improvements; Community facilities (fire, police, library, child care, schools, etc.); Electricity/utility infrastructure; Landscaping; Lighting; Local streets/roads; Parking; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Water
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Like redevelopment tax-increment financing (TIF), infrastructure finance districts (IFDs) divert new local property tax revenues (the increment) to either pay directly for the construction of infrastructure and public facility improvements or to issue bonds to finance those improvements. Under existing California law, a city or county may create an IFD by ordinance if a two-thirds majority of property owners in the proposed district approve the IFD, so long as there are no more than 12 registered voters living within the proposed district. More than 12 registered voters requires a two-thirds vote of all registered voters living in the district. In addition, all other affected taxing entities (e.g., counties, special districts) must approve the contribution of their portion of the tax increment to the IFD. Unlike redevelopment TIF, however, IFDs cannot divert property tax revenues from school or community college districts. Also under current law, IFDs may only be formed in areas that are not within current or former redevelopment project areas. Since the elimination of redevelopment in California, however, the state legislature is considering several proposals to make IFDs easier to implement, including lifting the restriction on forming IFDs in former redevelopment project areas and reducing or eliminating the requirement for voter approval.
 
Value CaptureBike/ped improvements; Electricity/utility infrastructure; Landscaping; Lighting; Local streets/roads; Parking; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Transit/transit station; Water; Community facilities (fire, police, library, child care, schools, etc.)
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  • Many state and federal transportation funds are allocated through California’s Metropolitan Planning Organizations (MPOs) and Regional Transportation Planning Agencies (RTPAs). To find your regional transportation agencies, check here: http://www.dot.ca.gov/hq/tpp/offices/orip/
  • California’s local air districts may offer grants for transportation and other projects that improve air quality. To find your local air district, check here: http://www.arb.ca.gov/capcoa/roster.htm
Grants
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In a special assessment district, property owners agree to pay an additional assessment to fund specific improvements or services within that district. The special assessment’s purpose must be determined prior to the district’s creation and the amount that each property owner pays must be directly proportional to the benefit the property will receive from the proposed improvement. Assessment districts are established by a vote of the property owners and require a simple majority (50% plus 1). California has dozens of statutes defining different special assessment district tools for distinct types of improvements and services, including everything from business improvement districts to lighting and landscaping, sewer, utility, parking, and community benefit districts. Although California law varies depending on the type of assessment district, most types of districts can issue tax-exempt bonds.
 
For example, a business improvement district (BID) or a property-based improvement district (PBID) assesses and provides benefits to either business owners or property owners, respectively, typically in a downtown or other defined commercial area. As with other special assessment districts, BIDs and PBIDs must be approved by a simple majority (50% plus 1) of affected businesses/property owners, and the amount that each business or property owner pays must be proportional to the benefit that they receive. Distribution of the money is managed by a board composed of affected businesses or property owners. BIDs and PBIDs can be used to pay for a wide range of activities, including parking facilities, street and streetscape improvements, lighting and landscaping, marketing and promotions, and business attraction and retention. Unlike other assessment districts, however, BIDs and PBIDs cannot issue bonds.
Value CaptureBike/ped improvements; Community facilities (fire, police, library, child care, schools, etc.); Electricity/utility infrastructure; Lighting; Landscaping; Local streets/roads; Parking; Ongoing operations and maintenance; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Water
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Mello-Roos community facilities districts (CFDs) are a type of special tax district formed when property owners within a geographic area agree to impose a tax on property in order to fund infrastructure improvements or services. These fees can then be used either for pay-as-you-go financing or to pay off tax-exempt bonds issued against the anticipated revenue from the CFD. CFDs are flexible in both the basis and application of tax; direct proportionality of benefit is not required, as with special assessment districts. Rates and methods of apportionment (RMA) have been based on land or property square footage or number of bedrooms; distinct areas and land uses may also be taxed differently. The only standard for the special tax is that it be reasonable and that it not be ad valorem (i.e., it cannot be based on property value). CFDs are also flexible in the type of improvements or services that can be paid for. They are used most commonly for streets, water, sewer/drainage, electricity infrastructure, schools, parks & police. The method of apportionment and types of improvements or services to be authorized, as well as the amount and term of any bond, must be designated.
 
Similar to an IFD, CFDs require a two-thirds vote of property owners, so long as there are no more than 12 registered voters living within the proposed district. More than 12 registered voters living in the district requires a two-thirds vote of registered voters. Because of this voter approval requirement, CFDs are most commonly formed in undeveloped areas where the district encompasses a small number of property owners who intend to subdivide the land for sale. (One provision of the Mello-Roos Community Facilities District Act is that the fees can be proportionally subdivided with the land and passed on to the future landowners.)
 
Value CaptureBike/ped improvements; Business attraction and retention, marketing, and promotions; Community facilities (fire, police, library, child care, schools, etc.); Electricity/utility infrastructure; Landscaping; Lighting; Local streets/roads; Ongoing operations and maintenance; Parking; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Water
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California law authorizes cities to conduct structured, bilateral negotiations with developers in order to obtain desired improvements in exchange for development rights. The extent to which a new development project can contribute to the provision of infrastructure or other public improvements depends on construction costs, lot size and configuration, parking ratios, market prices, and other factors related to the anticipated costs and revenues of the development project. All of these factors vary depending on the particular project and timing of development, so the amount of public benefits that can be provided is unpredictable and must be negotiated case by case.
 
Value CaptureBike/ped improvements; Community facilities (fire, police, library, child care, schools, etc.); Electricity/utility infrastructure; Landscaping; Lighting; Local streets/roads; Parking; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Water
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Joint development refers to a real estate development project that involves a cooperative arrangement between a private sector entity and a public entity like a city, county, redevelopment agency, or transit agency. Joint development arrangements can take a number of forms, including the sale or lease of publicly owned land or air rights for specific types of development, or joint construction of a transit or other public facility. Depending on the particular arrangement, the public and private partners can share costs, revenues, and/or financial risk. Joint development is only applicable where the public sector owns land.
 
Joint development can allow a public agency to benefit from a private developer’s expertise and access to credit, while maintaining some control over the use of public property and potentially receiving revenues from the development. From the private developer’s perspective, partnering with a public agency can provide access to subsidy or an agency’s bonding capacity, and/or help defray some of the risks associated with development. On the other hand, joint development can have downsides for both parties, leaving the public sector exposed to financial risk and reducing the private developer’s flexibility.
 
Value CaptureBike/ped improvements; Community facilities (fire, police, library, child care, schools, etc.); Electricity/utility infrastructure; Landscaping; Lighting; Local streets/roads; Ongoing operations and maintenance; Parking; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Transit/transit station; Water
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A private transaction or transfer fee is a charge that real property buyers are contractually required to pay to a private party, such as to the property’s developer or to a homeowner’s association. Developers sometimes attach these private transfer fees – different from public transfer taxes imposed by state or local governments – to new homes in order to pay for infrastructure or homeowner association costs, or to create a long-term revenue stream for the developer or original land owner. The fees are usually calculated as a percentage of the sales price and recorded in the property’s deed or covenant. Depending on the terms recorded, the fee may apply only the first time the property is sold or subsequent resale as well. This type of fee is relatively new and untested as a source of revenue for public agencies and would probably only be applicable where the public agency owns land (i.e., as part of a joint development deal).
 
Value CaptureBike/ped improvements; Community facilities (fire, police, library, child care, schools, etc.); Electricity/utility infrastructure; Landscaping; Lighting; Local streets/roads; Ongoing operations and maintenance; Parking; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Transit/transit station; Water
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Housing, Community, and Economic Development

 

Transportation

 

Parks/Open Space

 

Planning Grants

 

Water/Sewer/Storm Drains

GrantsBike/ped improvements; Business attraction and retention, marketing, and promotions; Community facilities (fire, police, library, child care, schools, etc.); Electricity/utility infrastructure; Landscaping; Lighting; Local streets/roads; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Transit/transit station; Water
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User Fees
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General Smart Growth/Sustainability

 

Transportation

 

Water and Related

 

Housing, Community, and Economic Development

GrantsCommunity facilities (fire, police, library, child care, schools, etc.); Electricity/utility infrastructure; Landscaping; Lighting; Local streets/roads; Parks/open space; Sewer/stormwater; Streetscape/placemaking improvements; Transit/transit station; Bike/ped improvements; Water