To: Honorable Mayor and Members of City Council
From: Vin Smith, Community Development Director
Prepared By: Neal Harrison, Economic Development Manager
TITLE:
Title
Infrastructure Financing Plan for the City of Napa Enhanced Infrastructure Financing District
LABEL
RECOMMENDED ACTION:
Recommendation
Adopt a resolution approving the Infrastructure Financing Plan for the City of Napa Enhanced Infrastructure Financing District, the formation of such District and the allocation of the City’s Incremental Tax Revenue generated in such District.
Body
DISCUSSION:
An Enhanced Infrastructure Financing District (“EIFD”) is a governmental entity that may be established by the City Council to use future incremental City property tax revenue from within the existing tax rate to fund public capital facilities and infrastructure, as well as other specified projects of communitywide significance that provide significant benefits to properties within the EIFD as well as the surrounding community. EIFDs are funded by capturing all or a portion of the future property tax increment revenue (i.e., the difference in property taxes received by the City prior to and after establishment of the EIFD) generated within the boundaries of the District. Thus, there are no new taxes imposed on the public. The EIFD may finance projects through the issuance of bonds and/or under a “pay-go” model where money is spent as it is collected. The requirements for the City’s establishment of an EIFD are set forth in Chapter 2.99 of Part 1 of Division 2 of Title 5 of the California Government Code, commencing with Section 53398.50, (referred to as the “EIFD Law”).
EIFDs are governed by a legislative body known as a public financing authority (“PFA”), which is composed of members of the legislative bodies of the taxing entities that allocate property tax revenue to the EIFD and two members of the public.
The proposed City of Napa Enhanced Infrastructure Financing District (“Napa EIFD”) boundaries include areas of the City that are currently vacant, significantly underutilized, and/or proposed for extensive development or redevelopment, as these areas represent the greatest potential for property tax growth and where investment in infrastructure has the capacity to trigger substantial economic development benefits.
Formation of the Napa EIFD would not create additional tax burden on property owners, residents, or businesses within the Napa EIFD. The Napa EIFD allows for the utilization of property tax increment revenues to leverage bonds and other finance mechanisms to encourage growth and development. If created, the Napa EIFD has the potential to help generate substantial financial benefits for the City and other taxing entities that receive property tax revenue from the properties within the Napa EIFD, including additional property tax revenue, sales tax revenue, transient occupancy tax revenue, business license and development-related fee revenues, in addition to ancillary benefits (e.g. job creation, wages) associated with the redevelopment and revitalization of a key area of the entire region.
BACKGROUND
On April 20, 2021, the City Council adopted a resolution establishing a Roadmap for the formation of the Napa EIFD and its PFA. The goal of the Roadmap was to document the initial steps needed to establish the PFA and appoint its members, including nominating three Councilmembers to the PFA; and establish the Napa EIFD to create a mechanism to assist in the financing of public facilities of communitywide significance
On July 20, 2021, the City Council adopted two resolutions: a Resolution of Intention to establish the Napa EIFD (“Resolution of Intention”) and a Resolution establishing the PFA for the Napa EIFD (“Napa PFA”). The Napa PFA is the Napa EIFD governing board made up of three Council members and two members of the public.
On August 24, 2021, the PFA held their first meeting and adopted a Resolution to direct the preparation of the Infrastructure Financing Plan for the Napa EIFD (“IFP”). The IFP will establish the legal description of the Napa EIFD boundaries, describe the projects that may be funded by the Napa EIFD, identify the maximum portion of incremental property tax revenue and projected total revenue that will be allocated to the Napa EIFD by the City, evaluate the net fiscal impact of the Napa EIFD to the City’s General Fund, and identify the date when the Napa EIFD will cease to exist. The current draft of the IFP is attached as Exhibit A.
On October 20, 2021, the Napa PFA held their first official public meeting to review the draft IFP and set the official public hearing schedule.
On December 2, 2021, City staff presented the Napa EIFD and the IFP to the Planning Commission. This was informational to provide the Planning Commission the opportunity to learn about the Napa EIFD and provide comments.
On February 2, 2022, the Napa PFA held the first official public hearing to receive comments from the public.
Following that hearing, City Staff with the City’s consultant, Kosmont Companies, made the following changes to the IFP based on Napa PFA feedback between the initial draft IFP and the current version dated February 17, 2022.
• Section 2.0 - addition of language clarifying that no tax increment will be allocated to the EIFD from property outside of current City boundaries unless it is annexed to the City
• Section 3.2 - removal of the phrasing “priority” and “secondary priority” and clarification that the list of projects are divided between those that had extensive planning already conducted and those additional planned projects that require further study and evaluation, but that the PFA has authority to approve any projects based on determined approval processes
• Section 5.0 - addition of language clarifying the contingent nature of annual allocation of tax revenues by City
• Section 5.4 - addition of language clarifying the extent of dollar allocation and approval process
• Section 9.0 - addition of Glossary of terms used throughout the IFP
The EIFD Law requires the Napa PFA to hold three public hearings, after which it may adopt a resolution proposing adoption of the IFP and formation of the Napa EIFD. Before the Napa PFA may adopt this resolution, the City Council must hold a public hearing and adopt a resolution approving the IFP and file the resolution with the Napa PFA.
In the Resolution of Intention, the City Council called a public hearing for December 7, 2021, to consider the adoption of a resolution approving the IFP and the proposed formation of the Napa EIFD. Pursuant to advice from City Staff, the City Council delayed holding the public hearing to give City Staff and its consultants more time to prepare the IFP.
City Staff has caused a notice of public hearing to be published in the Napa Valley Register and Staff recommends that the City Council adopt a resolution approving the IFP and the proposed formation of the Napa EIFD and approving the allocation to the Napa EIFD of the City’s property tax increment generated by taxable properties in the Napa EIFD.
City Staff believes that the IFP provides the City Council with appropriate opportunities to review and approve the proposed financing activities of the Napa EIFD.
NEXT STEPS:
Upon Council’s adoption of the recommended resolution (Attachment 1), and before the IFP receives its final approval from the PFA, the PFA will conduct at least two additional public hearings to receive comments from the public with no less than 30 days between each hearing.
FINANCIAL IMPACTS:
If the Napa EIFD is formed, incremental property tax revenue generated by increases in the assessed value of properties within the Napa EIFD that would otherwise be received in the City’s general fund would be allocated to the Napa EIFD for the purpose of public facilities and projects of communitywide significance. The IFP provides that City Council approval is required before the PFA may issue bonds or incur other debt payable from tax increment revenue allocated to the Napa EIFD.
CEQA:
The Community Development Director has determined that the Recommended Action described in this Staff Report is not subject to CEQA, since it is not in-and-of itself a “project” (pursuant to CEQA Guidelines Section 15378) since it does not result in a physical change in the environment. However, future actions (such as the funding of infrastructure improvements using funding from the Napa EIFD) will be subject to environmental review in accordance with CEQA at the “earliest feasible time” prior to “approval” consistent with CEQA Guidelines Sections 15004 and 15352.
DOCUMENTS ATTACHED:
ATCH 1 - Resolution Approving the Napa EIFD IFP
EX A - Infrastructure Financing Plan - Napa EIFD
Appendix A - Napa EIFD Boundary Map
Appendix B - Legal Description
Appendix C - Tax Increment Analysis
Appendix D - Fiscal Impact Analysis
NOTIFICATION:
Legal notice of public hearing was published in the Napa Valley Register on February 18, 2022.