The Oakland Coliseum JPA / EIFD: How It Would Work

Oakland (Special to ZennieReport.com) – On April 15, 2022 in the Zennie62Media, Inc, news site Oakland News Online, this author created the idea of the Oakland Coliseum JPA / EIFD. Or taking advantage of a provision in California law that permits Joint Powers Authorities to employ Enhanced Infrastructure Financing District law to help finance development and community benefit projects.

The main reason is the African American Sports and Entertainment Group (AASEG), which has an exclusive negotiating agreement with the Coliseum JPA, would need to employ tax increment financing, or “TIF”, to achieve its objectives.

Moreover, since AASEG was already working under that exclusive negotiating agreeement with the Coliseum JPA, a plan for a Oakland Coliseum JPA / EIFD that allows the fusing of the Coliseum JPA organizational structure with that of a redevelopment agency, and the collective use of tax increment financing, was the logical next step.

But What Is An EIFD, Let Alone Oakland Coliseum JPA / EIFD?

As reported at ZennieReport.com before, EIFD legislation was created in 2015:

On January 1, 2015, Governor Jerry Brown signed into law, SB628, “Enhanced Infrastructure Financing Districts” (EIFDs) which allows for a separate government entity1 to be created by a city or county within a defined area to finance infrastructure projects with community-wide benefits. EIFDs are an upgraded version of the Infrastructure Financing District (IFD). When formed through a Joint Powers Authority (JPA), an EIFD can be established without voter approval. EIFDs can finance public infrastructure projects, as well as private child care centers, affordable housing and parking facilities. While no voter approval is required to form an EIFD, a 55% affirmative vote is required for the EIFDs issuance of bonds.2 Through the establishment of a Joint Powers Authority, the EIFD accommodates more flexible institutional collaborations.
Source: Oakland News Online

So, what allows a Joint Powers Authority like the Oakland-Alameda County Coliseum JPA the right to employ EIFD law? Well, AB 336 does. As pointed out at Oakland News Online and ZennieReport News:

AB 336:, which was also signed on June 28^th 2021 by California Governor Gavin Newsom, will allow any member of the legislative body of a participating affected taxing entity who serves as a member of the PFA of an EIFD, to serve as a member of the governing body of a Joint Powers Authority (JPA) where the taxing entity is a member. This bill eliminates potential conflicts in current law against public officials holding incompatible offices. Incompatible office law generally prohibits a public officer, including an appointed or elected member of a governmental board, commission, committee, or other body, from simultaneously holding two public offices that are incompatible. AB 336 has the potential to lower transactional costs of an EIFD and may increase efficiency by clarifying the roles of board members.
Source: Oakland News Online

What The Coliseum JPA As Redevelopment Agency, AKA Public Financing Authority, Could Look Like?

Since previous posts at ZennieReport and Oakland News Online and Oakland News Now Blog news sites have focused on the specifics of how to bring a combination Coliseum JPA and EIFD to life, we can boil the process down to these steps:

Oakland Coliseum JPA forms basic on-paper structure and financing plan for organization in collaboration with Oakland Economic Development staff. Project manager and consultant hired by Coliseum JPA.
Project manager and consultant establish official map boundaries with Alameda County Assessor. (EIFD boundaries with respect to “assessed value”, if properly done, can yield the revenue required for a redevelopment project of scale.)
Determination of who staffs and sits on Coliseum Public Financing Authority.
Passage of Coliseum JPA / EIFD Legislation at Coliseum JPA level.
Approval of Coliseum JPA / EIFD Legislation by Oakland City Council and Alameda County Board of Supervisors level.
County of Alameda Approves Coliseum JPA / EIFD Public Financing Authority to collect property tax revenues. Actual collection done by County Assessor.
City of Oakland Approves Coliseum JPA / EIFD Public Financing Authority bonding capacity.
Public Financing Authority sets first meeting and agenda, focuses on formation of Infrastructure Financing Plan with respect to proposed future development and capital improvements projects.
Public Financing Authority sets project budget parameters and determines projects of “community-wide significance” after requested input of Oakland City Council
Public Financing Authority staff and consultant write Infrastructure Financing Plan.
Public Financing Authority approves Infrastructure Financing Plan.
Public Financing Authority holds competition to select master developer and developer teams. Developer teams contribution to project estimated and part of request for proposal along with PFA’s estimated subsidy amount for project.
Public Financing Authority staff and consultant and bond financial manager start work on bond issue.
Public Financing Authority approves bond issue.
Bond underwriter issues bond issue on behalf of Public Financing Authority.

What The Map And Financing Should Look Like For Coliseum Public Financing Authority

After further review, it was determined that a target base year assessed value of $1billion is ideal. And the best way to achieve that is a EIFD boundary that starts at the East Creek Slough, then 50^th Avenue to San Leandro Blvd, then San Leandro St to 98^th Avenue, 98^th to Doolittle Drive, Doolittle Drive to Hegenberger, Hegenberger to Earhart Rd, Earhart Rd to Swan, Swan to MLK Regional Shoreline, then to tip of the penensula and across to San Leandro Bay Shoreline and up to East Creek Slough.

Assuming a rate of growth in assessed value of 4 percent annually, the first year of revenue would be $224,000, then $456,960.00 for year two,

Assuming only using a base-year asssesed value financed project (which is not a real objective for obvious reasons), part of the bond proceeds should be used for Public Financing Authority administrative costs necessary to administer the plan, so that would serve to pay for Public Financing Authority staffing and equipment needs.

What Is The Tax Increment Revenue Available From The Coliseum JPA EIFD Area?

Calculating tax increment revenue is taking base-year (or first year of property tax revenue collection) then in the 2nd year, estimating the rate of growth in base-year assessed value, subtracting the base-year assessed value, and realizing the difference, or “tax increment”.

Then the “tax increment” is multiplied by the property tax rate, and that gets the First Year of TIF Revenue.

To get Year Two, estimate the rate of growth in assessed value from Year One to Year Two,

Then take Year Two assessed value and subtract the Base-Year Assessed Value.

We add our annual TIF revenue each year to get our cumulative total, and we do this process 45 times, representing 45 years of TIF Revenue calculation rounds.

The total bondable TIF revenue over the allowed 45 year period would be $808,170,637.18. Realistically, we can bond 50 percent of that, (which equals a two-to-one debt coverage ratio) or $404,085,318 – 7 percent of that for admin would be $28,285,972.3.

That would be the Coliseum PFA’s or Public Financing Authority’s baseline budget for the next ten years, or $2.828 million, annually. That would be on top of what the Coliseum JPA currently takes in each year. That would leave $375,799,346.

Now, if we take the total TIF revenue stream, then apply the 2 to 1 debt coverage ratio, that’s the same as 50 percent. Now, to determine the bond proceeds we can expect, we multiply the annual 50 percent of the TIF revenue by 0.5623862574, which is the expected ratio of semi-annual bond interest rate payments of 3.5 percent, and then sum the semi-annual payments, and get bond proceeds of $227,252,029.99 against a bond cost of $355,055,448.63 (which is the bond proceeds times a calculation of 1 plus the same 0.5623862574 ratio between proceeds and total bond cost, or 1.5623862574.)

Now, we have learned that we can expect double the bond proceeds if we double the total base year assessed value from $1 billion to $2 billion, or $454,504,059.98. Or, we can start with the $1 billion base year assessed value and via new construction, add the additional $1 billion in year 4, which would represent the time it would take to build a privately-owned mixed-use stadium.

So, if you a lay reader, at $1 billion assessed value, we can see a $227,252,029.99 bond issue, but if we are at $2 billion, then it’s a $454,504,059.98 bond issue.

What we have done is proved that we don’t have to wait for the TIF revenue stream to grow (contrary to the erroneous claims of some consultants in documents presented by the Coliseum JPA for the October 20th meeting). The Coliseum PFA can calculate its size ahead of time, and float our bond issue.

Please keep in mind, that assumes no new buildings in the entire area, either built with the involvement of the PFA or not, and only a small 4 percent rate of growth in annual assessed value versus an actual annual average rate of growth of just over 6 percent per year for the area.

From here, we can add the assessed value of proposed projects, and then see what our final total bondable TIF revenue would be. But this gives us a “base line” financial picture.

A Possible Future: The Oakland-Alameda County Coliseum Public Financing Authority

Those are the broad brush-strokes of a proposed plan that will take the Oakland-Alameda County Coliseum Joint Powers Authority well into the future, and produce an organization that has its own sustaining capital base and is not dependent on the City of Oakland or the County of Alameda.

A Summary Of How Assessed Value Is Used To Determine TIF Revenue, Then Bond Size, Which Equals Bond Proceeds And Total Bond Costs

First, we start with the Base Year Assessed Value of the total map of land of the Enhanced Infrastructure Financing District or .

Second, we use our TIF Revenue / Bond Issue model to insert the Base Year Assessed Value, then expected annual Rate of Growth in Base Year Assessed Value, and determined over the years of the life of the bond issue – in this case 45 years as per California EIFD law.

Third, then we get our Annual TIF Revenue and we start the sizing process.

Fourth we determine the Debt Service Bond Proceeds Rate, which is a test level Total Loan Amount divided by the Principal and Interest on the amount to be borrowed at a rate of, in this case, 3.5 percent, which yields a robust constant of 0.5623862564.

Fifth, that constant, or the Debt Service Bond Proceeds Rate, times the Annual TIF Revenue, gets our Sized Annual Proceeds Debt Service.

Sixth, our Total Bond Debt is the (Number One plus The Debt Service Bond Proceeds Rate) times the Sized Annual Proceeds Debt Service.

Seventh, our annual Bond Debt Service Reserve is the Total Annual TIF Revenue minus the Annual Total Bond Debt.

Finally, our most important totals are 1, the Annual Bond Proceeds, which added over the 45 year period gets us our Total Bond Proceeds AKA “Bond Proceeds”, and 2, the Annual Total Bond Debt, which added over the 45 year period gets us our Total Bond Cost.

We have just mated how big our EIFD will be from a base-year assessed value and annual assessed value perspective, with the Expected Total Bond Proceeds that could be used to pay for or help pay for projects listed in the Infrastructure Financing Plan. We can test different building completion schedules of adding the value of new development over the 45 year period, and see how that impacts the Expected Total Bond Proceeds for the EIFD project.