TaxIncrementFinancing:SmallmanStreet,StripDistrict– InitialRequestPittsburghPublicSchoolsBusiness/FinanceCommitteeOctober5,2016

1. WhatisTaxIncrementFinancing(TIF)?

2. TIFProcess

3. RequestforSchoolDistrict:InitialRequesttoStudyTIFforSmallmanStreet,StripDistrict&EngageaSchoolDistrictRepresentativeintheTIFProcess

Agenda

TIFisusedtoaddressblightanddeterioration,promoteneighborhoodstability/densityandinspiredistrict-orientedeconomicdevelopmentorredevelopment.

Decreasedfederalandstatefundingforredevelopment-relatedactivitieshaveforcedlocalgovernmentstoidentifycreativesolutions,suchasTIF,tofacilitateurbaninfilldevelopment.

TIFisusedin49statesandtheDistrictofColumbia.

WhatisTaxIncrementFinancing(TIF)?

Taxincrementfinancing(TIF)capturesthefuturetaxesgeneratedasaresultofrealestateimprovementstopaythepresentcostofthoseimprovements.

• Taxincrementcanfundconstructionandsoftcostsincludingbutnotlimitedto:

• SitePreparation• SanitarySewerandWater• RoadwayImprovements• Sidewalks• Lighting• PublicUseFacilities• Parks&RecreationFacilities• ParkingFacilities• Transit/otherTransportationInfrastructure• Architectural,Engineering,Planning,orLegalFees• EnvironmentalImpactStudies• OperationandAdministrationoftheTIFDistrict

WhatisTaxIncrementFinancing(TIF)?

TIFConcept

0 Propertyvaluesstagnateordecline(“base”)

1 Projectinfusedwithpublicandprivateinvestment

2

3

Completedimprovementsgenerateparkingandrealestatetaxincrement(“increment”)

Entiretaxincrementaccruestotaxingbodiesinperpetuity.

TaxRevenue

Basetaxrevenue

Additionaltaxrevenue

21 3Time

0

“Pledged”TaxIncrement:infrastructuredebtservice

“Unpledged”TaxIncrement:additionaltaxrevenue

TIFDistrictsintheCityofPittsburgh– the“ButFor”

• 18activeTIFDistrictshavebeenauthorizedintheCityofPittsburghsince1993.

• Fiveofwhicharenowcomplete,returning$9.5millionintaxincrementannuallytothe3TBs.

• CurrentactiveTIFsaregenerating$5.1millioninunpledged taxincrementto3TBs.

• Uponcompletion,theactiveTIFsareprojectedtogenerate atotalof$23.4millionin taxincrementannuallyto3TBs.

TIFDistrictsintheCityofPittsburgh– the“ButFor”

SouthSideWorks

PNCFirstside,FirstAvenueTStation

HeinzDistributionCenter

BakerySquare&EastLibertyGateway

URATIFGuidelines&Application

TIFProcess– Generally9-12Months(Approximately25PublicMeetings)

DefineProject

DetermineProjectEligibility&FundingGap– “…BUTFOR…”

EstimatePost-DevelopmentTaxes

Obtain3TBInitialApprovalstoStudyTIFasFinancingTool

ObtainCounty&SchoolDistrictFinalApprovals

PublicHearing

ApplyTIFFundstotheProject

ReceiveTIFApplicationbyDeveloperorInitiatedbyURA

DraftTIFPlan;workwithTIFCommittee

Commission3rd partyReports

ObtainCityCouncilFinalApproval

ArrangeforProjectFunding

TIFProcess– Generally9-12Months(Approximately25PublicMeetings)

TIFProcess– Generally9-12Months(Approximately25PublicMeetings)

StripDistrict:SmallmanStreet

• Regionaldestination,clusterofretailandwarehouseusers• Densitycreatinggreaterimpactonpublicinfrastructure

• TheSmallmanStreetTIFwouldcapturerealestateandparkingtaxesfromMcCaffery’stworedevelopmentsat1600SmallmanStreetandProduceTerminal(315KSFofnewoffice&retail)

• Othersareadding1,000newhousingunitsand806recentlycompletedhousingunits.

Strip District: Smallman Street

SmallmanStreetToday

SmallmanStreetToday:PublicSafetyIssues

SmallmanStreetToday:OtherChallenges

ProposedSmallmanStreetTIFDistrict

Taxincrementsources

PittsburghProduceTerminal– 150,000squarefeetoffice/retail– 272-spacesurfaceparkinglot

1600SmallmanStreet– 165,000squarefeetoffice– 253-spaceparkinggarage

PotentialTIFUses– SmallmanStreetandRelatedPublicSpace

Improvements• RoadwayImprovements• UtilityUpgrades,including

Stormwater/Sewer• Sidewalks,Ramps,Lighting

Taxincrementuses

TIFConcept:SmallmanStreet

2016 Realestatetaxrevenuestagnatesatonly$16,000 annually(“base”)

2017Projectinfusedwith$7.5million inTIFinvestmentthatleverages$131million inpublicandprivateimprovements

~2020

2037

Completedimprovementsarereassessed,generating$450,000 annuallyinrealestatetaxincrement– $113,000 ofwhichisdivertedtoSchoolDistrict(duringtheTIF)

Entire$450,000 taxincrementaccruestoSchoolDistrictinperpetuity(aftertheTIF)

TaxRevenue

Basetaxrevenue

Taxincrement(75%):infrastructuredebtservice

Taxincrement(25%):additionaltaxrevenue

Additionaltaxrevenue(100%)

~20202017 2037

Time2016

during

SmallmanStreetTIFDistrict:SchoolDistrictFiscalImpactProjections

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

2016 2017 2018 2019 2020-2037 2038

RealtyTransferTax EarnedIncomeTax RealEstateTax

$919,892

$582,892

$111,000$111,000$139,000

$16,000

$2.7million taxincrementinvestmentyields:

• $583,000 innewtaxrevenueannuallyduringTIF• $920,000 innewtaxrevenueannuallyuponcompletion

before after

Smallman Street TIF District: Investment Breakdown

SchoolDistrict$2,680,196

Parking$1,336,095

RealEstate$2,195,363

AlleghenyCounty$1,288,346

PotentialTIFProceeds

CityofPittsburghTIFInvestment

$7,500,000

OtherPublic&PrivateInvestment

$131,000,000

TotalInvestmentforSmallmanStreet,ProduceTerminal&1600

Smallman

þ “Butfor”TIF,theSmallmanStreetimprovements,adjacentredevelopmentwouldnotoccur

þ Publicinfrastructureinvestmentþ Eliminationofblightþ Increasedpropertytaxrevenueþ Increasedsalestaxrevenueþ Creationofnewpermanentjobsþ Creationofconstructionjobsþ Taxingbodieswillreceivecurrentbasetaxesinadditiontounpledged

(25%)incremental taxrevenuesþ Catalystfornewprivateinvestmentþ Re-occupancyofvacantbuildingþ AttractsresidentsintoCitywithadditionalhigh-wagejobs&affordable

housingþ TIFfundsincludeRealEstateTaxes(CitywouldalsodivertParkingTaxes)

SchoolDistrictTIFScorecard