HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 04/23/2013 - REVISED - FOOTHILLS REDEVELOPMENT PUBLIC FINANCINGDATE: April 23, 2013
STAFF: Darin Atteberry
Mike Beckstead
Pre-taped staff presentation: none
WORK SESSION ITEM
FORT COLLINS CITY COUNCIL
SUBJECT FOR DISCUSSION
Foothills Redevelopment Public Financing
1. Objectives/Summary:
a. Community vision and expectation. Over the last 10 years, the consistent
theme of request from citizens has been the revitalization of the mall. While there
were hopes that the previous owner - General Growth Properties - would achieve
that vision, sales tax revenue from the mall has deteriorated each year since the
peak in 2000.
b. Catalytic opportunity in Midtown. City staff believes the redevelopment of the
mall with an underpass that links the area to the Mason BRT system combined
with residential housing will be a catalyst for growth and development within the
Midtown corridor – creating a sense of place and destination for the community.
c. Revenue opportunity. The mall and surrounding area that will be redeveloped
generated approximately $3.1M of sales tax revenue for the City in 2012. It is
anticipated that when the mall opens approximately $1.7M of sales tax revenue
will transfer from other existing retail to the mall for a combined $4.8M of
existing current revenue. By 2018, the third full year of mall operations, it is
anticipated the mall will generate $8.8M of sales tax revenue. Net new revenue is
estimated to be $4.0M.
d. Minimize risk to the City’s balance sheet, credit rating and revenue. All of
the revenue generated to support the public improvement costs and associated
financing are anticipated new revenues to the City through Metro District
Property Tax mills, Develop Public Improvement Fees (PIF), URA Property Tax
Increment and a Sales Tax Pledge and Shareback. Each of these revenue streams
are described in greater detail below.
The City’s obligation does not include a guarantee of debt and will not negatively
impact the City’s AAA credit rating. The sales tax pledge is strictly a pledge to
share sales tax revenue above a defined base on the City’s core 2.25% tax rate as
necessary to support specific bond payments. It is expected that by 2018, the
other three revenue sources will generate sufficient revenue to support the bond
debt and City will retain all sales tax generated from the project.
In addition, the City retains all revenue associated with the 1.6% dedicated
portion of our sales tax rate (the 3 quarter cents and 2B .85%). Because the City
retains all of the dedicated sales tax and the base on the core sales tax, it is
anticipated the City’s sales tax revenue in the first full year of mall operations
(2015) will slightly exceed the current combined base and transfer revenue -
$4.9M in 2015 vs. $4.8M in 2012.
April 23, 2013 Page 2
2. Project Costs & Assumptions:
a. Project timing assumes groundbreaking in June 2013 with completion of the
majority of the mall by November 2014. The Sears portion of the mall will occur
later given the requirement to build and relocate Sears to a new location. The
residential portion of the project will not begin until 2014 and completion in
2015. There is a possibility the residential will occur in phases with completion
during 2015-2017.
b. Project economics assumes sales per square foot of $350 excluding the major
anchor with 95% occupancy by 2016. Growth in sales is anticipated at 2% a year
and property values are estimated to increase at 1% per year.
c. Total project costs are estimated at $312M with $230M of costs specific to the
Mall and $82M associated with 446 residential units.
3. Eligible Public Improvement Costs:
a. The City/URA has identified $45M of eligible blight and infrastructure costs plus
an additional $8M of public benefit improvement costs for a total of $53M of
eligible Public Improvements.
b. Eligible blight and infrastructure costs include deconstruction and asbestos
abatement of the existing mall; utility work for storm, water, sewer and fire;
relocation of the Larimer ditch running through the property; site work including
fill, streets, lighting, landscape; a parking structure and other costs eligible under
the URA statutes.
c. Eligible public benefit improvements include the cost of a pedestrian underpass at
College Ave to allow connection to the BRT scheduled for completion in May of
2014 and the completion of a new Foothills Activity Center (FAC) on the mall
property to replace the aging Youth Activity Center currently in the southeast
corner of the property.
d. Walton/Alberta will transfer ownership of the FAC to the City upon completion
of the project.
e. Eligible Costs for the Foothills project are approximately 23% of the total Mall
costs of $230M. In comparison, the public percent in the Longmont Twin Peaks
Mall, Streets at Southglenn, Belmar, and Denver Pavilions are 34%, 27%, 14%
and 23% respectively. In comparison to the City’s investment in Front Range
Village, the Foothills project is approximately 30% compared with Front Range
Village (24%) when measured the same way the incentives for Front Range
Village are accounted for.
4. Bond Issue:
a. It is anticipated the Metropolitan District will issue bonds in an amount necessary
to produce net proceeds in the amount of $53M to reimburse Walton/Alberta for
the Eligible Public Improvement costs.
b. It is anticipated the Bond par value will be approximately $73M, of which $10m
will be used for capitalized interest (the bonds will be issued in 2013 and revenue
from the project will not begin flowing until 2015-2017 depending on the revenue
source), $7M for a reserve fund that will be required by the bond holders, and
$3M of issuance costs for a net proceeds of $53M.
April 23, 2013 Page 3
5. Public Financing Summary:
a. The bonds will be payable by the Metro District from four sources of revenue that
will be pledged by the Metro District, the URA and the City. All revenue used to
support the debt payment is new revenue created as a result of the Project. The
pledged revenue will be applied in a priority order as outlined below. The Sales
Tax Increment Revenues will only be applied to the payment of debt service on
the Bonds to the extent necessary after applying the first 3 revenue sources.
i. Metro District ad valorem tax in the amount of 50 mills to be imposed on
property in the Project.
ii. A Public Improvement Fee to be imposed by the Developer on
retail sales in the Project in the amount of 1.00%.
iii. Urban Renewal real property tax increment generated by property
taxes on the Project.
iv. Retail sales tax increment generated by the City’s 2.25% general
fund sales tax on retail sales from the Project.
b. It is anticipated that in addition to the reserve fund established from the proceeds
of the bond offering described in 3(b) above, a supplemental reserve fund of an
equal amount will also be establish. The Sales Tax Increment revenues may also
be used to fund this supplemental reserve.
c. When the Property Tax, PIF and Property Tax Increment revenues exceed the
annual debt service cost and the supplemental reserve fund is fully funded, the
retail sales tax increment will no longer be used to fund the debt payments or
reserve. The sales tax increment pledge will remain in effect; however, the sales
tax increment will be returned to the City at the end of each year.
d. When the Property Tax, PIF and Property Tax Increment revenues exceed the
annual debt service cost, the excess revenue from these 3 sources will be applied
first, to reimburse the County for 50% of the County’s share of the residential
Property Tax Increment and second, will flow into a Capital Refresh fund that the
Developer/Metro District will use to repay the debt early, enhance the
maintenance to the mall or add capital additions to keep the mall updated and
fresh.
6. Conditions & Requirements:
a. A Financing Plan will be developed jointly by Walton/Alberta and the City/URA
b. Walton/Alberta will provide proof of leases and tenants prior to the bond issue
that define
i. % of leased space - % to be determined between Walton/Alberta and the
City/URA.
ii. The average sales per square foot of the leases as measured by
national average will exceed a TBD number.
iii. A percentage of the Junior Anchor Tenants will be considered
“first to market” retailers within the Fort Collins area.
c. Various project completion dates will be establish for the various phases of the
project. In the event there is a delay in the completion of the residential units,
Walton/Alberta and the City/URA will share equally in the annual reduction in
revenue associated with the delay.
April 23, 2013 Page 4
d. In the event the assessed value of the project is lower than the current County
“estimate of value”, Walton/Alberta and the City/URA will share equally in any
annual shortfall.
7. Financial Benefits to the City:
a. It is anticipated the Property Tax, PIF and Property Tax Increment will generate
$168M of revenue over a 25 year life of the project. $157M of this revenue will
be used for debt service of the bonds and approximately $11M of this revenue
will be available to support 4(d) designations described above.
b. It is anticipated the Sales Tax revenue from the project will total $252M over a 25
year life of the project. Note, this revenue will continue beyond the 25 years. Of
this $252M of sales tax revenue, it is anticipated that new revenue to the City
(excluding existing revenue from the Mall, base revenue, and the transfer of
revenue from other areas of the City, transfer revenue) will be approximately
$117M of the 25 years modeled.
c. On an annual basis, the mall currently generates approximately $4.8M a year in
sales tax revenue including the base and transfer revenue described above). It is
anticipated the City sales tax revenue above that needed to support the debt
service associated with the bonds will be $4.9M, $5.3M, $5.5M and $8.8M for
the years 2015-2018 respectively. The increase in 2018 to $8.8M reflects the City
capturing all sales tax revenue from the project. While the Sales Tax Pledge
remains in effect, the other 3 revenue sources generate enough revenue to support
100% of the bond payments and the City retains all sales tax revenue (described
in 4c above).
d. Summary Financial Benefits:
i. Stop the erosion of sales tax revenue at the mall that began in 2000.
ii. Public Improvements are all paid for with incremental new
revenue coming directly from and because of the project. This revenue
would not exist without the project.
iii. Sales tax receipts will be greater in the first year of mall operations
than they are today after sharing a portion of the sales tax receipts.
iv. Starting in 2018, the City anticipates $4.0M of new sales tax
revenue each year that will grow at 2% a year thereafter.
v. No credit or balance sheet risk, pledged revenue is limited to
incremental revenue generated by the new mall.
1
• Objectives:
• Realize Community Vision & Expectations
• Launch a Catalytic Opportunity in Midtown
• Realize a Significant Revenue Opportunity
• Minimize Risk to Balance Sheet, Credit Rating & Revenue
• Challenges
• Build a Competitive Design & Create a Sense of Place
• Resolve Tenant Issues without Resorting to Eminent Domain
• Create a Connection with Mason BRT
• Replace the Youth Activity Center
• Resolve County Concerns around URA TIF
Objectives & Challenges
REVISED PRESENTATION ATTACHMENT 1
2
Project Overview
23 April 2013
3
Blight Remediation
4
Unsafe conditions
Poor Screening & Loading
Faulty parking circulation
5
Lack of pedestrian facilities and deteriorating site conditions
6
Proposed Redevelopment
7
New Entry Forecourt &
Shops
8
New Entry
9
Enhanced & Refurbished
Interior Promenade
10
Urban Design Enhancements
Better Site Utilization
11
College Avenue Shops
Sidewalks and Urban Enhancements
12
Foothills (Youth) Activity Center
13
Foothills Activity Center
Underpass Location
Parking Structure
Urban Plaza
College Avenue Shops
New Forecourt & Shops
14
Connectivity
15
Night View From Above
16
Triple Bottom Line Analysis
17
Triple Bottom Line Analysis
(In progress)
Strengths Opportunities
Increased Consumer Choice New Retail Jobs
Youth Activity Center Increased Revenue for City &
County
District Formation for Mid Town Increased Revenue for Open
Space
Limitations Threats
May increase costs to other taxing
entities
Perceived negative impacts from
traffic
May reduce availability of low cost
consumer goods
Perceived threat from County
related to budget for social
services
Social
18
Triple Bottom Line Analysis
(In progress)
Strengths Opportunities
Infill and redevelopment
(fewer veh. Trips Outside of City)
Decreased vehicle miles traveled
regionally
Proximity to transit
(Max, Bus, Trails)
Targeted infill may reduce carbon
emissions
Opportunity to update
performance of buildings
Improved stormwater quality
Limitations Threats
Potential net increase in carbon
emissions
May increase regional miles
traveled by visitors
Increase carbon emissions during
construction
Additional waste generation
without active recycling
Increased resource consumption Increased energy and water
footprint
Environmental
19
Triple Bottom Line Analysis
(In progress)
Strengths Opportunities
Increased consumer opportunities New retail jobs and increased
retail tax base
Construction jobs provide a one
time benefit to economy
Reduce retail leakage
Revitalizes decaying long time city
resource
Catalyst for redevelopment in Mid
Town
Limitations Threats
Public investment risk Financial Risk if Mall fails to
perform
Potential increased local
competition among other retailers
Continuing competition from
outside of City
Higher rent rates may cause
displacement of local merchants
Economic
20
Mall Financing
23 April 2013
21
• Project Costs
• Total Project Costs
• Public Improvement Costs
• Public Improvement Cost Financing
• Metro District
• Property Tax
• Public Improvement Fee (PIF)
• Property Tax Increment
• Sales Tax Pledge & Share / Remittance
Outline
22
Mall Net Taxable Retail Sales History
Net Taxable Sales Have Declined 61% Since 2001
20
40
60
80
100
120
140
160
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sales (Milions)
Mall ‐ Total Net Taxable Retail Sales
Net Taxable Sales
‐4.1%
2.8% ‐.4%
‐4.7%
‐15.6%
‐16.3%
‐17.5%
‐12.7%
‐5.3%
‐10.1% ‐3.2%
23
Project Assumptions
• Project Timing – Assuming May 8 Go Date
• Mall except Sears – Ground breaking June 2013 – Completion Nov 2014
• Sears & Residential – Summer 2015
• Economics:
• Annual Sales per square foot - $350
• Occupancy – 80% 2015, 95% thereafter
• Growth – 2% year sales, 1% year property assessed value
• Project Costs - $312M:
• Mall - $230M
• Residential 446 units - $82M
• Public Improvement Costs - $53M
• Blight Removal & Infrastructure - $45M
• Public Benefits - $8M
Mall Open for 2014 Holidays, Fully Completed by Summer 2015…
Total Cost $312M Including $53M of Public Improvement Costs
24
Public Improvement Costs
Blight Removal & Infrastructure Costs of $45M….
City Foothills Activity Center and College Ave. Underpass $8M
($ millions)
Blight Removal
Infrastructure
City
Infrastructure
Total
Public
Land Acquisition $ 5.5 $ 5.5
Parking Structure 9.6 9.6
Demolition / Abatement 3.9 3.9
Fixture & Amenities 1.4 1.4
Ditch Relocation 2.8 2.8
Site Work 12.9 12.9
Utilities 4.5 4.5
Soft Costs 4.6 4.6
Foothills Activity Center 4.8 4.8
Pedestrian Crossing / Culvert 3.0 3.0
TOTAL $ 45.2 $ 7.8 $ 53.0
25
Bond Details
• Bond Issue Fall of 2013 $73M
less Capitalized Interest 10M
less Reserve Fund 7M
less Issuance Cost 3M
• Net Proceeds $53M
• Additional Supplemental Reserve of $7M from Pledged Revenue
• Senior Lien on Pledged Revenue in order of priority:
• Metro District 50 mills of property tax
• Developer 1% Public Improvement Fee (PIF)
• URA Property Tax Increment
• City Sales Tax Revenue Pledge on 2.25% Core rate
City’s Sales Tax Pledged Revenue is Limited to the Extent
Necessary after Applying Other Pledged Revenue
26
Sales Tax – Pledge vs. Share
Sales Tax Pledge is on the Core 2.25% Increment Only….
Distinction Between Pledge & Share
Core City Sales Tax Rate 2.25%
Dedicated City Sales Tax Rate 1.60%
• Transportation 0.25%
• Natural Areas 0.25%
• Building on Basics 0.25%
• Keep Fort Collins Great 0.85%
Sales Tax Pledge:
• Applies to Core Sales Tax Only – City keeps Dedicated
• Sales Tax increment above base (prior 12 months)
• Base = 2.25% * prior 12 months of District net taxable sales
Sales Tax Share / Remittance:
• City Shares Sales Tax to the extent necessary after all other
sources of debt service have been applied
27
Metro District Funding
• Metro District revenue above that needed to cover debt:
• Releases Sales Tax Share – Pledge remains
• First dollars applied to reimburse County for 50% Residential tax increment
• Remaining excess assigned to a Capital Refresh Fund
Metro District Assigned 3 Revenue Sources….
Property Tax, Public Improvement Fee, Property Tax Increment
Metro District Revenue First Full Year
District Property Tax $ 50.0 $ 2.0
Sales PIF 64.7 2.2
URA Property Tax Increment 53.6 2.2
Metro District Funding $ 168.3 $ 6.4
Today's Value $ 61.9
Cumulative
Funding
Annual
Funding 2017
25 Years
($ millions)
28
Sales Tax Revenue
Total of $252 Sales Tax Revenue Expected over 25 years….
Annual Sales Tax Revenue in the First Full Year of $8.4M
Base = existing revenue from the existing mall
Transfer = revenue from other areas of the city that will transfer to the mall
New = net new revenue associated with the redeveloped mall
City Sales Tax Revenue
Dedicated Base / Transfer / New $ 104.6 $ 3.5
Core Base 44.4 1.8
Core Transfer & New 102.7 3.1
City Sales Tax $ 251.7 $ 8.4
Today's Value $ 94.6
Cumulative
Funding
Annual
Funding 2016
25 Years First Full Year
($ millions)
29
Base Transfer New
Core Tax ‐ 2.25% 1.8 1.0 2.1 $ 4.9
Dedicated Tax 1.6% 1.3 0.7 1.5 $ 3.5
$ 3.1 $ 1.7 $ 3.6 $ 8.4
Base Transfer New
Core Tax ‐ 2.25% 1.8 1.1 2.2 $ 5.1
Dedicated Tax 1.6% 1.3 0.8 1.6 $ 3.7
$ 3.1 $ 1.9 $ 3.8 $ 8.8
Sales Tax in 2016
Sales Tax in 2018
($ millions) Sales Tax Revenue
Illustration of Revenue Retain by the City and Revenue Pledged
Sales Tax Revenue retained by the City
Sales Tax Revenue pledged towards debt service
30
City Sales Tax Revenue – First 5 Years
City Sales Tax Revenue in 2015 Exceeds 2012 Current Revenue….
City Retains all Sales Tax Revenue by 2018 and Grows to $8.8M
Remitted Sales Tax Revenue = $8.8M
YEAR
2012 ‐ 4.8
2015 2.0 2.5 4.5 ‐ 4.9 4.9
2016 2.3 3.1 5.4 ‐ 5.3 5.3
2017 6.4 3.2 9.6 ‐ 5.5 5.5
2018 6.5 3.3 6.0 3.3 5.5 8.8
2019 6.6 3.4 5.7 3.4 5.6 9.0
City Sales
Tax
Revenue
Metro
District
Revenue
Pledged
Sales Tax
Increment
Bond
Payments
& Reserve
Sales Tax
Returned
to City
Base &
Dedicated
Sales Tax
+
+
=
=
($ millions)
31
New and Pledged Sales Tax Revenue
$149M of Sales Tax Revenue Retained by the City
Base Transfer New
Core Tax ‐ 2.25% 44 35 68 $ 147
Dedicated Tax 1.6% 32 24 49 $ 105
$ 76 $ 59 $ 117 $ 252
Sales Tax over 25 years
Sales Tax Revenue retained by the City = $149
Sales Tax Revenue pledged towards debt service = $103
($ millions)
32
New and Pledged Sales Tax Revenue
$117M of New Sales Tax Revenue Anticipated
Base Transfer New
Core Tax ‐ 2.25% 44 35 68 $ 147
Dedicated Tax 1.6% 32 24 49 $ 105
$ 76 $ 59 $ 117 $ 252
Sales Tax over 25 years
New
Revenue:
$117M
Sales Tax Revenue retained by the City = $149
Sales Tax Revenue pledged towards debt service = $103
($ millions)
33
New and Pledged Sales Tax Revenue
$103M of Sales Tax Revenue Pledged by the City
Base Transfer New
Core Tax ‐ 2.25% 44 35 68 $ 147
Dedicated Tax 1.6% 32 24 49 $ 105
$ 76 $ 59 $ 117 $ 252
Sales Tax over 25 years
New
Revenue:
$117M
Pledged
Revenue:
$103M
Sales Tax Revenue retained by the City = $149
Sales Tax Revenue pledged towards debt service = $103
($ millions)
34
New and Pledged Sales Tax Revenue
$108M of Net New Sales Tax Revenue Anticipated
Base Transfer New
Core Tax ‐ 2.25% 44 35 68 $ 147
Dedicated Tax 1.6% 32 24 49 $ 105
$ 76 $ 59 $ 117 $ 252
Sales Tax over 25 years
New
Revenue:
$117M
Pledged
Revenue:
$103M
Remitted
Revenue:
$ 9M
New After
Remitted
Sales Tax Revenue retained by the City = $149 $108M
Sales Tax Revenue pledged towards debt service = $103
($ millions)
35
Risk Analysis
A 10% & 20% Reduction in Both Sales & Property Values Reduces
Net New City Revenue by $24M and $58M Respectively…..
Net New Revenue is $50M with a 20% Reduction
Assumptions
Sales per square foot $350 Sq Ft $315 Sq Ft $280 Sq Ft
Property Tax Estimate Value Base less 10% Base less 20%
Cum Bond Payments $ 165 $ 165 $ 165
Risk Sensitivity
Metro Revenue 168 149 129
Remitted Sales Tax Revenue 9 16 34
Net New City Revenue $ 108 $ 84 $ 50
Base Case
10%
Reduction
20%
Reduction
($ millions)
36
Benefits
• Critical Community Project that will be Catalyst for Midtown
Revitalization
• Stop the Erosion of Lost Sales Tax Revenue
• Financed Entirely from New Revenue Generated by the Project
• First Full Year Tax Receipts Greater than Current Tax Receipts
• Significant New Sales Tax Revenue Beginning in 2018
• No Credit or Balance Sheet Risk, Pledged Revenue is limited
to Incremental Revenue Generated by the New Mall