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FHWA
VALUE CAPTURE STRATEGIES: TRANSPORTATION REINVESTMENT ZONES-THE PRIME
JOB NO 21707
WEDNESDAY, APRIL 26, 2023
CART CAPTIONING PROVIDED BY:
KIM GOLDSTEIN
On behalf of
MID-ATLANTIC INTERPRETING GROUP, INC
This transcript is being provided in a rough draft format. Communication Access Realtime Translation (CART) is provided in order to facilitate communication accessibility and may not be a totally verbatim record of the proceedings. Due to the nature of a live event, terms or names that were not provided prior to the assignment will be spelled phonetically and may or may not represent the true spelling.
This text is being provided in a rough draft format. Communication Access Realtime Translation (CART) is provided in order to facilitate communication accessibility and may not be a totally verbatim record of the proceedings.
>> All participants are in listen only mode. Later we will conduct a Q&A session. If you wish to ask a question press one then 0. You can ask a question by pressing 1 and then 0. Pick up the handset before pressing the numbers. If you require assistance during the call press star and 0. I turn the conference over to your host Kate, please go ahead.
>> Kate: Hello, everyone. Welcome to today's webinar. On behalf of the federal highway administration, I would like to welcome everyone to the webinar on transportation reinvestment zone. My name is Kate and I work with USDOT in Cambridge, Massachusetts. I'll be monitoring today's webinar. Our webinar will run until 3:00 p.m. eastern time. We are recording today. It will be posted on the FHWA web side. The speaker slides will be available for download toward the end of the webinar. If you are interested in applying for professional development hours or credit for attending today's webinar, we will provide information at the end of the webinar on how to obtain confirmation for your attendance.
I will now give you a quick orientation to the webinar room. On the left side you will find the call-in information if you prefer to listen by phone. In the lower left hand corner is a chat window that you can use to submit questions or comments during the webinar. We will field questions at the end of each presentation, and we will also have time for additional Q&A at the end of the webinar.
If we don't have time to address all questions, we will post written responses along with the webinar recording on the FHWA value capture website. If you decide to use your phone to listen to today's event, you'll be able to ask questions by phone. We will remind you about that at the appropriate time. We are you can type your questions and answers into the chat. If you want closed captioning, please click on CC. There is a CC at the top of the bar and select closed captions from the drop-down menu.
I would like to ask the audience to fill in these polls. While you are answering the poll questions, I'll introduce the moderator of today's webinar Pepper Santalucia from the national transportation system here in Cambridge with me. She has been supporting the FHWA value capture since 2015. What do you think of the poll results?
>> PEPPER SANTALUCIA: We have a good mix of representation across different levels of government. We have a more transit agencies here today, which we are glad to see. But also, MPO, federal, state, local. Welcome everyone. The new question we ask at this time is how many people have attended one of our webinars in the past? It looks like over just about half of you this is your first webinar. We say welcome. We have more to come this year and lots of recordings from past years and from webinars earlier this year.
So I hope you'll check those out and I hope we will see you again.
It sounds like some people know something about transportation reinvestment zones. But they hope to learn more. That is what we hope to do during today's event.
Thanks, I'm going to introduce our first presenter. This is Dr. Rafael Aldrete. He is a scientist at the Texas A&M inns constitute. He has more than two decades of experience in research. Collaborating with local state and national agencies. Research is in infrastructure finance and economics focusing on public private partnerships and value capture.
He has authored multiple guidelines and multiple technical guidance documents for applications in transportation. He has written those for FHWA and Texas DOT. He is the author of the FHWA of the primer on reinvestment zone. It was published in 2021. We will make that available for download toward the end of that webinar and it holds as basis for his presentation today.
With that, please go ahead.
>> RAFAEL ALDRETE: Good morning and good afternoon, everyone. In the next few minutes, I'll give you an overview of the value capture. I will set the stage for the next two presenters that will present two relevant case studies from Texas and Utah.
Before we get into the details of TRZ let me give you an overview. We will cover six sections that follow the content of the we will then follow by basic your concepts that are going to be used throughout the rest. Then we move to the legal framework in the states they are allowed and discuss the process of implementing them. We will explore some of the most common uses of TRZs and we will wrap up with the local use and challenges for transportation improvement.
So, value capture techniques are a way to increase property to use to increase property values, business activity and economic growth that is linked to infrastructure project. To help pay or fund future transportation products. They rely on the principles of tax and financing to help pay for transportation projects.
To have illustrate this concept on the screen, let's consider the affect that public investment has in transportation infrastructure has. These investments can lead to economic development, including increased land values, land development, business activity. These in turn can increase the value of real assets for the property owners and boost retail sales. Ultimately, local and state governments benefit from this by seeing an increase in property tax revenue and sales tax revenue.
So TRZ they are simply a mechanism to capture of portion of growth in tax revenue to help pay for the project.
Talking about how TRZ is defined, we have several different concepts. Creating a TRZ allows local governments to pledge funding by capturing a portion of the land value increases. Continuity is a key aspect or key element of the TRZ recognition. To create a TRZ you identify a continuous area that is an impact zone. The local government can capture a portion of the future sales tax revenue or tax revenue that is in the zone. The capture tax implement is used to fund the project.
TRZ enables a community to use a portion of the land development and economic activity linked to the project to help pay for the project. This can help speed up the delivery of projects and allow the benefits of transportation project and the economic development it causes that they create by having the project active and in operation sooner.
Now, let's talk about some tax, some PRC tax increment financing definitions that should be helpful in understanding how they work. We will use a tax example from the Texas transportation code to understand this concept.
What we have on the screen is at the top we have a capture appraised value which is the triangle in A. It's the total value of property value for a year. We have a horizontal scale that affects the time and the vertical scale that is property value.
Then we have below that is the base. The appraised value of the property within the year designated is what we call the tax increment base.
Moving on to the bottom of the chart, we have the annual property tax increment which is the blue triangle C and these are the property taxes that are levied and collected by the local government for that specific year on the capture appraised value within the zone.
So, this amount increases as the value within the zone increases. Right below that we have property tax revenue related to the base. And this is property tax revenue collected from the base that is transferred to the local government revenue fund to continue funding the regular operations.
So, it's only the portion that is related to the increment in the triangle that the TRZ is eligible to receive. Moving to the next one.
With what I have said, there is the question of what is the difference between a TRZ and tax increment financing district.? Both TRZ and TIF allocate property tax for investments. The TRZ is dedicated exclusively to transportation. While TIF districts pay for a wider range of improvements and development projects. TRZs have been popular for funding because of the two main differences they have.
The first one is TRZ is easier to create. In Texas TRZ can be initiated only by a local government. It only requires approval from the governing body after a public hearing.
In contrast, this district in Texas and other states have a more complex mechanism. In Texas it can be initiated by municipality or property owners who own the majority of the appraised property value that is in the zone.
Additionally, this requires it also requires approvals from property owners if no more than 10% of the appraised value within the zone is residential. That is the first difference.
Second, TRZ have a less complex governmental oversight than TIF. A TRZ does not require a separate oversight structure once approved by the local government.
On the other hand, the Texas tax code requires establishment of TIF for the district.
What is the role that TRZs play in product delivery? They play three key roles. They enable local governments to leverage multiple funding sources. This is federal and state transportation funds and other value capture mechanisms. They allow to expedite or enable the execution of projects needed by the community.
Second, TRZ are not intended to be the only funding mechanism for transportation improvement. Here revenues most often used are
Finally, a TRZ can support single or multiple transportation improvements apply ag great deal of flexibility in implementation.
Why the local governments use TRZs? Local governments use TRZs to fund transportation projects for two main reasons including addressing transportation needs and promoting equity and economic efficiency. To address regional transportation needs, local governments can partner with neighboring jurisdictions to fund projects using TRZs. That because the local government allows that. The local governments setup their own TRZ for the same project.
TRZ help promote equity and economic efficiency ensuring those who benefit from the transportation project pay for some of the capital cost. Property owners and developers within the TRZ can benefit from increasing property values due to a proximity to a structure. Business owners can benefit from the flexibility that customers have to their businesses.
Let's move ton our next section to discuss the legal frame fork for the TRZs in the states where available. Texas and Utah are the two states were TRZs are allowed by law. In Texas, the legal framework was first introduced in 2007 and amended multiple times.
The first was in 2010. And in when the last one took place there were 8 municipal TRZs, 4 county and 4 port authority TRZs.
In contrast, Utah's legislation was enacted in 2018 and amended in 2019.
In TRZs are created yet. However, in 2021, the housing and transit reinvestment zone act. This law did not modify the existing TRZ law framework and our next presenter is going to go over the value capture mechanism in more detail in the housing and transit mechanism that Utah has.
So, the Texas TRZ frame work has evolved as I already mentioned. The changes that have been implemented, all the amendments the law has experienced has in in a result of the first one.
The changes primarily have been focused on expanding the practical use of TRZ and clarifying the process or requirements to establish them, which in turn has helped municipalities through the legal process. One amendment in 2011 streamlined implementation process providing increased the implementation of TRZs. In 2015, all the amendments were introduced and include all modes of transportation. It also allowed port authorities which are local entities in the state of Texas to establish port authority TRZs where they can use their taxing powers.
This amendment expanded significantly the types of projects that are eligible for TRZ funding and create the TRZ that could support multiple projects and also these changes also made possible to allow municipalities that are not located within their boundaries.
So, in Texas, local governments with create TRZs if they determine an area is active and underdeveloped. And the zone will promote public safety for develop. And enhance transportation or support the ability of the local government to sponsor a project.
The load doesn't regulate the size of the TRZ.
The boundaries can be amended at any time for which the zone was created. But the properties that already in the zone cannot be removed.
It can include property from preexisting tax p financing district. But the revenue from these projects or parcels is not payable until the previous commitments have been met.
And, more importantly, the law doesn't require local requirements to mitigate 100% of the tax to the government. The local government has the means to decide what will be dedicated to pay for the project.
Let's move onto the legal framework in Utah. For a TRZ to be established in Utah the law requires a payment of two or more public entities. Utah law allows for tracks and public agencies to participate in create ag TRZ as long as one of them has land use authority within the zone boundaries. In Utah, public agencies use includes municipalities or a county. They have to be part of a TRZ.
Continuing with the legal framework in Utah, it doesn't provide explicit guidance on whether the boundaries of the TRZ can be changed once established. It doesn't impose limitations on the size of the zone. The TRZ law in Utah is also flexible in that the funds can be used for a variety of transportation projects, and they are not limited to projects with local projects or state highway or federal highway projects.
The law is flexible to define the transportation need with improvement within the zone by describing the specific types of projects that can be funded.
Let's talk about implementation. The implementation of TRZs can be broken down into five distinct and sequential stages. Initiation, zone formation, public hearing and adoption, operation and termination. We draw upon the experience of Texas to illustrate the process. That is what I'm going do in the slides that come after this one.
Just based on the experience that the local governments have had in Texas, it takes about six months to create a TRZ and complete stage one through three.
The first step is initiation stage which involves identifying the eligible target for funding and this stage is when local government will conduct a preliminary analysis to assess the potential of the proposed project.
The analysis will often shrewd economic impact study, an assess 789 of the future revenue that is based on appraisal data, land use dynamics and property value forecast.
At this stage, and to build support for the project, the local government should initiate the dialogue with stakeholders which is the state DOT and planning organization and other interested parties.
Having a TRZ champion leading it can facilitate the interagency collaboration at this stage to build these partnerships.
The zone formation includes three steps. First is to identify the zone boundaries. The local government here has to select a geographic area within its jurisdiction and list all the properties within the boundaries of the zone.
TRZs in general vary in size. They have 1/4 and go to to one mile. They have a limit on the boundaries, or the limits have been chosen by the local agencies for the boundaries help prevent TRZ from excessively impacting local governments and revenue capacity for purposes of the general fund.
The second step is provide ag 60 day notice in Texas. And both Texas and Utah law require a public hearing before providing a TRZ. And the other is refining the building of the analysis in the initiation stage.
Next a public hearing and adoption. That is the next step in the process. At this stage, the local government calls a public hearing to discuss the benefits of the zone. After the hearing they will convene. That is when the TRZ begins the operation stage.
It's when the local government realize the revenue that is generated by the TRZ. So they can start collecting the tax revenue from the zone in the subsequent here. A private entity may be involved from the local government that relate to loans or bonds they have committed to fund the project.
Finally, the termination date that involve the use of TRZ. On the other hand, if the local government fails to use a TRZ for intended purpose within the time period of ten years, the TRZ will automatically terminate on December 31st on the tenth year after it was designated. If the TRZ is not used within ten years it expires automatically.
Now, what are the main uses of transportation through amendment zones. What types of jurisdictions can use them and what types of projects can they fund? In Texas it allows the laws and counties to decide.
however, loans and issuing bonds may be challenged for counties. This is according to Texas general opinion Texas attorney general opinions. This has prevented Texas counties from using TRZ revenue to fund transportation improvements.
A constitutional amendment that specifically addresses this issue was approved by popular vote in the November 2021 election, however, the amendment has not become effective because it's being challenged in court by advocacy groups that oppose it.
In Utah, the TRZ can be created by one by two or more public agencies as long as one of them has land use authority over the area where the TRZ is going to be established. And both Texas and Utah allow local governments to dedicate their resources for one set or multiple projects.
The types of projects that can be funded by TRZs are various. They are very flexible. In Texas where the types of project funded it includes all kinds of interest projects as you can see listed on the screen.
Additionally, the funds in Texas are more restricted to be used for state or other transportation project which allows the local governments to use TRZs to fund purely local transportation projects as long as they use the pay as you go for municipal bond financing. I will discuss the financing options in the next few slides. I'll leave it there.
If the project is not on the state highway system or local project, the local government has more limited options for financing.
In contrast, Utah law does not prescribe the type of projects that can be funded. In Texas, Utah does not limit the use of TRZ funds for state, local or federal project.
Now, how do municipalities or local governments use what types of financing can they use with the TRZ revenue in order to fund the project?
In Texas, we have seen three main financing options for TRZ revenues. Each one with its own benefits and drawbacks. First, we have the pay as you go option that involves using tax increment revenue to pay for the project. This approach doesn't incur financial cost or transaction cost, but it results in much lower in a slower availability of time.
Municipal bonds are the second option. They are issued by local governments to fund capital expenses including a transportation project. The local governments can seek financing from the capital markets using or pledging future TRZ revenue as collateral. This option has the ability to have flexibility in using TRZ funds for any transportation project including a local project that is not on the state highway system.
however, it comes with significant transaction cost and interest rate costs that are related to the risk of the local real estate market. Finally, we have the state infrastructure bank which are involving funds that have been established and operated by states that provide low interest loans to local governments for transportation projects.
The funds in are a mix of federal and state funds and have low transaction rates and interest rates and ten years.
They can use the TRZ as collateral which provides early access to capital and favorable financial cost. The drawback is that these funds are limited and they may face competition with other local governments trying to access the funds.
Also, important distinction is SIV funds can only be used on ones that are classified and are included in the TIP. A SIV loan cannot be used to pay for a local transportation project.
Local governments in Texas have experience with TRZs. First with the opportunities. You know, TRZs do not retire increase in existing property or sales tax rates, making them politically and publicly appealing. Revenue is only generated if there is growth in the real property tax base or sales activity within the zone.
This makes a TRZ a useful tool for expediting political transportation projects that might otherwise have to be delayed and providing access to the municipality project much earlier and promoting economic development well beyond the TRZ.
Because the impact of the project is felt in a much wider buffer than the TRZ.
Second, creating a TRZ requires a great deal of interagency collaboration, and it provides opportunities to leverage funds with different agencies. And to foster interagency trust and collaboration. The state of Texas has shown that creating a TRZ for a significant project not only prioritizes the project, but signals openness to other partners to find collaborative financing approaches to leverage resources from all the stakeholders to accelerate projects that are regionally significant or has significant benefits.
As I mentioned earlier, the fees promote economic efficiency.
Finally, we have the challenges. And in Texas, TRZ financing has occasionally faced concerns about the ability of a local government to maintain services win the zone due to the dedication of some of the property tax revenue to the transportation pro
However, the experience has shown these concerns can be generally eased by demonstrating how the transportation project will increase property values and economic activity well beyond the TRZ boundaries. The impacts of these projects are felt well beyond a quoted half a mile or mile buffer.
Next, TRZ revenues are subject to uncertainty of real estate market conditions within the zone. Particularly, the demand for undeveloped land and for zones of different zone types. Say from residential to commercial. The limitations of the general property value increases.
This has been reflected recently in terms of how much property prices have changed in different regions. The economic positions can impact the future property tax revenues and this adds a lot of uncertainty to the project, which in turn, results in increasing property and the interest rates the market will charge to provide those loans.
Loans that have a low interest rate and have long term have become the most cost-effective financing options for local government for transportation projects that are on the state highway system. PIV loans have more patience in terms of accepting some of the real estate market risks.
Finally, as we discussed earlier, Texas counties are currently not allowed to use TRZ revenues to secure long term financing for the transportation project. With that, I finished my presentation, Pepper. I wanted to leave enough time also for the next presentation for questions.
>> PEPPER SANTALUCIA: Thank you Rafael. We do have a few questions. Maybe we will take a couple then we need to rest so we can hear from Andrew next who has to leave us midway through the webinar.
The first question is can sales tax be used in tandem with property tax increment?
>> RAFAEL ALDRETE: According to the law, they can. In practice it has not happened. There has been not any local jurisdiction. It's creating a TRZ that relies on property tax.
>> PEPPER SANTALUCIA: The next question is easy. We will take that one and then defer the others until a little bit later in the webinar. It's a question, how many states are implementing TRZ's at this time?
>> RAFAEL ALDRETE: Two. Texas and Utah. And Utah is in the process of incrementing some and we will learn about them in the next presentation.
>> PEPPER SANTALUCIA: We will get to the questions that have been asked. Some great questions in the chat window. We will get to those, but we are excited it hear from our next presenter who I'll introduce now. Andrew Gruber is the executive director of Wasatch regional transportation in Utah.
The MPO provides the forum for public, private and community stakeholders to plan for land use and economic opportunity all embodied in the Wasatch choice region. Andrew it from New York City and then Chicago and moved to Utah for its natural beauty in 2010. Andrew, take it away.
>> ANDREW GRUBER: Thank you, very much pepper and Rafael. A great presentation. A great overview of this tool. I want to thank our friends and colleagues at USDOT for putting these sessions on. I know that we have learned a lot from them from our peers around the country and we are just thrilled and honored to have the opportunity to share with you some of the experiences we have had here in Utah with you, all of our colleagues around the country.
Here is my contact information if you want to. I'm going to talk I have three portions to what I'm going to cover now. I'm going to give you a little background about what is going on in Utah, so you have context. The point of my presentation and the next presentation is to put into a little application how the tools that Rafael was describing can be used. I'll talk a little about Utah. Then I'm going to describe the two types of TRZs that we have in Utah.
One is the transportation reinvestment zones and then we have another called housing and transit reinvestment zones. TRZ and HTRZ. And at the end we have white papers on both of those tools which we will give the links to if anyone wants to dig into more as time goes on.
Let's start out talking about Utah and its story by is a story of growth. Utah was the fastest growing state in the nation over the last decade. We have around 3 million people now and that population growth is rapid. We have just about the highest birth rate in America. Lots of you around the country are moving to Utah because of the quality of life here.
You think about Utah as the big western wide open state with national lands and national parks, and that is definitely true. But the majority of Utah's population, 90% is clustered into urbanized areas. You see those dots around the top of your screen. That is the Wasatch front area which includes Salt Lake City and surrounding area. That is where the majority of our population is. If you Zoom down to that area, it's a narrow, constrained area between the mountains and the lakes with Salt Lake City in the middle.
What we do here as the metropolitan planning organization, we develop regional vision and plans for transportation and land use for that Wasatch front, where the majority of people in our state live.
If you see a central area there, that is Salt Lake County. I'm going to Zoom into that and tell you a little about our Wasatch choice vision. That vision is what the label that we give to the official regional transportation plan and land use plans for our region.
Now, what you see is you see two shaded boxes there that are hovering over centers of development. And it is in each of those centers that we are aiming to put to use these tools. One, the TRZ and another HTRZ. I'm going to use them as case studies as we go forward.
Before we jump into the tools, just to give you a little more context, we are going to show you a short three-minute video to give you a little more information about our strategy on centered development combining transportation and land use.
(video)
>> Centers are special gathering places in our communities where people work, shop, live and play in a walkable setting. Communities have identified centers in the Wasatch choice vision. Our shared vision for the future. Creating great centers of communities is a core strategy of the vision. Having a center in your city near transit, trails or major road ways gives residents more choices about what to visit, how to get around and what to live in. And, since these residents tend to drive less, use less water and require fewer miles of infrastructure, it saves money for the entire state benefiting those who live and work outside of the centers as well.
Let's take a tour of a few planned centers. We will fly to weaver county and downtown Ogden. Ogden continues to invest in its downtown as a special unique place and it bustles with active all year round. They reworked the zoning ordinances. The economic health is upon this center.
We travel into Davis County. This is a community center takings shape with transportation choices in mind. By developing new homes and jobs within an easy walk to the front runner station, the residents will be able to access opportunities around the region without driving. Residents won't have to get on I15. Clear field is planning for great community spaces in the heart of this new development.
Let's travel south into Salt Lake County into mill creek. A county that is bringing a mixed-use center to life in the heart of the community. Right in the center of this development is the Mill Creek Commons which is the first element the city created to give its residents a place and it's already thriving with active.
We travel into Utah County to downtown vineyard. It's another center with visionary design taking place next to the front runner station. Most of the homes are single family detached with a yard. This will accommodate a mix of housing choices for people with different choices in life. Like an older couple who don't want to shovel snow but want to be near their grand kids. A younger couple, that wants access to good restaurants and transportation. As one of the fastest growing communities in the state, vineyard is looking ahead of the needs of their residents. This is an exciting time and so many examples of communities doing great things in planning centers across our region and state.
Working together, we can implement the Wasatch choice vision. Learn more at Wasatch choice.com.
>> ANDREW GRUBER: Great. Thanks for indulging us showing you that video so you can get a sense of what is happening at a combination of transportation and land use. Because this is a USDOT sponsored webinar, I want to note that the way that the transportation plans come together in Utah is through this unified transportation plan process here. I'm happy to site USDOT as recognizing that. That process which we develop our transportation plans is collaborative and comprehensive. It brings superior results.
Getting to the point of TRZs, it's about the funding. We have identified between now and 2050 a significant need for additional revenue to pay for our infrastructure investments. And it is in that spirit we have developed some of these tools.
So, let me hit the first one which Rafael talked about already. I'm going quickly through this. Transportation reinvestment zones. Again, the objective here of a transportation reinvestment zone it's two or more public agencies in an area have an interlocal agreement to capture the increased property or sales tax from an infrastructure project.
The outcomes are additional revenue for projects, well planned development that is coordinated with transportation, collaboration across boundaries and coordination between l municipalities and agencies.
these TRZs, I think is a way to help avoid having taxpayers generally having to cover the cost of a project. It enables the area through the increased economic activity to cover, pick up a portion of the cost of the project. I think it's helpful financially and politically.
Basically, the process is you define the need and you proposed improvement. The boundaries of the zone. You set your base year for calculating the increase in revenue, probably tax revenue in the zone and then the terms for sharing that increase in property or sales tax revenue within the zone.
How do you do that? The boundaries are drawn to include the area impacted by the project where the property or sales tax increases are anticipated. For those of you that are in NPOs or transportation planning, you'll be happy to know the projects have to be part of our long range plan to coordinate this development together.
Then the funds as Rafael noted earlier, very flexible uses. Capital projects and also for ongoing maintenance and operations. The revenue generation and sharing in the zone, again, for property taxes you establish a base year and the terms and use for sharing. For sales tax even more flexible. The terms and use for sharing. And so it's intentionally quite flexible. For the timing of the revenue collection, TRZs can be paired with bonding or revolving loan fund.
I think critically, everybody understands this, right? There is a mismatch in the timing of a capital expenditure and the revenue generation. You need the capital up front to create the infrastructure, which then enables the revenue generation of increased value that can be captured later.
By using a TRZ paired with bonding and with a loan fund or infrastructure bank enables addressing that mismatch expenditure and revenue generation.
Now, what is the difference? We get asked this question a lot. Why don't you just do regular tax increment financing? Normally for TIF it's one city or jurisdiction. TRZ is multijurisdictional.
Secondly a TIF is created just by the municipality. Here for a TRZ, it necessarily includes a transportation agency and also a municipality. This is a great way to have certainty about alignment on the project funding and then the financing times and designs so everybody is on the same page.
Now, a brief example of this, I told you I was goings to take you to this map of our region. What you see in the blowout already is the colored zones are centers of planned development. The blue lines are transit. The red lines are major roadways.
To the right, you see the light blue line. That is an anticipated bus rapid transit or light rail line going through a new development area. That line is not built and that is not the line that we anticipate we may use a TRZ to help to finance.
This line and now that line is now purple coming through this site is a new area called the point. This is the site of our old state prison which has been deconstructed and decommissioned and we are developing this area as a mixed-use area. Having transit right through it is critical to the success of development.
The land use and economic development depends on this transit project. You can imagine lots of new development occurring and we think we can capture some of that development and the value from that to fund through financing the infrastructure we are going to develop there, that transit line.
Here is another image what we anticipate it looking like. The red dot showing the route of the transit line and of course, what is a project plan without a nice image of people enjoying the community to be built. So that is the idea for trz.
Now I'm going to move on to the second tool. This is a newer one and it's called housing and transit reinvestment zone, specifically for transit.
The objective here is a little different. Here, we are looking to mitigate our housing affordability crisis. I know many of you around the country are struggling with rapidly increasing housing prices. The way we are looking to do that is facilitate mixed use, multifamily and affordable housing development near transit stations because those are great areas to absorb additional development and density through tax increment financing and city planning. That is the focus of the HTRZ.
Lots of desired outcomes. Affordability of housing, conserving water resources, air quality, mixed use development, strategic land use around development., access to opportunities and overcoming the development impediments that make it cross prohibitive to have affordable housing. That is where the funding comes in from the HTRZ.
What is an HTRZ here? Well, it allows property and sales tax increment capture, again, around transit to support project development costs. In an HTRZ, there are limits on the increment capture by area, by the radius around the transit station, by the total number of acres and by the number of years an HTRZ can capture revenue.
The mixed-use project should promote objectives in transit-oriented development, like the ones I was just talking about. There is a requirement to use this tool that a percentage of the housing be affordable.
The city has to have the zoning in place to support the development before final approval of the HTRZ, and there is a requirement for independent review and a committee before the HTRZ is approved. And the point here is to make sure the proposal is solid and that to be blunt, it's not simply a developer’s subsidy. Rather, it's a proposal and the funding capture is enabling development that would not otherwise be able to occur simply by utilizing the market alone.
The process here is its city driven. The city makes a proposal. It runs through a gap analysis. An independent financial gap analysis to make sure the proposed revenue capture is needed to achieve the objectives. Then this review by HTRZ committee that I mentioned.
Now the tax increment can be used by municipality. This is not just it can be used for housing, parking, for enhanced developmental costs. Horizontal, vertical construction costs. Land purchase costs. It can be used to pay off the bonds. And also for the administrative costs for the municipality.
In one slide this gives you an overview of the requirements. On the left column is the requirement. What you see is we have some differences, if you are going to do an HTRZ around a commuter rail station, a light rail station or a bus rapid transit.
The size of the HTRZ maximum size sorry, the number of units per acre, the density requirement for trail, 50 units per acre minimum on average across the HTRZ. Slightly less for BRT. BRT has less economic development potential associated with it because it's a less intensive mode of transit.
The radius of the HTRZ from that station, a third of a mile radius for commuter rail. Slightly smaller for light rail and BRT, again, reflecting the intensity and capacity of the transit.
The maximum number of acres within that radius that can be counted for the HTRZ 125 commuter rail, hundred and hundred for light rail and BRT. Then the maximum amount of increments that can be captured is up to 80% for commuter and light rail and 60% for BRT with a slightly longer time period for commuter rail than light rail and BRT. Again, reflecting the likelihood that the level of development around commuter rail with be more intensive and more expensive than light rail and BRT.
Then we have restrictions on the number of light rail and BRT. This is about compromise. The property and sales tax captured is not just from the city. It is from all the taxing entities. City, county, all special districts, school districts, et cetera.
There was a desire to move judiciously and not have too many HTRZs pop up too fast having too much of an impact on an entity. We are starting at a moderate pace.
There is at least a 10% affordable unit requirement in all HTRZs. A requirement for mixed use. And also a requirement that the units there not only be one bedroom. We have to be providing opportunities for family size housing also. We don't is want a situation where we have a one bedroom say a single person or couple has one bedroom and they start having kids and they have to move out of these transit oriented developments. We want them to work over a course of a lifetime.
Interestingly, one thing that has happened here that is pretty cool, up until now we have been talking about local taxes. Local property taxes and local sales taxes. But also in HTRZs in Utah, the state sales tax that is imposed, they are the largest taxing body. 15% of that from that area goes into a state transit and transportation investment fund for reinvestment in any transit projects around the state.
I said to you there has to be a gap analysis, a financial analysis. The city makes their proposal. It goes into the state economic development office which contracts for a financial analysis to look at the market for comparable developments in that area. And again, the point here is it's not just about developer subsidy it for money they would otherwise be spending on their own. It's to make sure that the development that is proposed would not be able to happen but for the additional HTRZ revenue that is generated.
And that leads to the second point here. The evaluation and verification of public financing and tax increment capture for the proposed development. More from the policy perspective, evaluation of the adequacy and efficiency to establish the HTRZ objectives I talked about before for transportation and housing, et cetera.
Again, it is reviewed by a body, a committee that is composed from a whole variety of stakeholders, taxing entities, legislative entities, et cetera and you can see the list here.
The committee takes action. They evaluate and verify whether the planned objectives of the HTRZ have met. The committee can request changes or vote to approve or deny the proposal.
I'm going to wrap up giving you an example of an HTRZ that has been approved. In southwest Salt Lake County called the daybreak neighborhood of south Jordan city. You see the blue line coming in. The second to the bottom dot is a station. That is the station that has not been built yet but will be built with the HTRZ tool and development around it.
It's going to be a mixed-use development with 65 units to the acre. More than the 50 minimum required for 4700 total units which is double what would happen just if we were using the market without the HTRZ. Again, that gets to that point of what could not be done but for using this tool.
You see a lot of new retail and office. 500 units of affordable housing. The gap analysis identified in order to get this development done as proposed, there is 512 million dollar investment gap. The HTRZ is intended to cover $160 million of that gap. And the developer is going to cover the remainder. The money will come in over the course of years and likely will be bonded against. So the bonds can be used to pay for the upfront infrastructure costs and then the HTRZ can be used to pay the debt service on those bonds over time.
And you just see we are really excited about this. We anticipate by having that transit station at the heart of this development, we will capture 30% of what otherwise would have been auto trips. 16 acres of open space and regional rail connections and lots of jobs in the area.
It's important to have a mix of homes and jobs so that people can live, work and play within this area. Here you go. This is what the station is going to look like within that quarter mile radius that I talked about before.
If you look at that overhead view, you see how the area in there is brown and dusty? It's not developed right now. Here is what it looks like. And what you see here is two planners standing on that site envisioning what the possibilities are for the future.
You get the picture from this. This is a green field well brown field development. This is for infill and redevelopment projects that can be used in both cases. I love this nation of people like us, the folks that are on this call thinking about and envisioning the possibilities. Something beyond perhaps just a standard subdivision development, mixed use, multifamily development that is transit oriented.
And there it is. That is what it's going to look like essentially. The development that is around that station right in the middle. I'll just sort of wrap here by quoting the mayor of south Jordan city. She said, the HTRZ area plan is the culmination of 20 years of planning and development to bring an urban center to the west side of the Salt Lake valley with jobs, recreation and housing, including affordable housing located near established transit.
Here is images of what we envision the development looking like. And as I said, and this is the conclusion here. If you want to access these, you can take a screen shot and I'm sure the materials will be shared to go into more detail including all the statutory citations and everything on the HTRZs and TRZs. The last comment I'm going to make here is I'm going to emphasize something Rafael said at the beginning, which is about collaboration.
Collaboration is essential in the development of the legislation and implementation of the tools. When we wrote these pieces of legislation, we were one entity working on it. We had senator Wayne Harper was our champion in Utah. We worked with the cities and counties and also with the private sector just to develop the legislation. And then, similarly, in any of those proposal to use these tools and developments, intensive collaboration between the public and private sector to be created is essential. There is no substitute for it. With that, I'll wrap up and Pepper turn it back to you.
>> PEPPER SANTALUCIA: Thank you, Andrew and I know you have to go soon. So, we will try to answer as many questions as we can before you have to go. There are a lot of compliments on the video. I'm glad we were able to share that successfully.
If there is any focus on accessibility for individuals with disabilities in any of these development centers? Or in transit?
>> ANDREW GRUBER: Certainly. Great question. This is one of the opportunities that comes from this type of development to design the community in a way that it is accessible. There is transit accessibility, there is neighborhood accessibility. That things are designed in a way they are walkable, and therefore, accessible for people who are elderly with mobility challenges or other disabilities, I think that is one of the goals to make these communities livable for a much broader range of folks who are not able or not interested in driving.
>> PEPPER SANTALUCIA: Thanks for that. We have another question from Wisconsin DOT. How are you using bill and justice40 funding? Some of these desired outcomes can be equity related. I guess it could be a bigger question to the extent you are using federal resource funding for some of these efforts?
>> ANDREW GRUBER: Another great and important question. I would just note that this type of development, I would say particularly the HTRZ has access to opportunities for all people at its heart. I mean, there are very specific requirements as I noted for affordable housing.
But we have a really significant housing choice and availability problem that has developed in Utah and in many other places. So, part of what we are trying to do here is to develop more housing and have that housing be affordable to more people. So statutorily required. Many of you know this, of course, doing housing that is transit oriented in proximity to high-capacity transit can reduce the overall household cost for housing plus transportation significantly.
So, you are reducing overall household cost by reducing or even eliminating the need for people to have one or more cars and to travel long distances by driving. And also, by locating housing and jobs in connection with the high-capacity transit system, you are also significantly increasing access to opportunities for jobs, for school, for recreation, for shopping, for more people.
I would say increasing access to opportunities for all is woven into all the policy we have here. There is a lot more possible said on that, but in the interest of time, I'll leave there.
>> PEPPER SANTALUCIA: There are a lot of questions. Your colleague Miranda is doing a great job of answering them. Have bonds been issued for the south Jordan project?
>> ANDREW GRUBER: Not yet. That HTRZ was just approved. So, the development is not happening yet. So, with the HTRZ approval, that kind of gives that green light. It's like, okay, we are gone. Let's do this thing and put the whole structure together. So, stay tuned. Maybe if you have me back to do another one of these next years, I'll be able to give you an update.
>> PEPPER SANTALUCIA: Here is a question that maybe Rafael can chime in on as well. There was a question about the comparability of the HTRZ in Utah and the TIRZ, which we didn't cover in detail that is available, I believe in Texas. Rafael, do you want to try to answer that one first?
>> RAFAEL ALDRETE: A TIRZ can be used for a variety of development projects and other capital projects. Not necessarily just transportation. It doesn't have all the policies that basically help local government push for affordable housing. There is no affordable housing requirement in TIRZ. I would say the main differences are basically on how focused the housing TIRZ is on implementing specific policies and changing land use and improving transportation and providing access. In the case of the TIRZ in Texas, you also have a tax financing have developed a reputation because of some examples of issues that occurred with tax incurred financing.
It's about the tax being used for purposes that have been questioned by the public. On the other hand, when you have transit focused TIRZ, there is less scope for misusing the funds in something that was not the intent of the original policy. I hope that answers the question.
>> ANDREW GRUBER: Pepper, I might just say. I apologize. I do need to run. Miranda and I would be very happy to have ongoing dialogue. I dropped my email into the presentation earlier. You have another great presentation coming up, so we want to leave time for that as well.
>> PEPPER SANTALUCIA: Thank you, Andrew. We will be following up with you and your staff to get all these questions answered for our participants. We do want to turn to our third presenter. We are saving time toward the end of the webinar to address as many questions as we can. We will open up the phone lines, for that as well.
Terry has over 30 years of municipal experience in financial administration and worked on the planning and financing for capital projects. She serves as the consulting capital improvement program manager for the town of horizon city Texas. Terry, take it away.
>> TERRY QUEZADA: Thank you, very much and thank you to your previous presenters. I think they have done a fantastic job of setting up this final presentation. I will try to be brief because a lot of the background has already been established. I think the major take away from this presentation is that a remanufacture sis that collaboration is critical in the use of TRZ. Horizon found it was critical to this project.
We have seen from Andrew a broad, regional approach to implementing these value capture tools. The town of horizon city is a small community in west Texas of western most tip of Texas bordering New Mexico and Mexico.
It's by far the smaller communities within the El Paso Texas County and it successfully implemented a transportation reinvestment zone. That project was completed on time, under budget, without the use of any federal funds which contributed to the on-time completion.
It is successful despite the fact we had Covid, and Rafael said earlier, that affects the real estate market and how the growth has proceeded despite all of that. The project has been successful. So go ahead and get started with horizon city's experience.
The proposal to implement a TRZ resulted from mobile plans. The city had a financial analysis conducted by Texas transportation institute. The comprehensive mobility plan was endorsed by all the participating agencies. So again, we are seeing this is an exercise in collaboration. Unlike Utah, where they have to be in the project projects have to be in the major plans. Here what happened is the entities looked at those master plans, went to the communities in the NPO and asked what their transportation priorities were. Then the comprehensive mobility plan was called by the authorities that those entities presented.
Just a little bit of background about horizon city. The population is 23,000. That is US estimate for 2021. The general fund budget is slightly over $13 million for 2023.
Now, it's important to note just like Utah, that horizon city is enjoying one of the more robust growth rates in El Paso County.
The population was about 16 half in 2010. We had more than a 7,000 person increase. Population just 23 years ago was five thousand. You can see this is a great deal of growth for a community that is basically land blocked.
The city adopted its first capital improvement program in FY14 totaling $15 million. It watts focused on infrastructure projects. It looked at street and drainage improvements. In 2018 the focus shifted, and the city approved $13 million for parks and recreation facilities.
It is now planning approximately 28 million dollar for infrastructure and a new police department facility. Their CIP is estimated at approximately $160 million, but the vast majority of those projects are unfunded.
So going back to the comprehensive mobility plan that was adopted in 2013. You can see El Paso County, again, the western most tip of Texas to the top of this chart would be New Mexico and to the bottom you would have Mexico. So that just gives you an idea of where we are located in the US.
The comprehensive mobility plan saw the use for funding. Vehicle registration fees which are collected by the county. Transportation reinvestment zone funds and federal funds primarily STP funds that are distributed through the NPO.
In 2013, the TRZ were expected to be created by both municipalities and the county. That was subject to a great deal of controversy. So, the county decided they were not going implement a TRZ and not be subjected to the potential drawbacks of being in litigation.
So, the city adopted a revised TRZ in 2014. It was projected to generate approximately $6 million to fund a single project within the zone Eastlake phase two. Phase one of the project was strictly in the County zone, thus the phasing of it. The project was completed in April of 2018 ahead of schedule and under budget.
And this is the zone. You can see that this is much, much bigger than the quarter mile from center line or half mile from center line.
That part was undeveloped. It still remains mostly undeveloped. So, the purpose of the roadway was to open up this area for development. There was primarily one property owner for all of this area. Anything outside of the lilac boundaries is outside of horizon City corporate City limits. This opens up vast areas that would not otherwise see development.
The city decided to describe the zone by parcel as opposed to metes and bounds. That is why all the parcels were included in the zone.
So here are some of the considerations that the town had to take into account as it was considering the implementation of the zone. They are not stand-alone considerations. They are interrelated. The zone size as a matter of practice in describing it, but also determining how much is going to be just enough. It's a Goldilocks type of approach. So that the rest of the town is not impacted by the loss of the increment.
Although there is no change not tax rate, and there is usually no growth or growth is at a much slower rate than what would happen given the infrastructure improvement, we still have to explain to the policy makers that growth for this development will occur or occur at a slower rate. So we still need to have some investment into the zone.
Certainly, the financial director was interested in was the zones impact would be to the general fund budget again, thinking about that increment and what she was foregoing in the growth.
The zones term would be look at the full 30 years or was it going to be something that was going to be shorter than that? And then, the project funding mechanism, because the city's portion of the TRZ zone funds was not nearly enough for the project budget. And again, the practical aspect of how to describe the zone.
Here is where the collaboration became critical. The city, the county and the Camino Real agreement relied on local entities which was important to all of us because that meant it was entirely local funds. We would not have to follow all of the federal regulations and we anticipated that would reduce the time to completion for the project.
So the provisions for the agreement was at the Camino Real mobility would serve as the clearing outside for the entire agreement structure. We opted not to utilize state infrastructure to prevent the project from being federalized.
What happened is the RMA was responsible for issuing bonds. I know we had a question about this in the chat. The RMA issued bonds that used the vehicle registration fees as the pledged repayment. That is a more stable and reliable funding source.
So, the RMA was able to get a more traditional bonding package and favorable interest rate and term because it was a known and quantifiable funding source.
TRZs, because they are somewhat speculative, usually do not do well as repayment sources when you are going out for bonds. That is one of the reasons that I mentioned state infrastructure bank, Rafael mentioned that as well. State infrastructure banks tend to understand the value capture concept and become more patient lenders.
Again, this this case, because we were using two different funding sources, the plan was that the vehicle registration fees would be the primary revenue source to fund the bonds. Then the TRZ funds generated from the cities TRZ would reimburse those funds and those would go to the RMA.
So, the schedule with the TRZ was adopted in December of 2014 in Texas. The year in which a zone like this is adopted becomes the base year. You basically have all year to do all of the work you need to do to determine the financial feasibility of the zone. You can adopt in that year and still have the year serve as the base year in the zone.
2015 the RMA awarded the design contract. We opened bids about a year after. In November of 2016, everyone was working and in November the three-party agreement was executed by the RMA and the city. In January of 2017, the project construction began, and we opened up the roadway to the traveling public by April of 2018.
Six months later the city accepted the project, so it became strictly a city roadway. And then, again, recognizing that the RMA understood not just vehicle registration fees, but value capture and the nature of TRZ. The first payment to the MA was not due until May of 2020.
This is what the design looked like. Three lanes with a shared bike path, a median and lighting. Again, this was in the green belt area. It was strictly new construction in vacant land.
You see more of what it looked like. This is what it looked like once it was constructed. Again, you see there was nothing along the roadway. This is the finished project.
So these are the finances. The estimated value of the project was $19 million. The county bore more than three quarters of the cost and the city's portion was about 23%. This was again, the first of its kind where the county agreed to participate in a road way that was strictly within city limits of an incorporated city.
As you can tell, with a budget of 13 million, a project like this is more than the entire budget for the community. So, participation, collaboration and innovative resources were crucial to see this project come to fruition.
We have savings on the actual cost. We retained the proportion ate share so that the city continued to pay the 77.7% and the city participated to the tune of about 23%.
Savings of about $500,000 to the city. The original agreement with the RMAs at the final payment would be scheduled for May of 2038. We had graduated payments. Again, because we had partners who understood value capture, the first payment was only $29,000 and the final payment was estimated at $842,000.
But what has been happening is that the city has been generating or the zone has been generating greater revenue than had been anticipated. You see the revenues for the last couple of years and estimated revenues for this year.
The estimated payments RMA was 128,000 for this year. But the city will be paying the full 548,000, the full amount that is realized in the zone will be paid because we have an agreement that allows for prepayment without any prepayment penalty.
The adoption process has already been covered by Rafael, so I won't go through this in too much detail. The city follows the process of notifying residents that it intended to create a zone. It held a public hearing. The zone was adopted by ordinance that includes two readings. It was introduced within a 30-day period between the public hearing on the zone and the final adoption. Then there was a final hearing again once the zone was adopted.
These are some of the clarifications for the public that it did not increase taxes. In this instance, there was no required contribution or participation by any other jurisdiction.
So, the zone affected only the city's portion of the tax bill. It affected only property taxes, nothing was pledged as far as sales taxes. The purpose, one of the objectives was vacant property would become both commercially viable and also open up for residential development.
And the occupied property along some of the existing areas where the roadway was already in place, that property could become more commercially viable since there was no connectivity for that part of the city.
Other points we have to consider is even though there were no federal funds, certainly, this was a regional significant project. The revenue stream had to be included in the master transportation plan at our MPO. We modified some of the short term regional transportation documents. And we had to recognize that added some of the time for some of the project to begin.
Again, this was earlier than some of the modifications to state legislation. So at the time these questions from the public came forward to the town, we could realign the boundaries prior to adoption, but then that would require a new economic analysis or a new public hearing. At the time, the legislation wasn't very clear. So, the city was conservative in its approach to any changes to the boundaries.
Then, realignment of the boundaries after adoption. Again, at that time, only in no
There was a question about extending the time frame to fund transit. But that was not allowable at the time that the TRZ was implemented. And this is my contact information. I'm happy to answer any questions about our experience in Horizon city with TRZs. Overall, it's been a very positive experience.
I'm happy to answer any questions.
>> PEPPER SANTALUCIA: I opened up a little different look to our webinar room so we can see the many questions we received. I'm looking. Rafael, I know you had some things you wanted to follow up with Terry based on her experience in Horizon City.
>> RAFAEL ALDRETE: I was wondering if you can talk about the considerations that you had to use during the analysis. How did you balance them? For example, geographical size of the zone and the width of buffer on each side of the center line of the project and the percentage of the revenue that the city or tax jurisdiction in this case Horizon City anticipated?
>> TERRY QUEZADA: TTI conducted financial analysis and looked at an optimistic, realistic and pessimistic scenario as far as growth and what percentage of the zone might possibly transition from residential to commercial. The town opted to take a more conservative approach and looked at the realistic scenario and that is the one it adopted. Because we didn't want to over promise. We wanted to make sure there was a greater level of confidence in the revenues that were projected.
As far as the size of the zone, if we had gone with a narrower zone, that would have required metes and bounds. That was more of a logistics issue. We didn't want to incur the cost of doing that massive surveying. In my experience, our central appraisal district is much more comfortable with parcels, entire parcels being within a zone because it's easier for them to identify the footprint. It's easier to keep track of how those parcels are being subdivided or changed.
Our zone is large simply because we wanted to capture the entirety of the parcel that were butting the road way that were within city limits mostly for logistics. The total acreage of the zone is 1700 acres. It is very big considering that the only project within the zone is the road way project. I don't know if that answered the questions you had.
>> RAFAEL ALDRETE: I think that covers it. Thank you.
>> PEPPER SANTALUCIA: We have other questions. Should we go over the ones I was on mute. I just wanted to point out for the audience that you should know see a file share window or pod on the left side of the webinar room. That pod has a bunch of resources available for download. First and foremost, the slides from today's webinar, that is number three. But number one is the primmer we referenced earlier on that was published in 2021. Also, a FAQ document. A shorter take on TRZs. That is number two.
The last three are resources related to the bipartisan infrastructure law and new opportunities for state and local governments that law created. If you want to download an individual file, you can hover your mouse pointer over the file name and you should see a few icons pop up. There is a downward facing arrow. You click on that and you'll be able to download that file. If you want to download all of them, if you click on the three dots in the upper right corner of that window, you should see a menu with an option for download all. And that should initiate a download of a zip file with all of the files inside.
I just wanted there have been a lot of questions about whether slides would be available. I wanted to make sure people knew they were. With that, we can scroll back and see what sorts of questions we have.
We can start with the most recent. If MPO funds which is category 7 be used for the project maybe help us if that is a specific Texas terminology or if it's more widely used than that?
>> RAFAEL ALDRETE: The law is flexible in that it doesn't describe in combination of which other funds it can be used. As long as the funds are eligible to be spent on the type of the project, you can leverage them. It's a good application of mixing different sources of funding.
>> PEPPER SANTALUCIA: You had answered a question in the chat about the maximum term of the TRZ. Maybe for folks who are listening to you can respond to that question.
>> RAFAEL ALDRETE: The question was what is the maximum term of a TRZ if it's ten years. Ten years is the maximum years for a TRZ if and when the plan is not commenced, or no other commitments have been made and are already enforced. As long as that has happened already, the TRZ does not have a prescribed end. The only end is when the commitment that was made is paid.
Only TRZs that are not used within a period of ten years, those will automatically expire. But there is no maximum for TRZ. Typically, they go according to the life of the loan or the debt that the municipality enters into.
>> PEPPER SANTALUCIA: What could that be? 20 years? 30 years?
>> RAFAEL ALDRETE: We are seeing around 20 years more or less. That is the terms of loans we have seen from the state infrastructure bank.
>> PEPPER SANTALUCIA: So, it's a very long and flexible process. Thank you for that. There was a question from someone about the effect of TRZ on folks with limited ability to pay higher property taxes? I think you addressed that in the chat, but maybe you can articulate that again for folks who are listening?
>> RAFAEL ALDRETE: TRZ does not involve an increase or change in the property tax rate. So the property tax bill of a property owner will only increase if the appraised value of the property increases. As such, it enjoys the same protections that regular property tax payments enjoy, which in Texas generally includes senior citizens, military veterans. Both of these groups have a good break in terms of the maximum taxable value their properties will receive.
And then, the other protection is just general homestead extension that prevents increases that are larger than 10% in one year to happen. Those are the protections for disadvantaged groups or other groups.
>> TERRY QUEZADA: If I may, I know a little bit more. I think that is always a concern that the finance director and the public might have. You are telling me that the property taxes aren't increasing. But if we don't enjoy the increment of the general fund then aren't we foregoing revenue? And won't that trickle down to the property owner?
But, I think this has been said in earlier conversations as well. If an entity is doing its due diligence and the investment in the infrastructure is strategic, then property taxes are only one of the revenue sources that are going to increase. One of the desired outcomes for Horizon City is this road way will create intersections where the commercial property is going to have increased feasibility. So we expect to have sales taxes increasing as well as property taxes increasing.
So, that contributes to the overall revenue streams to a municipality. So, again, if it's a strategic investment, it's going to benefit the community because those who are best benefited by the infrastructure improvement will basically be paying for it. And it's going to foster economic development that will benefit them, the community as a whole.
>> PEPPER SANTALUCIA: Thank you for that, Terry. We did have a question Rafael this is probably a good one to talk about is what kind of opposition do communities face when they are thinking about creating a TRZ? I know we don't have any Utah representatives to talk about what might happen in that state. But Terry and Rafael, if you have any insights about the Texas how people react to the TRZ.
>> RAFAEL ALDRETE: When the law was enacted, there was tolling of roads was a very politically charged in the state. When the law that enables the TRZs proposed, it was seen as an alternative to tolling in terms of funding roads.
So at that stage, there was no opposition as far as passing the law. However, once you get into the implementation of TRZs, frequently there were concerns about the ability of the local government to maintain services within the zone if a portion of the increment is going to be dedicated to a transportation project.
However, some of the conversations that help in overcoming these concerns include demonstrating how the impact of the TRZ, the positive impact of the project on the property tax revenues and sales tax revenues extends well beyond the TRZ boundaries.
it kind of increases the size of the pie rather than taking the splice of it. You may have other anecdotes you may want to share.
>> TERRY QUEZADA: Thank you. I was also involved in the development of the TRZ for the city of El Paso which is the largest municipality in El Paso County.
I cannot recall organized public opposition to the TRZs. Certainly, the formation of TRZs calls for public involvement and notices to the public in both the city of El Paso and Horizon City complied with those legal requirements.
We tried to make the outreach as we could. There was no real public opposition to it where there was a real organized concern. Usually, there were some questions to understand how TRZs operated. But, no real opposition.
>> PEPPER SANTALUCIA: There was a question whether TIF and TRZ can overlap and cover the same geography.
>> RAFAEL ALDRETE: Could you have overlapping district with a TRZ? And this is it is possible that when creating a new TRZ you may have a need to include a property that is already part of a district. As far as when it comes to continuity purposes that parcel is needed. The parcel can stay within the TRZ. The only thing that needs to be take into consideration is that property is not going to contribute to the TRZ until it has already met the requirements or commitments made for the TIF district. When they are included, they are included usually for continuity purposes. But they can't pay into both systems. One has to finish before the other kicks in.
>> PEPPER SANTALUCIA: Thank you for that. I did see there was a question you responded to about bonding. So bonding linked to TRZ revenue versus bonding that isn't. That was if relation to maybe the north central Texas. Can you tell us how you responded to that?
>> RAFAEL ALDRETE: The question was if there was any experience as far as when a municipality may prefer to use bonds that are backed by the TRZ revenue only for revenue funds that are backed by the municipality. There hasn't been a local government in Texas that used bonds to pay for a project. We don't have experience to understand how the market receives both. But what is clear, if it's only backed up by real estate property taxes, then it entails a much larger risk than the creation of a general revenue fund.
The debtors would not have resource to other taxing powers that the municipality may have such as sales tax. There is no experience.
>> PEPPER SANTALUCIA: I did see a question earlier while you were making your presentation about whether a TRZ can be established on tribal lands? I don't know if you encountered that question in the past?
>> RAFAEL ALDRETE: That is not clear. We have an example here in El Paso where the project that is in the works includes a component that goes through a tribal land. The ad joining municipality is setting up a TRZ, but the tribal community is considering other sources of funding.
It hasn't been testing. The law says local jurisdictions have taxing powers, but that is it. I don't have a clear answer on that. So far it hasn't happened. But there are projects that are involving tribal lands, but not necessarily including TRZ funding.
>> PEPPER SANTALUCIA: We are almost out of time, but there was a question you generated for Terry that maybe she can address in the few minutes we have.
What should the local government consider when deciding between the TRZ or the TIRZ which is the tax increment reinvestment zone?
>> TERRY QUEZADA: The TRZ is strictly for transportation projects. So if an entity is looking at making other infrastructure projects or housing projects, then a TIRZ would provide that flexibility. But a TRZ would be strictly for transportation projects.
In fact, Horizon City has implemented a TIRZ in another vacant area of town that has fractured ownership where it has decided the city determined that would be transit oriented developments. I was interested to see what Andrew was doing in Utah because that is the part of the vision that we share as well.
In that instance because it's more than just transportation the city opted for a TIRZ. The TIRZ will include the county. They will sit on the board manages the TIRZ. We are working with the provider for water and wastewater services in Horizon City. They expressed interest in participating in the TIRZ.
Again, we are looking at different types of infrastructure improvements, a different kind of development. That is a TIRZ. For Eastlake phase two, it was clear to the city it was going to be the road way that was going to provide the opportunities it needed to open up those vacant areas. So that was much more productive to create a TIRZ because it was going to be much faster to implement and we could also demonstrate to our partner agencies that the city was committed to dedicating those funds to the transportation improvement.
>> PEPPER SANTALUCIA: Thank you. Thank you, Terry and Rafael and to Andrew as well. At this point we are going to start wrapping up. I would like to turn things back over to your facilitator, Kate.
>> Kate: Thank you, all, for such great presentations and Q&A. As we begin wrapping up today's webinar, we would like to remind you of the upcoming webinars in the series. We have 11 more planned before the end of the year. You can register for them all showing on the screen. You can click that and they will take you to the registration page.
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(Webinar concluded at 2:58PMET)
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