Value Capture Webinar Series

Capacity Building Webinar:
Value Capture: Incremental Growth Techniques and Case Studies - Raw Transcript

August 22, 2019



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Thank you for standing by. Welcome to the value capture incremental growth techniques webinar. All participants are in a listen only mode. This conference is being recorded. If you should require assistance, press star zero. I would like to turn the floor over to your host.

Hello everybody. On behalf of the Federal Highway administration, I would like to welcome you to today webinar. I am with the U.S. Department of Transportation Volpi Center in Cambridge, Massachusetts. I will moderate today's webinar. As well as facilitating questions and answers and helping to address any technical problems. In the top left corner of your screen you should see the audio call in information. Below that is a chat box you can use to submit questions to our presenters during the webinar. You can also ask questions by pressing start 1 on your telephone. We will provide more instructions about that at the first question and answer session. If you have any technical difficulties, use the chat box to send a private message to me. You can start the private conversation by clicking on the button in the upper right corner of the chat pod and selecting, start chat with host. The webinar will run until 2:30 Eastern time and will feature three presenters. First Thay Bishop a senior program advisor with the Federal Highway administration. She will be followed by Alan Ferguson, a senior vice president for community development at invest Atlanta. And finally we will hear from Rafael Aldrete, senior research scientist at the Texas A&M transportation Institute. We will address questions for the presenters at the end of each presentation. And we anticipate having time at the end back of the webinar for additional Q& A. The speaker's presentation slides will be available for download on the left side of the screen at the end of the 11 are. If you are interested in applying for professional development hours or credits for your participation in today's webinar, we will provide information at the end of the event on how to obtain confirmation of your participation. Before we begin, I would like to ask participants to fill out the four quick poll questions that are showing on the screen. The purpose is to help us understand the affiliation of the people listening today, how many people are participating at your location, and your level of knowledge about the topic of today's webinar. I see we have a pretty good participation in the poll questions. Some participants are in jurisdictions that are using tax incremental finance or tax increment district. Thank you for your participation.

I will turn the webinar over to Thay Bishop.

Thank you. Good afternoon and good morning to everyone. Welcome to the value capture innovation webinar series. I am Thay Bishop, senior program advisor at the federal Highway administration in the office of innovative program delivery. I am also co-lead for value capture implementation team. The federal highway administration is currently implementing the fifth round of every day count initiative or EDC-5. Value capture is one of the 10 innovations included in the EDC-5. The EDC-5 value capture innovation promotes the use of capture techniques as part of funding and innovative finance strategy to accelerate project delivery and provide reliable and sustainable transportation gap funding. We define value capture broadly to include land value capture, cost recovery, and revenue generate from the public owned property. So Land value capture is just a component of the value capture that we defined here. We had group value capture techniques into seven broad categories. Today we cover the incremental growth category. Within that the tax incremental finance or tax incremental district would be the best examples. Although we discussed each technique independently, in many cases more than one techniques can apply together. For example, a special assessment and tax incremental finance are often overlapped and working in conjunction together as a layered financing techniques.

The webinar today will cover an overview of the tax incremental finance and how it works. Who has the most influence in Tax Incremental Finance as well as a case studies.

I include several key definitions into the presentation. I will not go through those. But they are available for you on the presentation. The one that I will spend time on is the base and the incremental revenues.

The base revenue represents a dark blue area. This is the amount of property tax available before the tax incremental district is created. The base revenue are shared amongst local government jurisdictions such as the public school, city, County, Township, and a special district. If the state does not allow opt out option, those government jurisdictions would have to agree to receive the same amount of the revenue for the specific duration at the time of the tax incremental district created. Typical between 25-30 years. I see one city that has 40 years. Incremental revenue represents the orange triangle area. The revenue generate from new development and increased in property value that resulted from a new transportation facilities or new development. Use to pay for the project. Because of the timing of the revenue generated by the tax incremental revenue, the local public agency issue tax exempt revenue bonds and pledge tax incremental revenue as the source of repayment. The light blue area represents a new tax base at the end of the tax increment district. It represents the combination between the base tax and the incremental tax revenue. This amount will become a new tax base so the local jurisdictions will receive the new tax base revenue for many years to come. It is much higher than it would have been without a tax incremental district.

Tax incremental finance comes in many different names. The objective and the project scope may be difference, but the process and the requirements are similar. You will hear from Alan Ferguson, senior vice president from invest Atlanta, Georgia -- Georgia is very successful use Tax Allocation District and have done quite a few projects. You will also hear from Rafael Aldrete, senior research scientist from Texas A&M Transportation Institute. He will share with us about transportation reinvestment zones use in Texas

What's Tax Incremental Finance? It is a value captures revenue technique that capture and uses increased property tax revenue generated from new development within a defined geographic area to fund transportation infrastructure. A technique to promote industrial development, mixed use development, eliminate blighted and rehabilitate deteriorating areas. It is also a public and private partnership. It requires a cooperation between the government and the private sector to stimulate economic growth. It's also a public-and public partnerships -- all the etax entities have to work together to promote the development. Authorized in 49 states and district of Columbia. Tax incremental finance is one of the country most effective economic development. The key is, no new taxes are requested. And no existing taxes are used to pay for the project.

The incremental revenue can be used to pay-as-you-go. Expenditure are undertaken as incremental revenue become available. Or developer financing, local reimburses the developer for eligible costs as tax incremental revenue become available. Another way of financing is municipal taking on financing by issue tax exempt revenue bonds or private activity bonds. If the project received a federal grant, tax incremental revenue can be used as local matching share to the federal grant. Incremental revenue provides the opportunity to access to federal low interest loan program and repay the loan with the incremental tax revenue.

Why is the need for value capture or tax incremental finance? Here the reason why state and local should consider all the revenue sources. [ Indiscernible ]

The country is facing infrastructure crisis—much of our infrastructure has outlives its useful life-cycle and chronic funding shortfalls have resulted in a massive backlog of deferred maintenance across almost every infrastructure category. The nation's costly and ineffective fixed worse first or fix as fails approach to maintenance have put us further behind as every dollar of deferred maintenance requires us to invest at least five dollars in the future in capital expenditures. Unfortunately the future is now. The country cannot afford to defer investment any longer. We all agree that eroding infrastructure diminishes mobility, impacts public safety and the quality of life. Just in transportation alone you can see about 47,000 bridges are in poor conditions. And over 260,000 of bridges are over 50 years old. Significant funding will be needed to replace these bridges.

The tax incremental finance is increasingly important as the federal and state and local resources are limited. In transportation, federal dollars are continuing declines or diminishes. The public has no appetite for any local tax increases. There is about 4.2 million miles of public roads in this country. Federal funds about 1 million mile left 3.2 million miles of road improvement have to be funded from other alternative funding sources. It is often that we see the state and local struggle to mobilize all funds to maintain, rebuild, and expand the local transportation system. Adding into the complexity is the complete street initiative to accommodate all mobility modes: pedestrian, bike, car, truck, transit. As you recall our road built long time ago focused on the automobile. Today the mobility has changed. Significant funding is needed to make the streets safer for the public. Also funding and financing challenges may result in projects being delayed for years - if not indefinitely, leaving important safety and mobility objectives unmet -- what is the benefit of tax incremental finance ? It offers a long-term and sustainable revenue source to provide additional funding for transportation improvements. It attracts private investment which results in increased development, create new jobs, greater economic vitality and stabilize communities. It preserves and strengthen the tax base and increases tax revenues. And provides critical but for funding otherwise that may not be possible. Economic growth would not occur in absence of tax incremental finance. It can be used as a local matching share for federal grant or access to federal -- low interest rate loan program. It appeals to politicians because they do not require the local to raise tax rate. Instead it generates revenue for redevelopment by capture the increased value of the property or new taxes from the from a new development properties. Tax incremental finance became recognized as a flexible and all-purpose funding technique for economic development. Who can form the tax incremental district ? really is locals. also economic development authority, housing redevelopment Authority or Port Authorities can for the tax incremental district. They can form the tax incremental district.

Let's look at how tax incremental finance works. Let use the suburban example. The mayor decided the area in city needed economic development. The city formed a tax incremental district that represents the blue area. The area lacks needed infrastructure such as roads, water and sewer systems, and other utility amenities and the new development such as business and residential investment will not happen without infrastructure in place. There is already a taxable property in the tax incremental district. This is represented by the gas station on the corner of the district. The property tax paid from the gas station property will continue go to the city, county, public school and any other government units -- in order to build infrastructure that is needed for development, the city issue tax exempt-- revenue bond. And pledge the future tax revenue from the new development to pay for the debt service of the bond. With the infrastructure in place -- I forgot to mention the city is issued bond to remediate the brownfield areas -- you can see the infrastructure includes a remediation of the two brownfield -- to protect public health. The infrastructure is in place. The office tower is built. The residential building also be built. Then the factory, retail store, hotel. The incremental tax revenue that generate from this new development will be used to pay for the city debt services that come from the bond issued -- to build the infrastructure. Finally, the infrastructure is in place. The development happened. The bond is repaid. And the tax incremental district is expiring. All the new property tax resulted from the new development as well as the base tax they came from the gas station go into the county, city, school and any other district. It is much higher than would have been without a tax incremental districts which is much higher than it would have been that the city would received from the tax property tax revenue from the gas station. Keep in mind the city, county, township, and tribal governments can use tax incremental to promote economic development, redevelopment or rehabilitation of the major infrastructure in the urban, suburban, or rural areas.

This is the process to create the tax incremental district. Regardless of the tax incremental finance for the specific project or tax incremental district, state law determines the necessary steps required to establish the tax incremental district. This is the typical process but it may be different depending on the state. The slide provides you the details. Due to the time constraints, I will only focus on but for -- analysis. This test determines the economic growth would not occur in the absence of tax incremental finance. The but for tax incremental finance requirements determine whether they are effective. To meet these requirements, the local reviewing body, every city or county will have a group that will review and evaluate the proposed tax incremental district and concluded that the project is necessary to assist the property's economic development. The team must be included the finding within a resolution for approval. It ensure that the tax incremental financing is necessary for the project success. Used to determine the minimum amount of tax incremental financing necessary to make the project feasible. The fundamental purpose of tax incremental finance is to attract investment to an area that has little or no new development or growth and it would not take place without tax incremental finance. Ongoing maintenance required for an annual audited report. If the district issued tax exempt revenue bonds-- an ongoing requirement annual audited finance statement and -- any changes to the project as well as a irregular occurrence, the information had to be deposited into the municipal security rule making board -- of that information is available to the investor or bondholder to access to.

At the end of the tax incremental district term -- it will terminate by the resolution from the city government or County government. The Department of revenue has to be notified. And audited financial report is required.

There will always be a challenges as well as benefits. The negative perception of challenges have to be addressed. Redevelopment and economic development do not happen in a vacuum. In the process can be highly political. The tax incremental finance techniques or value capture in general are very difficult to understand or explain. It needs to be clear and take time to explain -- if you had done a But-For analysis, you would have the data and information to communicate to the public. Share with the public a comprehensive vision of the project. Show them what it will look like if you are complete in phases. You need to show them and provide them complete picture. It is important to cover that the job creation, property appreciation, mobility and what is in it for the communities. It is ongoing communication and outreach and should never stops until the project is completed.

Let looking at who has the most influence in tax incremental finance. I mentioned earlier the state enabling legislation authorized tax incremental finance required -- the good news is 49 states and the district of Columbia have legislation in place. Local governments have the power to implement them. The development agency or other entity are part of implementing the program had direct influence. Private developer, real estate and financial institutions have a direct influence.

Federal has limited influence-- If you are using incremental tax revenue as the federal matching grant or the property you purchase with federal fund then federal and state have direct influence -- what that means is you can have to meet the federal requirement. The US D.O.T. strongly support value capture. One of the criteria for build grant is non federal revenue for transportation investment. Incremental revenue or value capture revenue in general is helpful to get the grant approval. The federal highway assembled the value capture implementation team. With us today is my colleague, who is a economist, value capture expert, and team leader from Federal Highway office of planning, environment and Realty. The Implementation team members also with us today and they are available to answer questions you may have.

We are focused on communication and outreach using the web conferencing system. We bring you the awareness of each of the value capture technique using the web conferencing platform. Just as we are providing you -- the webinar series right now. In terms of technical assistance we are partnered with the leading city, county and state have successfully done value capture. And assist in delivering technical assistance. We also have a consultant expert. We are using a web platform to house all the lessons learned, project examples, research and all the significant resources right now on the website. Keep in mind this is evolving. We will update the information as they are becoming available to us. You can help us. If your state, city, County or tribal government implement value capture technique. We would love for you to share with us. We want to showcase that and make it available for all other to learn from.

An important document we just completed is the value capture implementation manual. We plan to roll it out in late September. The first workshop will be held in Atlanta on September 24 and 25. We are limited to 50 participants. That way we can provide attention to the attendees. If you're interested, let me know. By email to me or We will contact you.

This slide provides you the link to the resources on the website.

Here is a couple of funding sources and what you to be aware of. The first is the stic incentive -- up to $100,000 per year. If your local that wants to use to aware of. Example the local want to implement the tax incremental finance. The tax incremental finance would require the But-For analysis. The city or county will not have the staff to undertaken this study. You would need a consultant. You may want to apply for this grant.

The second of funding source is aid demonstration grant -- up to $1 million annually. Let's say you had a project and you want to implement tax incremental finance. Your city or county has not used it before. This is opportunity to apply for this grant.

This is the conclusion of my presentation. Thank you for listening. I will turn it over to pepper.

Thank you. We have a few knowledge check questions to engage participants. We will give you a few minutes, a few moments to take the test. Then we will proceed with a quick question and answer session before we move on to our next speaker.

We have a question. On the chat pod. A good example in Georgia is the Atlanta Brave Stadium that moved from Atlanta to Cobb County. The old Stadium has quickly turned in to a new stadium for the University. While the new stadium that the Braves moved into Cobb County generated significant development around the area. Thus in this case there was not a zero sum game. That is why the But-For analysis is important. You got to looking at the market as well as the development potential. What I am seeing in Georgia, it is not a problem that moved from one area to the other. The city of Atlanta has grown significantly. The Stadium for the Braves baseball game has moved to Cobb County and they have exploded the development around that area.

I don't see any of the questions. I will check in with Greg to see if anyone has pressed the button to ask a question by phone.

Nothing right now. But a quick reminder, it is *1.

Okay. In the interest of time, I think we will proceed to hear from Alan Ferguson. Senior vice president for community development at invest Atlanta.

Thank you. Thank you everyone. Who has joined us webinar. Good afternoon and good morning. I am the senior vice president of community development for invest Atlanta. The Atlanta development authority. I would love to give a brief overview, introduction to invest Atlanta. And I will talk about our [ Indiscernible --low volume ] Invest Atlanta, the vision is to make Atlanta the most economically dynamic and competitive city in the world. Our mission is to advance Atlanta's global competitiveness by growing a strong economy, building vibrant communities and increasing economic prosperity for all Atlantans. Invest Atlanta is the trade name. It is the name for the Atlanta development authority. Several years ago, roughly about 16, we had a number of different small agencies and organizations chartered or controlled by the city doing a variety of different activities in the city of Atlanta. At that time the decision was made to start consolidating all of those different agencies and organizations under the Atlanta development authority. For the city of Atlanta. That is the organization that we currently have today with invest Atlanta. Invest Atlanta as the development authority we engage and build traditional economic development activities, business recruitment, retention and expansion activities, programs focused on creating jobs, workforce development, training, small business. We do it a variety of provisional and maybe some new economic development activity. We also have as a component of our responsibility, a strong and robust community development platform. Where we focus on housing development, as well as preservation. Affordable housing, homeownership, neighborhood [ Indiscernible ] and investment. That is really where our connection to the tax allocation district in the city comes in. We are designated as a redevelopment agent for the city of Atlanta. And under that designation and assignment, we have a responsibility for managing the cities tax allocation districts, as well as creating and implementing programs to help them achieve their goals. Within the city of Atlanta, we actually have 10 tax allocation districts and corridors that we created.

By law, by Georgia statute, no more than 10% of the city's property tax base can be included within a tax allocation district. You will see, although we first created the Westside was originally created in 1992. Between 1992 and 2006, several others were created. Currently, I will demonstrate in a slide going forward, we are unable to create new tax allocation districts. We are currently well above the 10% threshold for that.

You will notice a couple of the tax allocation districts, specifically the Atlantic Station and Princeton Lakes, we are no longer pursuing investments and programs in those particular tax allocation districts. Because they have fulfilled the core responsibilities of the initiative for which they were created. Which is to drive reinvestment. The objectives of Atlanta's tax allocation district program are threefold. Each that was created has and establish redevelopment plan that addresses specific challenges. Within those specific areas. Overall, all of the tax allocation districts contain at least one, usually all three of the elements that you see on the slide. Economic development, which includes increasing Atlanta's generally described as increasing Atlanta's competitive position. That is where use these dollars to it invest in projects that will deliver a significant amount of jobs and new jobs. Bringing residential and commercial development to underdeveloped areas. That is part of sparking reinvestment. Encouraging public and private investment toward Atlanta redevelopment. On the community redevelopment and revitalization bucket, revitalizing blighted residential neighborhoods. Replacing dilapidated public housing projects. Years ago when this was created, the city of Atlanta Housing Authority was the owner of several projects that were in need of significant reinvestment. Certain areas a TAD was established we will use some programs and program funding to support the redevelopment of public housing. Revitalizing declining commercial corridors. Building and supporting affordable housing. Doing things in terms of providing support and funding for infrastructure improvements that create walkable pedestrian or rented to communities. And connecting assets. Including the business district and universities and other institutions that are pivotal stakeholders. With greater opportunities for conductivity within the broader community. You have in the structure, sustainability and open space. I mentioned pedestrian oriented communities with a clear focus toward public transportation. Also providing some support toward connections to public transportation. Open space and trails. We worked a lot with the Parks and Recreation authority in order to support the acquisition of additional green space and open space and providing conductivity for communities. Supporting the buildout of new urban infrastructure. And supporting significant environmental remediation. Especially on properties that have become publicly owned land. So we could support future development or green spaces.

We have been very successful within the city of Atlanta with our tax allocation districts. We used our TAD resources to support over $5 billion in private development throughout the city. Since 1992.

Through the use of our tax allocation districts, whether it is using increment that is generated or issuing bonds, using the bond proceeds to support specific projects, we have been able to support over 12 million square feet of new residential development producing over 12,000 units and almost 7 million square feet of new commercial development for a variety of uses. Hotels, stores, office buildings. And what is a growing industry within the city of Atlanta and the state of Georgia is film and entertainment production and media production. We also used our TAD programs to support a number of public infrastructure projects. And services including fire stations, community and educational facilities. Green space, open trails and parks. And infrastructure improvement like stormwater investments in order to prevent flooding and remediate flooding issues in certain parts of the city. Also green infrastructure, especially adapting some of our parks so they can also address some particular issues regarding flooding while also providing amenities and so forth. And other investments. Around the city. The illustration gives you an example of some of the projects that we have supported. Everything from housing, major cultural events, [ Indiscernible --low volume ] Senior housing and also where we worked with a developer to not only revitalize a declining commercial corridor asset, but also worked to bring a supermarket providing fresh access to food and vegetables to an area that was a food desert. One of the slides that I like to show when we are talking about our tax allocation districts is this. It is a demonstration of how the TAD have performed. I provide this slide to show that the tax allocation districts are doing exactly what they were designed to do. Which is to attract investment and to encourage reinvestment and revitalization. Of a certain area. You will notice on this slide that not all of the tax allocation districts are equal. That is because some of the districts, in particular the Campbellton Road, Hollowell and the Stadium, the revocation of the Braves stadium outside of the city of Atlanta. Stadium tax allocation district is where the Braves used to be. You will notice that those particular tax allocation districts have not performed as well. That is because those districts do not have the participation of our local public school system as part of the creation of the tax allocation districts. Roughly about 50%-52% of potential property tax increment that those tax allocation districts would have been able to receive, they have not been able to receive those because our school system has not historically participated. The good news about that is based upon an agreement this year with the local school system. They are now going to start participating in the tax allocation districts although in a limited way. In the beginning. I want to say after about 5-7 years, depending on the TAD, we will have more increase participation. Allocate more resources which will allow us to implement more programs to encourage more investment in those commercial corridors. The other tax allocation districts, beltline, Eastside, Westside and Atlantic Station have generated a significant amount of private investment. That brings me to the one case that I wanted to highlight. Especially in this context. Talking about the nexus between the transit and infrastructure investment. And tax allocation districts and how you can capture the value. The beltline TAD. To give you a little bit of history on the Atlanta beltline, the organization, Atlanta beltline Incorporated was created in 2006. It is an affiliate organization of invest Atlanta. It was specifically created to go about the development and the implementation of the redevelopment plan for the Atlanta beltline. What it is, a tax allocation district. That circles the city and it comprises a 22 mile loop around the city. Essentially capturing what is unused and underutilized former railway. The came about as a plan to first drive conductivity between the city. To connect there's neighborhoods. I want to say it touches roughly 140 different neighborhoods around the city of Atlanta. It started off as a project, a green space and trails type of project initiative. To provide that level of conductivity. Atlanta beltline Incorporated are in charge of planning and implementation all aspect of the project. It includes about 3000 acres of underutilized land along the corridor. That will be available for public and private redevelopment opportunities. The funding for the Atlanta beltline project comes from a combination of resources from federal, state, local and private resources. Everybody is all in on this beltline plan. The federal government has been very supportive, especially in supporting the transit development initiatives around beltline. As far as the Atlanta beltline and transit, it is a coordinated approach. There are currently two major efforts underway to advance transit around the beltline and provide this conductivity for this loop around the city. Connecting these various neighborhoods. One is a program that was recently started last year, implemented in 2018. The financing was passed in 2017. Regarding more MARTA programs. The Metropolitan Atlanta rapid transit authority, is essentially our public transportation system within the city of Atlanta and also serves Fulton County and Clayton County in the metropolitan area. A bond issue is was passed to provide funding for a variety of public transit infrastructure activities and capital improvements and expansion to public transit within the city of Atlanta. With that plan, a variety of different projects and enhancements were identified. One key project identified is the Atlanta streetcar system. The ultimate plan for the beltline is that the streetcar system would more or less a light rail transit system, will run alongside in concert with the trail system network that is being created around the 22 mile loop. Trying to advance the more MARTA program, we have been able to attach it to resources from the federal government regarding studies so we can get all of the environmental planning and design and everything associated with it to advance not only for the MARTA program but the streetcar plan as well. In connection to all of these things, the invest Atlanta as a redevelopment agent has provided TAD support to support these initiatives as well. Often times [ Indiscernible --low volume ] Access to funding for those particular studies to be completed. There is a local match that is required and both the beltline as well as invest Atlanta three management and implementation of the TAD will support getting access to the federal grants to complete the studies. With the more MARTA plan, there were 16 projects throughout the city of Atlanta that will be funded that directly correspond and connect to the beltline. That comprises roughly about $1.2 billion in funding for beltline transit. Right now we are finalizing the design. It is the first expansion of our streetcar system. Which will connect with the east side trail and the west side trail connections of the beltline together. So you can traverse the city and be on the streetcar going East to West. And connected to the beltline. We are pleased about that project. The big picture, the plan calls for 50 miles of new streetcar routes and 12 miles of connected transit to include investment in other forms of public transportation to provide additional conductivity to the streetcar system. This is a really big deal, a big investment for the city. We look at it as transforming for the city. Not only providing additional options and access to mass transit, but really trying to drive some of the factors around equity and inclusion and address some of Atlanta's deficiency around income inequality, providing greater access to transportation. Especially to job centers and education. We view it as transformative in the city of Atlanta. The beltline despite its successes, it still has some challenges. I think it is important to highlight some of the challenges that we are trying to address. You can imagine with the success of the program and the success we have had so far with the beltline, even though it is yet to be completed, there has been some tremendous interest from private developers who are seeking to capitalize on the public investment. With that, we have a number of challenges that have arisen as a result of increased private development going unchecked. It has exacerbated an affordable housing challenge we have. Within the city of Atlanta. Driving up the cost of properties, driving up rent in areas that is creating a workforce housing challenge in the city. We have a variety of activities and programs that we are trying to use to address those challenges. Even with bond issuances that we issue, out of the beltline tax allocation district, 15% of every new bond issuance goes towards the beltline affordable housing trust fund. So we can support initiatives and projects that will produce affordable workforce housing. It is an uphill battle. The market just moves so much faster than the development. There are concerns around equity and inclusion the. The premise of the beltline was conductivity of neighborhoods and allowing our residents to connect to other areas, other parts of the city. And take advantage of Atlanta as a whole. So to speak. There is a significant amount of concern that areas of the beltline that have been developed, that local residents and local businesses will not be a part of the new narrative that is being created within the city of Atlanta. It has sharpened the beltline surface, they are focused on equity and inclusion. Last year they hired an officer to focus on equity and inclusion. Within the organization. To make sure that the initiatives and projects of the beltline have a clear focus [ Indiscernible --low volume ] We are encouraging throughout the city. As I eluded to, there is the issue of displacement. We are keen when we recognize that a lot of the areas where the beltline is being built, are areas that have historically experienced a lot of this investment and have not found areas for reinvestment. That creates activities that are focused on gentrification. I think the general consensus is that, mixed income communities are highly desired. But what people do not want is the aspects of displacement. That come along with it. In the city of Atlanta, we are into that. Both the displacement of residents, that is why we have strong initiatives going on as far as the creation of the preservation of affordable workforce housing. Both for sale and rental housing throughout the city. With a particular lens and focus on areas touched by the Atlanta beltline. As well as what has become more prominent in the conversation, the displacement of local or native businesses. Understanding that a number of a long time small entrepreneurial businesses in some of these areas and neighborhoods and communities, may not necessarily own the spaces they are in. We are looking strongly at creating a number of different initiatives that will encourage landlords to make a place and retain those existing businesses as well as try to facilitate those businesses to becoming owners of their own space. So it lessens the risk of displacement.

We are trying to attack all of these different issues at the same time.

It all starts with leveraging the tax allocation district. The property tax that is generated in order to generate the funding so we can create the programs which advances all of these various initiatives. Thank you. That concludes my portion of the conversation. I will be happy to answer any questions you have about the beltline or any of our approaches toward tax allocation district initiatives.

Thank you. We have a question in the chat pod. About the 10% cap you referenced. I believe that applied to the percentage of the tax base within the city that could be included in a tax allocation district. Do you have more information about how they arrived at the 10% figure?

I think there was a strong concern, when the state passed the legislation years ago, I think there was strong concern around as areas developed and property taxes increased, one of the provisions within the state legislation was that property tax increment generated within a tax allocation district is not affordable. So those resources had to be used and have to be deployed within that defined geography. From my understanding and historical recollection, further concern and the reason why limiting it to 10%, so that as areas improved, it did not necessarily put handcuffs on other areas of the city and the property tax generated to be used for other projects throughout the jurisdiction. It is a question that continuously comes up. Within the city of Atlanta. Both the mayors administration and the city Council members from time to time have asked the question, can we create a new tax allocation district ? The response is always, no. We have exceeded the 10% allocation.

Thank you. In the interest of time we will hold additional questions until the end of the next presenters presentation. I would like to turn the floor over to Rafael Aldrete from the Texas A&M transportation Institute.

Thank you. Good morning and for those on the West Coast, good afternoon. Thank you for attending the webinar. I am with the Texas A&M transportation Institute. For the last 10 years we had an opportunity to assist the state and several local governments. We did development and guidance and tools and the implementation of some of the finest techniques that were created by the legislature. These tools were to help local governments develop of their transportation networks. I will start with an introduction and background. I will describe what the transportation and limitations on is in Texas. I will also talk about how the legal framework governs the creation of TRC. That I will turn the focus to implementation of -- then I will talk about specific TRZ and examples for the tools. We have covered that transportation has exceeded the funding sources. This is not a recent phenomenon. Policymakers and transportation agencies had to become creative thinkers trying to answer the questions of how do we do more with less? Can we find other funding sources that can help us close the gap? In response to these challenges in 2007, -- since that time in 2007 up until now more than 14 local governments have established a TRZ to support the transportation projects. What is a Texas TRZ? The law defines it as a designated contiguous zone around a planned transportation improvement where the properties, the land is expected to benefit from the project through development and the value increases. It is also a legal arrangement that facilitates capturing value via the property and the sales tax mechanism to allow the local government to use those revenues as collateral for bonds. TRZ is not a new tax. The tax rates do not change.

The tax rate that the city or local government has at that time will remain unless it is changed. The revenue we realized -- Texas TRZ allow local governments to expedite transportation projects by helping them set aside local match contributions. And to leverage multiple funding sources like state funds. TRZ generally do not generate all the funding needed. It is part of a larger financing package. This requires local agencies to partner with other local agencies and the state Department of transportation. It becomes a mechanism that promotes the establishment of partnerships among agencies to fulfill your objective of regional transportation network. The legal framework of the TRZ has evolved. In response to the implementation experience that those agencies that adopted TRZ had first with technical issues. The law has been adapted to clarify the process to set up TRZ or to clarify requirements. The changes have also expanded the use and the types of TRZ. There are three types of TRZ that are allowed at this time. Municipal, County and Port Authority. Port Authority in Texas has the characteristics of a tax jurisdiction that has a geographic footprint that goes well beyond the property. They enjoy the same taxing powers within part of the county or city -- with having threes three types of potentially overlapping TRZ types, it allows for port authorities, counties and cities to team up and pursue projects that will benefit all three parties. When it is expedient to do so, these entities can team up and dedicate the TRZ resources to one project or set of projects that will enhance the transportation infrastructure within the overlapping parts of their jurisdictions. One a glitch that was found later on after the law had been set up that is not been resolved, an issue with County TRZ. Counties in Texas are constitutionally prevented -- issued for a project that is aimed at redeveloping a specific area. That includes transportation projects. Counties have -- the tool -- on top of that there are several state attorney general opinions that interpret the law and away that makes it -- it is called into question the constitutionality of the use of the tool for the same limitation I mentioned. Although there are a number of County TRZ that are set up and created, none of them has yet been used to actually acquire financing for the project.

It is a legal hurdle that is not been addressed yet. By the legislature. How does this work? Very similar to one of the first slides that was covered, they work by defining first a base, in the graph at the top you see a base color and what I call the tax increment base. With a blue line above the red line, it is intended to illustrate -- basically how much the property would appreciate due to increased value or development. That section within the blue triangle is what we call the caption appraisal value. Those areas, over time each year we multiply them by the tax rate and we get a property tax revenue that continues going into the municipalities general revenue fund and we also have the tax increment that is collected and funneled to another tax increment account. That is the amount of money that becomes available to use to pay for things related to the project. Until now, the description I provided is very similar to its cousin. We also have a tool called the tax increment reinvestment zone. It is a nether financing tool that a similar to the tax allocation district. It is a mechanism that -- but it can be dedicated to any variety of urban improvement projects. It can include utility, landscaping or infrastructure improvements. In transportation they have been used for transit. They are very similar. The main difference is that a TRZ is related to transportation improvements. It also has a more simple process to be created. It does not require a vote by landowners. It does not require setting up a board like tax increment zone requires. I will knock you into more details. Off-line I provide additional information. Once a municipality has access to the revenues, it can be dedicated to transportation project, what are the financing options they can use? There are three options. That can be used in TRZ. The first is the pay-as-you-go. Every year the municipality will put together revenue that they could potentially use to spend advancing the project. The expenditures are limited to the revenue collected. It has the advantage that there is no interest or financial cost. But the disadvantage is it would take a long time to deliver a project. We also have the option of municipal bond financing. Which involves securing finance from the capital markets. It has the advantage of providing much earlier availability of capital. It provides for's ability to finance different project types. That means that the municipality can potentially use it for any transportation improvement anywhere we -- there are no strings attached. The disadvantage of this financing option is there is a higher transaction cost and higher interest cost.

The third option is state infrastructure bank. It is a long-term debt provided by the state through the Texas Department of transportation. The state infrastructure bank is funded with a blend of federal and state funds. It is an important fact. You have the advantage of providing capital earlier than the pay-as-you-go. Just like the municipal bond financing. It is lower transaction costs than municipal bond financing. There is not as much fees and or other costs. It also has lower financial interest costs. Learns from the state infrastructure bank are generally a generous rate. And very flexible terms. That makes it attractive. On the other hand, the disadvantage of state infrastructure bank, there will be a lot of competition with other local governments that may be interested in the financing. Because of the fund blend mix, at the bank, the project becomes federalized. The project has to be located within the state highway network.

You cannot use that to pay for it project that is in a roadway that is not part of the state transportation highway network. The restrictions on financing projects that are off the state system.

In a TRZ, how do the funds flow ? What we have first is a city setting up a TRZ. The first year it is established incremental revenue goes into a tax increment account. Which then can be used as a repayment source to pay -- or the city itself. Which will in turn use those revenues to issue bonds or to secure a loan. In turn use that to pay for the capital expenses and other administrative costs. The funds have been used to make repayments on the loan. The project is then built.

That is fairly simple. I will move on now to how the framework for the [ Indiscernible ] evolved over time.

In 2007 when the legislation was established, the law required if a municipality is setting up a TRZ also has a pastor agreement -- that not only limits the project to be located on the state highway system but also require negotiating a source of funds -- from the state. Was a limited invitation. What happened in 2011, that requirement was removed. That made it more flexible in terms of being able to use it in other locations that did not have a pastor agreement. It also added the flexibility of using a TRZ for any transportation project which opened the tool to enable its use for financing, even for freight rail. In 2013, the legislature added two night new types of projects that could be used. That included port projects and multimodal projects. Which became relevant in port authority TRZ. Going back to 2007, in terms of the types of TRZ, in 2013 we had the addition of County energy TRZ and that was for companies experiencing severe damage in the road network as a result of the shale gas boom. The port authority TRZ I mentioned. In 2017 the County energy TRZ was repealed. The counties could use them were prevented from using them as a result of the Constitution of prohibition. We do not have a lot of County TRZ because of that restriction. The way the law changed was in 2007 the law allowed only for property tax to be part of the tax increment revenue collected by the municipality. Laws require that 100% of tax increment be dedicated to the TRZ. Which prevented several municipalities who did not feel comfortable dedicating 100% of the tax increment within a zone. In 2011 that changed. The sales tax increment provision was added. Although to date there has not been any local government that has been willing to use sales tax portion of the law. It changed to allow the allocation of any portion of the tax increment. They gave municipalities flexibility in deciding how much they would allocate from the tax increment. It encourage the municipalities to start using the tool. It allows municipalities to team up with private developers. What that means, the municipality could commit revenues from the TRZ to a private developer that in turn would provide the financing for the development of the project. It allowed for expansion of a TRZ. Further flexibility was added by allowing the municipalities to fund multiple projects and to allow what is called joint administration of the TRZ which means when two minister polities that are adjoining, the municipalities can enter into an agreement.

Where they set up a TRZ -- and coordinating the creation of the TRZ and the funding for the same project. That takes me to the implement process was just similar to the process described earlier. It includes five steps. Which I will go into more detail in the following slides. It starts with what we call the initiation. This is where the needs identifying the project is significant. It is significant from a feasibility standpoint and a land development standpoint. The project selected need to be showing economic benefits and the aspects that lead to economic development and land development intern that we provide the revenue that we will use to pay for the project. It is also necessary to demonstrate eligibility of the areas by demonstrating they are undeveloped or underdeveloped. That is a requirement on the legislation. At this stage also, it is a good idea to conduct a preliminary analysis to assess the project. With the numbers and hand the municipality can initiate dialogue with the entities in the local government. In other cases, the municipality may advance this project on its own. But eventually they will need to bring the Texas Department of Transportation along. If they intend to use a state infrastructure bank loan. These process requires a significant amount of interagency collaboration. The information that is needed has to be assembled from a variety of stakeholders. Which include not only the Texas Department of Transportation but also the local appraisal district and getting the support of city councilmembers or county commissioners. It is very important to develop a good stakeholder relation and to identify the champions for the project. The second stage is the formation of the zone. This involves several substeps. First define the boundaries. There's some practical considerations. One of them is research has shown that beyond a one-mile radius from the centerline of the road, the benefits in terms of value changes for properties are weaker.

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