In this Howard Terminal Update (although I am starting to think the giant downturn in and gloomy outlook for the World’s economy’s going to shelve the A’s and Major League Baseball’s plans for now) we look at an aspect of the project the City of Oakland’s commonly overlooks: tax increment financing or “TIF”.
Yes, I know the City of Oakland claims that it’s going to use Tax Increment Financing, but an actual look at its actions points to what looks like a total fib to me. Either that or the City of Oakland just doesn’t know what it’s doing. Take the matter of Howard Terminal Ballpark Infrastructure Costs, inflation, and TIF.
There’s a lot of talk about the impact of inflation on Howard Terminal Ballpark Infrastructure Costs. This is what the City of Oakland wrote in its recent presentation:
The offsite infrastructure cost estimates referenced in the 2021 term sheet were provided by the Oakland A’s based on their engineers’ conceptual designs and contractors’ unit pricing and assumed that a single construction contract for the overall offsite infrastructure program would be procured privately by the Oakland A’s. In response to Council’s July 2021 Resolution, in August 2021, Oakland Department of Transportation (OakDOT) staff accordingly began the process of validating and revising the Oakland A’s cost estimates to incorporate, where needed, elements of the offsite infrastructure scope that were missing, incomplete or incorrect, as well as to reflect public procurement through multiple construction contracts, each awarded through a competitive bid in accordance with the City’s (and in some cases, Federal or State) procurement procedures for public works projects. Finally, unit pricing was adjusted where the City had recent comparable data, inflation factors were increased to reflect recent trends, and the cost of administrative support services throughout the public procurement and contracting process was added. As the City’s current cost estimates are based only on available conceptual drawings, contingencies were also increased to account for the potential for further scope changes throughout the course of design development, permitting, construction documentation, right of way acquisition, and project implementation. With these changes, the City’s cost estimate to construct and implement all offsite transportation infrastructure improvements, including grade separations and parking management will significantly exceed the A’s previous estimate.
Over the past 18 months, consistent with the Council’s direction, City staff have been actively working, with support from the Oakland A’s, to identify and secure Federal, State, Regional and other funding sources to defray these projected costs. As described in Table 1 below, over the course of the last year, the City has successfully secured (or is in the process of securing) funds totaling approximately $321.5M, or more than 90% of the cost of the Project’s offsite infrastructure as it was projected by the Oakland A’s at the time of the Council’s 2021 Resolution
The City Failed To Consider Tax Increment Financing And The Impact Inflation Has On Estimates
Once again the City of Oakland’s lack of desire to talk about tax increment financing rears its head. To put it simply, if I know construction costs for private buildings is going up, doesn’t that increase the projected assessed value of the new buildings? Of course. But guess what? The City of Oakland has still failed to produce a credible, checkable, tax increment financing revenue estimate. And as I told Oakland Councilmember Loren Taylor in my recent interview, that should not be a secret because TIF revenue calculations are not rocket science. That brings me to my estimate.
Using my Howard Terminal Spreadsheet, a $2 billion base year assessed value, and assuming a small 4 percent rate of growth of assessed value (versus the city’s consultant Kosmont’s use of a rate of growth of between 8 percent and 6 percent) brings us to a total TIF revenue by year 45 of $1.617 billion. Realistically, that can yield a bond issue of just north of $800 million, and added to the over $300 million of state and federal grants, gives $1.1 billion in money available for infrastructure, affordable housing, and community costs. Remember, that’s at 4 percent – there should be a spending plan to deal with assessed value growth, and thus revenue, that allows for a higher level of spending. But, as I read the City’s memo, it looks like Oakland’s not even planning to form a public financing authority for Howard Terminal, and has planned to put spending in something called a “Community Fund”. Does the Ciry of Oakland actually, collectively, know what it is doing? It doesn’t look like it, candidly.
All of the work put in to plan for the creation of the Waterfront Ballpark District Community Fund should have been put in to the formation of the Howard Terminal Public Financing Authority. And for good reason: enhanced infrastructure financing district law calls for the formation of a “public financing authority” and the way the legislation is written, the wish-list of projects of the Waterfront Ballpark District Community Fund can be “poured” into that overall structure. It’s better to follow the law as its written, and any adjustments needed should call for a trip to Sacramento. But the way this is being done is going to take another two years to finish, if the City of Oakland does intend to use TIF. To me, it doesn’t look like it.
The City of Oakland has to stop fooling around with TIF in Howard Terminal, and call out in writing what the revenue estimate is, why, and where they are in forming a “public financing authority” as of this writing. And what their timeline looks like. Mine says 2024 before the new organization is finished and ready to think about floating bonds. Or is Libby just trying to stick this with the City of Oakland?
Limited Obligation Bonds Call For Issuer To Find Other Sources Of Revenue If Tax Money For Bonds Falters
The Mayor of Oakland (incorrectly) said to me that “Limited Obligation Bonds means TIF”. Well, not true. The Mayor basically and it seems unknowingly admitted that the City of Oakland was not going to use the Enhanced Infrastructure Financing District Legislation to issue bonds. Considering the protections Enhanced Infrastructure Financing District Legislation offers the City of Oakland from bond default risk since the Howard Terminal District is supposed to float the bonds, it’s wild that she would just blindly trust what a consultant says without getting a second and opposing opinion. Like mine for example. But that’s what Libby Schaaf and her staff have done: threatened to put the City of Oakland at risk for Howard Terminal-related bonds.
Full City Staff Report:
Kosmont Consultant EIFD Power Point Report