City Council Workshop or Special Called Meeting

CITY COUNCIL WORKSHOP WEDNESDAY - DECEMBER 14, 2022 - 5:30 PM Notice of AGENDA City Council Chamber/Municipal Courtroom 2801 Ranch Road 1869 Liberty Hill, TX 78642 Angela Jones Amanda L Young Will Crossland Chris Pezold Crystal Mancilla Liz Branigan LIVE VIDEO ACCESS AND RECORDINGS The live video link will be on the City's Facebook page. Following the meeting, the link for the live meeting will be removed. The recording of the meeting will be placed on the City's webpage: www.libertyhilltx.gov PLEASE SILENCE YOUR CELL PHONES 1) CALL TO ORDER AND ESTABLISH QUORUM 2) REGULAR AGENDA a) Public Improvement Districts (PIDs) and Tax Increment Reinvestment Zones (TIRZ) – THE BASICS - Sidney Smith, Paul Brandenburg, Jerry Millard & Jon Snyder from P3Works. 2022-12-2 PID-TIRZ 101 Presentation LIBERTY HILL 3) ADJOURNMENT 1 The City Council, Boards, and Commissions reserve the right to reconvene, recess, realign, change the order of business, or adjourn into Execu ve Session at any me during the course of the mee ng, prior to adjournment, to discuss any item listed above, as authorized by Texas Government Code Sec on §551.071 (Consulta on with A orney), §551.072 (Delibera ons about Real Property), §551.073 (Delibera ons about Gi s and Dona ons), §551.074 (Personnel Ma ers), §551.076 (Delibera ons about Security Devices), and §551.087 (Development). In compliance with the Americans with Disabili es Act, the City of Liberty Hill will provide reasonable accommoda on for persons a ending mee ngs. To be er serve you, requests need to be received 48 hours prior to the meeting. Contact the City Secretary at 512-778-5449 – Extension 125. POSTING CERTIFICATION: I, ELAINE SIMPSON – CITY SECRETARY – CITY OF LIBERTY HILL certify that the attached notice of meeting was duly posted on the bulletin board at City Hall located at 926 Loop 332, Liberty Hill, Texas 78642 and on the City website (www.libertyhilltx.gov) on the ______ day of ____________________, 202_ at ______. Elaine Simpson – City Secretary. REMOVAL CERTIFICATION: I ELAINE SIMPSON – CITY SECRETARY – CITY OF LIBERTY HILL certify that the attached notice of meeting was removed from the bulletin board at City Hall located at 926 Loop 332, Liberty Hill, Texas 78642 on the ______ day of __________________, 202_ at _______. INITIALS _______ 2  CITY COUNCIL WORKSHOP CITY COUNCIL WORKSHOP WEDNESDAY - DECEMBER 14, 2022 2801 Ranch Road 1869 - Liberty Hill AGENDA ITEM 2.a Public Improvement Districts (PIDs) and Tax Increment Reinvestment Zones (TIRZ) – THE BASICS - Sidney Smith, Paul Brandenburg, Jerry Millard & Jon Snyder from P3Works. 3  CITY OF LIBERTY HILL INTRODUCTION TO PUBLIC IMPROVEMENT DISTRICTS AND TAX INCREMENT REINVESTMENT ZONES DECE M BE R 1 4 , 2 0 2 2 4 1  Introduction to PIDs Chapter 372 of Local Government Code Statute provides a legal and regulatory framework that governs the process 5 2 Big Picture Considerations PIDs are NOT separate political subdivisions. The City Council is the de facto board Allows Cities to extend public infrastructure without burdening rate payers and tax payers Highly lucrative economic development tool can be useful when negotiating with developers (annexation, oversizing, amenities, etc.) Grows the City’s tax base without obligating City revenues (TIRZ, 380 Agreements, etc.) PIDs can be used to forward the City’s Comprehensive Plan, Thoroughfare Plan and Parks Plan 6 3  Why utilize a PID? Use PIDs as an economic development incentive tool to promote annexation Incentivizes amenities provided by the developer but for the creation of the PID  Superior plan, design, architecture and building materials that exceed subdivision building standards  Lot and residential unit size that align with the City’s goal for economic growth  Private amenities tailored to the community  Pools  Playgrounds  Fitness Centers Incentive  Enhanced Trails  Accelerate construction of improvements described in City’s Comprehensive Plan, Thoroughfare Plan and Parks Plan City can require cash contribution from developer (non PID funds) to fund City projects 7 4 How does a PID work? PID is formed over a defined area in the corporate limits of the City or the City’s ETJ Assessments are levied on property within the PID based on the benefit received from PID improvements Assessments can be paid in full or paid in annual installments The assessments are a lien that run with the land The Assessments are used to pay  Debt service on tax exempt bonds issued to fund PID improvements, or  Reimbursement agreement with developer, including interest Administrative expenses are included in the annual installment PID Boundary (area must be contiguous) 8 5  How is a PID created? PID Petition submitted by developer Professional Services Agreement executed and developer funds deposited with City Public hearing on advisability of creating PID PID creation resolution approved by City Council Preparation of Service and Assessment Plan, PID Finance Agreement, Landowner Agreement, and bond documents (if bonds are contemplated) Public hearing on levy of assessment Assessment Ordinance, Service and Assessment Plan, PID Finance Agreement, Landowner Agreement, and bond documents approved by City Council Typically a 6 month process 9 6 Who does the City have on their team? CITY STAFF 3RD PARTY CONSULTANTS City Manager Financial Advisor City Secretary Bond Counsel City Finance Director PID Administrator ogether City Engineer Underwriter veryone City Attorney Appraiser chieves ore 10 7  Types of PIDs  Pay-As-You-Go: allows future long-term reimbursements from assessments to developer  Interest rates predetermined; 2-5% above bond index  Reimbursement Bonds: allows reimbursement soon after infrastructure is installed  Appraisal to establish market value  Contracts with 3rd party builders  Less perceived market risk = lower interest rates = lower annual installments to homeowners  Interest rates lower since infrastructure construction is complete and homes beginning construction  The further the project is in the development cycle the less perceived risk  Construction Bonds: up front funds to construct infrastructure  Appraisal to establish market value  Contracts with 3rd party builders  More perceived market risk as land is undeveloped = higher interest rates  Generally one owner; single assessment payer 11 8 Developer Benefit  Pay-As-You-Go  Developer funds all infrastructure  Developer receives annual installments for life of PID  Developer may sell/assign revenue stream to 3rd party  Reimbursement Bonds  Developer funds all infrastructure  Developer receives reimbursement shortly after completion of infrastructure  Developer passes obligation to repay bonds to homebuilders/homeowners  Construction Bonds  Bond proceeds are used to construct infrastructure  Off balance sheet financing  Developer passes obligation to repay bonds to homebuilders/homeowners 12 9  City Obligations for PIDs  Inspect public improvements CITY IN CONJUNCTION WITH PID  Hire and oversee PID Administrator ADMINISTRATOR  Review request for draws by developer  Verify infrastructure costs against SAP  Certify compliance with the terms of the certificate of payment prior to the release of bond proceeds  Verify appropriate release of lien and all bill paid affidavit prior to release of payments to developer  Maintain database of all property within PID, update assessment roll, allocate assessments upon subdivision, track payment history  Send assessment roll to County for collection with property taxes  Prepare delinquency reports  Account for dollars withdrawn from trust estate against approved draws/debt service payments (account reconciliation)  Review developer quarter disclosure to ensure accuracy with construction and ownership/platting status  File annual continue disclosure reports as issuer/obligated party Blue bullet denotes activities for all PIDs  Pursue and enforce collection of delinquencies (via County contract) Gold bullets denote activities for bonded PIDs  Prepare and adopt annual SAP Update 13 10 Financial Implications for the City PID DEBT PID CREATION AND ADMINISTRATION PID debt is non-recourse to the City All City costs incurred as a result of creating the  Bonds or Reimbursement Agreements are PID should be paid by the developer via a cash backed only by the assessments on the escrow deposit with the City property within the PID Administration is typically contracted to a third Issuance of PID debt by the City does not reduce party, overseen by the City and paid for by the the City’s bonding capacity PID at the same time and in the same manner as the annual installments of the assessments City keeps all of its ad valorem and sales tax revenues Counts against Bank Qualified Debt limit 14 11 Weighing PID Benefits/Challenges BENEFITS POTENTIAL CHALLENGES Annexation Public perception Increased/accelerated tax base Headline risk Enhanced projects and amenities Market (Bonds) Advancing City master plans Administrative burden Cash contribution to City Covenant to foreclose 15 12  Introduction to TIRZs Chapter 311 of Texas Tax Code, the Tax Increment Financing Act, provides a legal and regulatory framework that governs the process 16 13 Big Picture Considerations A TIRZ is a tool that Cities and Counties can use to finance infrastructure in a defined area The TIRZ Board of Directors make recommendations to the governing body of the City or County on the implementation of the tax increment financing Each taxing unit can choose what percentage, if any, it will contribute A TIRZ obligates future tax revenues from each participating taxing unit to pay for project costs TIRZ revenues can be used to offset annual installments of PID assessments 17 14 PID/TIRZ Offset 18 15 Homeowner Annual Installment (Post-TIRZ) 19 16 Questions 20 17