What does it mean to say, "the Howard Terminal Development is 100% privately financed"?
The City and the Oakland A’s are in agreement that the Ballpark and all of the new residential and commercial development in the Waterfront Ballpark District at Howard Terminal will be 100% privately financed by the A’s. The A’s have asked the City and County to seek grants and use project-generated revenues to help fund the infrastructure and safety improvements, public parks, affordable housing, and other community benefits needed to make the Ballpark District successful, resilient, safe and equitable. This sort of public-private partnership is common on projects of this size because the contemplated infrastructure improvements and amenities benefit the City as a whole, and not just the project. Many safety and infrastructure improvements that the project would accelerate and fund are ones that are needed right now, including environmental clean-up and resilience, anti-displacement protections and affordable housing, safer separation and protection of Port-serving rail and truck routes, and better bike, pedestrian, and transit connections between BART and Oakland’s waterfront.
How will the A’s and City raise the funds for the infrastructure upgrades? What is an IFD?
IFD stands for “Infrastructure Financing District” and is one of the financial tools being considered to finance infrastructure for the Waterfront Ballpark District project. It is sometimes also called an EIFD, or “Enhanced Infrastructure Financing District.” Although an IFD and an EIFD have slightly different rules under State law, they are very similar, and the terms IFD and EIFD are often used interchangeably.
When an IFD is established, the district’s existing “base-year” level of property tax revenue is fixed. Then, as property tax revenues grow over the years due to new development, the additional (also known as “incremental” or “but for”) revenues over and above the fixed base year revenues are used for infrastructure supporting the new development project.
For example, if in the base year, the property tax revenues inside an IFD total $1,000, but increase to $1,500 the following year as new development is added to the tax rolls, the extra $500 would be used to pay for infrastructure, while the first $1,000 would continue flowing into the City’s or County’s General Fund. As that incremental property tax revenue grows over the years, the City can use it on a “pay as you go” basis or issue bonds in order to fund or reimburse infrastructure costs. Unlike general obligation bonds, IFD bonds don’t increase property tax rates, either in the District or elsewhere in the City. When the bonds are paid off, usually after 45 years, all of the property tax revenue resumes flowing into the City or County’s General Fund. Other taxes, like sales and parking taxes, flow to the City’s or County’s General Fund throughout the project’s life cycle.
IFDs are generally paired with a CFD, discussed below, and used as a reimbursement mechanism.
Are my taxes going to increase? / Will West Oakland neighbors see an increase in property taxes due to Howard Terminal Development?
No and no. An IFD does not increase anybody’s taxes and does not increase the property tax rate. It also does not impact or put at risk the City or County’s General Funds.
The current assessed value of the Waterfront Ballpark District site is approximately $29.5M. Over the next 16 years, as the proposed project is built out, that value is expected to grow to $7.6B. Property taxes will be assessed on this new development, generating significant new tax revenues every year.
What is a CFD and will one be used on this project?
CFD stands for "Community Facilities District", also sometimes known as a "Mello Roos District." When a CFD is created, the property owners within the district agree to impose a “special tax” on their property, over and above regular property taxes. The county tax collector collects these taxes, which can be used to help pay for construction or maintenance of public facilities. Typically, a CFD is used by a developer to secure inexpensive, upfront financing for infrastructure; because the special taxes are collected by the county, they are considered secure revenue and investors will lend against that revenue at lower interest rates.
The Oakland As are likely to request that a CFD be placed over the Howard Terminal site, effectively taxing themselves and any development partners in order to be able to borrow money inexpensively to build infrastructure for the project. The special taxes would apply only to the Howard Terminal project and no property owner outside of the project site would be subject to them. The IFD would reimburse the developer for qualified infrastructure development costs.
Bottom line: How much will this project cost Oakland taxpayers?
The project will not raise taxes or put the City or County’s General Funds at risk. The City’s goal is for the Waterfront Ballpark District project to create a net fiscal gain for the City of Oakland and its taxpayers. Even with the project’s new incremental property taxes diverted into an IFD to help cover the costs of infrastructure, the City will see increases in other revenue streams, such as sales taxes, real estate transfer taxes and business license taxes. Though more difficult to accurately measure, the City will also see indirect economic benefits from the project as it creates jobs and stimulates business activity from West Oakland to Chinatown. The City is committed to creating a financial structure wherein City and County taxpayers stand only to gain from the project, and are not at risk of being left “holding the bag,” as happened when the Raiders left Oakland without an obligation to repay the debt incurred on their behalf by the City and County to renovate the Coliseum.
So, is this like the Raiders deal?
Not at all. The Raiders 1995 return to Oakland required the City and County, which jointly own the Coliseum, to issue bonds to pay for its renovation. Those bonds are secured by the General Funds of the City and County. The City and County also jointly operate and maintain the Coliseum, and subsidize its annual operating losses.
In contrast, for the current proposed project, the Oakland A’s will privately finance, construct, operate and maintain the ballpark. No public funds will be used to build or operate the facility, nor will the City or County have operational duties or liabilities. Further, unlike the general obligation bonds issued to renovate the Coliseum, IFD bonds don’t put the General Fund at risk, and don’t increase Oaklander’s property tax rates.
Will a waterfront ballpark impact the Port?
No. By including transportation safety, infrastructure, and seaport compatibility measures, the ballpark project will not impact Port seaport operations. The Port has been consulted from the start of the environmental impact analysis and the design of the project so that potential impacts on seaport operations are considered and addressed. Read the Port’s own statements about the project and safeguards to ensure Port compatibility here and here.
Howard Terminal cannot accommodate the modern ultra-large ships and hasn’t been used for container cargo operations since 2014. The 50-acre site is separated from any adjacent Port-owned maritime terminal acreage by Schnitzer Steel, a metal recycling operation. There is still under-utilized capacity for seaport terminal operations to expand along the Port’s deeper water outer harbor, as well as in the more than 300 acres of converted Army Base land.
Also, the Project will include: 1) A land-use plan that ensures that residential development is restricted to the easterly portion of the project site, nearest Jack London Square and as far as possible from the Port and other industrial users; and 2) A transportation plan that minimizes disruption to truck and rail access to the Port.
In fact, in May of 2019, the Board of Port Commissioners voted unanimously in support of the Port’s own term sheet with the Oakland A’s. The Port has stated that it anticipates potential benefits of the project, including diversification of its business, greater nationwide visibility, more visitor traffic at Jack London Square, and a boost for neighboring businesses, and intends to impose its own Seaport Compatibility Measures to ensure that the project doesn’t affect its maritime business.
What exactly is the City of Oakland asking of the County?
The City is asking the County to make a non-binding resolution of intention to “opt in” to a planned Infrastructure Finance District (IFD) over the Howard Terminal site. By “opting in”, the County would join the City in contributing its share of the net new property taxes generated by the new development of the Waterfront Ballpark District at Howard Terminal – revenue that would not exist “but-for” the project - for the purpose of financing affordable housing, parks and other infrastructure of communitywide significance. In doing so, the County would help make the project possible and, even after contributing its net new property taxes, realize millions of dollars each year in net new revenue from sales and transfer taxes to fund critically needed healthcare, early childhood education, and services for those experiencing homelessness.
Why is the County’s participation needed?
Development of the Howard Terminal site requires significant investment in infrastructure, both on- and off-site, as well as community benefits that include affordable housing and new public parks. The cost of those improvements is beyond what can be borne by the City and Developer alone. In order to bring the project to fruition, unlock the potential of the Howard Terminal site, grow the City’s and County’s tax bases, and achieve equitable benefits for our residents, public investment from both the City and County is needed. City staff will be proposing to use an Infrastructure Financing District that is ONLY on the new development site itself, thereby ensuring the project pays for the project. Investing the new project-generated revenues into public infrastructure and benefits, without putting either the county or city’s general funds at risk, is a responsible way to maximize the public benefits of this transformative development.
Does this mean the County will be back in the sports business?
No. We are asking the County to help finance critically needed public infrastructure, public parks and affordable housing. The City and County would have no role in the financing, ownership or management of the proposed Ballpark at Howard Terminal, which, unlike the Coliseum, will be entirely privately funded, maintained and operated.
Why do we need the County approval?
Complex projects such as this were commonly funded without County approval in the past under California’s Redevelopment law, which was repealed in 2011. Redevelopment financing operated very similarly to the Infrastructure Financing District proposed here, except that under Redevelopment, the County’s participation would have been automatic. Under an IFD, the City and County must each independently “opt-in” through a vote of their elected officials and approve the Infrastructure Financing Plan. Because opting into an IFD does NOT raise anyone’s taxes, a vote of the people is not required.
What would the County’s money be used for?
The County’s tax revenues generated by the project would be used to help build public parks and open space, affordable housing and other public infrastructure of communitywide significance, both in and around the Howard Terminal site. Tax revenues from the IFD will NOT be used for the Ballpark, which will be privately financed, constructed and operated.
If the County Board of Supervisors votes against “opting in,” is the Waterfront Ballpark District a dead deal?
Most likely. The new County tax revenue generated by development of the Waterfront Ballpark District creates significant additional bonding capacity within the proposed IFD. Without any contribution from Alameda County to help fund the critical infrastructure and affordable housing required at the site, it’s unlikely any other entity can or will make those sizable investments. And without development of the Waterfront Ballpark District, the County will miss out on $57M in projected one-time tax revenue, $5M in projected recurring annual tax revenue generated by the project that can be used for affordable housing, healthcare and homelessness services throughout the county, and $6M in recurring tax revenues for countywide transportation improvements.
When will the Board of Supervisors vote?
The Board of Supervisors can vote on their intention to “opt in” at any time. At their special meeting of June 15, 2021, they indicated that County staff would undertake an independent financial analysis of the proposed district and its fiscal impacts to the County over the summer, and bring the matter back to the Supervisors for a vote in September. The City supports the County’s need for due diligence and will cooperate fully with the County as it conducts its analysis. The City’s non-binding term sheet for the Waterfront Ballpark Development will include the qualified assumption that the county will opt in. Final creation and binding approval of the IFD would require future votes of both the Oakland City Council and County Board of Supervisors.