Development Agreements Between Municipalities and Private Parties

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Development Agreements Between Municipalities and Private Parties Attracting Private Funding for Long-Term Development Projects, Addressing Land Use and Infrastructure Issues TUESDAY, DECEMBER 19, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Rob Killen, Shareholder, Kaufman & Killen, San Antonio Sarah M. Rockwell, Partner, Kaplan Kirsch & Rockwell, Denver The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 We use our experience and relationships to find the most effective solution for our clients.

6 Leveraging Development Agreements between Municipalities and Private Parties Presented by Rob Killen December 19,

7 Development Agreements from the Developer/Business Perspective Overview Important considerations Value for developer/business Types of agreements Sample enabling legislation Potential challenges Examples 7

8 Initial Questions How much do you need? What taxes will be generated? How many jobs (temporary/permanent)? What is the public purpose? Which tool(s) do we use? Any other issues? 8

9 Why Enter into a Development Agreement Value for Developer: Certainty in the development process Creation of necessary public infrastructure Offset development costs 9

10 Categories of Development Agreements 10

11 Potential Development Agreement Incentives Direct Municipal Assistance Applicability of Current or Future Ordinances Tax Abatement or Reinvestment Annexation Special Districts 11

12 Direct Municipal Assistance Grants Fee Waivers Construction of pubic improvements Participation in costs of public improvements 12

13 Applicability of Current or Future Ordinances Permitted land uses upon annexation Grandfathering/Vested rights Special zoning districts 13

14 Tax Abatement or Reinvestment Tax Abatement Tax Rebate Tax Increment Reinvestment Zone 14

15 Annexation Non-Annexation Agreement Delayed Annexation 15

16 Special Districts Districts with Land Use Controls Districts that use existing tax revenues Districts that can collect taxes and assessments 16

17 Examples Special Districts Municipal Utility District (MUD) Water Control & Improvement District (WCID) Public Improvement District (PID) Special Improvement District Road District Municipal Management District (MMD) Municipal Development District County Development District 17

18 Community Benefit Agreements 18

19 What is a Community Benefit Agreement? A contract between a community group and developer which requires the developer to create amenities or other improvements that benefit the community. The community group agrees to support the project as part of the agreement. Although this can be done informally in any jurisdiction, some jurisdictions have established laws authorizing CBAs. 19

20 Los Angeles Atlanta Denver Milwaukee Minneapolis New Haven New York City Philadelphia Pittsburgh San Diego San Francisco San Jose Seattle Syracuse Washington, D.C. 20 Who is Using CBAs?

21 Why Enter into a Community Benefit Agreement? Value to Developer Reduce risk by establishing community support Value to community group Enforceable agreement to provide benefit 21

22 Difference Between CBA & Development Agreement Developer Development Agreement CBA City Community Group 22

23 Examples of Texas Statutes Authorizing Development Agreements 23

24 Texas Developer Participation Agreement Without complying with the competitive sealed bidding procedure of Chapter 252, a municipality with 5,000 or more inhabitants may make a contract with a developer of a subdivision or land in the municipality to construct public improvements, not including a building, related to the development. (a) Under the contract, the developer shall construct the improvements and the municipality shall participate in their cost. (b) The contract: (1) must establish the limit of participation by the municipality at a level not to exceed 30 percent of the total contract price, if the municipality has a population of less than 1.8 million; or (2) may allow participation by a municipality at a level not to exceed 70 percent of the total contract price, if the municipality has a population of 1.8 million or more. [T]he contract may also allow participation by the municipality at a level not to exceed 100 percent of the total cost for any oversizing of improvements required by the municipality, including but not limited to increased capacity of improvements to anticipate other future development in the area. 24

25 Texas Non-Annexation Agreement The governing body of a municipality may make a written contract with an owner of land that is located in the extraterritorial jurisdiction of the municipality to: (1) guarantee the continuation of the extraterritorial status of the land and its immunity from annexation by the municipality; (2) extend the municipality's planning authority over the land by providing for a development plan to be prepared by the landowner and approved by the municipality under which certain general uses and development of the land are authorized; (3) authorize enforcement by the municipality of certain municipal land use and development regulations in the same manner the regulations are enforced within the municipality's boundaries; (4) authorize enforcement by the municipality of land use and development regulations other than those that apply within the municipality's boundaries, as may be agreed to by the landowner and the municipality; (5) provide for infrastructure for the land, including: (A) streets and roads; (B) street and road drainage; (C) land drainage; and (D) water, wastewater, and other utility systems; (6) authorize enforcement of environmental regulations; (7) provide for the annexation of the land as a whole or in parts and to provide for the terms of annexation, if annexation is agreed to by the parties; (8) specify the uses and development of the land before and after annexation, if annexation is agreed to by the parties; or 25

26 Texas Non-Annexation Agreement (9) include other lawful terms and considerations the parties consider appropriate. An agreement under this subchapter must: (1) be in writing; (2) contain an adequate legal description of the land; (3) be approved by the governing body of the municipality and the landowner; and (4) be recorded in the real property records of each county in which any part of the land that is subject to the agreement is located. (d) The total duration of the contract and any successive renewals or extensions may not exceed 45 years. (e) A municipality in an affected county, as defined by Section , Water Code, may not enter into an agreement under this subchapter that is inconsistent with the model rules adopted under Section , Water Code. (f) The agreement between the governing body of the municipality and the landowner is binding on the municipality and the landowner and on their respective successors and assigns for the term of the agreement. The agreement is not binding on, and does not create any encumbrance to title as to, any end-buyer of a fully developed and improved lot within the development, except for land use and development regulations that may apply to a specific lot. (g) An agreement under this subchapter constitutes a permit under Chapter 245. (h) An agreement between a municipality and a landowner entered into prior to the effective date of this section and that complies with this section is validated. 26

27 Texas 380 Agreement The governing body of a municipality may establish and provide for the administration of one or more programs, including programs for making loans and grants of public money and providing personnel and services of the municipality, to promote state or local economic development and to stimulate business and commercial activity in the municipality. The governing body may contract with the federal government, the state, a political subdivision of the state, a nonprofit organization, or any other entity for the administration of a program 27

28 Potential Challenges to Development Agreements 28

29 Contract Zoning In City of Shavano Park v. Ard Mor, 2015 WL (Tex.Ct.App. San Antonio 2015), a property owner in Shavano Park challenged a development agreement that would have provided for annexation and guaranteed the right to operate a gas station upon annexation, claiming that this was spot zoning. 29

30 Contract Zoning Impermissible contract zoning occurs when a governmental entity agrees to zone land in a certain way in exchange for a landowner's agreement to use the land in a certain way Zoning is a legislative function a city cannot cede. Therefore, a city cannot surrender its authority to determine proper land use by contract. 30

31 Contract Zoning Zoning decisions must occur via the legislative process and not by special arrangement with a property owner. [C]ontract zoning is invalid because, by entering into such agreements, the city impermissibly abdicates its authority to determine proper land use, effectively bypassing the entire legislative process. 31

32 Observations on Recent Economic Development Trends 32

33 Observations on Recent Trends Utility rate competitiveness National (and International) Competition Corporate Welfare Claims Job Creation and other metrics Impact of national politics on local decisionmaking on development agreements 33

34 Five Quick Case Studies in San Antonio 34

35 35 Sun Edison Solar Farm

36 SunEdison Solar Farm Project: Solar farm in south San Antonio Incentive: Non-Annexation Agreement, Tax Abatement Value to developer: No City taxes Value to Municipality: Additional renewable energy 36

37 TPC San Antonio Golf Courses and JW Marriott Resort TPC San Antonio Golf Courses and JW Marriott Resort Cibolo Canyons Special Improvement District 37

38 38 Cibolo Canyons

39 Cibolo Canyons & JW Marriott Resort Project: Residential development, room hotel and 2 TPC golf courses Incentive: Special district, non-annexation agreement Value to developer: District collects property, sales, and hotel occupancy taxes Value to Municipality: Aquifer recharge zone protection and destination resort 39

40 40

41 PETCO Co-Headquarters Project: Creation of corporate headquarters Incentive: Tax abatement and grant Value to developer: Cash and no taxes Value to Municipality: Over 400 high paying jobs 41

42 42 City Base West Shopping Center

43 City Base West Shopping Center Project: Retail shopping center Incentive: Purchase of real property and drainage improvements Value to developer: Equivalent of grant for public improvement Value to County: Job creation, public infrastructure, new retail in underserved area 43

44 Microsoft Data Center 44 44

45 Project: Data Center Incentive: Microsoft Data Center Tax abatement for any future location within San Antonio Creation of new (lowest) rate through City-owned electric utility Tax incentives through State Comptroller s office Value to developer: Incentives designed to allow for flexibility in site selection, low energy cost Value to City: Multi-billion dollar investment in real and personal property, $1 million grant from Microsoft to UTSA, creation of joint-use R&D between UTSA and Microsoft 45

46 46 Other Examples

47 47 Agave Apartments

48 48 Agave Apartments (Greystar)

49 49 Westside 211 Public Improvement District

50 50 Southtown Flats (Transwestern)

51 DEVELOPMENT AGREEMENTS Special Considerations For Public Entities Strafford Publications CLE Webinar Development Agreements between Municipalities and Private Parties December 19, 2017 Sarah M. Rockwell, Esq.

52 Topics When is the Public Sector Involved? Public Sector Goals Pre-Agreement Planning Pre-Agreement Documents Structuring the Development Agreement Processing and Approval Monitoring the Agreement Over Time Examples 52

53 1. When Do Public Entities Get Involved? Public entity owns the land Public entity will contribute significant project components Public sector will provide public financing Public/community desire for signature project Transit-oriented development Urban redevelopment project New community 53

54 2. Typical Public Sector Goals Implement desired project Impose enforceable obligations and timelines on private developer Establish road map Protect the public interest Approval Enforce and monitor over time 54

55 3. Public Sector: Pre-Agreement Planning Master Planning Blueprint for development Enhances community support Sets expectations Some Denver Examples Stapleton Green Book Lowry Reuse Plan I-25 and Broadway Station Area Plan 55

56 56

57 57

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59 3. Public Sector: Pre-Agreement Planning Development Solicitation RFP Obligations and expectations Who makes the selection? How is the selection approved? 59

60 3. Public Sector: Pre-Agreement Planning Do I have the authority? State law Local charter and ordinances What are my limitations? Restrictions against joint venture Can t improperly delegate Limitations on binding future elected bodies Social ordinances 60

61 3. Public Sector: Pre-Agreement Planning Negotiating the Agreement How does the public sector make decisions? Who drafts/reviews? Need for regular briefings of elected officials and staff How/when to involve the public? What is the formal approval process? 61

62 3. Private Sector: Pre-Agreement Planning Project Team Due Diligence Investor/Lender Requirements Acknowledge how public sector negotiations are different Prepare to be transparent Know your limits 62

63 4. Pre-Agreement Documents Exclusive Negotiation Agreement Term Sheet 63

64 5. Structuring the Agreement: The Road Map 1 The Property 2 Infrastructure Requirements 3 Public Finance 4 Environmental Issues 5 Project Entitlements 6 Developer Obligations 7 Public Amenities 8 Defaults and Remedies 64

65 5. Structuring the Agreement: The Property What property will be included? Timing of property acquisition Title issues Conditions precedent to takedown 65

66 5. Structuring the Agreement: Infrastructure Requirements What infrastructure is needed? Who is responsible? What are the timing requirements? Who will operate and maintain? 66

67 5. Structuring the Agreement: Public Finance How will infrastructure be paid for? Developer advances Tax increment financing or other non-urban renewal financing State or Federal loans or grants Special district financing Other financing mechanisms (improvement districts, community fees, etc.) 67

68 5. Structuring the Agreement: Environmental Issues Environmental condition of the property Clean up responsibility Clean up standards Environmental insurance Role of environmental regulatory agencies 68

69 5. Structuring the Agreement: Project Entitlements What entitlements are required and what is their timing? Will vesting be provided? If so, what is vested and for how long? 69

70 5. Structuring the Agreement: Developer Obligations Takedown requirements Development requirements Managing the project Contracts with developers and homebuilders CCRs Design Review Environmental Liabilities Ownership of infrastructure 70

71 5. Structuring the Agreement: Public Amenities and Other Requirements Affordable Housing Parks and Open Space Schools Public Art Other social ordinance requirements Community role 71

72 5. Structuring the Agreement: Defaults and Remedies Defaults Public entity Private entity Remedies When does developer lose right to complete the project? Consider lender provisions 72

73 6. Approving the Agreement What public bodies must approve? Notice Requirements mail, posting, newspaper Public outreach Public hearing? Who signs the agreement? Recording 73

74 7. Monitoring the Agreement Over Time Financial components Public and private sector obligations Amending the agreement How to deal with noncompliance Educating new elected officials and staff informed 74

75 8. Final Tips for Win Wins Up front planning Understand goals and constraints Respect process and time Clear roles for negotiating and decision making Draft provisions carefully When you re stuck, use road map Plan for the approval process Think through ongoing monitoring 75

76 Examples from Denver: 61 st and Pena Alameda Station Broadway Station 76

77 61 st and Pena Development Agreement Parties: City and County of Denver/Rail Stop LLC (Fulenwider entity) Goals: Establish parties responsibilities for funding of infrastructure Establish mechanism to reimburse Denver for upfront payments Determine process for design review Determine joint efforts going forward 77

78 Table of Contents/Development Agreement related to 61 st Avenue Station TOD Project TABLE OF CONTENTS I. Definitions...2 II. Term of Agreement...8 III. District Agreements...8 IV. Phase I Work Design and Construction...9 A. RTD Station Work Notice to Proceed Coordination with RTD...9 B. RTD Station-Related Improvements, Joint Infrastructure and Non- DIA Property Work...9 V. Funding for Phase I Work...9 A. DIA Funding...9 VI. Funding for Cost Increases Prior to Letting of Construction Contracts...12 D. Additional Contingency...14 Reimbursement and Repayment to DIA...14 A. Obligation for Reimbursement of DIA Funding of $17 Million...14 B. Obligation for Reimbursement of DIA Funding of $3 Million...14 C. Obligation for Repayment of DIA Priority Investments Land Sale Net Land Sale Proceeds DIA Priority Investments Reimbursement Net Land Sale Accounting...16 D. Obligation for Repayment of Developer Priority Investments Funding for RTD Station and Associated Work Funding for Joint Infrastructure Additional Funding for Joint Infrastructure and Non-DIA Property Work Deposit of DIA Deposited Funds Phase I Costs...10 B. Developer Funding Funds Required Equity Funding Smith 1 Funds SMT Funds Loans...11 C. Funding for Cost Increases General...12 VII. DIA Conditions Precedent to Closing...17 A. Conditions Precedent Title Subscription Agreements Management Rights Coordination Agreement District Agreements Loan Documents Legal Opinions...18 VIII. Closing...18 A. General...18 B. Closing Deliveries For Developer For DIA

79 Table of Contents/Development Agreement related to 61 st Avenue Station TOD Project C. Closing Actions Equity Funds Smith, SMT and Lender Funds DIA Funds Development Agreement Inclusion Agreements CCRs and Design Declaration...19 IX. Pre-Development Activities...19 A. General...19 B. Zoning, Site Planning...20 C. Conditions Covenants and Restrictions/Design Guidelines CCRs Design Declaration and Design Guidelines Coordinating Committee Smith and SMT Property...20 D. Panasonic Related Items Other Improvements Micro-Grid...21 E. Development and Marketing Plan Development of Plan Vertical Development on DIA Property and Developer Property...21 X. Cooperation Regarding Planning and Vertical Development...22 A. General Understanding...22 B. Coordinating Committee...22 Members Meetings Coordinating Committee Responsibilities...22 C. District Board of Directors...23 XI. Future Funding, Construction and Maintenance of Project Infrastructure...23 A. Future Infrastructure Costs...23 B. Infrastructure on Each Party s Land...23 C. Operation and Maintenance...23 XII. Transfers and Financings...23 A. Developer...23 XIII. Informal Dispute Resolution...24 A. Dispute Notice...24 B. Panel...25 XIV. Default and Remedies...25 A. Events of Default by Developer Funding Loans Cost Increases Compliance District Agreements...25 B. Events of Default by DIA Funding Cost Increases Compliance...26 C. Default Notice

80 Table of Contents/Development Agreement related to 61 st Avenue Station TOD Project 1. Default Notice Cure...26 D. DIA s Remedies Remedies Remedies...27 E. Developer s Remedies Remedies Remedies...27 XV. Developer s Representations and Warranties...28 A. Authority...28 B. Power...28 C. No Conflict...28 D. No Violation...28 E. Litigation...28 F. Developer Property...28 G. Developer Control...28 XVI. DIA s Representations and Warranties...29 A. Authority...29 B. Power...29 C. No Violation...29 D. No Consents or Approvals...29 XVII. Miscellaneous Provisions...29 A. Governing Law...29 B. Multi-Year Fiscal Obligation...29 C. Notices...29 Drafting...30 E. Entire Agreements; Amendments...30 F. Day for Performance...31 G. Exhibits...31 H. No Joint Venture, Partnership, Agency, etc...31 I. No Waiver...31 J. Survival...31 K. Usage of Terms...31 L. Notice of Litigation...31 M. Force Majeure...31 N. Changes in Law...32 O. Conflict of Interest...32 P. Paragraph Headings...32 Q. Third Party Beneficiary...32 R. Counterparts, Electronic Signatures, and Electronic Records...32 S. No Personal Liability...32 T. No Discrimination in Employment...32 U. Appropriation...33 V. Including...33 W. Examination of Records...33 X. Covenants Running with the Land...33 Y. Further Assurances...33 Z. Agreement Subordinate to Agreements with United States...33 AA. Bond Ordinances...33 BB. Actions by DIA/City Under this Agreement

81 Alameda Station Parties: D4 Urban/Regional Transportation District - Goals: - Establish D4 responsibilities for construction of RTD transit plaza - Establish D4 responsibilities for D4 construction of residential project Key issues: - Process for approval of design and construction - Remedies for non compliance - Ongoing maintenance of transit plaza - Lender provisions 81

82 Broadway Station Redevelopment Agreement (and ancillary agreements) Parties Broadway Station Metro District No. 1/Denver Urban Renewal Authority ( DURA ) Goals: Identify horizontal infrastructure eligible for reimbursement Establish City and DURA processes/requirements for tax increment financing (TIF) reimbursement Describe District obligations regarding project art, hiring, signage, insurance, SBE, other covenants Coordinate with numerous other agreements related to the project. 82

83 Questions? Sarah M. Rockwell, Esq. 83