Lots of questions came up after the San Diego’s City Council voted unanimously to explore the creation of a special tax district that could help fund affordable housing at the Sport’s Arena redevelopment. The Union-Tribune was first to break the news and it has a whiff of scandal as it portends a major unexpected subsidy for the Midway development that people had not publicly discussed before the city chose to work with the developers in line to get the project.
What tax increment is: The city decided only to explore the creation of the Enhanced Infrastructure Financing District, or EIFD. Essentially, if it formed one around the nearly 40 acres of land the city owns and wants to develop in Midway, the property taxes within the area that flow to the county, city and school districts would freeze. As improvements to the property came on, money from the new or increased property tax revenue would stay in the district.
The city would be able to borrow money against this expected revenue stream and invest it in the project paying off the debt with the new property taxes that stay within the area. You may remember this is how redevelopment worked before the state ended that project more than 12 years ago amid scandal and a dire fiscal crisis.
The questions: The first one to come to mind is “Was this part of the plan to pay for the 2,000 housing units set aside for people who make 80 percent of area median income or less Midway Rising said it would build all along?” And “If so, how come we’re only hearing about it now?” “Did the other teams who bid on this massive project also plan to propose something like this? They lost essentially because Midway Rising (developers Zephyr and Chelsea Investment Corp.) promised more affordable housing. But how great of a promise is that if taxpayers have to make it work?”
“This project is not financially feasible without getting some of the infrastructure paid for,” Brad Termini, the CEO of Zephyr told the U-T.
Update: All three of the final teams bidding for the opportunity to do this project proposed an EIFD to help finance it. You can read the final staff report recommending Midway Rising here.
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Mayor Todd cooking up another Ash St debacle? The collective group seems to have a permanent case of tunnel vision.
While working for a local nonprofit, I obtained financing and built affordable housing projects for a number of years, and I know that such projects usually require heavy public subsidies in order to keep the resulting rents low. However, in this case the developer is also building market rate units on land donated (I do not think that they are buying the land) by the City. Consequently, the lower project cost (i.e. no land purchase) and profits from the market rate project elements should be able to support the building of the affordable units with minimal, or no, public subsidy.
Another question comes to mind: If the property tax funds are being diverted for housing, how does all the infrastructure to support the housing and it’s residents–like schools, fire stations, etc.–get funded?