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Some Oakland officials want to use the same financing approach under consideration for the Athletic’s Howard Terminal ballpark complex to fund affordable housing across Oakland.
The approach is called an enhanced infrastructure financing district, or EIFD, and it raises money for housing development or other projects by reserving some portion of future property tax increases in a given geographic area.
If Oakland created an EIFD, property taxes would continue to fund the same services and programs they always have. But a portion, say 4%, of future increases in property tax revenue in the designated district—from new development projects, or as property values increase—would be set aside and used to build new housing or other infrastructure.
“It’s not a new tax,” said Joe Dieguez, vice president at real estate advisory firm Kosmont Companies, at Monday’s meeting of the Oakland City Council’s Finance & Management Committee.
“The property owner will see no difference on their tax bill,” Dieguez said. “We liken it to a retirement account…you’re saving some portion of future revenue.”
An EIFD is a new governing body, separate from the City Council. If Oakland formed an EIFD to create new housing, its board would include three councilmembers and two members of the public whom they appoint. The city could also partner with the county to create a joint EIFD.
There are many different shapes an EIFD could take. It could include the entire city, or just one neighborhood, or even three specific sites in three different parts of Oakland. It could set aside a small percentage of tax revenue, or a significant chunk, and it could be structured to fund only housing, or a number of other infrastructure projects, like transit, parks, or libraries, too. The districts are permitted under a state law approved in 2014.
The A’s want to take advantage of the mechanism by having the city create a special EIFD to fund the $12 billion Howard Terminal complex, using property tax revenue generated by the project itself to pay for its construction.
At the end of last year, Councilmember Sheng Thao, along with Nikki Fortunato Bas and Carroll Fife, asked for a feasibility study on the use of an EIFD for affordable housing across Oakland. The resulting report, written by Kosmont Companies and funded by developer TODCO, was presented at a meeting of the council’s Finance Committee on Monday.
Thao’s original request for the study in December did not specify that TODCO would fund the research. Bobbi López, a director of TODCO’s policy arm, spoke at Monday’s meeting, saying TODCO got involved not to make money from a future EIFD but because the developer is a passionate advocate of the method for encouraging affordable housing.
In its report, Kosmont projected future tax revenue in order to predict how much money a citywide EIFD could produce in Oakland
In the more conservative scenario, where the EIFD receives only 2.5% of future tax increases, revenue for the district would be between $1.3 million and $1.8 million annually, after five years. By 10 years, the annual revenue could be up to $2.8 million. If the tax set-aside rate was set at the higher 7.5%, the revenue could be as much as $8.5 million annually by year 10. State law allows EIFDs to be set up for 45-year periods.
Oakland would likely ask voters to approve bonds to raise a few million or even as much as $138 million over 10 years to build housing. The revenue collected by the EIFD could be used to pay down the debt on these bonds.
Kosmont also explored a West Oakland-specific EIFD, which could collect 25-50% of property tax increases. The smaller the district, the higher the tax contribution rate can be without burdening the general fund, Dieguez said.
In both cases, Kosmont excluded the Howard Terminal site from its calculations, to avoid redundancy in case the A’s project is approved.
City officials and members of the public Monday said an EIFD could help Oakland build or preserve more sorely needed affordable housing. While the city has blown past its targets for building market-rate housing, it’s been deeply and consistently behind on the affordable housing it’s required by state and regional governments to plan for.
“We’ve barely made a dent,” said Thao. “Oakland is going to need a lot more revenue.”
She and other speakers said Oakland should conduct a racial equity analysis to determine how to structure a potential EIFD so that it can help prevent further displacement of communities of color and prioritize existing or former Oakland residents for new development.
City Administrator Ed Reiskin praised the “creative thinking” behind the EIFD idea. He called for more detailed analysis of Oakland’s housing needs and which financing approaches would be most appropriate for meeting them.
“It may be that an EIFD fits well with some of those needs but not all of them,” he said at the meeting.
EIFDs are similar to a previous state funding mechanism called Redevelopment Agencies. Even though he relied heavily on Oakland’s redevelopment agency to fund projects while he was mayor in the 2000s, when he became governor, Jerry Brown dissolved redevelopment in 2012. A couple of years later, the state authorized the use of EIFDs.
“For decades, cities throughout California did this on the regular,” said Councilmember Rebecca Kaplan, voicing support for an EIFD in Oakland. “For no apparent reason the state wiped that out a few years ago, and now we have the worst affordable housing crisis.”
Many cities and counties throughout California have created, or are in the process of forming, this sort of tax district to fund infrastructure projects including housing. In the Bay Area, Pittsburg, Brentwood, and Napa are all forming EIFDs for transit-oriented housing development, according to Kosmont.
Thao said that having an EIFD would put Oakland in a better position to access additional private and public funds. Cities with tax districts automatically score higher on applications for state housing grants.
“EIFD should not be considered a replacement for other useful financing mechanisms, but rather a complementary tool,” Kosmont’s report said.
The Finance Committee voted to direct the city administration to work with Kosmont and TODCO on a broader feasibility study looking at the possibility of EIFDs in East and West Oakland, and with county partnership. If the full council approves that recommendation, the city administration will come back with the report in September.