ONN – Howard Terminal: City Of Oakland, SB 293 Skinner, Mello Roos, And Private Activity Bond – video by the YouTube channel in the video’s upper left hand corner.
Howard Terminal: City Of Oakland, SB 293 Skinner, Mello Roos, And Private Activity Bonds
The City of Oakland, in its presentation to the County of Alameda, said it was planning to junk SB 293 Skinner, and use an rather questionably complicated approach that calls for an “over-lay” community district with the enhanced infrastructure financing district. All to avoid a bond backed by the City of Oakland.
They also proposed using Mello Roos Financing for the community district, but the problem is, are the A’s willing to pay that, and the other question is are they paying the annual property tax? That annual property tax payment is of primary importance because it’s the monetary blood that causes tax increment financing to work. Indeed, SB 293 Skinner calls for such payments, and basically points to the A’s as the payer.
In her talk, Project Manager Molly Mayburn said that they were advised that existing law, presumably SB 293 Skinner, did not allow for specific boundaries. That’s not what the law was designed to do, but it calls for the “Agency” or the Public Financing Authority of the City of Oakland (my name for it) to do that. Moreover, no Enhanced Infrastructure Financing District (EIFD) law version does that. The trouble is the Alameda County Board of Supervisors people did not know that.
Mello Roos taxes are commonly applied where there is a known base of existing buildings and owners, not a newly constructed development on previously un-developed land. The idea of Mello Roos is to finance services in the area, like for security guards. A common process can be observed in the 11 Oakland Business Improvement Districts. There, existing property owners pay a fee, called a “special assessment “, to pay for much the much needed security guards.
But a cold-read of what SB 293 Skinner (still The Project Bible) allows to be paid for implies that services can be covered (albeit backhandedly) and in the process of developing schools, libraries, parks, recreational facilities, and open space – all listed as covered in the law. Another “out” is that the tax increment financing money is going to the Agency, which should be structured such that it’s a private agency paying the bonds and with the Oakland A’s ballpark interests as its primary focus – the spending for community needs and services that SB 293 Skinner calls for, can then be done that way, without the need for a Mello-Roos approach (spelled out in my Howard Terminal Spreadsheet).
The best way to have a bond issue that is issued by the Public Financing Authority of the City of Oakland that still has not been created and is a year behind, is to call what SB 293 Skinner will produce, what it really is: a bond issue for the Oakland A’s, where the A’s are a private company. Thus, the spending percentage goes well over the 10 percent threshold, and makes the bond a Private Activity Bond.
Private Activity Bonds “are tax-exempt bonds issued by or on behalf of a local or state government for the purpose of providing special financing benefits for qualified projects. The financing is most often for projects of a private user, and the government generally does not pledge its credit”, according to Investopedia. But this is not the first time I have introduced this approach: I did so in the matter of the plan I created to retain the Raiders in Oakland.
Lay readers, especially those who favored the Raiders leaving Oakland for Las Vegas, made fun of my sketch of an overall design for the Coliseum Complex. But they completely ignored the financing plan I created behind it, perhaps because they didn’t understand it to start with. While I focused on an “industrial development lease revenue bond” approach in that plan, a simpler private activity bond, very much like the former concept, is what I propose for the Athletics case, and also for the African American Sports and Entertainment Group’s effort to bring the NFL back to Oakland.
The idea of the Private Activity Bond is to avoid using Oakland’s coffers as a backstop. The developer – in my idea for the Raiders, I planned to form a new LLC – assumed the risk. In this case, the A’s would assume the risk of bond default.
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