Culture

Cannabis –Unfunded Pension Liabilities Solution?

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The passage of the Adult Use Marijuana Act in 2016 has opened the door to what is expected to be a multi-billion-dollar industry in California - increasing economic output and generate jobs as well as generating revenue for services. Local jurisdictions can now choose to allow cannabis sales, cultivation, manufacturing and other activities and can levy excise taxes.  Most cities that initiated ballot measures (with most passing the 2/3 vote) projected millions of dollars in excise taxes annually (after January 1, 2018) that would go toward General Fund budget deficits and liabilities, including unfunded pension liabilities.  This is unfortunately a time when few new sources of expanded revenue sources exist for cities, and this revenue source is piquing the interest of many communities throughout the State.

But cannabis is a relatively new phenomenon in the State and is a sensitive subject that causes concern for residents, businesses and city officials. What will communities look like with dispensaries and other cannabis businesses?  How will public safety be impacted? How can jurisdictions start a conversation about cannabis and determine whether it is an option that should be evaluated?

Many of our current city clients have reached out to us to discuss the implications of cannabis in recent months – on both the pros and cons.  During these conversations, clients have indicated that because of legalization on a State level, even those communities who prohibit cannabis businesses will likely be affected by the legal usage (similar to alcohol usage).  Some clients, like the City of Bellflower, have decided to evaluate the fiscal and economic impacts to conservatively and accurately predict the net revenues potentially generated, new jobs created and economic stimulus to the community. A summary of this analysis can be found at the City's  website.

Attendance at two local cannabis conferences in September made it clear that the cannabis industry has a large number of consultants, attorneys, accountants and advisors on their side.  Cities should similarly have professionals that understand the industry (but are independent and neutral parties) to provide information to make informed decisions regarding cannabis, if that is what they choose.  Just as cities will bring in experts to help negotiate development agreements or conduct real estate analysis for a potential project, cities can make confident, well-informed decisions when armed with their own reliable data.  In addition, a third-party review of developer agreements and/or permits for cannabis businesses is also advisable to ensure that the terms, conditions and agreements are beneficial to the city.  For more information, please contact Hitta Mosesman, Principal, at RSG at hmosesman@webrsg.com or (714)316-2137.

Written by Hitta Mosesman, a Principal at RSG

RSG Well Deserved Fun Day

RSG’s commitment to its clients, employees, and local communities is evident daily. The 2016/2017 period has been especially challenging for RSG, given the current difficulties facing California cities and recent changes in legislation, just to name a few. Yet, without skipping a beat, staff continued to hunker down and produce top notch work; meeting deadlines, finding creative solutions for our clients and forging new relationships and service avenues. This dedication did not go unnoticed by the firm’s Partners!   

Recognizing the huge effort by staff to overcome the challenges over the past year, the Partners decided to scrap the already scheduled June All-Company meeting. Instead they treated us to a day of fun on a Duffy Boat out of Newport Harbor, followed by a yummy lunch from The Cannery in Lido Village. Very tre-chic for this group, but that was the best part about it!

Call it a re-boot for the mind, body, and soul, these types of events are relished, cherished, and appreciated! For those of us who joined the work force before the invasion of the “creative work space demanding millennials,” events like this were held only on rare occasions to commemorate extraordinary achievements by companies. However, the owners at RSG are in the trenches every day with us, working alongside us, jumping every obstacle with us. So, it is not a surprise that they felt the need to say thank you in a BIG WAY!

And for this, I personally want to express my gratitude, and let them know that I am thankful every day that I work with such committed and passionate leaders. Leaders who always strive to celebrate and appreciate more than the bottom line. They choose to celebrate and appreciate staff and all their accomplishments-because it is each of these individual accomplishments melded together that make up the RSG Family!  

Written by Business Office Coordinator, Erin Woodmas7.19.17

Build It, and They Will Prosper?

 Copyright 2016 Kelly Wilson, Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Copyright 2016 Kelly Wilson, Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Do sports stadiums generate net economic benefits for the community? 

The consensus is generally no. Economists say that sports teams spur little new spending in the community. 

While stadiums are limited in use, politicians and developers claim that a stadium is a win for local communities. Proponents say that sports facilities improve the local economy by creating construction jobs, generating new spending, attracting tourism and multiplying local income and job creation. Advocates argue that new stadiums spur so much economic growth that subsidies are offset by revenues from ticket taxes, sales taxes, and property tax increases.

These arguments may overstate the benefits of stadiums. Economic growth takes place when a community’s resources become more productive. Increased productivity can arise from economically beneficial specialization by the community or from local value added. Building a stadium is good for the local economy only if it is the most productive way to make capital investments and use its workers.

Still, there are non-economic benefits, such as community pride and cultural activity. Some projects, such as the NFL Rams’ return to Los Angeles, which occurred with limited financial obligations for Los Angeles taxpayers, provide a valuable lesson in how to attract sports teams and new stadiums based on a market’s strength rather than subsidies.

Calculating the economic and fiscal impacts of a development is crucial when deciding on whether or not a project should break ground. RSG has extensive experience in projecting tax revenue from projects and can help determine if a sports stadium or other large municipal investment would be a good idea in your community!

Written by Jeff Khau, a Senior Analyst at RSG

Could Now Be the Time for a CRIA?

 Copyright American Planning Association Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Copyright American Planning Association
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

AB 2492 extends Community Revitalization and Investment Areas to wealthier regions of the state, without much change to financial benefits of these tax increment financing (TIF) districts.

Last month, RSG discussed the limited financial benefits of Enhanced Infrastructure Financing Districts, one of several newer tax increment financing tools that provide limited benefits similar to redevelopment financing. Community Revitalization and Investment Authorities (CRIAs) are similarly structured and provide these tools AND opportunities for other community development tools. These characteristics have attracted some of our clients to evaluate their benefit. As it turned out, most of California could not benefit from a CRIA given the narrow socioeconomic requirements. 

However, just this week, the Governor signed Assembly Bill (AB) 2492 (Alejo) into law that makes changes to CRIAs, so we took a hard look at these changes and how they affect cities looking for help on community development projects. As it turns out, AB 2492 primarily expands the net on eligibility for CRIAs, but fails to provide much needed new capital to communities.

Here are the main changes:

  • More communities qualify – a greater number of lower income neighborhoods qualify because AB 2492 allows wealthier areas of the state to identify CRIAs in areas that have a median income less than 80 percent of the city or county median income, not just the state;
  • More flexibility - Added flexibility in measuring what parts of communities qualify by allowing the use of census tracts and/or block groups;
  • Any California Environmental Protection Agency-designated “disadvantaged community” automatically qualifies for CRIA - this certainly helps some very low and low income neighborhoods that would otherwise not qualify under the old law; and
  • Some added financial benefit – in addition to tax increment generated by the CRIA, special districts may now have the authority to allocate funds from certain tax and assessment revenues to the CRIA.  Cities and counties already had this ability.

We would love to see more done to make these districts more attractive by:

  • increasing the amount of tax increment revenues,
  • lowering the costs for startup, and
  • providing some other efficiencies like those RSG outlined in last month’s article for EIFDs. 

It’s important to note -  qualifying alone does not mean this tool is right for you.  It’s important to look at the financial feasibility carefully before jumping ahead.

Written by Jim Simon, a Principal at RSG

Summer Festivals: Parties with A Purpose

 

Summer is here and festival season is upon us. Whether it is a community concert series or an event of a larger scale, festivals bring people together. Summer events are a great way for local governments and municipalities to celebrate local culture, spurring short- and long-term investment in an area. Although we may not be the festival’s headliner, RSG can help clients capture the economic and social impact of these summer events to realize opportunities for community development.

Here are a few tips about making your summer event successful:

  • Communicating clearly, getting the word out, making the event a team effort, planning for the unexpected and reining in the budget are helpful in making an event go smoothly, according to Asa Gurden, head of the Scout Association's Scout Activity Centres, as reported in The Guardian.

  • Staying true to organizing principles, spreading the word sensibly and knowing whom you want to attract are tips from Joanne Steele at RuralTourismMarketing.com.

  • Keeping people hydrated, ensuring proper layout, providing activities for all ages, providing safety and security measures and showing appreciation are some important aspects of planning a summer event, according to EventManagerBlog.com. The site lists important “don’ts” like: overserving guest, skimping on restrooms, overscaling events, and not being environmentally sensitive.

Better communities, bolder futures – that is what we do.

Written by Evanne Holloway, a Research Assistant at RSG

Are CRIAs or EIFDs Right for You?

Community Revitalization and Investment Authorities (CRIA) and Enhanced Infrastructure Financing Districts (EIFD) are receiving a lot of hype as the “new” redevelopment options. While they offer many valuable tools, they have many restrictions. CRIAs and EIFDs are not one-size-fits-all solutions and may not work for every community.  

The major benefit is the ability to collect tax increment revenues and issue bonds to fund projects such as infrastructure and building improvements, environmental remediation, business assistance, and affordable housing. Unlike EIFDs, CRIAs allow the use of eminent domain, but they also mandate a 25% set-aside for affordable housing.  A big hurdle is that either your agency’s share of property tax must be large enough to fund desired projects or other taxing agencies must agree to contribute. Lastly, CRIAs can be challenged by a protest vote, and EIFDs require voter approval to issue bonds

The main questions to consider are:

•    Do CRIAs or EIFDs fund the projects we need?
•    Are the proposed boundaries eligible?  
•    Will my agency’s share of property tax revenue be enough to fund projects, or will there be enough support from other taxing agencies to share the cost?
•    Will elected leaders and the community support a new CRIA or EIFD?

RSG can help you determine which tool is best, based on your area’s eligibility and needs.  Call us to learn more.

Written by Suzy Kim, a Senior Associate at RSG

Keeping Up with Community Trends

 Photo credit: USC Alumni Real Estate Network

Photo credit: USC Alumni Real Estate Network

One community trend is the transit renaissance in Los Angeles. Dima and I attended an event at which Philip Washington, the new CEO of Los Angeles County Metropolitan Transportation Authority, spoke about five mega-trends affecting the future of transportation in Los Angeles:

1.     Funding is crucial, but sustainable funding is a struggle. Funding comes from federal, local, and private institutions.

2.     Safety and security are priorities. Our infrastructure needs to be reliable for the next 100 years.

3.     Workforce and lifestyle changes affect travel behavior.

4.     Demographic shifts, such as gentrification, should be addressed as transit-oriented development breaks ground.

5.     By accelerating technological advances, we can better serve the public. Uber and Metro are partnering to provide access to the new Expo line.

 Photo credit: USC Alumni Real Estate Network

Photo credit: USC Alumni Real Estate Network

Washington’s points set the stage for a potential ballot measure, expected to go to LA County voters in the November ballot. It would raise $120 billion over a 40-year period to fund transportation infrastructure maintenance and construction. The measure would augment Measure R—the current half-cent sales tax—by an additional half-cent. It would also extend the sales tax by another 18 years. More details regarding the plan can be found here.

RSG keeps up with trends affecting communities. To learn more about how RSG’s knowledge can benefit your project, call us today.

Written by Jeff Khau, a Senior Analyst at RSG

 Photo credit: USC Alumni Real Estate Network

Photo credit: USC Alumni Real Estate Network

Economic Development for People and Places

Aaron Renn recently wrote a thoughtful, balanced opinion piece about the dilemma between people-based and place-based economic development. People-based economic development is theoretically more effective. Place-based economic development, which is sometimes the only available approach for local governments because of their territorial nature, generally is structurally incentivized and provides quicker gratification.

At RSG, we are very familiar with this dilemma. Our clients are usually cities. We recognize that they need to generate property and sales taxes now to fund core services. Investments in education that pay off 20 years later (and possibly somewhere else) are needed, but difficult to justify. At the same time, with our focus on people and relationships, we know that people-based investments are more sound in the grand scheme of things.

Renn provides solid advice for state and federal governments to change the incentive structure to make it easier for local governments to pursue people-based economic development. Keeping in mind the glacial pace of state and federal policy change, we’re here to help cities balance economic development for both people and places.

Written by Dima Galkin, an Associate at RSG

Considering All Options in the Affordable Housing Toolbox

In the National Housing Institute’s blog “Rooflines,” Alan Mallach, former director of housing and economic development for Trenton, NJ, encourages us to consider which tools are most effective in creating affordable housing. Sometimes, apartments and houses can be purchased and restricted to residents of certain income levels more cost-efficiently than building new affordable housing. Average existing homes in cities like Dallas and Phoenix (Mallach’s examples) can be bought for under $200,000 while building affordable housing can cost over $200,000 per unit.

Mallach doesn’t argue against new construction. In places like San Francisco, the market for existing homes is incredibly expensive. A per-unit construction cost of $300,000 or more is “still a good deal.” Mallach urges consideration of all affordable housing tools.

RSG maintains and analyzes a database of California’s affordable housing tax credit projects. The database for 4% projects shows that per-unit costs range from $85,000 to $782,000. Acquisition and rehabilitation may not be cheaper than new construction, depending on the specific market and the specific project.

RSG can analyze the market and project results to maximize the effects of affordable housing spending. If you wonder whether spending money on acquisition or new construction will provide the most benefit in your community, contact RSG today!

Written by Dima Galkin, an Associate at RSG

A Fresh Look at Economic Development

The Brookings Institution recently released a report with guidelines to prioritize growth, prosperity, and inclusion in economic development efforts. 

The goal of economic development, should be to “put a regional economy on a trajectory of higher growth that increases the productivity of firms and workers and raises standards of living for all, thus achieving growth that is robust, shared, and enduring,” according to the report. Economic development should prioritize building strong business ecosystems for core industries, improving the productivity of firms and people, and facilitating trade. These are the market foundations from which growth, prosperity, and inclusion emerge. The report recommends five action principles:

1.    Set the right goals, 
2.    Grow from within, 
3.    Boost trade, 
4.    Invest in people and skills, and
5.    Connect place.

The report has already received coverage from outlets with broad distribution, like CityLab, which said that the report calls for a paradigm shift in economic development thinking, away from competitiveness and growth for growth’s sake, and toward a more inclusive prosperity. Such coverage is important for the ideas and approaches to spread and be adopted more widely.

At RSG, we have long focused on making growth equitable for all community members: residents and businesses. Our economic development analyses incorporate Brookings’s action principles. Contact us to discuss how your city can achieve inclusive growth and prosperity.

Written by Dima Galkin, an Associate at RSG