City of Alexandria, Virginia
MEMORANDUM
DATE: SEPTEMBER 11, 2023
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
FROM: JAMES F. PARAJON, CITY MANAGER /s/
DOCKET TITLE:
TITLE
Public Hearing, Second Reading and Final Passage of an Ordinance amending the Landmark Community Development Authority. [ROLL-CALL VOTE]
BODY
ISSUE: Amend the ordinance creating the Landmark Community Development Authority (“Landmark CDA”) to allow the Landmark CDA to increase its financial backstop from $86 million to $123.6 million to ensure that the City’s additional investment in the Landmark Redevelopment is fully repaid.
RECOMMENDATION: That City Council:
1) Consider the proposed Landmark CDA Amending Ordinance (Attachment 1), on the first reading and schedule it for second reading, public hearing, and final passage on Saturday, September 23, 2023.
2) After public hearing on September 23, 2023:
a. Adopt the Landmark CDA Amending Ordinance; and
b. Authorize the City Manager to execute an amendment to the Memorandum of Understanding (“MOU”) (Attachment 2) on behalf of the City, between the City, Landmark CDA, Industrial Development Authority of the City of Alexandria (“IDA”), Landmark Land Holdings, LLC, consistent with the Development and Financing Agreement (“Development Agreement”), laying out the updated improvement financing plan.
BACKGROUND: The City created the Landmark CDA by Ordinance adopted on September 18, 2021 to provide the necessary financial backstop to ensure that the City’s original $86 million investment in the redevelopment is fully repaid. Following City Council approval and authorization on May 23, 2023 to execute amendments to the Landmark Redevelopment Agreements including an increase in the City’s contribution of up to $37.6 million in additional proceeds for increased costs of infrastructure improvements, the City Manager executed an amendment to the Development Agreement between the City, Landmark Land Holdings, LLC, and Inova Health Care Services on May 31, 2023. By June 30, 2023, as expected, the City received an addendum to the original petition (Attachment 3) from the two fee simple owners (Landmark Land Holdings, LLC and the Industrial Development Authority of the City of Alexandria) representing 100% of the Landmark Redevelopment land area or assessed value of the land. This addendum petitioned for an amendment to the Landmark CDA consistent with the executed amended Development Agreement.
DISCUSSION: The amendments to the CDA backstop the increased general obligation capital improvement bonds (“City Bonds”) that may be issued to generate additional net proceeds of up to $37.6 million to fund a portion of the increased infrastructure costs per the amended Development Agreement. The City Bonds are intended to be repaid from incremental real property tax, retail sales and use tax, meals tax, and transient lodging tax (“Incremental Tax Revenues”) generated from the Landmark site. This synthetic tax incremental financing is backstopped with special assessments imposed on the taxable property comprising the CDA district. The special assessments will provide a second source of funds to reimburse the City for debt service paid on the City Bonds to the extent the Incremental Tax Revenues is insufficient to timely pay such debt service. The original CDA backstopped the City’s original infrastructure contribution of $86 million. The CDA may increase the special assessments levied on each property upon the request and agreement of the owners of the land comprising the CDA district; these special assessments can only be collected and applied as approved by the CDA. Thus, the City can only access the additional security for its increased contribution in the financing of the infrastructure improvements (i.e., the special assessments) through the amendment of the CDA; the increased contribution for the infrastructure improvements is conditioned on the CDA increasing its special assessments to wholly cover the increased City contribution. While the Rate and Method of Apportionment of Special Assessment has not changed, the Special Assessment Report has been amended (Attachment 4) consistent with the executed amended Development Agreement.
FISCAL IMPACT: For the City, the Landmark Redevelopment is estimated to generate $1.15 billion in tax revenue over a 30-year period from the Landmark development site and redeveloping the current Seminary Road Inova site into taxable residential use. After deducting estimated total debt service of approximately $344 million for both the infrastructure improvements and the land purchase, the net gain for the City to pay for Landmark and citywide services is $810 million. This net gain does not include new tax revenues created by the positive economic impact of the redevelopment of sites adjacent to and near the Landmark redevelopment site.
The City will increase its City Bonds issuance in a maximum aggregate principal amount sufficient to (i) generate an additional $37,600,000 in net construction proceeds available to pay the costs of the infrastructure improvements and (ii) pay associated capitalized interest. To the extent that the Incremental Tax Revenues are less than the debt service on the City Bonds, the City shall be entitled to seek reimbursement for any City funds applied to pay debt service on the City Bonds through the collection of annual installments of the special assessments. The annual assessment roll continues to use an interest rate of 4.5% that is considered appropriate for the City’s AAA credit rating. Even at interest rates higher than 4.5%, the currently estimated Incremental Tax Revenues should be more than sufficient to cover that potentially higher incremental financing cost.
ATTACHMENTS:
1. Landmark Community Development Authority Amending Ordinance
2. Memorandum of Understanding
3. Addendum to Petition to Create Landmark CDA
4. Amended Special Assessment Report
STAFF:
Joanna Anderson, City Attorney
Shawn Lassiter, Assistant City Attorney
Kendel Taylor, Interim Deputy City Manager
Julian Gonsalves, Assistant City Manager for Public-Private Partnerships
Kevin Greenlief, Assistant Director - Revenue Division, Department of Finance