Presented  by:
Carolynne  C.  White   and
Blair  E.  Lichtenfels
May 8, 2014
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Shareholder,  Brownstein  HyaH  Farber  Schreck
Co-­‐Chair,  Real  Estate  Department
SpecialLes:
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•   land  use,  zoning  and  enLtlement  process   public  finance  –  PIF,  TIF,  special  purpose  districts
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•   public  policy   state  and  local  government  relaLonships   redevelopment,  infill,  mixed  use,  transit-­‐oriented   development   brownfields   urban  renewal   eminent  domain   historic  preservaLon   cwhite@bhfs.com
303.223.1197
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Associate  at  Brownstein  HyaH  Farber  Schreck  since
2007
Member,  Real  Estate  Department.
Focus  on  Urban  Infill  Redevelopment  and  New
Development,  with  an  emphasis  on:
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structuring     feasibility   enLtlements,  land  use,  zoning
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acquisiLon   financing   community  outreach     public-­‐private  partnerships
Blair  has  draZed  and  negoLated  mulLple  Public
Improvement  Fee  (PIF)  Covenants  on  behalf  of  private   developers,  retail  property  owners  and  Title  32  Special
Districts,  each  of  which  are  one  component  of  complex   public  financing  for  various  development  projects   across  the  State  of  Colorado.     blichtenfels@bhfs.com
303.223.1190
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What  is  a  PIF?
PIF  CharacterisLcs
What  can  PIFs  be  used  for?
PIFs  for  New  Retail  Development
PIFs  for  ExisLng  Retail  Development
AdministraLon  and  CollecLon  of  PIFs
Explaining  the  PIF  to  Stakeholders
Public  Disclosure
Case  Study
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A  PIF  walks  like  a  sales  tax,  quacks  like  a  sales  tax,  but  it  is   not  a  sales  tax.
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Imposed  by  private  contract,  not  pursuant  to   governmental  taxing  power,  in  the  form  of:
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Covenant  recorded  against  the  property
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Retail  leases
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Tenant  consent
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PIF
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Imposed  via  private   contract  or  lease
Intended  to  pay  for   specific  improvements
Those  improvements   must  “touch  and   concern”  and  benefit   the  real  property   encumbered  by  the  PIF
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Sales  Tax
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Imposed  by   governmental  enLty  via   taxing  powers
General  revenue  raising   mechanism
Revenue  allocated  to   governmental  authority   general  fund
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“ Touch  and  Concern”  the  land
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Common  law  covenant  requirement  that  the  PIF  touch  and  concern  the  land  it   encumbers
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Imposed  via  private  covenant  recorded  against  private  property  or  a  retail   lease
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OZen,  no  governmental  approval  required  to  impose  PIF;  no  general  elecLon
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Intended  to  pay  for  specific  improvements  that  benefit  the  encumbered   property
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Curbs,  sidewalks,  street  furniture,  fountains,  landscaping,  land  purchase,   upgraded  architecture,  pedestrian  bridges,  structured  parking,  parks,  plazas,   open  space,  water,  sewer  and  storm  water  faciliLes,  roads,  street  lights,  traffic   signals,  trails  and  other  public  ameniLes  i.e.,  public  events  and  markeLng   efforts
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Use  PIF  to  pay  for  installaLon  and  ongoing  maintenance  of   certain  “public”  improvements  located  in  retail  shopping  area
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Requires  analysis  of:
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All  costs  associated  with  any  type  of  public  improvement  on  the   property,  together  with
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All  potenLal  sources  of  revenue  to  finance  construcLon  of  those   public  improvements.
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Threshold Inquiry: Does the PIF Touch and Concern the Land and
Benefit the Property?
Statutory Authority
Political Will IRS Regulations
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Strategic  ConsideraLons  –  New  Retail
Development
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Consider  PIF  as  one  component  of  public  finance  package  for   new  development.
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Issuance  of  tax  exempt  bonds?
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Pledge  of  Tax  Increment  Financing  Revenue  from  Urban
Renewal  Authority?
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MoneLze  PIF  revenue  via  convenLonal  loan  ?
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Type  of  Development?  Total  tax  burden  on  adjacent  and   neighboring  properLes?
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Which  retailers  are  being  targeted  for  inclusion  in  the   development?
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How  will  the  PIF  be  administered?    Through  a  Title  32
Metropolitan  District  or  a  PIC?
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Who  will  enforce  and  collect  the  PIF  Revenue?    A  PIC?    A
District?    The  applicable  governmental  authority?
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Is  the  PIF  amount  to  be  fixed?    Will  it  be  based  on  a  formula?
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Who  has  the  right  to  change  the  PIF  amount  in  the  future  (if   anyone)?
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In  addiLon  to  (and  on  top  of)  the  City’s  current  sales  tax
(“Add  On  PIF”)
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No  need  to  get  municipal  approval
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City  can  reduce  its  sales  tax  rate  via  a  credit  to  lower  total   impact  on  buyers  (“Credit  PIF”)
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Credit  PIF  can  only  be  imposed  within  a  municipality  (not   on  property  located  in  an  unincorporated  county)
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Requires  municipal  agreement  with  City
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A  PIF  or  RSF  (Retail  Sales  Fee)  can  be  imposed  upon   exisLng  retail  developments
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Why?
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Ideal  for  exisLng  retail  developments  that  would  benefit   from  public  ameniLes  and  public  improvements
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Especially  if  local  municipality  is  unwilling  or  unable  to  fund   those  improvements/ameniLes
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Requires  consent  of  property  owner  and/or  tenant
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OpLmal  to  have  all  property  owners/tenants  parLcipate  in   collecLon  of  PIF  in  order  to  eliminate  potenLal  compeLLve   disadvantage
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Prepare  talking  points  for  property  owners/retailers  re:   advantages  of  PIF  structure  to  pay  for  public  improvements
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•   straight  pass-­‐through  to  customers   if  everyone  parLcipates,  no  compeLLve  disadvantage
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•   preferable  to  tax  or  fee   improve  streetscape,  façade  improvements,  etc.
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Need  to  obtain  consent  of  property  owners/tenants   before  implementaLon
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No  need  to  record  a  PIF  Covenant  against  the  real   property
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Landlord  needs  to  update  future  leases  and  lease   amendments  to  include  covenant  to  collect  and  remit
PIF
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Retailers  are  required  to  collect  and  report  on  the  PIF
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Who  should  collect  the  PIF  from  the  Retailers?
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PIC
Governmental  EnLty
Title  32  Metro  District
Other
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Enforcement:
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Private  Contractual  Remedy  (whether  imposed  via  PIF  Covenant   or  lease)
A  recorded  PIF  Covenant  establishes  lien  rights  against  real   property,  but  these  lien  rights  need  to  be  considered  in  context   of  other  liens  and  pracLcaliLes  of  enforcement
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PotenLal  Stakeholders:
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Property  Owners
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Third  Party  Real  Property  Purchasers  i.e..,  parLes   taking  subject  to  real  property  encumbered  by  PIF
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Retailers/Tenants
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Governmental  EnLLes
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UlLmate  Consumer
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Important  to  educate  the  general  public  about  the  PIF
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Amount  of  the  PIF
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Public  benefit  from  imposiLon  of  the  PIF
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Post  placard  at  register/point  of  sale  –  Describe  PIF,  benefits  etc.
Recommend  posLng  informaLon  at  the  property  and  on  the   internet
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See  The  Promenade  Shops  at  Centerra  InformaLon  from   www.lovelandpoliLcs.com
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For  retailers  and  consumers
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Project
Belmar
Jurisdiction Local Sales Tax
County
Sale Tax
State
Sales
Tax
Other Taxes Waiver PIF
City of Lakewood /
Jefferson County
2% city tax rate is 3%
.5%
RTD/CD/FD
1.2%
2.5%
2.9% 1%
Colorado Mills
City of Lakewood /
Jefferson County
2% city tax rate is 3%
.5%
Creekside Shopping
Center
Pueblo Crossing Retail
Center
City of Lakewood /
Jefferson County
2% city tax rate is 3%
.5%
City of Pueblo /
Pueblo County
3.5% 1%
Promenade Shops at
Centerra
The Broadmoor
Glenwood Meadows
Prairie Center
Westminster Mall
City of Loveland /
Boulder county
3%
El Paso County 2.5%
.8%
1%
City of Glenwood
Springs / Garfield
County
3.7% 1%
City of Brighton/
Adams County
2.5%
City tax rate is
3.75%
.7%
City of Westminster/
Jefferson County
3.85%
(.25 dedicated to open space; .6 dedicated to public safety)
.5%
2.9%
2.9%
2.9%
2.9%
RTD/CD/FD
1.2%
RTD/CD/FD
1.2% none none none
1.25%
1.4%
7.0%
1.5%
8.1%
.5% capped at
$1.5M
1.25%
Also a Retail
Sales Fee of
1%
7.9%
7.7%
2.9%
2.9%
Pikes Peak RTA
1%
Lodging Tax 2% none
Roaring Fork
RTA
.6% none
2.25%
1.5%
11.65%
9.7%
2.9%
RTD/CD/FD
1.2%
"Credit PIF"
1.25%
"Add On PIF"
1%
8.3%
2.9%
RTD/CD/FD
1.2% none none
Total Tax/
PIF Burden
8.1%
8.45%
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Property  Owner  owns  and  operates  a  successful  retail  shopping   center  in  large  metropolitan  area.  Property  Owner  owns  most   of  shopping  area  in  fee  simple,  and  leases  shops  to  a  variety  of   tenants  (15+).
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Tenants  include  retail  shops  and  restaurants.
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The  shopping  area  is  very  successful,  but  Property  Owner  wants   to  improve  the  facades  of  all  buildings,  upgrade  the  exisLng   streetscape  ameniLes  and  host  public  events  to  promote  the   shopping  area  and  aHract  shoppers.
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Property  Owner  has  financed  property  via  a  convenLonal  bank   loan  secured  by  a  mortgage  recorded  against  the  property.
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What  does  the  Property  Owner  need  to  consider  in  order  to   determine  whether  to  use  PIF  as  a  financing  mechanism?
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If  PIF  is  an  appropriate  financing  mechanism,  what  does  the
Property  Owner  need  to  consider  in  order  to  determine  the   structure  of  the  PIF?
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Can  Property  Owner  obtain  consent  of  all  Tenants?
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CompeLLve  Disadvantage  in  Imposing  PIF?
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How  will  PIF  funds  be  spent?
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Any  lodging  uses  at  the  Property?
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What  types  of  improvements  does  Developer  intend  to  finance  with
PIF  revenues?
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How  will  that  financing  work?
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Who  will  collect  the  PIF  from  Tenants?
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How  to  convince  resistant  Tenants?
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Call  or  email  Carolynne  or  Blair:   cwhite@bhfs.com
or  303.223.1197   blichtenfels@bhfs.com
or  303.223.1190
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