Public Development Financing is not just a set of tools that communities and developers can use to turn an otherwise undesireable project into a more palpable opportunity. (See ”Making Lemons Into Lemonade“, June 25, 2008) Public Development Financing can also be a valuable tool for communities in creating the necessary environment to foster economic development and economic growth. Cities and counties often need to make certain improvements to their infrastructure to facilitate economic growth within an area. New companies may choose not to locate in or relocate to communities that have inadequate streets, substandard utility services, or other inferior public facilities or services. It is also difficult for existing businesses in a community to prosper in areas that have poor public infrastructure and services.
Fortunately, Texas law provides a number of ways to finance needed public improvements. Traditionally, Texas communities use their existing tax base, either ad valorem taxes or sales taxes, as collateral for municipal bonds sold in the open market to generate capital for public improvement projects (i.e. building of streets, sidewalks, parks, fire stations, libraries, etc.) However, in many communities the traditional way of generating capital for public improvements may not be enough to accomodate all the public infrastructure needs of a community. Instead communities are left to make difficult decisions regarding the needs of their citizens. It is even more difficult to generate enough capital for improvements in rural or urban communities with a small or diminishing tax base. There are, however, several solutions available through Public Development Financing that can help generate the necessary capital for needed public infrastructure improvements. In this three part series, we will examine one rarely used Public Development Financing mechanism that can benefit communties, developers and business owners alike by supplying the necessary capital for public infrastructure improvements without using the existing tax base.
Public Improvement Districts (PIDs) offer cities and counties an alternative means for undertaking public improvement projects needed for economic growth. The Public Improvement District Assessment Act allows any city to levy and collect special assessments on property in a desiganted Public Improvement District created within the city limits or within the city’s extraterritorial jurisdiction (ETJ). Further, counties may levy and collect special assessments on property located in a PID created within the county’s juristictional area, unless within 30 days of a county’s action to approve the public improvement district, a home rule city objects to the establishment of the PID, but only if the PID is located within the objecting home rule city’s corporate limits or ETJ. The statute authorizing the creation of PIDs is found in Chapter 372 of the Texas Local Government Code.
Public improvement districts may be formed to accomplish any of the following improvements:
- water, wastewater, health and sanitation, or drainage improvements (including acquisition, construction, or improvements of water, wastewater or drainage improvements);
- street and sidewalk improvements (acquiring, constructing, improving, widening, narrowing, closing or rerouting sidewalks, streets or any other roadways or their rights-of-way);
- mass transit improvements (acquisition, construction, improvement or rerouting of mass transportation facilities);
- parking improvements (acquisition, construction or improvement of off-street parking facilities);
- library improvements (acquisition, construction or improvement of libraries);
- park, recreation and cultural improvements (the establishment or improvement of parks);
- landscaping and other aesthetic improvements (erection of fountains, distinctive lighting and signs);
- art installation (acquisition and installation of pieces of art);
- creation of pedestrian malls (construction or improvement of pedestrian malls);
- similar improvements (projects similar to those listed above);
- supplemental safety services for the improvement of the district, including public safety and security services; or
- supplemental business-related services for the improvement of the district, including advertising and business recruitment and development.
The creation of Public Improvement Districts allow communities to designate areas in need of public infrastructure improvements and levy an assessment on only those benefiting from the public improvements without having to tap into the existing tax base of the entire community. Chapter 372 provides for two types of public improvement districts. In our next post, we will discuss the similarities, differences, advantages and disadvantages of these two types of public improvement districts. Our final post on this topic, discusses the best practices to use in the creation of a public improvement district and how communities, developers and businesses can achieve the greatest benefit from this type of Public Development Financing mechanism. Stay tuned…
