A Project That Will Provide Annual Cash Flows Of What Is Community Infrastructure District ("CID")?

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What Is Community Infrastructure District ("CID")?

Background of CID – As real estate development expands in Idaho, the impact of such expansion will require the necessary construction of public infrastructure to accommodate such growth. In 2008, the Idaho Legislature enacted the Idaho Community Infrastructure District Act (the “Act”). The act was intended to create a new mechanism for public agencies and developers to finance public improvements. Modeled after similar laws in New Mexico and Florida, the legislation addressed the pressing issue of how to cost-effectively pay for the new public corrections burden. The act authorizes the issuance and repayment of bonds with a system of taxing or assessing land to benefit new public improvements. It provides for much-needed community development that might otherwise be impossible due to the significant costs imposed by extensive public improvement burdens. Currently, a Community Infrastructure District (“CID”) is permitted within a city’s comprehensive planning area and if the city consents to the creation of a CID, within the included city or county. The Act allows for the issuance of general obligation bonds, special assessment bonds or revenue bonds or any combination thereof. A projected annual assessment, tax or revenue stream secures repayment of bonds.

Eligible public improvements are available for CID financing

  • Water improvement
  • sewer improvements
  • Flood Control Project
  • Roadways
  • Public parking structures
  • Landscaping and ponds
  • Light and traffic control
  • parks
  • Recreational facilities
  • Public safety facilities
  • Financing costs
  • Real property interest
  • Development Impact Charges

A solid CID needs to be established keeping in mind the following overall objectives:

The real estate developer’s financial objectives must be met whenever reasonably possible because their project and its customers will repay the cost of borrowing CID financing as long as it does not represent any undue credit risk;

A real estate developer should use an experienced consultant to help them understand all available options when going through the CID process;

On large development projects, CID financing should be structured to allow for multiple bond issues over time and improvement areas should be used to reduce financial liability on improved or undeveloped properties; The characteristics or limitations of a particular development project should be understood so that the risks associated with the development of the project and the ability to repay the bond loan are clarified. Examples of these are environmental constraints, infrastructure constraints and private financing constraints;

The legal and engineering aspects of the acquisition of construction and/or improvements should be understood if tax-exempt bond financing is used. More specifically, specific construction related guidelines and procedures should be clarified when a real estate developer is constructing public improvements and seeking reimbursement from CID bond proceeds;

All property owners involved in the development process must fully understand and properly disclose the estimated annual costs and maximum annual costs of CID financing incurred; And

Project appraisal value must be done in accordance with sound bond underwriting and appraisal practices because CID bonds are ultimately secured by project value. Appraisal instructions should be clearly defined from a CID bond credit perspective. For example, if bonds are issued at an appraised value that assumes that the project consists of improved lots with no guarantee of performance as of the appraisal date, the appraiser has overestimated the value for the value-to-assumption ratio.

Please visit http://DPFG.com for more information on properly installing the CID

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