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Councilmember Frank Smith, Jr.
A BILL IN THE COUNCIL OF THE DISTRICT OF COLUMBIA
To encourage the development and improvement of the downtown area and assist private investment within the downtown area by creating the District of Columbia Tax Increment Finance Commission as an instrumentality of the government with the powers necessary to issue revenue bonds and to pledge certain dedicated taxes and fees, including tax increments, as security for the payment of the revenue bonds and finance development costs.
BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this act may be cited as the "District of Columbia Tax Increment Finance Commission Act."
Sec. 2. Findings
The Council finds that:
(1 ) There exists in the District, a problem of chronic unemployment and underemployment.
(2) The downtown area has declined over many years and as a result, the District's real property tax and sales tax revenues have not sufficiently meet the expenditures of the government.
(3) The lack of new retail, entertainment, cultural, recreational, housing and community facilities within the downtown area is the major cause of the decline of the downtown area.
(4) The lack of authority to provide financial incentives to encourage development in the downtown area in accordance with the District's comprehensive plan have contributed to the decline of the downtown area.
(5) Governmental action is required to revitalize the downtown area in order to eliminate blight that exists in and near the downtown area; reduce the problems of unemployment and underemployment; and encourage the investment of private funds in the downtown area.
(6) The issuance of revenue bonds pursuant to this act will benefit the health, education, safety and welfare of the residents of the District; contribute to the creation and preservation of jobs for residents of the District; and encourage economic development in the District.
For the purposes of this act, the term:
1. "Assessor" means the Office of Taxation and Revenue, or such other person or office as is from time to time responsible for assessing the value of real property within the downtown area.
2. "Available real property taxes" means real property taxes provided for in Chapter 8 of Title 47 of the D.C. Code and payments in lieu of real property taxes, exclusive of the special tax provided for in Section 481 of the District of Columbia Home Rule Act (D.C. Code Section 47-331) and pledged to the payment of general obligation indebtedness of the District.
3. "Available sales tax" means the tax imposed on retail sales and sales at retail pursuant to Chapter 20 of Title 47 of the D.C. Code, including any penalties and interest charges, exclusive of the portion thereof required to be deposited in the Washington Convention Center Authority Fund established pursuant to D.C. Code Section 9-809 and the portion thereof required to be deposited in the Metrorail/Metrobus Account pursuant to D.C. Code Section 1-2466(b)(2)(A).
4. "Bonds" means bonds, notes or other obligations of the Commission;
5. "Capital improvement" means the same under generally accepted accounting principles.
6. "Collector" means the District of Columbia Treasurer, or such other person or office as is from time to time responsible for the collection of real property taxes and sales taxes within the downtown area.
7. "Commission" means the District of Columbia Tax Increment Finance Commission created by this act.
8. "Council" means the Council of the District of Columbia.
9. "DD Regulations" means the Downtown Development District Regulations, 11 §1700 et seq. (1995), the Zoning Regulations of the District, as amended from time to time.
10. "Development costs" means any or all of the following costs incurred or estimated to be incurred in furtherance of the objectives of this act:
11. "Development sponsor" means any organization or person that seeks to undertake, or undertakes, a project.
12. "District" means the District of Columbia.
13. "Downtown area" means the area of the District addressed by the Downtown Interactive Task Force, being the area with the boundary commencing at the intersection of Pennsylvania Avenue, N.W. and Twelfth Street, N.W.; north on Twelfth Street, N.W. to N Street, N.W.; east on N Street, N.W. to New Jersey Avenue, N.W.; southeast on New Jersey Avenue, N.W. to Second Street, N.W.; south on Second Street, N.W. to Pennsylvania Avenue, N.W.; and northwest on Pennsylvania Avenue, N.W. to the point of commencement.
14. "FAR" means Floor Area Ratio within the meaning of the Zoning Regulations of the District, as amended from time to time.
15. "Gross floor area" means Gross Floor Area within the meaning of the Zoning Regulations of the District, as amended from time to time.
16. "Initial assessed value" means, with respect to each lot of taxable real property within a tax increment area, the assessed value of the parcel on the date of adoption of the resolution establishing the tax increment area.
17. "Initial sales tax amount" means, with respect to a tax increment area, the amount of sales tax receipts collected by the District and derived from sales at locations within the tax increment area in the calendar year immediately preceding the year in which the tax increment area is established.
18. Project" means any capital improvement undertaken within the downtown area;
19. "Property tax increment receipts" means the portion of the available real property taxes allocable to the Commission pursuant to section 12.
20. "Sales tax increment receipts" means the portion of the available sales taxes allocable to the Commission pursuant to section 13.
21. ''Tax increment area" means any area designated and established pursuant to the provisions of this act.
There is established the District of Columbia Tax Increment Finance Commission as a body corporate instrumentality of the District government, to provide financing for public and private development projects in accordance with the provisions this act by issuing taxable or tax exempt revenue bonds, notes or other obligations as provided in Section 490(a)(1 ) of the District of Columbia Home Rule Act.
(a) The Commission shall consists of 2 voting ex-officio members and 5 voting public members. The public members shall be appointed by the Mayor and confirmed by the Council. The Mayor of the District and the Chief Financial Officer shall constitute the ax-officio members. Any ax-officio member may appoint a representative to act on his or her behalf by filing a written notice with the Commission.
(b) Each public member shall be a resident of the District with ascertainable professional experience in the planning and development of at least 2 large scale private sector property developments of not less than $50 million each; or in urban retail business development; or in the development of at least 2 housing projects of not less than 100 units, in urban areas; or in senior executive positions in banking and finance at an institution with over $50 million in assets; or in the practice of law with experience in downtown development.
(c) The term of each public member shall be 4 years. Of the initial public members, 1 member shall serve for a term of 1 years, 1 member shall serve for a term of 2 years, 1 member shall serve for a term of 3, and 2 members shall serve for a term of 4 years each.
(d) Public members of the Commission shall serve without compensation, but shall be reimbursed for actual expenses incurred by them in the performance of their duties.
(e) Members of the Commission shall hold office until their respective successors have been appointed and qualified. Any public member may resign by filing notice of resignation with the Commission, the Mayor, and the Council. Any public member may be removed from office by a resolution adopted by a two-thirds vote of the Council. Each vacancy shall be filled for the unexpired term by appointment as provided in this act.
(f) A member of the Commission may not vote on a resolution of the Commission if the member has a direct ownership or equity interest in a firm, partnership, corporation or association that may benefit from the enactment of the resolution. A resolution of the Commission that is approved by a majority of the members not barred from voting under this paragraph is a valid action of the Commission for all purposes.
(a) Members of the Commission shall elect a chairperson from among themselves. The chairperson shall serve for a one year term. The chairperson shall preside over all meetings of the Commission. A vice-chairperson may be elected by the Commission from among its other members. The vice-chairperson shall serve for a term expiring on the same date as the term of the chairperson. The vice-chairperson shall preside over all meetings in the absence of the chairperson.
(b) The members of the Commission may appoint a secretary and a treasurer, who shall be members of the Commission, to hold office at the pleasure of the members.
(c) The Commission may provide for compensation to be paid to its employees and its professional advisors. The compensation may include such incentives and bonuses as may be determined by the Commission.
(a) The Commission shall meet at least twice in each year. A majority of the members of the Commission shall constitute a quorum for the transaction of business or the exercise of a power or function.
(b) The Commission may meet and transact business by electronic media if participants and members of the public in attendance can hear and have the same right to participate in the meeting as if the meeting were conducted in person and copies of all resolutions and pertinent materials are reasonably available to participants and to the public. A meeting by electronic media as provided in this paragraph has the same legal effect as a meeting in person.
(c) The Commission shall keep minutes of each meeting and send a certified copy of the minutes to the Council.
(d) The Commission shall act by resolution. All resolutions, all proceedings of the Commission, and all documents and records of the Commission shall be public records, open to public inspection, except such documents as are kept or prepared for negotiations or in connection with any suit, action or proceeding to which the Commission is or may be a party.
(e) In connection with any project, the Commission may consult with any economic development corporation in whose jurisdiction such project is located.
The purposes of the Commission are to promote, develop and advance the general prosperity and economic welfare of the people of the District, to relieve problems of unemployment and underemployment, to re-establish the downtown area as the primary retail shopping and entertainment center for the Washington metropolitan area, and within the downtown area, to improve public facilities and public infrastructure, to encourage private development, to foster the development of entertainment, cultural, recreational and residential facilities, to provide improved transportation and community facilities, by providing various means of financing public and private development costs in accordance with this act.
The Commission shall have the following powers:
(1) To sue and be sued;
(2) To have a seal;
(3) To make and alter bylaws for its organization and management;
(4) To adopt regulations governing the exercise of its powers and to establish procedures in furtherance of the purposes and objectives of this act;
(5) To acquire interests in personal property, by purchase, gift or lease;
(6) To lease property for such rentals and upon such terms and conditions as the Commission may consider advisable;
(7) To issue bonds and otherwise to incur indebtedness, in accordance with this act, in order to finance the cost of any purpose authorized by this act or by a supplemental act of the Council;
(8) To sell, by installment sale or otherwise, exchange, donate, convey or encumber in any manner by mortgage or by creation of any other security interest personal property owned by it, or in which it has an interest;
(9) To sell personal property, with or without consideration, and without regard to the fair market value or acquisition cost of the property;
(10) To accept gifts, grants or loans from, and enter into agreements with, the federal government, any federal agency, the District, any District instrumentality, or any private organization or person;
(11) To deposit and invest its funds;
(12) To charge fees to private developers and other persons;
(13) To incur and to finance development costs;
(14) To enter into agreements to secure its bonds and other undertakings;
(15) To establish within the downtown area, one or more tax increment areas, to establish the boundaries of each tax increment area and, subject to the rights of its bondholders, to abolish or merge tax increment areas or to alter the boundaries of tax increment areas; and
(16) To enter into agreements, including security agreements, loan agreements and development agreements, with respect to the exercise of any of its powers, and to do all things necessary or convenient to carry out its corporate purposes and exercise the powers granted by this act.
(a) Upon receipt of a written petition of the development sponsor(s) of a project that satisfies the requirements of this act, the Commission shall by resolution establish the area described in the petition and including the entire site of the project as a separate tax increment area. Each resolution shall adopt tax increment financing for the tax increment area, shall determine the boundaries of the tax increment area and establish the termination date of the tax increment area.
(b) The Commission shall by resolution provide for the allocation, in accordance with the provisions of this act, of property tax increment receipts and sales tax increment receipts within each tax increment area established by the Commission and shall establish one or more separate tax allocation funds for the deposit and application of property tax increment receipts and sales tax increment receipts from each tax increment area.
(c) Subject to the consent of each development sponsor of a project within the affected tax increment areas and the rights of the holders of its bonds, the Commission may by resolution abolish a tax increment area, merge tax increment areas or alter the boundaries of a tax increment area.
(d) A certified copy of each resolution adopted pursuant to this section shall be filed with the Council, the Assessor, and the Collector.
Each resolution establishing a tax increment area shall provide that the available real property taxes, if any, arising from the levies upon taxable property in the tax increment area in each year after the date of adoption of the resolution until the termination date of the tax increment area, shall be divided as follows:
(a) That portion of available real property taxes levied upon each lot of taxable real property that is attributable to the lower of the current assessed value or the initial assessed value of each lot of taxable real property shall be allocated to, and when collected should be paid by the Collector to the District in the manner required by law in the absence of the adoption of tax increment financing.
(b) The portion, if any, of the available real property taxes that is attributable to the increase in the current assessed value of each lot of taxable real property over and above the initial assessed value of the lot shall be allocated to, and when collected shall be paid by the Collector to the Commission.
Each resolution establishing a tax increment area shall provide that the available sales taxes, if any, derived from sales at locations in the tax increment area in each year commencing after the date of adoption of the resolution until the termination date of the tax increment area, shall be divided as follows:
(a) That portion of the annual sales tax receipts equal to the initial sales tax amount shall be paid by the Collector to the District in the manner required by law in the absence of the adoption of tax increment financing.
(b) That portion, if any, of the annual sales tax receipts in excess of the initial sales tax amount shall be allocated to, and when collected shall be paid by the Collector to the Commission. '
When the Commission provides for tax increment allocation financing and establishes a tax increment area, the Assessor shall determine and certify the initial assessed value of each lot of taxable property within the tax increment area and the Collector shall determine and certify the initial sales tax amount for the tax increment area.
Ail property tax increment receipts paid to the Commission from the allocation of real property taxes provided for in section 12, and all sales tax increment receipts paid to the Commission from the allocation of sales taxes provided for in section 13, shall be deposited into one or more separate tax allocation funds for the applicable tax increment area as determined by the Commission. Moneys held or to be held in a tax allocation fund shall be used to pay development costs associated with projects in the applicable tax increment area and to pay the principal of and interest on the bonds of the Commission issued with respect to the tax increment area. Moneys in a tax allocation fund or specific portions of the moneys may be pledged as security for the payment of bonds of the Commission issued to finance development costs with respect to the applicable tax increment area. Subject to its agreements with the holders of its bonds, any moneys in a tax allocation fund that are not required to retire indebtedness or to pay development costs may, by resolution of the Commission, be paid over to the District for deposit in the General Fund.
(a) Each project within a tax increment area shall be entitled to be allocated all funds held in a tax allocation fund, including the proceeds of sale of the bonds, the property tax increment receipts and/or the sales tax increment receipts derived from the project, provided that the project satisfies one of the following:
(b) The requirements for a project to comply with this section shall be set forth in an agreement between the Commission and the development sponsor of the project.
(c) Subject to compliance with the regulations and procedures established by the Commission, a project which complies with the requirements set forth in this section shall be entitled to have the Commission issue bonds with respect to the property tax increment receipts and/or the sales tax increment receipts derived from the project.
(d) The Zoning Administrator, the Director of Office of Planning and the Office of Corporation Counsel shall furnish to the Commission such certificates as may be required to confirm a project's compliance with the requirements set forth in this section.
(a) The Commission shall authorize and provide for the issuance of bonds pursuant to the act for the purpose of raising funds to pay development costs and for the purpose of funding or refunding any of its bonds. The Commission shall exercise the power to authorize bonds by adopting a bond resolution, which shall describe in brief and general terms sufficient for reasonable identification, the development costs to be financed or the bonds that are to be funded or refunded and the property tax increment receipts, the sales tax increment receipts and the other revenues, and assets and funds of the Commission that are to be pledged to secure the repayment of the bonds.
(b) Upon the adoption of a bond resolution the Commission may incur indebtedness borrow money and issue its bonds for the purposes authorized by the bond resolution. The bonds may be issued in more than one series, may be executed in such manner, and may bear such date or dates, mature at such time or times (provided, however, that the final maturity date of any bonds payable from property tax increment receipts or sales tax increment receipts derived from a tax increment area may not be later than the termination date of that tax increment area), bear interest at any fixed or variable rate, be subject to redemption upon such terms and have such other terms and provisions as the bond resolution, including any resolution supplemental thereto, a trust agreement or a trust indenture may provide.
(c) The aggregate principal amount of bonds, other than refunding bonds, issued before January 1, 2003 shall not exceed $300 million.
(d) The Commission may charge an administrative fee in connection with the issuance of bonds. The amount of the administrative fee shall not exceed the lesser of (i) $50,000 and (ii) 0.5% of the principal amount of the bonds issued.
(e) Bonds of the Commission may be sold at public or private sale and at a price or prices as the Commission shall determine by resolution or by any officer or employee of the Commission to the extent the power has been delegated to the officer or employee pursuant to a resolution of the Commission.
(f) All tax increment receipts not required as security for bonds, for debt service on bonds, or for administrative costs, may be used to prepay the bonds and otherwise shall be returned to the District of Columbia for deposit in the General Fund. In no event shall the proceeds of any tax increment bonds exceed twenty-five percent of the total project costs.
The housing and community development fund is established as a special fund to be administered by the Department of Housing and Community Development of the District. If less than 25 percent of the net proceeds of sale of any issue of bonds shall be used for development costs associated with a housing project, then a portion of the proceeds equal to the excess of 25 percent of the net proceeds over the portion of the proceeds used for development costs associated with a housing project, shall be deposited into the housing and community development fund. Moneys in the housing and community development fund shall be used for projects within the downtown area that provide housing or community facilities, provided that not less than 60 percent of the moneys in the housing and community development fund shall be granted to projects within the downtown area that provide housing, and the amount of each grant for projects that provide housing shall be $30 per FAR square foot of the housing provided.
A series of bonds may be secured by a trust agreement or trust indenture between the Commission and a corporate trustee having trust powers, or by a secured loan agreement or other instrument or under a resolution of the Commission giving power to a corporate trustee by means of which the Commission may do the following:
(1) Make and enter into any and all covenants and agreements with the trustee or the holders of the bonds that the Commission may determine to be necessary or desirable including, without limitation, covenants and agreements as to the following:
(2) Pledge, mortgage or assign moneys, agreements, property or other assets of the Commission, either presently in hand or to be received in the future, or both;
(3) Provide for bond insurance and letters of credit, or otherwise enhance the credit of and security for the payment of its bonds; and
(4) Provide for any other matters of like or different character that in any way affect the security for or payment of the bonds.
If there shall be a default in the payment of the principal of or interest on any bonds of a series after the principal or interest shall become due and payable, whether at maturity or upon call for redemption, or if the Commission shall fail or refuse to carry out and perform the terms of any agreement with the holders of any the bonds; then the holders of the bonds, or the trustee appointed to act on behalf of the holders, may do the following:
(1) By action, writ or other proceeding enforce all rights of the holders of the bonds. including the right to require the Commission to carry out and perform the terms of any agreement with the holders of the bonds or its duties under this act:
(2) By action, require the Commission to account as if it were the trustee of an express trust;
(3) By action, petition to enjoin any acts or things that may be unlawful or in violation of the rights of the holders of the bonds, and
(4) Declare all the bonds due and payable, whether or not in advance of maturity and, if all the defaults be made good, annul the declaration and its consequences.
The Commission may cause any bond resolution adopted by it to be posted for public inspection in its office. The Commission may thereupon cause to be published in a newspaper of general circulation in the District a notice stating the fact and date of adoption and the place where the bond resolution has been posted for public inspection and also the date of the first publication of the notice and also that any suit, action or proceeding of any kind or nature in any court questioning the validity of the creation of the Commission or the validity or proper authorization of bonds provided for by the bond resolution, or the validity of any covenants or agreements provided for by said bond resolution shall be commenced within 20 days after the first publication of the notice. If any such notice shall at any time be published and if no suit, action or proceeding questioning the validity of the creation of the Commission or the validity or proper authorization of bonds provided for by the bond resolution referred to in said notice, or the validity of any covenants or agreements provided for by said bond resolution shall be commenced or instituted within 20 days after the first publication of said notice, then all residents, taxpayers and owners of property in the District and all other persons whatsoever shall be forever barred and foreclosed from instituting or commencing any suit, action or proceeding in any court, or from pleading any defense to any suit, action or proceeding, questioning the validity of the creation of the Commission, or the validity or proper authorization of the bonds, or the validity of any such covenants and agreements, and the Commission shall be conclusively deemed to have been validity created and to be authorized to exercise its powers under this act, and said bonds, covenants and agreements shall be conclusively deemed to be valid and binding obligations of the Commission.
(a) Neither the members of the Commission nor any person executing bonds issued pursuant to this act shall be liable personally on the bonds by reason of the issuance thereof.
(b) Notwithstanding any other provision of this act, bonds issued pursuant to this-act are not general obligations of the District and shall not be in any way a debt or liability of the District within the meaning of any debt or other limit prescribed by law. Neither the full faith and credit nor the taxing power of the District (other than property tax increment receipts and sales tax increment receipts from the project) may be pledged to secure the payment of any bonds issued pursuant to this act.
The property tax increment receipts and the sales tax increment receipts constitute "tax increments" as defined in subsection (m)(6) of Section 490 of the District of Columbia Home Rule Act that are declared to be dedicated pursuant to this act to the payment of debt service on bonds issued pursuant to this act, the provision and maintenance of reserves for that purpose, and to the payment of development costs.
(a) The District does hereby pledge to and covenant and agree with the holders of any bonds issued pursuant to a bond resolution of the Commission that the District will not limit or alter the rights vested in the Commission by this act to adopt a tax increment financing, to establish tax increment areas, to allocate available real property taxes, to allocate available sales taxes, to receive, apply and pledge property tax increment receipts and sales tax increment receipts and to fulfill the terms of any agreement made with the holders of the bonds, and will not in any way impair the rights or remedies of the holders, and will not modify in any way the exemptions from taxation provided for in this act, until the bonds, together with interest thereon, with interest on any unpaid installment of interest and all costs and expenses in connection with any suit, action or proceeding by or on behalf of the holders, are fully met and discharged. The Commission is authorized to include this pledge and agreement of the District as part of its contract with the holders of any of its bonds. This act shall constitute a contract between the District and the holders of the bonds authorized by this act. To the extent that any acts or resolutions of the Council may be in conflict with this act, this act shall be controlling.
(b) It is the intention of the Council that a pledge made by the
Commission in respect of its bonds shall be valid and binding from the time the pledge is
made; that the money or property so pledged and thereafter received by the Commission
shall immediately be subject to the lien of the pledge without physical delivery or
further act; and that the lien of the pledge shall be valid and binding as against all
parties having any claim
(a) All bonds issued by the Commission pursuant to this act are declared to be issued by an instrumentality of the District for an essential public and governmental purpose. The bonds and the interest thereon and the income therefrom, and all funds, revenues and other moneys of the Commission, and all moneys pledged or available to pay or secure the payment of the bonds, shall at all times be exempt from taxation by the District except for estate, inheritance and gift taxes.
(b) The Commission may require that the sponsor of any project which is allocated property tax increments or sales tax increments pursuant to this Act shall comply with the requirements of Mayor's Order 83-265 (November 9, 1983) in connection with the construction of such project.
(c) Before one year from the date of enactment of this act, the Office of Business and Economic Development shall report to the Mayor and City Council on the desirability of authorizing tax increment allocation financing for areas of the District outside of the downtown area.
The Council adopts the fiscal impact statement in the Committee Report as the fiscal impact statement required by section 602(c)(3) of the District of Columbia Self-Government and Governmental Reorganization Act, approved December 24, 1973 (87 Stat. 813; D.C. Code §1-233(c)(3)),
This act shall take effect following approval by the Mayor (or in the event of veto by the Mayor, action by the Council to override the veto), approval by the Financial Responsibility and Management Assistance Authority as provided in section 203(a) of the District of Columbia Financial Responsibility and Management Assistance Authority Act of 1995, approved April 17, 1995 (109 Stat. 116; D.C. Code §47-392.3(c)), and a 30-day period of Congressional review as provided in section 602(c)(1) of the District of Columbia Self- Government and Governmental Reorganization Act, approved December 24, 1973 (87 Stat. 813; D.C. Code §1-233(c)(1)), and publication in the District of Columbia Register.
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