Santa Rosa PFA pauses action on EIFD plan after wide debate over project mix, locations and metrics

The Public Financing Authority (PFA) on Thursday reviewed proposed changes to the draft Infrastructure Financing Plan (IFP) for the City of Santa Rosa Enhanced Infrastructure Financing District (EIFD) -- also called the Downtown Business Corridor -- but did not adopt the revised plan. After extensive discussion about project categories, percentage allocations, whether projects may lie outside the district boundary and what metrics should be used to judge "tangible benefit," the PFA continued the public hearing to May 15 at 1 p.m. and left the hearing record open for additional public comment.

The IFP revision under review would set categorical limits on how EIFD tax increment could be applied. The draft discussed in the PFA meeting carried language capping funding for a major catalyst project (the performing-arts / sports-entertainment center) at up to 70% of district bond proceeds, placemaking and streetscape improvements at up to 10%, and affordable housing at up to 20% of funding. Staff described earlier drafts that separated streetscaping and placemaking (formerly 20% combined) and said those categories were revised following city and county comments.

Gabe (staff presenter) summarized the edits and the legal process for the IFP, saying the second public hearing is the point "to either modify, and those can be really accepting the proposed modifications as is, or making modifications in this meeting." Lenny (staff member) read specific revised language from the draft, including: "the EIFD will not fund or reimburse projects under construction as of the date of this IFP."

Discussion focused on several recurring issues raised by the PFA, city and county staff and members of the public: where EIFD funds may be spent (inside the legal district boundary versus adjacent or within a broader downtown area), how to define and measure the "tangible benefit" or economic return used to justify expenditures outside the boundary, whether the proposed categorical percentages should be rebalanced, and the level of detail expected in the fiscal impact analysis (county staff questioned why the sheriff's costs were omitted from the fiscal analysis appendix).

Staff said the fiscal-impact analysis (appendix C and related exhibits) shows a net positive fiscal effect for both the city and county based on the draft projections but acknowledged the sheriff's operations presented complications and were not itemized in the same way because of jurisdictional differences. "That was the justification as to why that comment was not addressed," staff said, noting that even with inclusion of sheriff-related costs the model still indicated net positive results in staff briefing to county decision-makers.

Members pressed staff for clarity on locations that could be financed. Staff described options the PFA could adopt: require financed projects be strictly within the EIFD legal boundary; allow only parcels that abut (directly touch) the boundary; permit projects within a specified walkable radius (example thresholds discussed included one-half mile to one mile); or apply the broader downtown station-area boundary used for prior planning. Staff said adopting an inside-only rule would be the simplest to administer; allowing projects outside the boundary would require project-specific demonstrations of tangible benefit and additional approvals by the city council and the board of supervisors.

Board members and public commenters also debated the percentage split between placemaking and the catalyst project. One comment letter submitted on behalf of Downtown Action Organization asked for a much higher placemaking allocation (the letter asked for 50% to placemaking, with affordable housing and the catalyst project sharing the remaining 50%). Several PFA members suggested hybrid approaches: for example, folding placemaking into an 80% bucket (with the catalyst and housing sharing the remaining 20% or some other split) or designing a dynamic formula that shifts funds over time if a catalyst project does not materialize. Staff said such options are feasible but would require clearer metrics and political agreement among the PFA, city council and county board before being written into the long-lived IFP.

On process and timing, staff reiterated that the IFP is governed by state EIFD procedures and that the PFA's action will be followed by city council and board of supervisors review; staff said the tentative schedule (if the PFA completes its action) was city council and board consideration beginning on June 3 and a final protest/proceedings hearing on June 16. Attorney Chris Lynch (Jones Hall) summarized the protest thresholds under the statute for the record: if a majority of the combined number of landowners and adult (18+) residents protests, the formation process must stop; a protest level between 25% and 50% triggers an election; below 25% the PFA may proceed.

After extended discussion and several PFA members asking for more time to review red-line revisions and to consider metric-based alternatives to the percentage caps, the body voted to continue the public hearing to May 15 at 1 p.m. and to leave the hearing record open. Staff said they would return with redlined language and options that could include dynamic percentage formulas and clearer definitions for "tangible benefit," along with references to the underlying appendix materials. The PFA asked staff to identify any changes that were new since the introductory meeting that had not been previously presented to the public.

Why it matters: The IFP will govern how tax increment from property-value growth in the downtown corridor can be used for public infrastructure, affordable housing and a prioritized catalyst project over the EIFD's multi-decade life. The PFA's choice about categorical limits, location rules and how to measure economic benefit will determine what kinds of public investments are feasible and whether large private-sector catalyst projects can be financed with EIFD bonds.

Next steps: Staff will return with more time for PFA review and suggested redlines. The PFA scheduled a continued public hearing for May 15 at 1 p.m.; staff confirmed the public comment record will remain open until that continued hearing.