Mar 21, 2024 - News

Two major SD redevelopments are eyeing the same subsidy

A rendering of people lounging and swimming at an urban beach with a city skyline in the bakcground.

A conceptual rendering of Seaport San Diego. Courtesy of Arcadis

Two of San Diego's biggest redevelopment projects are considering the same type of public subsidy to make the projects viable.

Why it matters: Regional leaders seem increasingly willing to cover infrastructure costs as part of private developments on public lands.

State of play: The San Diego City Council last week agreed to explore using a subsidy — called an enhanced infrastructure financing district (EIFD) — to help fund Midway Rising, which would include a new sports arena and thousands of homes in the Midway District.

  • And last year, the Port of San Diego signaled its support for letting the developers who are rebuilding Seaport Village pursue the same type of subsidy, among other public revenue sources.

How it works: The state created EIFDs in 2014 to pay for public improvements through increases in tax revenue brought about by economic development.

  • Local governments create a district, freezing the property tax revenue generated in the area at that point. They continue to collect that amount each year going forward.
  • Any new revenue above that level is then diverted into a separate fund to pay for infrastructure and amenities, or to repay loans used for those investments.
  • EIFDs function as scaled-back replacements to the redevelopment program the state killed in 2011, which San Diego relied on for many downtown revitalization projects.

The latest: Midway Rising and the city could strike a deal to develop roughly 50 acres of city-owned property around Pechanga Arena by the end of this year.

  • The Council's decision last week to explore an EIFD could determine how much revenue one would generate and what improvements it would fund.
  • 1HWY1, the developer selected in 2016 by the Port of San Diego to rebuild Seaport Village, said in late 2022 it needed $550 million in public funds to make the project possible.
  • Yehudi Gaffen, CEO of 1HWY1, told Axios this week that his team is still pursuing an EIFD to provide infrastructure and public amenities amid rising construction costs on a property that's proving to be complicated for the developer.

Flashback: The city and county also created EIFDs to cover projects from the past few years.

  • They each created EIFDs along the San Diego River in 2022, which was expected to bring in $380 million to $750 million to help with flood prevention and pedestrian improvement projects along the river.
  • In 2017, the city created an EIFD in Otay Mesa that was expected to generate more than $900 million for the community's list of needed public facilities.
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