Economic Development Fundamentals September 22, 2016...–Incentive district TIF applies to all...
Transcript of Economic Development Fundamentals September 22, 2016...–Incentive district TIF applies to all...
© 2016 Bricker & Eckler LLP
Bricker & Eckler LLP
www.bricker.com • www.developohio.com
Matt Stout, Esq.
614.227.8861
Colin Kalvas, Esq.
614.227.4998
Economic Development Fundamentals
September 22, 2016
Moderator: Jeffrey R. Rink
Managing Director, KeyBanc Capital Markets Inc.
© 2016 Bricker & Eckler LLP
Economic Development
Simple definition: activities which promote
investment, create jobs, and enhance
communities.
Generally includes collaboration between
government entities and private entities
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Economic Development
Ohio Constitution Definition: Certain activities
which:
– “create or preserve jobs and employment
opportunities,”
– “improve the economic welfare of the people of the
state,”
– “control air, water, and thermal pollution,” or
– “dispose of solid waste”
Article VIII, Section 13
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Economic Development
From a local government point of view,
economic development consists of deploying
various tools which advance those goals
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Tools Covered
Tax Increment Financing (TIF)
Community Reinvestment Area (CRA)
Enterprise Zone (EZ)
Special Assessments and Property Assessed Clean
Energy (PACE) Financing
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Tax Increment Financing (TIF)
Tax: based on real property taxation
Increment: applies only to the increase in real
estate taxes resulting from a development
Financing: allows a developer and local
government to pay for needed public
infrastructure improvements
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TIF Basics
Service payments in lieu of taxes
– Owners of property subject to TIF required to pay
“service payments in lieu of taxes”
– Paid in the same amount and collected in the same
manner as real property taxes
– TIF is therefore a way to focus otherwise dispersed
tax money on specific, local improvements
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TIF Basics
Uses of service payments in lieu of taxes
– Service payments are collected into a segregated
fund which must be established
– May be used to pay for “public infrastructure
improvements” as defined in O.R.C. 5709.40(A)(7).
– Generally include: roads, sewers, environmental
remediation, land acquisition, demolition, storm water
remediation, gas, electric and communications
service facilities
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TIF Basics
* “Tax Increment Finance Best Practices Reference Guide” (CDFA and ICSC), page 2.
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TIF Basics
Governments which may implement:
– Municipal corporations (O.R.C. 5709.40 & .41)
– Townships (O.R.C. 5709.73)
– Counties (O.R.C. 5709.78)
© 2016 Bricker & Eckler LLP
TIF Basics
Creation
– Legislative authority passes ordinance or resolution
• Determines base year as of January 1
• Identifies TIF boundaries and parcels
• Notice must be given to school district and other affected
political subdivisions
– Form DTE 24
• Exemption application filed with the Ohio Department of
Taxation
• Contains parameters set forth in the authorizing legislation
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TIF Basics
Project TIF vs. incentive district TIF
– Project TIF applies to a specific parcel or parcels
(See O.R.C. 5709.40(B))
– Incentive district TIF applies to all parcels within a
geographic district (See O.R.C. 5709.40(C))
• No more than 300 contiguous acres exhibiting one or more
characteristics of economic distress as listed in ORC
• Public improvements do not need to directly benefit every
parcel
Municipal Urban Redevelopment TIF (.41 TIF)• Unique TIF used in urban redevelopment setting
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TIF Basics
Percentage of increased value to which TIF
may apply
– Up to 75% without the consent of the impacted city,
local, or exempted village school district
– Up to 100% with consent
– Note that county consent is required for municipal
corporation and township incentive district TIFs if
exemption is over 75%
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TIF Basics
Term of TIF
– Up to 10 years without the consents of the impacted
city, local, or exempted village school district
– Up to 30 years with consent
– Note that county consent is required for municipal
corporation and township incentive district TIFs if term
exceeds 10 years
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TIF Basics
Rights of school districts and counties
– Along with consent is ability to negotiate
compensation
– Maximum compensation for city, local, and exempted
village school districts and joint vocational school
districts is amount that would have been paid but for
TIF (“non-school TIF”)
– Maximum compensation for county is amount that
would have been paid but for TIF (recall, only applies
to municipal corporation and township incentive
district TIFs)
© 2016 Bricker & Eckler LLP
TIF Basics
Municipal Income Tax Sharing -Municipality must share income tax with School District if:– Municipal Income tax in place
– New payroll in excess of $1,000,000
– No make whole provision for School District in place
Six Months to Negotiate Agreement– 50/50
– Municipality entitled to infrastructure set-off (up to 35% of annual income tax increase)
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Why Use TIF?
Encourage development
Facilitate redevelopment
Finance infrastructure
No additional cost to developer
– But revenue stream is development dependent
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TIF Monetization
General obligations bonds or cash payment
by government– Government takes risk
Revenue bonds and conduit bonds– Generally requires additional security
Pay-as-you-go TIF– Developer takes risk
Developer financing– Developer takes risk / provides security
© 2016 Bricker & Eckler LLP
Combining TIF With Other Tools
CRA
– TIF could be subordinate to total abatement of CRA
for CRA period (O.R.C. 5709.911)
Special assessments
– Special assessments can back up TIF service
payments in event development does not occur at
desired pace
New Community Authority
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Community Reinvestment Area
(CRA) Characteristics of CRAs
– Real property tax exemption
– Municipalities and counties have the authority to create new CRAs
– Area within a municipal corporation or the unincorporated area of a county
– Area in which housing facilities or structures of historic significance are located
– Reality – used to grant commercial/industrial exemptions where at least two housing structures exist
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Community Reinvestment Area
(CRA) Types
– Pre July 1, 1994 CRA• No agreements
• No revenue sharing
• No school district notice or approval
– Post July 1, 1994 CRA• Agreements
• Revenue sharing
• School district notification and approval
© 2016 Bricker & Eckler LLP
CRA Basics
Creation (O.R.C. 3735.66)
– Municipal corporation or county passes legislation
after housing survey
• Area is in need of renovation
• At least 20% of properties in need of rehabilitation
– Incentive parameters established
• May be only on residential property, only on commercial /
industrial property, or on both
• Maximum exemption is 100% of new value
– Must publish notice of legislation
– Must petition ODSA for confirmation of CRA
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CRA Basics
Exemption term (O.R.C. 3735.67(D))
– Remodeling costing $2,500+ of residential with fewer
than two dwelling units: up to 10 years unless
historically significant
– Remodeling costing $5,000+ of residential with
greater than two dwelling units or remodeling of
commercial industrial: up to 12 years unless
historically significant
– New construction: up to 15 years
© 2016 Bricker & Eckler LLP
CRA Basics
Granting exemption (O.R.C. 3735.67):
– Residential:
• Application to “housing officer”
• Verification of construction or remodeling and its cost and
other eligibility criteria
• Housing officer grants exemption
• Forwards approval to county auditor
© 2016 Bricker & Eckler LLP
CRA BasicsCRA PROGRAMS BENEFITS PRE
JULY 1, 1994 CRA
POST
JULY 1, 1994 CRA
EXEMPTION LEVELS:
Real Property Must be 100% Up to 100%
Personal Property None None
Inventory None None
TERM EXEMPTIONS:
Residential Remodeling (2 units or
less; minimum $2500)
Up to 10 years as specified
in the legislation that
creates the CRA
Up to 10 years as specified
in the legislation that creates
the CRA
Residential Remodeling (more
than 2 units; minimum $5000)
Up to 12 years as specified
in the legislation that
creates the CRA
Up to 12 years as specified
in the legislation that creates
the CRA
Residential New Construction Up to 15 years as specified
in the legislation that
creates the CRA
Up to 15 years as specified
in the legislation that creates
the CRA
Commercial and Industrial
Remodeling (minimum $5000)
Up to 12 years as specified
in the legislation that
creates the CRA
Up to 12 years as negotiated
and approved in an CRA
Agreement
Commercial and Industrial New
Construction
Up to 15 years as specified
in the legislation that
creates the CRA
Up to 15 years as negotiated
and approved in an CRA
Agreement
© 2016 Bricker & Eckler LLP
CRA Basics
Granting exemption (cont’d):
– Commercial / industrial
• Pre-1994 – same process as residential
• Post-1994 – negotiate agreement under O.R.C. 3735.671
• If agreement required, may require school district approval
(O.R.C. 3735.671(A))
• Agreement must be in form set forth in O.R.C. 3735.671
• Agreement must be certified to ODSA
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CRA Basics
Annual Compliance
– Commercial / industrial with agreements must comply
with reporting to ODSA as described in O.R.C.
3735.672
– All exemptions must be reviewed by “housing officer”
(O.R.C. 3735.68) and by “housing council” (O.R.C.
3735.69)
– In addition to commercial / industrial agreement
reporting, enacting government must give annual
status report to ODSA (O.R.C. 3735.69)
© 2016 Bricker & Eckler LLP
Why Use CRA?
Encourage development
Encourage redevelopment
Encourage maintenance of historically
significant structures
© 2016 Bricker & Eckler LLP
Monetizing CRA(?)
CRA does not itself produce any revenue
But governments have been able to negotiate
voluntary compensation from developers
For municipal corporations, additional income
tax from added jobs or residents may be an
advantage
© 2016 Bricker & Eckler LLP
Combining CRA With Other Tools
Special Assessments
New Community Authority
TIF
– Note that CRA will take priority for its term, but once
over, TIF service payments become payable
© 2016 Bricker & Eckler LLP
Enterprise Zone (EZ)
Enterprise: encourage businesses to make
specified types of investments
Zone: specified geographic area
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EZ Basics
Governments which may create:
– Municipal corporations (O.R.C. 5709.62)
– Counties (O.R.C. 5709.63)
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EZ Basics
Zone characteristics
– Minimum population:
• County pop. > 300,000 = 4,000 min. pop. of EZ
• County pop. < 300,000 = 1,000 min. pop. of EZ
– Single contiguous boundary
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EZ Basics
Legislation creates EZs
Copy of legislation and related documents must
be certified to ODSA for confirmation
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EZ Basics
Types of Zones (both cities/counties)
– Non-Distressed Based (Limited Authority Zone
under ORC 5709.632)• No distress requirements
• But, intrastate relocations only allowed with waiver from
ODSA
– Distress-Based (Full Authority Zone)• Six distress criteria outlined in ORC
• MSA Principal Cities and Appalachian Counties require to
meet 1 criteria
• Other locations required to meet 2
• If meet criteria, do not need waiver from ODSA to grant
exemptions for intrastate relocations
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EZ Basics: Pre-1994 EZs
Pre 1994 (Senate Bill 19)
– Enterprise zones existing before July 1, 1994 have
limited tax exemption authority
– Cannot grant exemptions to businesses involved in
intrastate relocation
– Under ORC 5709.62(E) or 5709.63(D), must be:
• Establishing its first Ohio facility or
• Ohio business establishing a new facility that doesn’t
reduce employment or assets at the other sites or
• Relocation of business from another state or
• Expanding a current Ohio facility or
• Obtain a waiver from the ODSA Director under ORC
5709.633(B).
© 2016 Bricker & Eckler LLP
EZ Basics
Enterprise requirements
– Must be an “enterprise” as defined in O.R.C.
5709.61(B), which broadly includes most business
entities
– Must agree to “establish, expand, renovate or occupy
a facility in the zone and hire new employees, or
preserve employment opportunities for existing
employees”
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EZ Basics
Project eligibility (O.R.C. 5709.61(C)):
– Must be a “facility”
– Facilities are: “Place of business in a zone, including
land, buildings, machinery, equipment and other
materials except inventory used in business.
– Facility does not include any portion…used primarily
for making retail sales, unless:
• The place of business is located in an impacted city as
defined in 1728.01 or
• [NEW!!] the city, local, or exempted village school district
within the territory of which the place of business is located
waives the exclusion of retail facilities under O.R.C.
5709.634
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EZ Basics
Property eligible for exemption:
– Tangible personal property: Percentage of “assessed
value of tangible personal property first used in
business at the project site as a result of the
agreement”
– Real property: Percentage of “the increase in the
assessed valuation of real property constituting the
project site”
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EZ Basics
Exemption parameters
– Municipality: (1) up to 75% and up to 10 years or (2)
average of 60% over term
– Unincorporated area: (1) up to 60% and up to 10
years or (2) average of 60% over term
– Exception with school district approval (up to 100%
for up to 15 years)
– Can “front load” exemption, exceeding allowable
percentages in early years as long as average
remains under 60%
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EZ Basics
Granting exemptions:
– Local officials negotiate agreement with business
– Legislation required for final approval of agreement
– File with ODSA and ODT within 15 days
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EZ Basics
Annual requirements:
– Every agreement must be annually reviewed by local
Tax Incentive Review Council (TIRC)
– Local administrator must file annual report with ODSA
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Why Use EZ?
Encourage new business investment
Increase jobs, income taxes
© 2016 Bricker & Eckler LLP
Monetizing EZ(?)
EZ does not itself produce any revenue
But governments have been able to negotiate
voluntary compensation from developers
For municipal corporations, additional income
tax from added jobs may be an advantage
© 2016 Bricker & Eckler LLP
Combining EZ With Other Tools
Special Assessments
New Community Authority
TIF
– Note that EZ could take priority for its term, but once
over, TIF service payments become payable (O.R.C.
5709.911)
© 2016 Bricker & Eckler LLP
Special Assessments
Special: in addition to other real property taxes
and charges, and for a very specific purpose
Assessment: levied against real property for
payment with real property taxes
Note: unlike other economic development tools,
special assessments are very old
© 2016 Bricker & Eckler LLP
Special Assessment Basics
Governments which may implement
– Municipal corporations (O.R.C. Chapters 727,
729; charters)
– Counties (O.R.C. Chapter 6131, 5555, 6117, and
6103)
– Townships (O.R.C. Chapters 505, 515, 521,
5543, 5571 and 5573)
© 2016 Bricker & Eckler LLP
Special Assessment Basics
Public improvements for which special
assessments may pay (differs for each
enacting government):
– Streets and sidewalks
– Water and sewer
– Off-street parking
– Lighting
– Trees
– Special Improvement District plans
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Special Assessment Basics
Amount and term:
– Aggregate amount generally cannot exceed costs
(including soft costs) of public improvements
– Term generally cannot exceed useful life of public
improvements
– Other limits may apply
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Special Assessment Basics
Apportionment
– Aggregate amount must be apportioned among all
parcels being assessed
– General methods:
• Proportion of “front footage” along improvement
• Proportion of tax valuation
• Proportion to “special benefits” resulting from the
improvements
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Special Assessment Basics
Petitions
– Generally, levying special assessments takes a lot of
due process for property owners
– Petition submitted by the requisite number of property
owners can waive some of the procedures otherwise
required
– Petitions also can provide substantive benefits (e.g.,
ability to pay 100% of project costs under O.R.C.
727.06)
© 2016 Bricker & Eckler LLP
Special Assessment Basics
Special Improvement Districts (O.R.C. Chapter
1710)
– Townships and municipal corporations may form at
request of property owners
– Allows for use of special assessments to pay for all
public improvements and public services contained
within a “plan” adopted under O.R.C. Chapter 1710)
© 2016 Bricker & Eckler LLP
Special Assessment Basics
Energy Special Improvement Districts and
PACE Financing
– Special form or special improvement district
– Non-contiguous properties allowed
– Properties may be added
– Special assessments pay for advanced energy and
energy efficiency improvements which may be owned
by private property owners
© 2016 Bricker & Eckler LLP
Why Use Special Assessments
Fund public improvements and public services
Properties which benefit from improvements
and services pay for them
Can support tax exempt obligations
© 2016 Bricker & Eckler LLP
Special Assessment Monetization
General obligation bonds
– O.R.C. 133.17(A)
Bond anticipation notes
– O.R.C. 133.17(B)
Revenue bonds
– May require additional security
Conduit bonds
© 2016 Bricker & Eckler LLP
Combining Special Assessments
With Other Tools CRA
– Replace abated taxes to pay for local improvements
EZ
– Replace abated taxes to pay for local improvements
TIF
– Back up to service payments in lieu of taxes
© 2016 Bricker & Eckler LLP57
Case Study
Pinecrest Development Project
Tax Increment Financing
59
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60
Overview - Pinecrest Development Project
Upscale Mixed-Use Development A walkable outdoor lifestyle destination conveniently situated
on 80 acres with excellent freeway visibility and access near
the intersection of I-480 and I-271 in Orange Village, Ohio.
L I V E
• 90 upscale residential apartment units
• Future adjacent development with over 300 multi-family units
W O R K
• Over 150K sqft. of Class A office space
S T A Y
• On-site 120-key boutique hotel
P L A Y
• Over 400K sqft. of retail & movie theater
• Variety of dining options
• State-of-the-art fitness center
P I N E C R E S T
61
The Capital Stack
Uses of Funds Sources of Funds (the Capital Stack)
Filling the Gap Tax Increment Financing is an integral part of the capital stack in the
Pinecrest pro-forma that is filling a hole between the amount of private debt
and equity that has been raised and the required capital needed to complete
the project as contemplated.
The TIF Bonds will provide a much needed more than $35 million of net
proceeds for the Project to fund a portion of the cost of public infrastructure
throughout the development (i.e. parking garages, sidewalks, lighting,
streetscape, etc.)
Total Project Cost
>$200 Million
TIF Bond Proceeds
≈ $35 MillionLess
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Establishing the TIF – Process & ResultsThe Process
A TIF is a common mechanism used to assist real estate
developments by monetizing future property tax revenues to
fund current development. Since the passage of a TIF means
governmental entities forgoing future property taxes in
support of the project, certain approvals need to occur before
the TIF is enacted.
The Result (Terms of the TIF)
Type of TIF: 5709.40 – for public infrastructure improvements
that directly benefit the TIF property
Term: 30 years from when improvements appear on the tax
roll
TIF Exemption Amount: 100% of property taxes that would
have otherwise been paid
Agreement with the School District:
– Compensation Payments equal to 25% of the property
taxes the School District would have received without
the TIF Exemption
– 100% of property taxes from an increase in tax rate
levied by the School District
– Upfront donation to the School District from the
Developer of $300,000
– 41.5% share of new income taxes received by the
Village in excess of $500,000
Projected Financial Benefits*:
Public Support
• Public support was needed to get residents on board with the Project and in support of the TIF
• Flyers were sent out and calls were made to residents to make them aware of the Project and what was needed to make it happen.
Village Negotiations
• The Developer had to negotiate the terms of the TIF and show the need for public assistance for completion of the Project.
• As a result, the Developer met with Village officials and Council members to garner further support.
School Board Approval
• Per Ohio law, any TIF in excess of 10 years or 75% TIF Exemption must be approved by the School District.
• Extensive negotiations took place between the School Board, the Village, and the Developer to arrive at a solution that compensated the School District for approving the TIF.
Council Meetings
• TIF legislation was prepared for reading and approval by Village Council.
• After many rounds of negotiations with all of the parties and numerous public hearings, the TIF was passed on May 6, 2015.
Orange Village Orange City SD
Proposed New Income Tax Sharing** 1,387,090 629,304
New Commercial Phase Property Taxes:
Proposed Annual TIF Compensation Payment (25%) - 902,106
Projected New Property Taxes from School Millage
Increases (No Assumed AV Growth)***- 621,664
Lodging Taxes 191,808 -
Total Projected Annual New Tax Revenues $1,578,898 / yr $2,153,074 / yr
* Represents average annual revenues over the term of the 30-year TIF
** Represents average annual income tax revenue over term of proposed TIF, Income Tax sharing per the Compensation Agreement
*** Assumes a 4.0 Mill levy every seven years, beginning in 2019
63
Estimated Valuation and Timing
Before structuring and selling any debt, we had to derive what the TIF
revenues would be over the life of the exemption. As such, we went straight
to the people who will be valuing the Project for tax purposes once it is built,
the County Appraisal Group.
Monetizing the TIF
Develop Pro-forma Cash Flows and Finalize Project Plans
Present to County Appraisal Group
Receive County Appraisal Group’s projections of Assessed Value and timing of TIF Revenues.
The letter from the Appraisal Group contains
accompanying analyses and a description of the
methodology used to arrive at the values projected in
the letter.
The Appraisal Group worked with our team in looking at the
projected cash flows and design layout, as well as
comparable projects in the area in order to arrive at their
estimated valuation.
Letter from the Appraisal Group
64
Monetizing the TIF (continued)TIF Analysis
Net TIF-PILOT revenues available for debt service
(right-most column) is a function of all of the above
metrics, as well as the agreements with the Village
and the School District (i.e. 100% TIF with a 25%
Compensation Payment to the School District).
TIF-PILOT Revenue Analysis:
Tax
Year
Collection
Year
Total Incremental
Assessed
Valuation on Tax
Duplicate*
Annual TIF-
PILOT Revenue
(100%)
School District
Portion of
PILOT Revenue
School District
Allocation (%)**
School District
Allocation -
25% for 30yrs**
Net Annual TIF -
PILOT Revenues
Available for DS
2015 2016 - - - 25.0% - -
1 2016 2017 6,710,000 565,213 360,829 25.0% 90,207 475,005
2 2017 2018 24,827,750 2,091,350 1,335,107 25.0% 333,777 1,757,573
3 2018 2019 56,609,500 4,768,465 3,044,165 25.0% 761,041 4,007,424
4 2019 2020 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
5 2020 2021 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
6 2021 2022 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
7 2022 2023 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
8 2023 2024 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
9 2024 2025 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
10 2025 2026 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
11 2026 2027 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
12 2027 2028 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
13 2028 2029 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
14 2029 2030 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
15 2030 2031 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
16 2031 2032 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
17 2032 2033 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
18 2033 2034 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
19 2034 2035 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
20 2035 2036 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
21 2036 2037 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
22 2037 2038 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
23 2038 2039 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
24 2039 2040 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
25 2040 2041 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
26 2041 2042 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
27 2042 2043 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
28 2043 2044 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
29 2044 2045 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
30 2045 2046 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231
Total $160,038,115 $102,167,538 $57,870,577 $134,496,230
* Dev eloper / Fairmount Prop EST (May 2015) - - Cuy ahoga County Appraisal Div ision PRELIM Projections (May 2015)
** Pay ment to Orange CSD per TIF Compensation Agreement
Considerations for TIF Debt Structuring
Base Valuation (existing value and property taxes)
Projected Valuation (upon completion of the Project – Appraisal Group)
Incremental Value (difference between base and projected valuations)
Tax Rates (of all taxing districts)
Timing (when the improvements will hit the tax roll)
Terms of the TIF Agreement (e.g. duration and exemption amount)
Investor Negotiating Points
Debt Service Coverage Requirements
Debt Service Reserve Requirements
Interest Rate
Amortization Structure
Treatment of Excess Revenues
65
Debt StructuringMaximizing Project Proceeds
Once we had the TIF Revenues Available for Debt
Service, we were able to structure the debt with the
goal of maximizing proceeds for the Project, all while
working within the structural confines of no additional
security for the Bonds (i.e. Tax Increment Revenues /
Minimum Service Payments only, resulting in a non-
rated, high yield bond transaction).
In structuring the debt, the following steps took place:
– Identify Costs of Issuance and any Annual Fees
– Determine necessary Capitalized Interest (until
TIF revenues are sufficient to cover debt
service)
– Identify a potential conduit issuer (City, County,
Port Authority, etc.)
– Identify and educate the potential investor(s) on
legal mechanics and protections of the TIF.
Year
TIF Revs
Available for
DS
Coverage
TIF Revs
After DS
Coverage
PrincipalCapitalized
InterestDSRF
Net Debt
Service
Excess
Revs
Cap-I 2015 - - - - 553,852 - - -
Period 2016 - - - - 4,178,890 - - -
2017 - - - - 4,178,890 - - -
No Principal 2018 2,065,862 100% 2,065,862 - 2,098,144 14,884* 2,065,862 -
2019 4,174,140 100% 4,174,140 - - 4,750 4,174,140 -
Project 2020 4,750,231 100% 4,750,231 575,000 - 4,750 4,749,140 1,091
Stabilized 2021 4,750,231 100% 4,750,231 620,000 - 4,750 4,749,290 941
2022 4,750,231 100% 4,750,231 665,000 - 4,750 4,745,930 4,301
2023 4,750,231 100% 4,750,231 720,000 - 4,750 4,749,060 1,171
2024 4,750,231 100% 4,750,231 775,000 - 4,750 4,747,900 2,331
2025 4,750,231 100% 4,750,231 835,000 - 4,750 4,747,450 2,781
2026 4,750,231 100% 4,750,231 900,000 - 4,750 4,747,320 2,911
2027 4,750,231 100% 4,750,231 970,000 - 4,750 4,747,120 3,111
2028 4,750,231 100% 4,750,231 1,045,000 - 4,750 4,746,460 3,771
2029 4,750,231 100% 4,750,231 1,130,000 - 4,750 4,749,950 281
2030 4,750,231 100% 4,750,231 1,215,000 - 4,750 4,746,810 3,421
2031 4,750,231 100% 4,750,231 1,310,000 - 4,750 4,747,040 3,191
2032 4,750,231 100% 4,750,231 1,410,000 - 4,750 4,744,860 5,371
2033 4,750,231 100% 4,750,231 1,520,000 - 4,750 4,744,880 5,351
2034 4,750,231 100% 4,750,231 1,640,000 - 4,750 4,746,320 3,911
2035 4,750,231 100% 4,750,231 1,770,000 - 4,750 4,748,400 1,831
2036 4,750,231 100% 4,750,231 1,905,000 - 4,750 4,745,340 4,891
2037 4,750,231 100% 4,750,231 2,055,000 - 4,750 4,746,750 3,481
2038 4,750,231 100% 4,750,231 2,215,000 - 4,750 4,746,460 3,771
2039 4,750,231 100% 4,750,231 2,390,000 - 4,750 4,748,690 1,541
2040 4,750,231 100% 4,750,231 2,575,000 - 4,750 4,747,270 2,961
2041 4,750,231 100% 4,750,231 2,775,000 - 4,750 4,746,420 3,811
2042 4,750,231 100% 4,750,231 2,995,000 - 4,750 4,749,970 261
2043 4,750,231 100% 4,750,231 3,225,000 - 4,750 4,746,360 3,871
2044 4,750,231 100% 4,750,231 3,480,000 - 4,750 4,749,810 421
2045 4,750,231 100% 4,750,231 3,750,000 - 4,750 4,748,370 1,861
2046 4,750,231 100% 4,750,231 8,790,000 - 4,754,981 4,745,639 4,592
Investor Negotiating Points
Debt Service Coverage Requirements
Debt Service Reserve Requirements
Interest Rate
Amortization Structure
Treatment of Excess Revenues
© 2016 Bricker & Eckler LLP
Questions?
66
Matt Stout, Esq.
614.227.8861
Colin Kalvas, Esq.
614.227.4998
Jeffrey R. Rink
Managing Director, KeyBanc Capital Markets Inc.