Biographical Information Kelli J. Saunders, Senior Director - - PDF document

Tuesday & Wednesday, January 28‐29, 2020

Hya Regency Columbus, Columbus, Ohio

Workshop H

Ohio Economic Incentives & Tax Credits - Legislative Changes and Program Update

Tuesday, January 28, 2020 1:45 p.m. to 2:45 p.m.

Biographical Information

Kelli J. Saunders, Senior Director Incentives & Site Selection DHL Supply Chain, 570 Polaris Parkway, Westerville, OH 43082 614-865-8423 Fax: 614-865-8879 Kelli.saunders@dhl.com Kelli started her career with Deloitte Tax LLP in Columbus, Ohio in 2003 as a tax analyst in business tax

• services. Kelli joined DHL Supply Chain in 2005 with responsibility for Federal, State and Local income

tax compliance. DHL Supply Chain is the North American leader in contract logistics, providing customer- focused solutions to a wide range of industries including automotive, consumer, retail, engineering and manufacturing, life sciences and healthcare, technology, energy and chemicals. In 2012, DHL Supply started an Economic Incentives & Tax Credits function within its legal department. Kelli assumed the role

• f Director, Economic Development in May of 2012. Beginning January 2015, Kelli is responsible for

Economic Development for all divisions of DHL Americas; including the Express, Global Forwarding, and Parcel businesses. Kelli has worked on multiple incentive deals at the Federal, State and Local levels in

• ver 20 states.

Kelli is a graduate of Miami University in Oxford, Ohio with a B.S. in Accountancy and is a Certified Public Accountant. Chris Magill, Economic Development Director, Ice Miller LLP Arena District 250 West Street, Suite 700, Columbus, OH 43215 614-462-1141 614-222-4245 (Fax) cmagill@icemiller.com Chris Magill is the Economic Development Director for Ice Miller and leads a collaborative team of professionals and attorneys to assist public and private sector clients in achieving growth strategies through economic development consulting. For corporate clients, Chris provides consulting on capital investment projects and has strategically negotiated and analyzed tax credit, grant and loan-financing solutions for capital investment projects in 16 different states. In addition to his consulting on capital investment projects, Chris delivers economic development compliance strategies, best practice government compliance consulting and compliance report-filing. For public sector clients, Chris advises local governments in building strategic economic plans and creating sustainable economic development tools at the state, regional, county and municipal levels in an effort to enhance an area’s standard of living. Chris works closely with Ice Miller’s attorneys in Bond Financing, Broadband, Brownfield & Environmental Remediation, Government Law, Municipal Finance, Real Estate and Tax Law to provide true end-to-end strategies for both public and private sector clients. Prior to joining Ice Miller, Chris served as the executive director of the Ohio Tax Credit Authority (Authority) for the Ohio Department of Development (ODOD), a board consisting of the Director of the ODOD and four

• ther members appointed by Ohio’s governor, the speaker of the House of Representatives and the president
• f the Senate. As executive director of the Authority, Chris was responsible for managing more than $100

million in business tax credit programs annually including Ohio’s flagship business tax credit programs, the Job Creation Tax Credit (JCTC), Job Retention Tax Credit (JRTC) and the Ohio Motion Picture Tax Credit (OMPTC). Chris has a comprehensive understanding of state and local tax credit programs and was instrumental in transitioning Ohio’s JCTC and JRTC programs through major legislative changes, which included a complete overhaul of both long-standing programs from an individual employee-based system to a payroll-based system. Chris also played an integral role with ODOD’s team in structuring the Ohio Motion Picture Tax Credit and served on ODOD’s Insurance Tax Credit Task Force. In August of 2014, Chris was recognized as the only private-sector employee by Columbus Business First as

• ne of “20 People to Know in Government,” given his unique combination of experience in government

administration, public sector and private sector economic development consulting. Education  Bachelor of Science, Bowling Green State University  Master in Business Administration, Ohio University

Biographical Information

Stephen K. Hall, JD, LLM, Member, Zaino Hall & Farrin, LLC 41 South High Street, Suite 3600, Columbus, OH 43215 shall@zhftaxlaw.com 614-349-4812 Fax: 614-754-6368 Steve provides state and local tax services, legal business counsel, and lobbying services to clients in multiple states and local jurisdictions. He leads the Firm's Real Estate Tax Practice Group, representing real property

• wners in valuation matters and exemption matters. He has represented clients in all types of state and local

income tax, sales and use tax, excise tax, public utility tax, personal and real property tax, and gross receipts tax matters. Steve’s practice focuses on tax controversy and tax policy at the state and local level, including representation

• f clients before County Boards of Revision, Local Income Tax Boards of Review, the Ohio Board of Tax

Appeals, Ohio state courts, and state and local tax agencies across the country. He also frequently represents clients before Ohio’s General Assembly, the Ohio Department of Taxation, and other state and local government agencies, both in tax controversy and lobbying matters. Earlier in his career, he served as Assistant Counsel to the Ohio Tax Commissioner, where he was a policy and technical advisor to the Tax Commissioner, the Ohio Governor’s Office, and the Ohio Department of Development, while representing the Ohio Department of Taxation before the Ohio General Assembly. He has spent significant time drafting tax legislation and lobbying for the implementation of tax law changes both while in the Tax Commissioner’s office and on behalf of clients while in private law practice Steve is a frequent speaker on technical state and local tax matters, state and local tax policy, and national tax policy matters addressing multistate taxation. He is actively involved in lobbying Ohio's General Assembly and participates in various Ohio Bar Association committees addressing Ohio tax policy and procedure. He is the chair of the Ohio State Bar Association subcommittee on municipal income tax matters. John Werkman, Chief, Business Services Division, Ohio Development Services Agency 77 S. High St., Columbus, OH 43215 614-466-6791 John.Werkman@development.ohio.gov John Werkman joined the Ohio Development Services Agency in February 2014, serving as Manager of Tax

• Incentives. In January 2018, he was promoted to Assistant Chief of the Business Services Division. In this

role, John oversaw the agency tax incentive, grant and loan programs, including the Historic Preservation Tax Credit and Local Government Safety Capital Grant programs. In August 2019, John was promoted to Chief of the Business Services Division. He oversees Ohio’s economic, small business and technology-based development efforts, ensuring quality customer service and accountability. John started his career as an Appeals Attorney with the Ohio Department of Taxation, focusing on corporation franchise tax, personal income tax and pass-through entity tax. His primary responsibilities included managing staff attorneys and drafting final determinations in response to appeals filed by taxpayers throughout Ohio. John is a graduate of Ohio University with a bachelor’s degree in Economics and Political Science. He received his law degree from the University of Toledo College of Law.

Biographical Information

Josiah Huber, Managing Director, DiPerna Advisors 62 North Fourth Street, Columbus OH 43215 jhuber@dipernafinancial.com 440-223-9299 Josiah leads DiPerna’s real estate development and public-private partnership (“P3”) financial advisory practice, delivering highly structured and unique financial solutions for its commercial real estate developer and Port Authority clients. Since 2012, Josiah has led or assisted in the structuring and closing of over $1 billion in P3 capital for its clients. Often monetizing revenue streams through the issuance of revenue bonds, Josiah consistently structures revenue bond offerings that are salable in the Capital Markets without the need for governmental credit enhancement. Recent accomplishments include serving as structuring agent in raising

• ver $140 million in P3 capital for the master-planned Bridge Park community in Dublin, OH; closing $21

million in tax increment revenue (“TIF”) anticipation notes for the Red Cedar master-planned brownfield redevelopment adjacent to Michigan State University, closing of TIF bonds for a spec industrial warehouse facility in Aurora, IL, and closing of approximately $100 million in special parking revenue backed bonds for various parking facilities in Cincinnati, OH over the course of the past three years. Harnessing DiPerna’s long-history of financial innovation, Josiah has created custom financial products for some of his clients in response to their development and portfolio challenges. In Cincinnati, OH, Josiah guided the formation of a master parking facility program in which his client will pool its parking facility portfolio into a cross-collateralized, open trust indenture, allowing the client to issue notes to capitalize the assets on a long-term, fixed rate basis at institutional interest rate levels (which are much lower than the original debt costs). After spending much of his career learning about the challenges and opportunities C-PACE financing provides, Josiah partnered with a financial institution in creating a C-PACE financing program with distinctive financing terms that are tailor-made for new construction development projects that most other C-PACE financing programs cannot offer given their institutional constraints. Josiah graduated from Ohio Wesleyan University with a Bachelor of Arts degree, concentrated in Finance, Accounting and Economics. He sits on the Bridge Park New Community Authority and Randall Residence New Community Authority Board of Trustees. He maintains a FINRA issued Series 50 license and is studying to obtain his Chartered Financial Analyst (“CFA”) designation from the globally acclaimed CFA institute (currently a level 3 candidate).

Ohio Economic Incentives & Tax Credits

Legislative Changes and Program Update Insights on major changes and creative use of tax incentives

Incentive Matrix

Job- Based Training Abatement & Exemptions Special Districts Broadband Capital Investment Business Investment Public Infrastruct ure Site Prep Housing

Local

JCTC, JGI Job Centers CRA, EZ JEDD, NCA, DRD/ID LGIF, Discounted Fiber TIF, Streetscap e, Parking Incentives, P3 Workforce Housing

County

WIG TID Small Business Loans Public Works

State

JCTC, JRTC JO Training, TechCred , ISP QEP/OAQD A/Data Center STE OEBF, Historic Preservation, NMTC, 166 Loan, JO Loan/Grant InvestOhio, Third Frontier, OZ TC 629 JO Revitali zation Grant/L

• an

OHFA Financing

Federal

WOTC USDA TI Loan, Community Connect, EDA, HUD NMTC, USDA OZ OWDA, EPA, EDA FHLB, LIHTC, HUD

Other

Port Authority Sales Tax CDC Loans, Port Authority Financing

HB 166 Changes

• 122.171 - Job Retention Tax Credit Program

– Traditionally restrictive (500 ftes - $35m payroll - $25m corporate cap-ex or $50m manufacturing cap ex.) – Broadened Definition of “Eligible Business”

• Manufacturer

– $50 million (over three years) or – 5% of the net book value of all tangible property used at the site as

• f the last day of the three-year period in which capital investment

payments are made

• Corporate (“Significant Corporate Administrative Functions”)

– $25 million (over three years) – 1) be located in a foreign trade zone, 2) employ at least 500 full-time equivalent employees or 3) have an annual payroll of at least $35 million and

HB 166 Changes

• 5727.75 – Qualified Energy Project Tax Exemption

– Previously set to expire for new applications – Extends applicant period

• Extends by two years from December 31, 2020 to December 31, 2022, the

deadline by which the owner or lessee of a qualified renewable energy project may apply for a property tax exemption.

– Changes to the PILOT Provision

• Clarifies the calculation of payments-in-lieu-of-taxes, paid by solar energy

projects that receive the exemption.

• Technical correction to out-of-date language regarding the calculation of

PILOTs that must be paid with respect to solar energy facilities. The correction causes each year’s PILOTS to be calculated on the basis of generating capacity rating as of the last day of the preceding year instead as of December 31, 2016.

HB 166 Changes

• 122.85 – Ohio Motion Picture Tax Credit

– Awarding Tax Credits: The act requires the Director to award tax credit certificates in two rounds each fiscal year. The first round of applications would be approved by July 31, and the second round would be approved by January 31. The amount of credits awarded in the first round of applications is limited to $20 million plus any credit allotment that was not used in the previous fiscal year. Under continuing law, the maximum amount of credits that may be awarded in any fiscal year is $40 million. – Broadway Theatrical Productions: Extends eligibility for the motion picture tax credit to “Broadway theatrical productions” that are directly associated with New York City’s Broadway Theater District. Additionally, the application requirements were adjusted to accommodate this production type. – Production Contractors: Extends eligibility for the credit to companies that are involved in a motion picture certified as a tax credit-eligible production but are not themselves the production company. – Transferability: terminates the authority of the credit recipient to transfer all or part of the credit to another person. – Eligible Expenditures: broadens the types of expenses upon which the credit is based to include postproduction, advertising, and promotional expenditures. – Rescinding Certification: in the instance a production is not meeting progress metrics, allows the Director to rescind the certificate within a fixed time period as opposed to allowing the production company to demonstrate circumstances causing the delay and receive extensions.

HB 166 Changes

• 3735.661 – Community Reinvestment Area

– Adds to the list of specified amendments that will not bring a CRA under the newer state law requirements. Specifically, the act allows municipal corporations and counties to require that developers and property owners agree to provide affordable housing as a condition of receiving tax benefits through a CRA that existed on July 21, 1994, without bringing that CRA under the law’s subsequently enacted requirements.

• 122.26 - Rural Industrial Park Loan Program

– Appropriate $25 million to reinstate a program allowing loans and loan guarantees for the development and improvement of industrial parks in rural areas of Ohio.

• 122.121 – Sports Event Grant Program

– Grants may be awarded by the Director of Development Services to counties, municipalities, or nonprofit organizations acting on behalf of a county or municipality to support the selection of a site for a national or international sports competition. Removes a provision that the event has to be at least two-years removed from being held in Ohio.

Notable Legislative Activity

• REGIONAL ECONOMIC DEVELOPMENT ALLIANCE STUDY COMMITTEE – recommends changes to

existing economic development programs, ie Ohio JCTC, Ohio JRTC, JobsOhio Programs (ED Grant and Revitalization Funds), OEBF, 629 Grants, PACE, etc.)

• SB 39 INSURANCE TAX (Schuring, K.) authorize an insurance premiums tax credit for capital

contributions to transformational mixed use development projects.

• SB 89 CAREER-TECH EDUCATION AND ENTERPRISE ZONE TAX ABATEMENTS (Huffman, M.)

modify the Ohio Revised Code sections relating to enterprise zone tax exemptions and require that if an agreement is negotiated between the legislative authority and the school district in which the project is located to compensate the district for all or part of the taxes exempted, the legislative authority must also compensate the joint vocational school district

• SB 212 NEIGHBORHOOD DEVELOPMENT AREAS (Schuring, K.) authorize townships and municipal

corporations to designate areas within which new homes and improvements to existing homes are wholly or partially exempted from property taxation.

• SB 95 BUSINESS INVESTMENTS (Peterson, B., Kunze, S.) lengthen the maximum term of the job

creation tax credit available under ORC 121.171 from 15 to 30 years for businesses making substantial fixed asset and employment investments (and meeting the definition of “megaprojects” as set forth in the bill) and for their suppliers, authorize commercial activity tax exclusions for receipts of those suppliers from sales to such businesses, and authorize local governments to grant longer term (up to 30 years) property tax exemptions (enterprise zones or community reinvestment areas) for such businesses or suppliers.

Determining Ohio Opportunity Zones

Based on submissions by local government

• fficials and nonprofit

and economic development

• rganizations.

In Ohio, Opportunity Zones are available in large cities, small communities, and Appalachian counties.

320 Census tracts 25 percent of 1,280 eligible tracts, its full allocation

Ohio Opportunity Zones

Ohio Opportunity Zone Incentive

Included as part of Governor Mike DeWine’s FY 20-21 biennial budget bill. 10% nonrefundable income tax credit for investment in Ohio OZs, with up to $1MM in credits per investor per biennium. Applications can be submitted between Jan. 2, 2020, to Jan. 31, 2020, for investments made by an Ohio QOF in QOZ Property in Ohio in calendar year 2019. Development will review the applications in the order they are received, issuing the tax credit certificate allocation until all eligible applications are funded OR the $50 million in tax credits is fully utilized, whichever comes first.

Ohio Opportunity Zone Incentive

Eligible Taxpayers

• Be subject to the income tax levied under ORC Section 5747.02.
• Make an investment in an Ohio QOF.
• Ohio QOF invests all or a part of the Taxpayer’s fund contribution in

QOZ Property in Ohio.

Eligible Ohio QOFs

• Be designated as a “Qualified Opportunity Fund” as defined by the

federal government in 26 U.S.C. 1400Z-2.

• Hold 100% of its invested assets in QOZ Property in an Ohio OZ.

Ohio Opportunity Zone Incentive

“… the first state to enact a meaningful, complimentary program that will truly attract opportunity zone capital to Ohio.” –Stonehenge Capital

• Up to $2,000 per employee

per application period

• Up to $30,000 per employer

per application period

• Identify skill needs
• Partner with credential

provider

• Apply online:

Deadline is Jan. 31, 2020

• Verify certification
• Receive reimbursement

Industry Sector Partnerships

Alliance of local leaders: Business, Education, Civic Spark Grant

• Seed Funding
• $50,000 – $100,000
• Local match

Accelerant Grant

• Expand Reach and

Impact

• $50,000 – $250,000
• Local Match

UNCLASSIFIED (PUBLIC)

17

DHL North American Headquarters

UNCLASSIFIED (PUBLIC)

18

DHL North American Headquarters

LOCATION Westerville, OH SIZE 145,000 SF

UNCLASSIFIED (PUBLIC)

19

Tax Credit & Incentives Overview

• Property Tax Abatement (CRA) - $11.7M
• Twelve-year, 100% property tax abatement for

taxable improvement on land.

• Sales Tax Exemption - $700K
• Delaware County Finance Authority partnered with

DHL to exempt sales tax on construction materials.

• Public Infrastructure - $3M Roadway
• Westerville commits to dedicate funding for the

remaining roadway and public infrastructure to complete the project.

UNCLASSIFIED (PUBLIC)

20

Collaboration & Partnership

• Be transparent on “must-haves” for the project
• Communicate and shortfalls in jobs and investment when it is known
• Remember this is a partnership

Downtown Redevelopment Districts “DRDs”

• Created by ORC 5709.45
• Economic development tool similar to TIFs and NCAs
• Used by a municipal corporation to encourage:

– the rehabilitation of historic buildings – economic development in commercial and mixed-use areas

• % of the increased value of parcels located within the DRD is

exempted from property taxation

• Term: 10 years, or 30 years with approval from schools
• Owners of those parcels make service payments in lieu of taxes

(PILOTS) and may be imposed with redevelopment charges

• Revenue derived from the 1) service payments and 2)

redevelopment charges must be used by the municipal corporation for the economic development purposes

• Source of revenue and qualifier for “innovation districts”

DRD Innovation Districts

• Allows for Creation of “Innovation Districts”
• Economic development tool similar to grant and loan districts
• Used to encourage:

– attracting and facilitating growth of qualified businesses – supporting the economic development efforts of business incubators and accelerators

• Mimics term of DRD
• Grants and loans available for “Qualified Businesses”

– primarily engaged, or primarily organized to engage, in a trade or business that involves:

• research and development
• technology transfer
• bio-technology
• information technology
• application of new technology

– developed through research and development or acquired through technology transfer

DRD Case Study

Historic Trolley Barn Market

Project:

• Historic Building Fresh Foods Market
• Food Business Incubator
• Office Space

DRD/ID Qualifier: Renovation of a Historic Building Connectivity to 100-gig Broadband Use of DRD/ID:

• 1. Rehab of historic building
• 2. Grants/loans to qualified businesses
• 3. Rehab of incubation space
• 4. Loans to non-qualified businesses
• 5. Agreement for school programming

Other Incentives:

• Port Authority/City of Columbus Loan
• PACE Financing
• Federal New Markets Tax Credits
• Federal & State Historic Tax Credits

Challenges:

• First DRD in the City
• Length of term
• 100-gig Broadband Partner
• Financing issues (Market, Site quality, etc.)

State Historic Preservation Credit

Total projects, approved and completed: 453 Approved, still underway: 171 Completed: 282 Total investment, all projects: $6,505,275,631 Total investment, completed projects: $3,918,261,313 Total credit amount, all projects: $790,018,647 Total credit amount, completed projects: $512,207,371 Total number of historic buildings, all projects: 571 Historic buildings, completed projects: 388 Number of communities with projects: 71 Number of counties with projects: 48

New Community Authorities

• New community authorities (NCA’s) are special units of

government that have been authorized under the Ohio Revised Code for many years.

• Formed at the request of a private developer with the

consent of local government.

• NCA's are an ideal tool for mixed use development.
• If within a municipality, NCA’s may be of any size, and

need not be comprised of contiguous property.

• Within a new community authority, each property
• wner is obligated to make community development

charges in accordance with the declaration forming the NCA.

New Community Authorities

Powers:

• Acquire real and personal property interests within or
• utside of the new community district.
• Improve, maintain, sell, lease or otherwise dispose of real

and personal property and community facilities (i.e. public improvements) within the new community district, without competitive bidding.

• Impose charges and user fees to cover costs in carrying out

its new community development program, with charges based on assessed value, per parcel or otherwise.

• Levy community development charges on property. Such

charges are accorded a lien on a parity with property taxes.

New Community Authorities

Powers:

• Finance as Community Facilities private facilities, not just public

improvements or facilities used by the public. Formerly, only public improvements qualified as public improvements

• Levy community development charges based on business

revenues, not simply property values or on a per parcel basis, as under prior law.

– Example: Charges based on retail sales – Example: Charges based on hotel occupancy – Example: Charges based on admissions

• Provide for the selection of board members by appointment, rather

than through an election in which residents within the NCA may

• vote. Under prior law elections were required to replace board

members.

• NCA may issue bonds secured by community development

charges levied on property within the District:

– To fund public improvements like community centers, roads and parking facilities and amphitheaters. – To fund private improvements like privately owned practice or playing fields.

• Community Development Charges may be used:

– To supplement other revenues available for Project. – To backstop contingent revenues like TIF Revenues. – As a first source of payment (in the case of transactional community development charges, for example, charges based

• n retail sales).

– To pay operating costs of the District (much like a common area maintenance fee).

New Community Authorities

New Community Authority

Case Study: Dublin Bridge Park

• The Developer petitioned the City of Dublin to

create a New Community Authority to support the financing of approx $80 million in parking facilities, a community events center, and roadway improvements.

• Types of NCA Charges enabled:

– Millage tax form – Lodging tax form – Sales tax form (although not collected)

New Community Authority

Case Study: Dublin Bridge Park