[PPT] - COMMUNITY REINVESTMENT AREA 101 COMMERCIAL CRA 1 WHATS THE PowerPoint Presentation

SLIDE 1

COMMUNITY REINVESTMENT AREA 101

COMMERCIAL CRA

1

SLIDE 2

COMMUNITY REINVESTMENT AREA

Industrial, Office, Commercial, 4+ Residential Units

RESIDENTIAL CRA

1–3 Residential Units

WHAT’S THE DIFFERENCE?

2

SLIDE 3

HAVE A PLAN TO DEVELOP VACANT, BLIGHTED, UNDERUTILIZED PROPERTY?

3

SLIDE 4

TAX INCREMENT FINANCING COMMERCIAL CRA JOB CREATION TAX CREDIT RESIDENTIAL CRA LOAN PROGRAMS COMMUNITY CONNECTION TECHNICAL ASSISTANCE & CITY FACILITATION COMPETITIVE AFFORDABLE HOUSING NBD ASSISTANCE FEDERAL FUNDS MANAGEMENT

HOW CAN DCED HELP?

4

SLIDE 5

WHAT EXACTLY IS AN “ABATEMENT”?

Abatements reduce or eliminate the property tax on the INCREASED VALUE created by an investment for a DEFINED PERIOD OF TIME not to exceed 15 years.

See Ohio Revised Code Sections 3735.65-3735.70 Commercial CRAs are reactive, not proactive. The State of Ohio and Cincinnati City Council policies direct the Department of Community & Economic Development on the CRA award process.

5

SLIDE 6

PROPERTY TAX BREAKDOWN

PRE-IMPROVEMENT TAX PAYMENT NEW TAX LIABILITY

ABATED TAXES VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) SCHOOL BOARD 15% 25%

6

SLIDE 7

PROPERTY TAX BREAKDOWN

PRE-IMPROVEMENT TAX PAYMENT NEW TAX LIABILITY

ABATED TAXES VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) SCHOOL BOARD 15% 25%

PRE-IMPROVEMENT TAX PAYMENT NEW TAX LIABILITY

ABATED TAXES VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) SCHOOL BOARD 15% 25%

7

SLIDE 8

Reduce current taxes being

paid on a piece of property

Require the City, County or

Schools to pay money to a developer or property owner

Last forever
Have any value unless a

developer/property owner invests money to build something new or refurbish an existing building

ABATEMENTS DO NOT:

8

SLIDE 9

PROFORMA

REVENUE YEAR 1 REVENUE ADDITIONAL INCOME $144,000.00 $1,100.00 TOTAL REVENUE $137,900.00 EXPENSES MANAGEMENT $54,000.00 YEAR 2 $146,8800.00 $1,122.00 $140,658.00 $55,620.00 YEAR 3 $149,817.60 $1,144.44 $143,471.16 $57,288.60 YEAR 4 $152,813.95 $1,167.33 $146,340.58 $59,007.26 YEAR 5 $155,870.23 $1,190.68 $149,267.39 $60,777.48 YEAR 6 $158,987.64 $1,214.49 $152,252.74 $62,600.80 YEAR 7 $162,167.39 $1,238.78 $155,297.80 $64,478.82 YEAR 8 $165,410.74 $1,263.55 $158,403.75 $66,413.19 YEAR 9 $168,718.95 $1,288.83 $161,571.83 $68,405.58 YEAR 10 $172,093.33 $1,314.60 $164,803.27 $70,457.75 INSURANCE & UTILITIES $11,000.00 $11,330.00 $11,669.90 $12,020.00 $12,380.60 $12,752.01 $13,134.58 $13,528.61 $13,934.47 $14,352.51 TAXES $15,198.75 $15,654.71 $16,124.35 $16,608.08 $17,106.33 $17,619.52 $18,148.10 $18,692.55 $19,253.32 $19,830.92 TOTAL EXPENSES $80,198.75 $82,604.71 $85,082.85 $87,635.34 $90,264.40 $92,972.33 $95,761.50 $98,634.35 $101,593.38 $104,641.18 NOI $57,701.25 $58,053.29 $58,388.31 $58,705.24 $59,003.00 $59,280.41 $59,536.30 $59,769.41 $59,978.45 $60,162.09 RESERVES $875.82 $880.58 $885.04 $889.21 $893.04 $896.54 $899.68 $902.43 NOI LESS RESERVES $57,701.25 $58,053.29 $57,512.48 $57,824.67 $58,117.95 $58,391.20 $58,643.25 $58,872.87 $59,078.77 $59,259.66 DEBT SERVICE $71,408.84 $69,408.84 $67,408.84 $65,408.84 $63,408.84 $61,408.84 $59,408.84 $57,408.84 $55,408.84 $53,408.84 CASH FLOW. ($13,707.59) ($11,355.55) ($9,896.36) ($7,584.17) ($5,290.89) ($3,017.64) ($765.59) $1,464.03 $3,669.93 $5,850.82 ACQUISITION CONSTRUCTION $80,000.00 $600,000.00 CONTINGENCY TENANT IMPROVEMENTS $38,760.00 $7,269.00 PERMITS ARCHITECTURE & ENGINEERING $7,592.00 $14,600.00 DEVELOPER FEE MISC. $25,000.00 $12,000.00 TOTAL USES $785,221.00 DEBT EQUITY TOTAL SOURCES $628,176.80 $157,044.20 $785,221.00

SOURCES USES PROFORMA

9

SLIDE 10

FINDING PROPERTY TAX INFORMATION

10

SLIDE 11

HOW ARE PROPERTY TAXES CALCULATED?

Valuation of Property Tax Statement/Collection Millage, Levies, Assessment

TAX BILL

Treasurer

TAX CALCULATION

Auditor

PROPERTY VALUE ASSESSMENT

Auditor

“The new values are only one part of the taxing process. Taxes are based on the levies (millage) passed by the taxpayer multiplied by the assessed value (35% of the fair market value).” -Hamilton County Auditor’s website

11

SLIDE 12

PROPERTY TAX BREAKDOWN

Fair Market Value $100,000 Assessed Value $35,000 Tax Bill $3,272 Fair Market Value $600,000 Assessed Value $175,000 Tax Bill $19,631

$1M

Investment

12

SLIDE 13

PROPERTY TAX BREAKDOWN

Example

$3,272 PAID TO COUNTY $4,090 NEW REVENUE PAID

TO SCHOOL BOARD

$2,454 NEW REVENUE PAID

TO NONPROFIT PROGRAM ADMINISTRATOR

$9,815 FORGONE

ABATED TAXES (NET 60%) VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) SCHOOL BOARD

FULLY CONTRIBUTING

YEARS 1–10 YEARS 11 +

13

SLIDE 14

CONSTRUCTION COMMENCEMENT APPLICATION RECEIVED

Applicant provides completed application & supporting documents to DCED for review. Process includes $1,250 non-refundable application fee to DCED & $750 fee to ODSA.

APPLICATION REVIEWED

Staff will review all application materials & review City Council’s CRA policies.

INCENTIVE NEGOTIATION

DCED will negotiate with applicants based on Council’s CRA policies. Once an offer is approved by DCED, staff will inform applicant of the incentive the department intends to propose to City Council.

LEGAL AGREEMENTS & ORDINANCE

Upon agreement of terms, DCED works with the City’s Law Department to draft an ordinance to provide to the City Manager or approval & to City Council for a vote.

COUNCIL APPROVAL

Once the City Manager approves the offer, the incentive package is presented to City Council for a vote. This process generally takes about four weeks from introduction to passage.

COMMERCIAL CRA TIMELINE

14

SLIDE 15

COMMERCIAL CRA TIMELINE

Application Received

{00165030-1}

Pg. 1

City of Cincinnati -- Revised 9/18 APPLICATION FOR COMMERCIAL TAX ABATEMENT CITY OF CINCINNATI COMMUNITY REINVESTMENT AREA COMMERCIAL, INDUSTRIAL, MIXED-USE, MULTI-UNIT (4+ UNITS) Note: After review and recommendation by the Department of Community & Economic Development, all applications must be reviewed and approved by the City of Cincinnati Council before commencing construction. Any projects that start construction before City Council approval will be INELIGIBLE for a Commercial CRA Tax Abatement. The City requires that the Applicant provide the following documentation with this application:

A detailed breakdown of all Sources and Uses of Funds for the project (templates are available upon

request). A minimum of $40,000 in costs must be documented.

Supporting documentation for ALL sources of funding for the project. For instance, if a bank loan will

be obtained, a letter or term sheet from the bank specifying, among other things, the loan amount and term. A contact person must be identified for each funding source.

A post-construction operating pro forma for the building and cash flow analysis. NOTE: Please

submit a copy of the pro forma used to apply for any bank financing as required and a contact person considering the application for bank financing.

A $1,250 application fee in the form of check, money order, or cashier’s check payable to “City of

Cincinnati”. Note the application fee is nonrefundable.

Corporate Resolution, Articles of Incorporation, and an Operating/Partnership Agreement for entity

applying for abatement showing who is authorized to sign for the organization

Copy of the Deed or other Legal Description of the Property
A copy of the proposed construction plans/rendering/etc.
Estimated pre-construction, and post construction real estate taxes
If this project is seeking LEED or Living Building Challenge (Full, Net Zero, or Petal [must include

“Energy Petal”]) Certification, provide confirmation of registration SECTION I – Applicant/Project Information Applicant Information: Legal Name of Property Owner Applying for Abatement: ____________________________ Form of business enterprise _____________________________________ (corporation, partnership, proprietorship, LLC, non-profit, or other) Is the Applicant affiliated with a larger developer or development entity? (Yes / No). If Yes, please provide the name of this developer or development entity: ____________________________ Legal Address of real property owner: ____________________________ Federal Tax ID #(s): ___________________________ Applicant Contact Person: ___________________________________Title: _______________________ Phone:_________________ Main Contact email address: ______________________ Address of subject property_____________________________________________ Zip: 452_____ Hamilton County Auditor Parcel ID#: ____ - _______ - _______ (see page 3 if additional space needed for multiple addresses or parcel IDs) City of Cincinnati Neighborhood: Is any other financial assistance being requested from the City of Cincinnati for this project? _______ If yes, please indicate the Development Analyst you are working with: __________________________

STAFF EVALUATES & VERIFIES:

Sources & Uses of Funds Supporting Documents for ALL Sources of Funding Post-construction Operating Proforma & Cash Flow Analysis Application Fee Corporate Resolution, Articles of Incorporation, and an Operating/Partnership Agreement Copy of the Deed Proposed Construction Plans/Rendering Estimated Pre-construction, and Post-construction Real Estate Taxes Confjrmation of Registration for LEED or Living Building Challenge (if needed)

APPLICATION RECEIVED CONSTRUCTION COMMENCEMENT APPLICATION REVIEWED INCENTIVE NEGOTIATION LEGAL AGREEMENTS & ORDINANCE COUNCIL APPROVAL

15

SLIDE 16

COMMERCIAL CRA TIMELINE

Application Reviewed

APPLICATION RECEIVED CONSTRUCTION COMMENCEMENT APPLICATION REVIEWED INCENTIVE NEGOTIATION LEGAL AGREEMENTS & ORDINANCE COUNCIL APPROVAL

STATE LOCAL

Ohio Revised Code 3735.65–3735.70 City Council Ordinance No. 274-2017, 275-2017, & 339-2018

16

SLIDE 17

COMMERCIAL CRA TIMELINE

Application Reviewed

APPLICATION RECEIVED CONSTRUCTION COMMENCEMENT APPLICATION REVIEWED INCENTIVE NEGOTIATION LEGAL AGREEMENTS & ORDINANCE COUNCIL APPROVAL

Applications for projects located outside the Streetcar VTICA Area will be scored in accordance with the below point values: “But For” Analysis – 0-3 points (determined by Department of Community and Economic Development Non-LEED, LEED Certified, or Non-LBC Qualified – 0 points LEED Silver – 2 points for new construction; 3 points for renovation LEED Gold/LBC Net Zero – 3 points for new construction; 4 points for renovation LEED Platinum/LBC Full or Petal (must include “Energy Petal”) – 5 points for new construction; 6 points for renovation VTICA – 8 points for 15% VTICA contribution; 1 point for any payment up to but excluding 15% VTICA contribution

Points Term (years) Net Rate* 3 25% 1 4 30% 2 5 35% 3 5 40% 4 6 40% 5 6 45% 6 7 45% 7 7 50% 8 8 60% 9 9 60% 10 11 60% 11 12 60% 12 13 60% 13 14 60% 14 15 60% 15 15 60% 16 15 60% 17 15 60%

GOVERNING RULES & REGULATIONS

Environmental, LEED
Neighborhood
Financial Need
Historic, New Construction
VTICA/No VTICA
Community Support

NEIGHBORHOOD SCORE CARD

17

SLIDE 18

HAVE A PLAN TO DEVELOP VACANT, BLIGHTED, UNDERUTILIZED PROPERTY?

18

SLIDE 19

$ GAP

DEVELOPER FINANCING

(Equity + Bank + Other)

PROJECT COST

19

SLIDE 20

PRE-DEVELOPMENT PROCESS

Multi-Year, “At-Risk”

$3,272 PAID TO COUNTY $4,090 NEW REVENUE PAID

TO SCHOOL BOARD

$2,454 NEW REVENUE PAID

TO NONPROFIT PROGRAM ADMINISTRATOR

$9,815 FORGONE

ABATED TAXES (NET 60%) VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) SCHOOL BOARD

FULLY CONTRIBUTING

YEARS 1–10 YEARS 11 +

Sourcing Capital is a critical priority throughout pre-development. 20

SLIDE 21

PROFORMA

REVENUE YEAR 1 REVENUE ADDITIONAL INCOME $144,000.00 $1,100.00 TOTAL REVENUE $137,900.00 EXPENSES MANAGEMENT $54,000.00 YEAR 2 $146,8800.00 $1,122.00 $140,658.00 $55,620.00 YEAR 3 $149,817.60 $1,144.44 $143,471.16 $57,288.60 YEAR 4 $152,813.95 $1,167.33 $146,340.58 $59,007.26 YEAR 5 $155,870.23 $1,190.68 $149,267.39 $60,777.48 YEAR 6 $158,987.64 $1,214.49 $152,252.74 $62,600.80 YEAR 7 $162,167.39 $1,238.78 $155,297.80 $64,478.82 YEAR 8 $165,410.74 $1,263.55 $158,403.75 $66,413.19 YEAR 9 $168,718.95 $1,288.83 $161,571.83 $68,405.58 YEAR 10 $172,093.33 $1,314.60 $164,803.27 $70,457.75 INSURANCE & UTILITIES $11,000.00 $11,330.00 $11,669.90 $12,020.00 $12,380.60 $12,752.01 $13,134.58 $13,528.61 $13,934.47 $14,352.51 TAXES $15,198.75 $15,654.71 $16,124.35 $16,608.08 $17,106.33 $17,619.52 $18,148.10 $18,692.55 $19,253.32 $19,830.92 TOTAL EXPENSES $80,198.75 $82,604.71 $85,082.85 $87,635.34 $90,264.40 $92,972.33 $95,761.50 $98,634.35 $101,593.38 $104,641.18 NOI $57,701.25 $58,053.29 $58,388.31 $58,705.24 $59,003.00 $59,280.41 $59,536.30 $59,769.41 $59,978.45 $60,162.09 RESERVES $875.82 $880.58 $885.04 $889.21 $893.04 $896.54 $899.68 $902.43 NOI LESS RESERVES $57,701.25 $58,053.29 $57,512.48 $57,824.67 $58,117.95 $58,391.20 $58,643.25 $58,872.87 $59,078.77 $59,259.66 DEBT SERVICE $71,408.84 $69,408.84 $67,408.84 $65,408.84 $63,408.84 $61,408.84 $59,408.84 $57,408.84 $55,408.84 $53,408.84 CASH FLOW. ($13,707.59) ($11,355.55) ($9,896.36) ($7,584.17) ($5,290.89) ($3,017.64) ($765.59) $1,464.03 $3,669.93 $5,850.82 ACQUISITION CONSTRUCTION $80,000.00 $600,000.00 CONTINGENCY TENANT IMPROVEMENTS $38,760.00 $7,269.00 PERMITS ARCHITECTURE & ENGINEERING $7,592.00 $14,600.00 DEVELOPER FEE MISC. $25,000.00 $12,000.00 TOTAL USES $785,221.00 DEBT EQUITY TOTAL SOURCES $628,176.80 $157,044.20 $785,221.00

SOURCES USES PROFORMA

21

SLIDE 22

PRE-DEVELOPMENT PROCESS

$$ $$ $$ $$ $$ $$ $$ $$ $$ $$ SITE SELECTION DUE DILIGENCE FEASIBILITY STUDY REQUIRED REPORTS PROFORMA PURCHASE CONTRACT SECURING FINANCING HIRING ARCHITECTS, ENGINEERS, CONSULTANTS COMMUNITY OUTREACH & COMMUNICATIONS MUNICIPALITY SUBMITTAL & REVIEW CITY PROCESS ZONING, PLANNING, UTILITY APPROVALS PRE-CONSTRUCTION COORDINATION CONSTRUCTION DRAWING/ PLAN SUBMITTAL FINALIZE BUDGET $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ SITE SELECTION DUE DILIGENCE FEASIBILITY STUDY REQUIRED REPORTS PROFORMA PURCHASE CONTRACT SECURING FINANCING (SHORT TERM > LONG TERM) $$ $$ $$ $$ $$ $$ SECURING FINANCING SECURING FINANCING (SHORT TERM > LONG TERM) ENTER CRA PROCESS

22

SLIDE 23

PROJECT FEATURES

Intake to DCED

Example: Nation Restaurant & Bar (Westwood)

Small
Vacant
Blighted
Distressed

Example: Burke Expansion (West End)

CHARACTERISTICS:

New Construction
Transformative
High-competition

Factors

CHARACTERISTICS:

23

SLIDE 24

CONSIDERING MARKET CONDITIONS

CORRECTING MARKET INCENTIVIZING STANDARD COMMERCIAL HIGH RISE INDUSTRIAL AFFORDABLE HOUSING MARKET

24

SLIDE 25

NEHEMIAH MANUFACTURING

LOWER PRICE HILL

RECENTLY COMPLETED 50 New Jobs

$12M Total

Investment

25

SLIDE 26

CINCINNATI SCHOLAR HOUSE

WALNUT HILLS

UNDER CONSTRUCTION 44 Affordable Residential Units

$12.8M Total

Investment

26

SLIDE 27

CROSLEY BUILDING

CAMP WASHINGTON

CANDIDATE PROJECT 331,958 sq ft Industrial History Residential & Commercial Real Estate Unproven in Neighborhood

27

SLIDE 28

COMMERCIAL CRA

QUESTIONS?

28