CT Main Street Center Downtown Revitalization Institute Got - - PowerPoint PPT Presentation

CT Main Street Center Downtown Revitalization Institute Got Funding?

Kevin฀F.฀Gremse National฀Development฀Council 277฀Fairfield฀Ave Bridgeport฀CT฀06604 212.682.1106฀(NY฀office) 203.367.7740฀(CT฀office) kgremse@nationaldevelopmentcouncil.org

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Afternoon฀Panel:฀Financing฀ Downtown฀Development

• Kevin฀Gremse
• National฀Development฀Council
• Nancy฀O’Brien
• Connecticut฀Housing฀Finance฀Authority
• Andrea฀Pareira
• Local฀Initiatives฀Support฀Corporation
• Mark฀Cousineau
• Connecticut฀Community฀Investment฀Corporation
• Parag Mehta
• PM฀Architecture

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National฀Development฀Council฀(NDC)

• Nation’s฀oldest฀not-for-profit฀organization฀

specializing฀in฀economic฀and฀housing฀ development฀finance

• Mission

– Increase flow of capital to underserved communities

• Provides฀technical฀assistance฀and฀financial฀

resources฀to฀over฀80฀municipalities฀and฀local฀ development฀organizations฀around฀country

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Financial฀Incentives

• Promote฀Incentives฀and฀Be฀Willing฀to฀Use
• Guidelines
• “But฀For” Test
• Net฀Financial฀Benefit฀to฀Public
• Minimize฀Financial฀Risk฀to฀Public
• No฀“Unduly฀Enrichment” of฀developers
• Articulate฀incentives฀in฀RFPs
• Be฀wary฀of฀developers฀and฀businesses฀who฀obsess฀on฀

grants฀and฀incentives฀and฀are฀short฀on฀details

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Incentive฀Incentives/Approaches

• Reduce฀Development฀Cost
• Reduce฀Cost฀of฀Capital
• Make฀capital฀more฀readily฀available฀
• Decrease฀operating฀costs
• Use฀Tax฀Credits฀to฀attract฀equity
• Capitalize฀the฀tax฀increment฀to฀fund฀

infrastructure

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Reduce Development Costs

• Discounted sale of land and building
• Offset infrastructure costs

– Parking, utilities

• Reduce/waive DOB and Permit Fees
• Accelerate Review and Approval Process

– Time is money! – Land use approval process can be better coordinated and streamlined – Efficient, consistent, and predictable – City departments work together for fostering investment friendly environment

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Reduce฀Cost฀of฀Capital

• Long-term,฀lower฀rate฀

– stretches฀borrowing฀capacity

• Senior฀and฀subordinated฀debt฀instruments฀from฀

government฀agencies

– DECD,฀CDA,฀CHFA

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Make฀Capital฀More฀Readily฀Available

• Additional฀credit฀leverages฀private฀investment฀by฀

lowering฀equity฀requirements – 75/25 – 50/40/10

• Know฀all฀lending฀sources

– Community฀Development฀Financial฀ Institutions฀(CDFI) – CT฀Community฀Investment฀Corp – Community฀Economic฀Development฀Fund

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Decrease฀operating฀expenses

• Tax฀Options

– PILOT – Phase-in฀programs฀allowed฀under฀state฀statute

• Utility฀rebates
• Green฀design

– Higher฀capital฀costs฀offset฀by฀lower฀operating฀ expenses

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Raise฀Equity฀through฀Tax฀Credits

• Outside฀investors฀invest฀in฀exchange฀for฀tax฀

credits

• Dollar฀for฀dollar฀credit฀against฀federal฀taxes฀

realized฀by฀passive฀investors฀

• 4฀types฀of฀credits

– Low฀Income฀Housing฀Tax฀Credits฀(LIHTC) – Rehabilitation฀Tax฀Credit฀(RTC) – New฀Markets฀Tax฀Credits฀(NMTC) – Film฀Tax฀Credit฀

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LIHTC

• Administered฀by฀CHFA
• Eligibility฀Criteria

– Income/Occupancy

• At฀least฀40%฀of฀the฀units฀occupied฀by฀households฀

earning฀<฀60%฀AMI

• At฀least฀20%฀of฀the฀units฀occupied฀by฀households฀

earning฀<80%฀AMI – Rent – State฀approval

• Powerful฀resources฀despite฀recent฀market฀impact
• Good฀for฀mixed-income฀and฀mixed-use฀deals
• Specialized฀development฀niche

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New฀Cassel:฀Gateway฀Site

National฀Development฀ Council

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New฀Cassel:฀Gateway

• 57฀Residential฀Units
• All฀priced฀between฀30฀to฀100฀percent฀of฀

area฀median฀income

• 20,000฀square฀feet฀of฀commercial฀space฀--

grocery฀store,฀café,฀coffee฀shop

• 120฀underground฀parking฀spaces

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Gateway฀Sources฀and฀Uses

USES

Land฀Acquisition $500 Construction 14,000 Soft฀Costs 3,600 Developer฀Fee 1,900 TOTAL฀USES $20,000

SOURCES

Tax-Exempt฀Bond $6,200 Commercial฀Mortgage 1,900 State฀ 1,700 County฀HOME 1,000 LIHTC฀Equity 2,900 State฀Tax฀Credit฀Equity 4,200 Developer฀Equity 1,600 Deferred฀Developer฀Fee 500 TOTAL฀SOURCES $20,000

How฀Equity฀is฀Raised฀from฀LIHTC

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Historic฀RTCs

• One฀time฀20%฀federal฀tax฀credit
• For฀historically฀significant฀buildings
• Credit฀raise฀equity฀to฀offset฀rehab฀costs
• Pricing฀yields฀equity฀raise฀@฀15%฀of฀basis

– $1฀million฀rehab฀will฀generate฀about฀$150K฀in฀investment

• Specialized฀Development฀

– Need฀experienced฀team – secretary฀of฀Interior฀Standards฀ – 3-step฀review฀process

• State฀of฀CT฀Historic฀Tax฀Credit

– Nice฀supplement฀to฀federal฀historic฀credit – Limited฀in฀dollar฀amount฀and฀type฀of฀project฀(need฀residential฀ use)

• Stamford฀Old฀Town฀Hall

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Old฀Town฀Hall:฀Equity฀Raise

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Old฀Town฀Hall:฀Sources฀and฀Uses

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New฀Markets฀Tax฀Credits

• Commercial฀tax฀credit฀
• Geographic-specific฀credit฀

– low฀income฀communities

• 39%฀over฀7฀years฀to฀investor
• Credits฀awarded฀to฀entities฀(CDEs),฀not฀projects
• CDEs find฀investors฀and฀projects

• 2฀Models

– Debt subsidy

• Reduced฀cost฀of฀capital฀@฀400฀basis฀points

– Leverage equity

• $10฀million฀project฀*฀39%฀=฀$3.9฀million฀NMTC
• Raise฀@฀$2.7million฀(Less฀fees)฀in฀exchange฀for฀

$3.9฀million

• Investor฀pays฀@฀.70/$฀for฀NMTC
• Develop฀relationships฀w฀CDE฀that฀have฀allocation

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Bijou฀Square฀- Bridgeport

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Bijou฀Square:฀Financial฀Challenge฀฀

USES OF FUNDS $4,300,000 SOURCES OF FUNDS Conventional฀Debt $2,300,000 Equity฀for฀Market฀Return $700,000 $3,000,000 GAP ($1,300,000)

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2฀Types฀of฀Tax฀Credits฀ Bijou฀Square

• Rehabilitation฀Tax฀Credit฀(RTC)

– Historic฀Tax฀Credits – For฀historically฀significant฀buildings – 20%฀one-time฀credit฀for฀investor – Used฀for฀Bijou฀Square฀and฀3฀other฀development฀in฀CBD

• New฀Markets฀Tax฀Credits฀(NMTC)

– Commercial฀tax฀credit฀designed฀to฀attract฀private฀investment฀in฀ low฀and฀moderate฀income฀areas – 39%฀credit฀over฀seven฀years – NMTC฀used฀as฀valuable฀resource฀in฀Bridgeport

• 4฀transactions฀in฀CBD

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RTC฀Impact฀on฀Bijou฀Square

RTC฀Basis฀ $2,400,000 RTC฀Credit฀% 20% RTC฀ $480,000 Price/$ 86% Equity฀Raised $410,400

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NMTC฀Impact฀on฀Bijou

Citi฀Investment $3,200,000 NMTC฀Value 39% NMTC฀ $1,248,000 Citi฀Equity฀Investment $900,000 Citi฀Loan $2,300,000 Total฀Citi฀Investment $3,200,000 Citi฀Equity฀Investment $900,000 NMTC $1,248,000 Citi฀Investment฀as฀a฀%฀of฀NMTC 72%

Stepping฀Stones฀Musuem

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Stepping฀Stones

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Project฀Cost $17,000,000 SOURCES฀OF฀FUNDS Steppijng฀Stones฀Fundraising $14,000,000 NMTC฀Investm ent $3,000,000 $17,000,000

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Tax฀Increment฀Financing

• Tax฀Increment฀Financing

– Very฀powerful฀but฀under-utilized฀tool฀in฀CT – Particularly฀important฀for฀large-scale฀mixed- use฀developments฀that฀have฀huge฀ infrastructure฀needs

• Project’s฀economics฀can’t฀support฀all฀infrastructure
• Only฀so฀much฀state฀grant฀money฀available

– Bridgeport฀and฀Stamford฀

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How฀TIF฀Works

• Chapter฀132,฀Municipal฀Development฀Projects
• Incremental฀real฀property฀taxes฀can฀be฀used฀to฀pay฀debt฀

service฀on฀tax-exempt฀special฀obligation฀revenue฀bonds

• Bonds฀used฀to฀pay฀qualified฀public฀improvements

– Remediation,฀utilities,฀parking,฀roadways

CDA฀:฀Brownfields TIF฀

• CDA฀฀works฀with฀CT฀municipalities฀
• Use฀฀future฀increases฀in฀tax฀revenue฀to฀finance฀the฀current฀

improvements฀that฀will฀create฀those฀gains฀

– Increased฀site฀value฀and฀investment฀creates฀more฀taxable฀ property,฀which฀increases฀tax฀revenues฀ – Increased฀revenue฀is฀used฀to฀finance฀debt฀to฀pay฀for฀the฀"project"฀ – TIF฀creates฀funding฀for฀public฀projects฀that฀may฀otherwise฀be฀ unaffordable฀to฀municipalities

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Prospective฀CDA฀Brownfields TIF฀Deal

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NDC฀Professional฀Training฀Classes

• Professional฀Certification฀Classes฀

– Economic฀Development – Housing฀Development

http://nationaldevelopmentcouncil.org

• Academy,฀Washington฀DC฀

May฀23-25 – Learn฀what’s฀new฀in฀the฀world฀of฀economic฀ development