Tax Increment Finance Course November 1-2, 2007 Doubletree Hotel, Washington, D.C. 1
Tax Increment Finance Course TIF Financing Variations TIF mechanics are wide in scope. TIF financing is available using revenue or general obligation bonds, pay-as-you go financing, developer financing and combinations of various tools. This session will address how TIF deals can be financed in various ways outside of traditional tax increment-backed bonds. Presenters will discuss additional sources for the repayment of TIF debt including: property tax, sales tax and special assessments. Speakers: Ken Powell , Managing Director Alan C. Cason , Managing Partner Stone & Youngberg LLC McGuireWoods LLP Bill Calderon , Partner Marc Hughes , Director (Moderator) Hawes Hill Calderon DEPFA First Albany Securities LLC 2
Tax Increment Finance Course Alan C. Cason 3
Tax Increment Finance Course “MORE MONEY SOONER” Additional governmental revenue sources to supplement or “back-up” traditional property tax increment revenues 4
Tax Increment Finance Course ADDITIONAL REVENUE SOURCES 1) Special Taxes and Assessments 2) Special Hotel Occupancy Taxes (SHOT) 3) Sales Tax Revenues 4) Enterprise Zone Tax Credits 5) Personal Property Taxes 6) PILOT Revenues 7) State and local grants or contributions 5
Tax Increment Finance Course SPECIAL TAXES AND ASSESSMENTS 6
Tax Increment Finance Course SPECIAL HOTEL OCCUPANCY TAXES Gaylord National Harbor Hotel Prince George’s County, Maryland Hilton-Baltimore Baltimore’s Publicly Owned Convention Center Hotel 7
Tax Increment Finance Course SALES TAX REVENUES DISTRICT OF COLUMBIA ALABAMA 8
Tax Increment Finance Course ENTERPRISE ZONE TAX CREDITS East Baltimore Research Park (legislation pending) 9
Tax Increment Finance Course PERSONAL PROPERTY TAXES 10
Tax Increment Finance Course PILOT REVENUES (Payments in-lieu of taxes) The New Yankee Stadium Tenant: New York Yankees Groundbreaking: August 2006 Construction began: August 2006 Opening: Spring 2009 Capacity: 51,800 Style: Open air Surface: Grass Owner: New York Yankees Cost: $1.02 billion Public financing: $220 million from New York City for parking facilities ($75 million), parkland along The waterfront ($135 million) and other work related to the Stadium Private financing: $800 million from the Yankees 11
Tax Increment Finance Course STATE AND LOCAL GRANTS OR CONTRIBUTIONS (to off-set costs of infrastructure improvements) National Harbor Prince George’s County, Maryland 12
Tax Increment Finance Course LEGAL CONSIDERATIONS 1) Legal authority to pledge additional revenue source. 2) Contractual availability of additional revenue source. 13
Tax Increment Finance Course Ken Powell 14
Tax Increment Finance Course 3. Special Assessments A. Variation of TIF B. Rate and Method – Reasonableness C. Priority / Recordation / Foreclosure D. Examples 1. The Farms of New Kent CDA 2. Eastridge CFD (Prescott Valley, AZ) 3. Reynolds Crossing CDA 15
Tax Increment Finance Course The Farms of New Kent (New Kent County, Virginia) September 2006 Bond Issue: $85,666,000 The Farms of New Kent Community Development Authority Special Assessment Bonds, Series 2006A, B, & C Location: New Kent County, VA - Approximately 30 miles east of Richmond on I-64 Development: 1,450 age-restricted units �� 300 estate lots �� 450 single family homes �� 100 resort cottages �� 830,000 sq. ft. of commercial space �� 18-hole Rees Jones Golf Course �� Winery, vineyards, polo complex, farmer’s market Developers: Boddie-Noell Enterprises, Republic Land and K. Hovnanian Use of Proceeds: Public infrastructure improvements including road, water and wastewater improvements. Primary Security: Special Assessment Revenues Special Features: ▪ Second largest non-rated special district financing in Virginia. ▪ Unique bond structure in which prepayments used first to call Series A Bonds, then the Series B Bonds and finally the Series C Bonds. ▪ Alleviated County’s problem of limited existing wastewater treatment capacity restraining development in County 16
Tax Increment Finance Course The Farms of New Kent (New Kent County, Virginia) September 2006 17
Tax Increment Finance Course Eastridge (Prescott Valley, Arizona) September 2003 Bond Issue: $2,500,000 Eastridge Community Facilities District Special Assessment Lien Bonds, Series 2003 Location: Prescott Valley, AZ - Approximately 80 miles northwest of Phoenix Development: ▪ 12 parcel, 40 acre development on Highway 69 frontage property �� ▪ commercial �� ▪ retail �� ▪ banking �� ▪ auto sales and repair Developers: Eastridge Investments Use of Proceeds: Public infrastructure improvements including major roads that intersect with Highway 69, water lines, sewer lines, storm drains and street lighting. Primary Security: Special Assessment Revenues Special Features: ▪ Ownership: 7 different landowners – 2 own over 30% each. 100% landowner support ▪ Five Year Sales Tax rebate (portion) to encourage development 18
Tax Increment Finance Course Eastridge (Prescott Valley, Arizona) September 2003 19
Tax Increment Finance Course Reynolds Crossing (Henrico County, Virginia) May 2007 Bond Issue: $14,594,000 Reynolds Crossing Community Development Authority Special Assessment Revenue Bonds, Series 2007 Location: Henrico County, VA - 5 miles northwest of downtown Richmond, Virginia. Borders I-64 and is 3 miles West of I-95. Development: 71 acre mixed-use development 250-room Westin hotel 480,000 sq. ft. of new office space 170,000 sq. ft. of restaurants and retail tenants 230,000 sq. ft. seven-story office building 64,000 sq. ft. medical office building Developers: Reynolds Holdings, LLC Use of Proceeds: Public infrastructure improvements including road improvements (curb, gutters, paving, striping, sidewalks and traffic signals), a storm water drainage system, public water and sanitary sewer lines and facilities, development signage and landscaping. Primary Security: Special Assessment Revenues Special Features: ▪ Public improvements enhanced existing development to attract national tenants such as Westin hotel. ▪ Former site of Reynolds Metals Company headquarters. 20
Tax Increment Finance Course Reynolds Crossing (Henrico County, Virginia) May 2007 21
Tax Increment Finance Course William Calderon 22
Council of Development Finance Agencies 2007 Workshop: TIF Financing Variations •Presented by
Tax Increment Finance Course Workshop Outline w 1. Introduction w 2. Revenue Tools • Sales Tax Corporations • Assessment Based Mechanisms • Municipal Utility Districts • Development Corporation (or Local Government Corporation) • 380 Programs 24 • Other Tools
Tax Increment Finance Course Introduction • This discussion will provide an overview of various economic development tools available to supplement TIF Financing. All have the following characteristics in common: • Governmental (public) entities subject to state/local statues • Oversight provided by local governing authority • May engage in partnerships with private sector to 25 finance public projects
Tax Increment Finance Course Sales Tax Corporations w Purpose: To promote economic development through programs to encourage new and expanded industry and manufacturing, and civic and commercial projects, within the municipality and its vicinity. w Eligibility Criteria: 26
Tax Increment Finance Course w Powers and Duties: Sales Tax Corporations • Use of tax proceeds for authorized purposes • Limited power of eminent domain • Powers of nonprofit, non-stock corporation • Exempt from federal, state, local taxes • Compliance with Open Meetings Act, Public Information Act • Board of directors subject to municipal oversight 27
Tax Increment Finance Course Sales Tax Corporations w Permitted Services and Projects: • Provision of land, buildings, equipment, facilities • Targeted infrastructure improvements for job creation • Transportation, research, manufacturing, industrial facilities • Solid waste disposal, recycling, pollution control facilities • Professional and amateur sports parks • Parking, entertainment, convention, tourist facilities 28
Tax Increment Finance Course Sales Tax Corporations w Revenue: Derived from economic development sales tax equal to between one-eighth and one-half of one percent. w Bonds: A Corporation may issue bonds, notes, and other contractual obligations to fund projects. However, a bond or debt issued by the Corporation is not an obligation of the city. 29
Tax Increment Finance Course Assessment Based Mechanisms w Purpose: Created to finance public improvements and facilitate economic growth within a defined area and in a manner that equally distributes costs and benefits among property owners subject to the assessment. w Eligibility Criteria: • Created through State Legislature or Municipality pursuant to 30 stakeholder petition
Tax Increment Finance Course Assessment Based Mechanisms w Powers and Duties: • May levy taxes, assessments, impact fees in accordance with a Service Plan and Assessment Plan authorized by petition of affected property owners and its board of directors 31
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