Tax Increment Finance Course November 1-2, 2007 Doubletree Hotel, - - PowerPoint PPT Presentation

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Tax Increment Finance Course November 1-2, 2007 Doubletree Hotel, - - PowerPoint PPT Presentation

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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,

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November 1-2, 2007 Doubletree Hotel, Washington, D.C.

Tax Increment Finance Course

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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.

Ken Powell, Managing Director Stone & Youngberg LLC Bill Calderon, Partner Hawes Hill Calderon Alan C. Cason, Managing Partner McGuireWoods LLP Marc Hughes, Director (Moderator) DEPFA First Albany Securities LLC Speakers:

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Tax Increment Finance Course

Alan C. Cason

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Tax Increment Finance Course

“MORE MONEY SOONER”

Additional governmental revenue sources to supplement or “back-up” traditional property tax increment revenues

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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

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Tax Increment Finance Course

SPECIAL TAXES AND ASSESSMENTS

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Tax Increment Finance Course

SPECIAL HOTEL OCCUPANCY TAXES

Hilton-Baltimore Baltimore’s Publicly Owned Convention Center Hotel Gaylord National Harbor Hotel Prince George’s County, Maryland

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Tax Increment Finance Course

SALES TAX REVENUES

DISTRICT OF COLUMBIA ALABAMA

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Tax Increment Finance Course

ENTERPRISE ZONE TAX CREDITS

East Baltimore Research Park (legislation pending)

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Tax Increment Finance Course

PERSONAL PROPERTY TAXES

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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

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Tax Increment Finance Course

STATE AND LOCAL GRANTS OR CONTRIBUTIONS (to off-set costs of infrastructure improvements)

National Harbor Prince George’s County, Maryland

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Tax Increment Finance Course

LEGAL CONSIDERATIONS

1) Legal authority to pledge additional revenue source. 2) Contractual availability of additional revenue source.

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Tax Increment Finance Course

Ken Powell

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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
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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

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Tax Increment Finance Course

The Farms of New Kent (New Kent County, Virginia) September 2006

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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

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Tax Increment Finance Course

Eastridge (Prescott Valley, Arizona) September 2003

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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.

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Reynolds Crossing (Henrico County, Virginia) May 2007

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William Calderon

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  • Presented by

Council of Development Finance Agencies 2007

Workshop: TIF Financing Variations

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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
  • Other Tools
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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

finance public projects

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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:

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Tax Increment Finance Course

Sales Tax Corporations

w Powers and Duties:

  • 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
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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
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Tax Increment Finance Course

Sales Tax Corporations

w Revenue:

Derived from economic development sales tax equal to between

  • ne-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

  • r debt issued by the Corporation is not an obligation of the

city.

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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

  • wners subject to the assessment.

w Eligibility Criteria:

  • Created through State Legislature or Municipality pursuant to

stakeholder petition

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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

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Assessment Based Mechanisms

w Permitted Services and Projects: w Such districts may provide services and improvements related to:

  • economic development
  • business recruitment
  • promotion of health and sanitation
  • public safety, traffic control, recreation
  • landscaping, lighting, signs
  • streets, walkways, drainage
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Tax Increment Finance Course

Assessment Based Mechanisms

w Administration:

  • Board of directors appointed in legislation or by

governing authority

  • New appointments/reappointments administered by

board and approved by local governing authority

  • Terms vary

w Duration:

Districts generally exist until dissolved by:

  • Petition of property owners
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Tax Increment Finance Course

Municipal Utility District

  • Purpose:

To finance water, wastewater, and drainage facilities to support development.

  • Powers and Duties:
  • Created by petition of the landowner(s).
  • Empowered to construct, finance and operate water, wastewater

and drainage facilities to serve land within their boundaries.

  • May be created inside or outside the boundaries of a municipality.
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Tax Increment Finance Course

Municipal Utility District

  • Typical Uses:

MUDs are typically used to finance and operate water, wastewater, and drainage facilities for residential and commercial development.

  • Revenue, Bond Capacity
  • MUDs typically finance facilities through the issuance of tax-exempt

bonds, secured by property taxes assessed on land within the MUD.

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Tax Increment Finance Course

Municipal Utility District

  • In-City MUDs:
  • In-City MUDs are also subject to the oversight of the city

in addition to a state regulatory body.

  • The city must approve of bond issuances by in-city

MUDs.

  • Because the city tax is also levied within the boundaries
  • f an in-city MUD, the bonding capacity of the MUD is
  • ften diminished.
  • Administration
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Development Corporation (or LGC)

w Purpose:

To perform on behalf of a city/county any of the functions

  • f the sponsoring local government.

w Eligibility Criteria:

City/county resolution finding that:

  • Articles of incorporation meet criteria
  • Specific public purpose of corporation exists
  • Creation of the corporation is advisable
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Development Corporation (or LGC)

w Powers and Duties:

  • Promote and develop transportation facilities and

systems

  • Enter into contracts and developer reimbursement

agreements

  • Land Assembly (not by condemnation)
  • Enter into public/private partnerships
  • Manage TIRZ Projects and Services
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Tax Increment Finance Course

Development Corporation (or LGC)

w Bonds

Corporation may issue bonds as allowed by the city/county

w Administration:

  • Board consists of three or more directors.
  • Terms vary
  • Appointed by local governing authority (city/county)
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Other Economic Development Tools

w Enterprise Zones:

Purpose is to identify severely distressed areas of the state and provide incentives by state and local government to induce private investment, provide tax incentives and economic development program benefits.

w Neighborhood Empowerment Zones:

Promote the creation of affordable housing, increase economic development, increase quality of social services, d ti bli f t t id t

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Guiding Principles

  • 1. Consider Impact of Revenue Streams derived by

Various Mechanisms

  • Ad Valorem Tax
  • Sales Tax
  • Hotel Occupancy Tax
  • Special Assessments
  • Municipal Bond Proceeds
  • Development Corporation (or LGC) Bond Proceeds
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TIF Financing Variations

w Southwest Houston

  • 1. City of Houston TIRZ #20
  • Commercial Corridor Enhancements
  • Mall Redevelopment
  • Developer infrastructure reimbursement
  • 2. City of Houston Public Improvement District
  • Maintenance of Infrastructure
  • Supplemental Security
  • Business District Promotion
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TIF Financing Variations

w Kendall Lakes - Lake Houston

  • 1. Municipal Utility District
  • Water
  • Sewer
  • Drainage
  • 2. City of Houston TIRZ #10
  • Streets, Sidewalks
  • Landscaping
  • Public Amenities
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TIF Financing Variations

w Aldine - Harris County

  • 1. Municipal Management District
  • Water, Sewer, Drainage
  • Transportation
  • Environmental Design
  • Public Safety & Security
  • Economic Development
  • 2. Public Improvement District
  • New development infrastructure reimbursements for projects

that enhance the greater water/sewer system

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Q&A, Discussion

Houston P.O. Box 22167-2167 Houston, Texas 77227 (713) 541-0447 Arlington 805 E. Abram, Suite 200 Arlington, Texas 76010 (817) 807-5782 Rio Grande Valley P.O. Box 720339 McAllen, Texas 78504 www.hhcllp.com