tax increment finance course - cdfa · 2019-08-29 · 16 tax increment finance course the farms of...

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

Tax Increment Finance Course

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TIF Financing VariationsTIF 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 DirectorStone & Youngberg LLC

Bill Calderon, PartnerHawes Hill Calderon

Alan C. Cason, Managing PartnerMcGuireWoods LLP

Marc Hughes, Director (Moderator)DEPFA First Albany Securities LLC

Speakers:

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Alan C. Cason

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“MORE MONEY SOONER”

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

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ADDITIONAL REVENUE SOURCES

1) Special Taxes and Assessments2) Special Hotel Occupancy Taxes (SHOT)3) Sales Tax Revenues4) Enterprise Zone Tax Credits5) Personal Property Taxes6) PILOT Revenues 7) State and local grants or contributions

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SPECIAL TAXES AND ASSESSMENTS

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SPECIAL HOTEL OCCUPANCY TAXES

Hilton-BaltimoreBaltimore’s Publicly Owned Convention Center Hotel

Gaylord National Harbor HotelPrince George’s County, Maryland

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SALES TAX REVENUES

DISTRICT OF COLUMBIA

ALABAMA

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ENTERPRISE ZONE TAX CREDITS

East Baltimore Research Park (legislation pending)

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PERSONAL PROPERTY TAXES

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PILOT REVENUES(Payments in-lieu of taxes)

The New Yankee StadiumTenant: New York Yankees Groundbreaking: August 2006Construction began: August 2006Opening: Spring 2009Capacity: 51,800Style: Open airSurface: GrassOwner: New York YankeesCost: $1.02 billionPublic financing: $220 million from New York Cityfor parking facilities ($75 million), parkland alongThe waterfront ($135 million) and other work relatedto the StadiumPrivate financing: $800 million from the Yankees

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

National HarborPrince George’s County, Maryland

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LEGAL CONSIDERATIONS

1) Legal authority to pledge additional revenue source.

2) Contractual availability of additional revenue source.

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Ken Powell

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3. Special Assessments

A. Variation of TIFB. Rate and Method – ReasonablenessC. Priority / Recordation / ForeclosureD. Examples

1. The Farms of New Kent CDA2. Eastridge CFD (Prescott Valley, AZ)3. Reynolds Crossing CDA

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

Bond Issue: $85,666,000 The Farms of New Kent CommunityDevelopment Authority Special AssessmentBonds, Series 2006A, B, & C

Location: New Kent County, VA - Approximately 30 miles east of Richmond on I-64Development: 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 marketDevelopers: Boddie-Noell Enterprises, Republic Land and K. HovnanianUse of Proceeds: Public infrastructure improvements including road, water and

wastewater improvements.Primary Security: Special Assessment RevenuesSpecial 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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The Farms of New Kent (New Kent County, Virginia)September 2006

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Eastridge (Prescott Valley, Arizona)September 2003

Bond Issue: $2,500,000 Eastridge Community FacilitiesDistrict Special Assessment Lien Bonds, Series 2003

Location: Prescott Valley, AZ - Approximately 80 miles northwest of PhoenixDevelopment: ▪ 12 parcel, 40 acre development on Highway 69 frontage property�� ▪ commercial�� ▪ retail�� ▪ banking�� ▪ auto sales and repairDevelopers: Eastridge InvestmentsUse 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 RevenuesSpecial 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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Eastridge (Prescott Valley, Arizona)September 2003

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Reynolds Crossing (Henrico County, Virginia)May 2007

Bond Issue: $14,594,000 Reynolds Crossing CommunityDevelopment Authority Special AssessmentRevenue Bonds, Series 2007

Location: Henrico County, VA - 5 miles northwest ofdowntown Richmond, Virginia. Borders I-64 andis 3 miles West of I-95.

Development: 71 acre mixed-use development250-room Westin hotel480,000 sq. ft. of new office space170,000 sq. ft. of restaurants and retail tenants230,000 sq. ft. seven-story office building64,000 sq. ft. medical office building

Developers: Reynolds Holdings, LLCUse 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 RevenuesSpecial 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

•Presented by

Council of Development Finance Agencies 2007

Workshop:TIF Financing Variations

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Workshop Outline

w 1. Introductionw 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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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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Sales Tax Corporationsw 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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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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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.

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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

stakeholder petition

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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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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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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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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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• 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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• 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

of an in-city MUD, the bonding capacity of the MUD is often diminished.

• Administration

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Tax Increment Finance CourseDevelopment Corporation (or LGC)

w Purpose:To perform on behalf of a city/county any of the functions of 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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Development Corporation (or LGC)

w BondsCorporation 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 Houston1. 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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w Kendall Lakes - Lake Houston1. Municipal Utility District

• Water • Sewer • Drainage

2. City of Houston TIRZ #10• Streets, Sidewalks• Landscaping• Public Amenities

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w Aldine - Harris County1. 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

Q&A, Discussion

HoustonP.O. Box 22167-2167Houston, Texas 77227(713) 541-0447

Arlington805 E. Abram, Suite 200Arlington, Texas 76010(817) 807-5782

Rio Grande ValleyP.O. Box 720339McAllen, Texas 78504

www.hhcllp.com

tax increment finance course - cdfa · 2019-08-29 · 16 tax increment finance course the farms of...

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