Welcome

• Presenters• Brad Baumann, CLA – New Markets Tax Credits

• Christopher Moss, CLA – Opportunity Zones

• Tim Hess, Invista Analytics – Historic Tax Credits & Tax Increment Financing

• City of Oshkosh – Tax Increment Financing

WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING

Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor

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New Markets Tax CreditsBrad Baumann, Principal, CLA

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Real Estate Cost Analysis

Real Estate Cost Analysis

Cost Segregation

(New Buildings)

Commercial Energy

Efficiency Deduction

(179D)

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History of the New Markets Tax Credit Program

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• Created by Congress as part of the Community Renewal Tax Relief Act of 2000

• Codified in Section 45D of the Internal Revenue Code

• Administered by the CDFI Fund (Community Development Financial Institutions Fund)

• Non-Permanent Program

• Most recently extended through 2019 at $3.5B/year

• Bipartisan support for permanent expansion

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Purpose of the New Markets Tax Credit Program

To encourage private investment in low-income communities by incentivizing investors to do so.

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Low-Income Community

- Lower risk- More favorable returns

- Higher risk- New Markets Tax Credit

to incentivize riskThriving Community

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The New Markets Tax Credit Process

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Federal Government (US Treasury)

• 1.) Certifies Community Development Entities (CDEs) for the NMTC program.

2.) Authorizes Annual Credit Authority (Allocation Amount) for NMTCs

CDFI Fund

• 3.) Oversees the NMTC program and provides allocation awards to CDEs

Community Development Entities

• 4.) CDEs determine what projects will be selected for NMTC financing

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Benefits of the NMTC Program

Allows investors to receive 39% Federal income tax credit based on the amount of investment (Loans and Equity) into the project.

• 7 year compliance period

• Investor receives 5% of tax credits in years 1-3 (15%)

• Investor receives 6% of tax credits in years 4-7 (24%)

For Recipient of Financing:

• Significant benefit at the end of the 7-year compliance period in the form of a forgivable loan

• Recipients will also receive below market interest rates on their loan which will reduce debt service obligations.

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Program Definition and Essential Acronyms

CDE must use….

Sub All of the proceeds from….

QEIs to make….

QLICIs in….

QALICBs located in….

LICs.

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???

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Breakdown of Definition

Community Development Entities must use…

Substantially All of the proceeds from…

Qualified Equity Investments to make…

Qualified Low-Income Community Investments in…

Qualified Active Low-Income Community Businesses located in..

Low-Income Communities.

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Translation of Acronyms

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• “Community Development Entity”: an entity that is certified by the CDFI Fund as an entity with a primary mission to serve or provide capital to low-income communities or personsCDE

• “Qualified Equity Investment”: an equity investment in a CDE that triggers the availability of the NMTC to the equity investorQEI

• “Qualified Low-Income Community Investment”: an equity investment or loan to a QALICB from a CDE.QLICI

• “Qualified Active Low-Income Community Business”: a corporation, partnership, or LLC that is qualified to receive QLICIsQALICB

• “Low-Income Community”: is a census tract with a poverty rate more than 20% or median family income is less than 80% of the area median income.LIC

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NMTC Structure Example

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CDFICDE

Investment Fund

How would I finance this Project?

InvestorLender

Investment that generates

NMTCs

Loan

Loan Equity

NMTCs

NMTCs

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WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING

Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor

Qualified Active Low-Income Community Business (QALICB)

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Qualifying as a QALICB(Qualified Active Low-Income Community Business)

• At a minimum, the client’s existing or proposed project must be located in a “Qualified Census Tract” deemed by the CDFI

or

• Is serving a Targeted Population.

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Mixed-Use Real Estate

Office

Retail

Non-Profit

Health Related Facilities

Medical Facilities

Manufacturing/Industrial

Operating Businesses

Hotels

Community Centers

K-12 Schools, Universities, Vocational Training, other educational services

Theatres, Museums, Restaurants, and other entertainment venues

For Sale Housing: Condos and Single Family Homes

Typical Projects (But Not Limited To)

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Businesses Prohibited for QALICBs

x Golf course

x Country club

x Massage parlor

x Hot tub or suntan facility

x Racetrack or other gambling facility

x Any store where the principal purpose is the sale of alcoholic beverages for consumption off premise

x Farming

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QALICB Selling Points

• Creates or maintains quality jobs

• Increases wages

• Assistance to low-income businesses

• Assistance to minority or women-owned businesses

• Increases home ownership

• Provides goods and services

• Increases environmental services

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WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING

Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor

New Markets Tax Credit Potential Structure and Benefits

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$6MM New Markets Tax Credit Sample Structure

New Markets Tax Credit Investor

Investment Fund

Sub- CDE

“QALICB”Qualified Active Low-Income

Community Business

$1.92MM

Investment

@

$0.82/Credit

Leverage Lender

$4.08MM

Loan

$6MM

Allocation

$4.08MM

Loan A$1.71MM

Loan B

Parent CDE (s)

$210,000

Allocation

Fee

Sources and Uses

SourcesLoan A: $4.08MM

Loan B: $1.71MM

Project Contribution: $650,000

Total: $6.44MM

UsesProject Hard/Soft Costs: $5.885MM

NMTC Closing Fees: $555M

Total: $6.44MM

$2.34MM

Tax Credit

External Funding from Project $650,000

Project Sources $4.08MM

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NMTC Closing Net Benefits AnalysisNMTC Benefit

BenefitAmount

% of Allocation Comments

NMTC Allocation $6MM 100%

NMTC Equity $1.92MM 32%

NMTC Fees NMTC Costs % of Allocation

Allocation Fee $210,000 3.5% Paid at closing

NMTC Legal Fees Fees $140,000 1.89%Legal fees for project, CDEs, Investor and Lender

(if applicable) *QALICB Legal estimated @ $45,000

Accounting/Consulting/Title $100,000 1.89% Paid at closing

CDE Asset Management Fees $210,000 3.5%Asset Mgmt. fee paid over 7 years (Can be

Reserved at closing) – Reserved in this analysis

CDE Tax/Audit Fee $105,000 1.05% Audit/Tax fee for CDEs over 7 years (Can be Reserved at closing)

Benefit $1.155MM 19.25%

Interest Savings (Estimate): $600M

Net Benefit $1.755MM 29.25%

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The NMTC Process for Borrowers

Provide Allocation Request

Report/CDE Application to

CDE

Bank loans (if needed) need to be approved to be paired with

NMTCs

Identify Investor

CDE, Bank, and Investor will provide Term

Sheets

Closing Process (8-12 weeks)

Funding

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CLAconnect.com

Brad Baumann, Principalbrad.baumann@CLAConnect.com

Direct: 920-232-2214

Thank You

WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING

Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor

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Opportunity ZonesChristopher K. Moss, Principal, CLA

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Disclaimers

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen, LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her CliftonLarsonAllen, LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen, LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

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Opportunity Zone Program

Created by the Tax Cuts and Jobs Act of 2017

Formed to generate economic activity and job creation in low-income communities

Encourages investment of unrealized capital gain into these low-income community projects/businesses

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Opportunity Zones

• Deferral of capital gains

• Reduction of deferred gain over time

• Permanent gain exclusion on appreciation of investment

Benefits

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Opportunity Zones

• Capital Gain Deferral Period• Deferred until investment is sold, or Dec. 31, 2026

whichever comes earlier

• If investment is not sold before Dec. 31, 2026 any remaining deferred gain is recognized at that time

Benefits

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Opportunity Zones

• Permanent Reduction of Deferred Gain• Investments held less than 5 years result in 100%

deferred gain recognition

• Investments held > 5 years, < than 7 years result in recognition of 90% of deferred gain

• Investments held > 7 years results in 85% deferred gain recognition

Benefits

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Opportunity Zones

• Permanent exclusion for investments held for at least 10 years

• At sale of investment, election made to step up basis in investment to FMV

• Election results in a permanent exclusion from income of any post-acquisition capital gain

• Results in permanent benefit for depreciation deductions

• Taxpayers can recognize losses by not making the permanent exclusion election

Benefits

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Opportunity Zones – Timing of Investment

• From date asset sold – 180 days to put into a QOZ Fund

• Funds do not need to go to a qualified intermediary

• The date the money is transferred to fund will be the start of the 10 year hold window

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Opportunity Zone Timeline

Year 0 $20MM Gain Invested into Opportunity Zone. $20MM Gain Deferral.

Year 1

Year 2

Year 3

Year 4

10% Step-Up Basis on original $20MM Capital Gains ($2,000,000).Year 5

Year 6

Year 7 Additional 5% Step-Up Basis ($1,000,000). $3,000,000 Step Up Total. $17MM of Original Gain Recognized.

Year 8

Year 9

Year 10 Opp. Zone Fund exits structure with $30MM Buyout. $10MM in Capital Gains recognized and not taxable.

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Opportunity Zone

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Comparison to Non-OZ

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Comparison to §1031

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Opportunity Zones

• Does not have to be like-kind property

• Real or personal property

• Substantially all must be located in an OZ

• No identification of replacement property requirement

• Close on replacement within 180 days of sale

• Only need to invest gain from sale

• Can invest in partnership interests and stock

• Gain recognized – earlier of sale or 12/31/26

• 10% basis step up for 5 year hold, 15% for 7 year hold

• Permanent exclusion on appreciation if held longer than 10 years

§1031

• Must be like-kind property

• Real property, no personal property

• No location requirement

• Replacement property must be identified within 45 days

• Close on replacement within 180 days of sale

• Must invest entire proceeds from sale

• Cannot invest in partnership int. or stock

• Gain rec. – upon sale of replacement prop.

• No step up in basis

• No gain exclusion on appreciation

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Qualified Opportunity Zone (QOZ)

Low-income community population census tract, AND

• Nominated by the chief executive officer of the state

• Number of zones:– Limited to 25% of low-income communities in a state– If state has less than 100 low-income communities can choose 25 QOZ’s

• Contiguous Tracts– Contiguous tracts not in a low-income community may be designated QOZ’s if:

◊ Contiguous with a low-income community designated as a QOZ, and

◊ Median family income of the tract does not exceed 125% of the contiguous low-income community

– Contiguous tracts cannot make up more than 5% of census tracts designated in the state as QOZ’s

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Oshkosh (Region) Opportunity Zones

• https://wedc.org/programs-and-resources/development-opportunity-zone-tax-credit/

Wisconsin Economic Development Corporation (WEDC)

• https://greateroshkosh.com/doing-business/incentive-programs/

Oshkosh City Opportunity Zones website

• https://www.claconnect.com/services/tax/opportunity-zones

• Mapping tool available

CLA Opp. Zone website

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Oshkosh Opportunity Zones

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Qualified Opportunity Zone Fund

• Fund can be any partnership or corporation that holds at least 90% of its assets in QOZ property

• Must follow guidelines outlined by statute and the Treasury

• Requires self certification, no approval required by IRS• Complete a form and submit with Federal income tax return

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Investment Structure – Direct Investment

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Investor(s)Opportunity Zone Fund

Qualified Opportunity

Zone Business (Project)

Deferred Capital Gains Managing

Member (Developer)

Deferred Capital Gains

Acquisition

99% 1%

Qualified Opportunity Zone Business

Property (QOZBP)

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Investment Structure – Indirect Investment

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Investor(s)Opportunity Zone Fund

Special Purpose Entity

Partnership

Deferred Capital Gains

Developer

80% Interest

20% Interest

Project in Opportunity Zone Census

Tract

100% Interest

Qualified Opportunity Zone Business (QOZB)

Qualified Opportunity Zone Business

Property (QOZBP)

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What Can Opportunity Zones Invest In?

• Real Property– Original use must be with fund or must be

substantially improved

– Substantially Improved = At least 100% of adjusted basis in property

• Operating Businesses– Equity investments or stock purchase

• Equipment

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Related Party Issues

• Gains generated from a related party sale are not eligible for opportunity zone benefits

• Property purchased from a related party is an ineligible opportunity zone asset

• The definition of a related party is tied to its definition in §267(b) or §707(b)(1)

– However, must substitute 20% for 50% each place it occurs in each section

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Rev Ruling 2018-29

Eases substantial improvement test

Land can be backed out of calculation

Example:

• Purchase property for $100,000

• Land appraised at $50,000

• Substantial improvement requirement of $50,001

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Issues Addressed with Proposed Regs. (Released Oct. 2018)

• How to qualify for “Substantially All” with land improvements

• Types of taxpayers and gains that qualify

• Partnership gains

• Do you have to hold the investment for 10 years?

• How to certify funds (Form 8996) and capital gain deferral election (Form 8949)

• Sale and reinvestment of Opportunity Fund interest

• What are the benefits of investing through a two-tier structure or a Qualified Opportunity Zone Business?

– “Substantially all”

– 31 Month Working Capital Safe Harbor

• Fund level debt

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Substantially All - QOZBP

At QOZB Level “substantially all” =

70%

Still need clarification on

intangible property

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Types of Gains and Taxpayers

Types of gains allowed

• Capital gains – Short Term and Long Term

• §1231 Gains

• Some issues with §1256 contracts and straddles

• Gain cannot be generated via a related party sale

Types of taxpayers

• Trusts

• Individuals

• Partnerships

• Corporations

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Passthrough Gains

Partnership or S Corp can make election to invest in QOF

• Gain flows out to partners

• Can make election to use same asset sale date as passthrough, or

• Can elect to use last date of taxable year for passthrough

If fail to make election

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10 Year Investment Matters

Clarified the investment does not need to be held 10 years

If investment is sold prior, proceeds can be reinvested into new QOF within 180 days

Undetermined if the 10-year window is restarted

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• Available at the QOZB Level

• Allows for 31 months to deploy cash at QOZB level

• Alleviates some testing requirements on indirect structure

Working Capital Safe Harbor

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• Disposition (Sale/Exchange) of investor’s interest in the Opportunity Fund for post 10-year step-up

• Qualify Greenfield Development as Original Use or Substantial Improvement

• How to calculate/implement Gross Income Test

• How to calculate/implement Intangibles Test

• Debt refinance and distribution restrictions

• Recycling of assets within a QOF/Qualified Opportunity Zone Business

• How are penalties applied

Questions Outstanding (Waiting Further Guidance)

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Disposition of Investment

Regulations didn’t fix the issue that investment must be sold -

not the underlying asset

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This makes multiple asset funds difficult

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Greenfield Development

• Did not clarify what substantial improvement is for ground up construction

• Is $1 enough to qualify as substantial improvement or original use?

• How does asset testing play into this?

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Gross Income Test

Requires that 50% of income be from active trade or business within a zone

Need clarification on qualified income

Need measurement tests

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Debt Refinancing and Distributions

Debt financed distributions are allowed, but care should be taken– Must make sure opportunity zone investors have basis to take distributions

– Distributions cannot be a return of capital

– If return of capital, would trigger a partial disposition of QOF investment

– Can refinance and distribute to the extent of appreciation in property

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Further clarification on these rules is needed.

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Recycling of Assets

If a fund sells assets, the investors in the fund can reinvest into a new QOF.

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Can a QOZB or QOF sell assets and invest into another asset?Does this restart the 10 year hold?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

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Penalties

• Drafting error on how penalty is calculated

• Right now it is 5% per month for a maximum of 60%

• Makes hitting these testing windows imperative

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Christopher K. Moss Principal 920-232-2202chris.moss@CLAconnect.com

Opportunity Zone Contacts

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WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING

Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor

Questions?

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Historic Preservation

Timothy Hess, PhD

thess@invista-analytics.com

Federal Historic Tax Credits

State Historic Tax Credits

▪ 20% Credit Applied to Federal Income Tax

▪ Subject to passive income restrictions

▪ More work to Monetize

▪ 20% Credit Applied to State Income Tax up to $3.5 million

▪ No passive income restrictions

▪ Easier to Monetize

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Works with Ownership TeamDecision Maker of State Registry ListingMakes Recommendation to NPS:▪ National Registry Listing▪ Description of Proposed Work▪ CertificationInterface with WEDC for State Credits

State Historic

Preservation

Office (SHPO)

Decision Maker on:▪ National Registry Listing▪ Description of Proposed Work▪ Certification of Completed Work

National

Park Service

WEDC

Administers State Credit Application / Award

Ownership Team

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That are associated with events that have made a significant contribution to the broad patterns of our history; or

That are associated with the lives of significant persons in our past; or

That embody the distinctive characteristics of a type, period, or method of construction, or that represent the work of a master, or that possess high artistic values, or that represent a significant

and distinguishable entity whose components may lack individual distinction; or

That have yielded or may be likely to yield,

information important in history or prehistory.

Listing Property on National

Registry of Historic Places

B u i l d i n g s h o u l d b e m i n i m u m o f 5 0 y e a r s o l d

Criteria for Evaluation

The quality of significance in American history, architecture, archeology, engineering, and culture is present in districts, sites, buildings, structures, and objects that possess integrity of location, design, setting, materials, workmanship, feeling, and association, and:

https://www.nps.gov/subjects/nationalregister/how-to-list-a-property.htmhttps://www.nps.gov/nr/publications/forms.htmhttps://www.nps.gov/nr/sample_nominations.htm

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A

B

C

D

Application Process

Part 1 Part 2

Evaluation of Significance Description of Rehabilitation

Part 3

Certification of Completed Work

Use to:

▪ Certify building contributes to significance of Historic District

▪ Make preliminary determination that building is likely to be listed on National Historic Register

NOTE

▪ Can skip to Part 2 if building already individually listed on National Historic Register

Use to:

▪ Document existing condition in detail with narrative and photos

▪ Document rehabilitation plan in explicit detail including narrative and architectural plans.

60 Day Review Time

Use to:

▪ Document completed work with photographs and floor plan with photo key.

Complete

Project

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Claim

Credits

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Submit Signed Part 3 with Taxes

Unused credits can carry over to

subsequent years up to 20 years

▪ Includes:

o Any expense in interior / exterior of building

o Developer fees

o Interest and Taxes

o Professional Services

Claim 20% of credit each year for

5 years

▪ Excludes:

o Additions

o Site work / landscaping

o Furniture / Appliances / movable cabinets / tacked carpeting

▪ https://www.irs.gov/pub/irs-mssp/rehab.pdf (186 pg audit guide)

State Credits

▪ 60 – 90 cents on the dollar

▪ Easier to use = Easier to find a buyer

▪ Simple WI-DOR form to transfer credits

Federal Credits

▪ 90 cents on the dollar

▪ Cannot buy/sell credits – Must be issued to title holder

▪ Syndication through limited partnership allowed to bring in investors

o Trade off between legal burden and ease of investor acquisition based on timing

Tax Credit Broker or Large Accounting

Firm can help

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Monetize

Credits

Ownership

Team

Historic Preservation Consultant

Consultants

Architect

Tax Credit BrokerAccountant

Attorney

68

Financial Impact

Additional Consultants not inexpensive

Appraisal often less than desired

Preservation to Secretary of Interiors Standards can add substantial expense

An Example Project

Cost to Construct w/o HTC 3,450,000 3,450,000

Building Acquisition 550,000 550,000

Addt’l cost Sec of Int Standards 500,000

HTC Consultants 80,000

% of Eligible costs 75%

HTC Credits Claimed 1,374,000

% Savings after monetization 16.42%

Net cost after monetization 3,343,400 4,000,000

Total Costs 4,580,000 4,000,000

Monetization Proceeds (90%) 1,236,600 0

w/ HTC w/o HTC

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Historic Tax Credit Takeaways

01

70

Many Variables that can substantially impact how to proceed:

▪ Is the building listed on National Register?▪ What is owner’s tax position?▪ Operationalize Tax Credit or Monetize for Financing?▪ What is the intended use?▪ What is Layout of building and amount of Historic Fabric?

02 There are many competent experts to help

03Tough to generalize typical financial impact of HTC program

given how much specifics of individual project plays a role

04 Can combine with other incentive programs

05Benefits

▪ Preserving our History AND▪ Likely have positive financial impact for owner

Tax Increment Financingin Oshkosh

Timothy Hess, PhD

Time

Assessed Value

TIF Created

Baseline Value

Incremental Value

TIF Ends

Post TIF Assessed Value

Leverage Tax Revenue generated from

increment to finance portion of project

How TIF Works

Taxing Entities Revenue remains

fixed over life of TIF

Upon termination of TIF all revenues revert back to taxing entities

TIF Facts

• All states and Washington DC authorize some form of TIF except Arizona

• Between 2015 -2017 WI averaged 71 new TIFs per year

• Recent City of Oshkosh TIFs created

Year TID # Project Type2016 28 Beach Bldg Central City Redevelopment2016 29 Morgan District Central City Redevelopment2016 30 Washington Bldg Central City Redevelopment2017 31 Menominee Nation Arena Central City Redevelopment2017 32 Granary Bldg Central City Redevelopment2017 33 Lamico / Annex Central City Redevelopment2018 34 Oshkosh Corp HQ Industrial – Economic Development2018 35 Oshkosh Ave Corridor Redevelopment

• Statutory obligation to meet ‘but for’ finding in order to create TIF

The ‘But For’ Test

• State statutes require Joint Review Board (JRB) make the “but for” finding in its resolution to approve the creation of the district.

• Name comes from the assertion, "The development would not occur but for the use of TIF.”

• No statutory definition:• Financial Perspective – Internal Rate of Return• Offer from another municipality• A pro-basketball will not select this city• other

“Even if the developer expects a profit, it may not be large enough to compensate for the risk; therefore, the project may not be worthwhile.”

- 2019 WI DOR TIF Manual

https://www.revenue.wi.gov/DOR%20Publications/tif-manual.pdf

Local Authority – Local Priorities

• WI Statutes give broad authority to municipalities to create TIFs to address local priorities.

• Municipalities set TIF objectives, eligible and ineligible development, through policy.• Oshkosh has scoring Matrix for different types of TIF

• WI Statutes declare most costs eligible• Municipalities typically limits eligible costs on a

project-by-project basis.

https://www.ci.oshkosh.wi.us/PlanningServices/Documents/TIFPolicyApplication.pdf

Washington Bldg – 2016 TIF

Approval Process

Meet w/ City Staff

PrepareApplication

Submit Application &

Initial Presentationto Common Council

Ehlers Financial Review

City Prepares TIF Plan

Notice ofPublic

Hearing

Public Hearing&

Plan CommissionVote

Common CouncilVote

Official TIFStart Date

Joint Review Board Vote

Monetizing TIF

• City issues general obligation bond and gives proceeds up front to developer to finance project costs.

• City issues pay-as-you-go municipal revenue note agreeing to pay proceeds of tax increment revenue annually to developer over an agreed amount of time.

• Developer and operationalize proceeds over timeor

• Developer can monetize note through private lender• Better rate if part of overall financing package• Possible to finance just pay-go note

Net Present Value of Pay-Go TIF Note

𝑁𝑃𝑉 ≈ 𝐼 ∙ 𝜌 ∙ 𝜇1 − 1 + 𝑖 − 𝑛−𝑑

𝑖 1 + 𝑖 𝑑

where

I = incremental value

ρ = allocation percentage

µ = average tax rate

i = interest rate

n = number of years

d = delay till first payment

Net Present Value as a Proportion of Increment

Source: www.invista-analytics.com/wp/NPVv4n1.pdf

Net Present Value of Pay-Go TIF Note

Net Present Value of Pay-Go TIF Note

Example 1

$6,000,000 x 0.1524 = $914,400

Over the coarse of 12 years how much total tax revenue is this?

$6,000,000 x 0.025 x 10 x 0.90 = $1,350,000

Purchase price $1Baseline Assessment $0After completion assessment $6,000,000Incremental Value $6,000,000

You and city staff tentatively come to an agreement that they will provide 12 years of pay-go assistance. They are willing to provide 90% of the increment to you keeping the remaining 10% to pay for administrative costs or other public improvements over the life of the TIF. Your bank quotes a 5.5% interest rate on the TIF note. How much money is the note worth up front?

Net Present Value of Pay-Go TIF Note

Example 2

Example from HTC discussion.Purchase price $550,000After completion assessment $3,800,000Incremental Value $3,250,000

You have identified $500,000 worth of public improvements as part of the project that the city has agreed to finance through pay-go TIF. The city’s policy is to provide 90% increment. Further your bank has quoted a 6.5% interest rate. How long does the TIF note need to be to cover the costs of the public improvements?

$500,000 / $3,250,000 = 15.38%

13 Year lookup 15.25% 14 Year lookup 16.18%

Find first value in table greater than 15.38%

Justifying Use of TIF

Example 1 (Continued)

Cost to build $6,000,000Bank to finance 80% LTV $4,800,000Cash $1,200,000

20 yr term at 4.75%Use Year 11 NOI to estimate reversion proceeds. $2,358,000

10 Year IRR = 6.36%

20 yr term at 4.75%Use Year 11 NOI to estimate reversion proceeds. $2,358,000

10 Year IRR = 12.88%

TIF Proceeds = $914,400 Bank Financing = $ 3,885,600

No TIF IRR

Madison Typical Range

Oshkosh Max

w/ TIF IRR

Tax Increment Financing Takeaways:

• TIF can provide substantial financial assistance to those projects that meet the ‘but for’ test.

• The process in Oshkosh is well defined.

• Local elected officials are the primary decision maker.

• Suggestions to improve chances of success include:• Selecting projects that meet city objective• Substantially document everything

• Costs to construct, anticipated revenue, operational costs, any assumptions

• Keep city staff informed CONTACT INFORMATIONEmail: thess@invista-analytics.comWeb: www.intista-analytics.comPhone: (920) 203-2177Address:

240 Algoma Blvd – Suite AOshkosh, WI

TAX INCREMENT FINANCING (TIF)

Questions?

Contact

Greater Oshkosh Economic Development Corporation

www.greateroshkosh.com

(920) 230-3321

City of Oshkosh

www.ci.oshkosh.wi.us

(920) 236-5000

Thank You For Attending!