Installment Financings

Transcription

1 Capital Finance for Local Governments: Project Development Financings Kara Millonzi January 2015 Installment Financings aka Tax Increment Financings or TIFs 1

2 Project Development Financings TIF Security Taxes on increased valuation in defined area Legal Projects Various (G.S ) Voter Approval LGC Approval Bond Counsel Public or Private Sale Method of Sale Limit on Amount No Yes Yes Usually Private N/A Enhanced Security; 5% Rule Authority G.S. 159, Art. 6 2

3 Security Proceeds allocated to pay off TIF bonds Valuation Proceeds allocated to unit s general fund Enhanced Security 3

4 Authorized Security GO Bonds Revenue Bonds Installment Financings (COPs, LOBs) Special Obligation Bonds Tax Increment Financings Unlimited taxing power Revenues from revenueproducing asset or system Mortgage interest in a portion or all of financed asset Revenues other than unit-levied taxes Property tax revenue from increased valuation in defined area Net revenues from utility or public enterprise system Revenues from special assessments Mortgage interest in financed asset Mortgage interest in financed asset Mortgage interest in financed asset Minimum tax levy agreement Revenues other than unit-levied taxes Revenues from special assessments Valuation 4

5 Process Unit must establish a financing district Authority differs for counes and cies A COUNTY district must consist of property that is 1. blighted, deteriorated, deteriorang, undeveloped, or inappropriately developed from the standpoint of sound community development and growth; 2. appropriate for rehabilitaon or conservaon acvies; or 3. appropriate for economic development. Process A CITY district must consist of property that meets at least one of the condions set forth for a county district in G.S (c) or that meets the criteria of an urban redevelopment area as defined by G.S. 160A A city s planning commission may designate the following types of property as a redevelopment area: 1. property that is blighted because of dilapidated, deteriorated, aged, or obsolete buildings; inadequate venlaon, light, air, sanitaon, or open spaces; high density of populaon or overcrowding; or unsanitary or unsafe condions; 2. a nonresidenal redevelopment area with dilapidated, deteriorated, aged, or obsolete buildings; inadequate venlaon, light, air, sanitaon, or open spaces; defecve or inadequate street layout or faulty lot layout; tax or special assessment delinquency exceeding the value of the property; or unsanitary or unsafe condions, 3. a rehabilitaon, conservaon, and recondioning area in present danger of becoming a blighted or nonresidenal redevelopment area; or 4. any combinaon of the above types of areas. 5

6 Plan A descripon of the boundaries of the development financing district A descripon of the proposed development, both public and private The costs of the proposed public acvies The sources and amounts of funds to pay for the proposed public acvies (depending on the scope of the project, may include funds in addion to the debt proceeds from project development bonds) The base valuaon of the development financing district The projected increase in the assessed valuaon of property in the district The esmated duraon of the development financing district (the earlier of thirty years from the effecve date of the district or when the bonds are repaid) A descripon of how the proposed public and private development of the district will benefit district residents and business owners in terms of jobs, affordable housing, or services A descripon of appropriate ameliorave acvies if the proposed projects negavely impact district residents or business owners in terms of jobs, affordable housing, services, or displacement A statement that that the inial users of any new manufacturing facilies included in the plan will be required to pay an average wage that is above the average manufacturing wage paid in the county or is not less than 10 percent above the average weekly manufacturing wage statewide, unless an exempon to such requirements is approved by the secretary of commerce as required by G.S (d), and 160A (c), (d). 6

7 5% Rule The total land area within all county or municipal project development districts may not exceed 5% of the total land area in the taxing unit that establishes the district. County Approval A county board of commissioners has veto power over a municipal development finance district. 7

8 State Agency Approval The LGC must approve all project development financings. DENR must approve any development financing plan that includes construcon and operaon of new manufacturing facility. Secretary of Commerce must cerfy that any plan for a manufacturing facility requires certain wage requirements. Likely Not Tax Exempt Government Bonds Only government directly benefits from financed project Tax exempt Private Acvity Bonds Private enty benefits from financed project above certain threshold level 5% or 10% tests Not tax exempt Certain excepons 8

9 Synthec Project Development Financings Installment Financing Ancipate using increased property tax revenue from new development to actually repay loan Roanoke Rapids, NC $21.5 million in project development bonds Enhanced security: lease payments, local sales and use tax pledge, initial letter of credit 9

10 Woodfin, NC $25 million in project development bonds approved, $12.5 million issued Minimum property valuation assessment agreement Kannapolis, NC $95 million in project development bonds approved none issued Enhanced Security: Personal guarantee by David Murdock 10

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