Economic Development Fundamentals September 22, 2016...–Incentive district TIF applies to all parcels within a geographic district ( See O.R.C. 5709.40(C)) • No more than 300 contiguous

© 2016 Bricker & Eckler LLP

Bricker & Eckler LLP

www.bricker.com • www.developohio.com

Matt Stout, Esq.

614.227.8861

[email protected]

Colin Kalvas, Esq.

614.227.4998

[email protected]

Economic Development Fundamentals

September 22, 2016

Moderator: Jeffrey R. Rink

Managing Director, KeyBanc Capital Markets Inc.

[email protected]


Economic Development

Simple definition: activities which promote

investment, create jobs, and enhance

communities.

Generally includes collaboration between

government entities and private entities



Ohio Constitution Definition: Certain activities

which:

– “create or preserve jobs and employment

opportunities,”

– “improve the economic welfare of the people of the

state,”

– “control air, water, and thermal pollution,” or

– “dispose of solid waste”

Article VIII, Section 13



From a local government point of view,

economic development consists of deploying

various tools which advance those goals


Tools Covered

Tax Increment Financing (TIF)

Community Reinvestment Area (CRA)

Enterprise Zone (EZ)

Special Assessments and Property Assessed Clean

Energy (PACE) Financing


Tax Increment Financing (TIF)

Tax: based on real property taxation

Increment: applies only to the increase in real

estate taxes resulting from a development

Financing: allows a developer and local

government to pay for needed public

infrastructure improvements


TIF Basics

Service payments in lieu of taxes

– Owners of property subject to TIF required to pay

“service payments in lieu of taxes”

– Paid in the same amount and collected in the same

manner as real property taxes

– TIF is therefore a way to focus otherwise dispersed

tax money on specific, local improvements


TIF Basics

Uses of service payments in lieu of taxes

– Service payments are collected into a segregated

fund which must be established

– May be used to pay for “public infrastructure

improvements” as defined in O.R.C. 5709.40(A)(7).

– Generally include: roads, sewers, environmental

remediation, land acquisition, demolition, storm water

remediation, gas, electric and communications

service facilities


TIF Basics

* “Tax Increment Finance Best Practices Reference Guide” (CDFA and ICSC), page 2.


TIF Basics

Governments which may implement:

– Municipal corporations (O.R.C. 5709.40 & .41)

– Townships (O.R.C. 5709.73)

– Counties (O.R.C. 5709.78)


TIF Basics

Creation

– Legislative authority passes ordinance or resolution

• Determines base year as of January 1

• Identifies TIF boundaries and parcels

• Notice must be given to school district and other affected

political subdivisions

– Form DTE 24

• Exemption application filed with the Ohio Department of

Taxation

• Contains parameters set forth in the authorizing legislation


TIF Basics

Project TIF vs. incentive district TIF

– Project TIF applies to a specific parcel or parcels

(See O.R.C. 5709.40(B))

– Incentive district TIF applies to all parcels within a

geographic district (See O.R.C. 5709.40(C))

• No more than 300 contiguous acres exhibiting one or more

characteristics of economic distress as listed in ORC

• Public improvements do not need to directly benefit every

parcel

Municipal Urban Redevelopment TIF (.41 TIF)• Unique TIF used in urban redevelopment setting


TIF Basics

Percentage of increased value to which TIF

may apply

– Up to 75% without the consent of the impacted city,

local, or exempted village school district

– Up to 100% with consent

– Note that county consent is required for municipal

corporation and township incentive district TIFs if

exemption is over 75%


TIF Basics

Term of TIF

– Up to 10 years without the consents of the impacted

city, local, or exempted village school district

– Up to 30 years with consent

– Note that county consent is required for municipal

corporation and township incentive district TIFs if term

exceeds 10 years


TIF Basics

Rights of school districts and counties

– Along with consent is ability to negotiate

compensation

– Maximum compensation for city, local, and exempted

village school districts and joint vocational school

districts is amount that would have been paid but for

TIF (“non-school TIF”)

– Maximum compensation for county is amount that

would have been paid but for TIF (recall, only applies

to municipal corporation and township incentive

district TIFs)


TIF Basics

Municipal Income Tax Sharing -Municipality must share income tax with School District if:– Municipal Income tax in place

– New payroll in excess of $1,000,000

– No make whole provision for School District in place

Six Months to Negotiate Agreement– 50/50

– Municipality entitled to infrastructure set-off (up to 35% of annual income tax increase)


Why Use TIF?

Encourage development

Facilitate redevelopment

Finance infrastructure

No additional cost to developer

– But revenue stream is development dependent


TIF Monetization

General obligations bonds or cash payment

by government– Government takes risk

Revenue bonds and conduit bonds– Generally requires additional security

Pay-as-you-go TIF– Developer takes risk

Developer financing– Developer takes risk / provides security


Combining TIF With Other Tools

CRA

– TIF could be subordinate to total abatement of CRA

for CRA period (O.R.C. 5709.911)

Special assessments

– Special assessments can back up TIF service

payments in event development does not occur at

desired pace

New Community Authority


Community Reinvestment Area

(CRA) Characteristics of CRAs

– Real property tax exemption

– Municipalities and counties have the authority to create new CRAs

– Area within a municipal corporation or the unincorporated area of a county

– Area in which housing facilities or structures of historic significance are located

– Reality – used to grant commercial/industrial exemptions where at least two housing structures exist


Community Reinvestment Area

(CRA) Types

– Pre July 1, 1994 CRA• No agreements

• No revenue sharing

• No school district notice or approval

– Post July 1, 1994 CRA• Agreements

• Revenue sharing

• School district notification and approval


CRA Basics

Creation (O.R.C. 3735.66)

– Municipal corporation or county passes legislation

after housing survey

• Area is in need of renovation

• At least 20% of properties in need of rehabilitation

– Incentive parameters established

• May be only on residential property, only on commercial /

industrial property, or on both

• Maximum exemption is 100% of new value

– Must publish notice of legislation

– Must petition ODSA for confirmation of CRA


CRA Basics

Exemption term (O.R.C. 3735.67(D))

– Remodeling costing $2,500+ of residential with fewer

than two dwelling units: up to 10 years unless

historically significant

– Remodeling costing $5,000+ of residential with

greater than two dwelling units or remodeling of

commercial industrial: up to 12 years unless

historically significant

– New construction: up to 15 years


CRA Basics

Granting exemption (O.R.C. 3735.67):

– Residential:

• Application to “housing officer”

• Verification of construction or remodeling and its cost and

other eligibility criteria

• Housing officer grants exemption

• Forwards approval to county auditor


CRA BasicsCRA PROGRAMS BENEFITS PRE

JULY 1, 1994 CRA

POST

JULY 1, 1994 CRA

EXEMPTION LEVELS:

Real Property Must be 100% Up to 100%

Personal Property None None

Inventory None None

TERM EXEMPTIONS:

Residential Remodeling (2 units or

less; minimum $2500)

Up to 10 years as specified

in the legislation that

creates the CRA


in the legislation that creates

the CRA

Residential Remodeling (more

than 2 units; minimum $5000)



creates the CRA



the CRA

Residential New Construction Up to 15 years as specified


creates the CRA



the CRA

Commercial and Industrial

Remodeling (minimum $5000)



creates the CRA

Up to 12 years as negotiated

and approved in an CRA

Agreement

Commercial and Industrial New

Construction



creates the CRA

Up to 15 years as negotiated

and approved in an CRA

Agreement


CRA Basics

Granting exemption (cont’d):

– Commercial / industrial

• Pre-1994 – same process as residential

• Post-1994 – negotiate agreement under O.R.C. 3735.671

• If agreement required, may require school district approval

(O.R.C. 3735.671(A))

• Agreement must be in form set forth in O.R.C. 3735.671

• Agreement must be certified to ODSA


CRA Basics

Annual Compliance

– Commercial / industrial with agreements must comply

with reporting to ODSA as described in O.R.C.

3735.672

– All exemptions must be reviewed by “housing officer”

(O.R.C. 3735.68) and by “housing council” (O.R.C.

3735.69)

– In addition to commercial / industrial agreement

reporting, enacting government must give annual

status report to ODSA (O.R.C. 3735.69)


Why Use CRA?

Encourage development

Encourage redevelopment

Encourage maintenance of historically

significant structures


Monetizing CRA(?)

CRA does not itself produce any revenue

But governments have been able to negotiate

voluntary compensation from developers

For municipal corporations, additional income

tax from added jobs or residents may be an

advantage


Combining CRA With Other Tools

Special Assessments


TIF

– Note that CRA will take priority for its term, but once

over, TIF service payments become payable


Enterprise Zone (EZ)

Enterprise: encourage businesses to make

specified types of investments

Zone: specified geographic area


EZ Basics

Governments which may create:

– Municipal corporations (O.R.C. 5709.62)

– Counties (O.R.C. 5709.63)


EZ Basics

Zone characteristics

– Minimum population:

• County pop. > 300,000 = 4,000 min. pop. of EZ

• County pop. < 300,000 = 1,000 min. pop. of EZ

– Single contiguous boundary


EZ Basics

Legislation creates EZs

Copy of legislation and related documents must

be certified to ODSA for confirmation


EZ Basics

Types of Zones (both cities/counties)

– Non-Distressed Based (Limited Authority Zone

under ORC 5709.632)• No distress requirements

• But, intrastate relocations only allowed with waiver from

ODSA

– Distress-Based (Full Authority Zone)• Six distress criteria outlined in ORC

• MSA Principal Cities and Appalachian Counties require to

meet 1 criteria

• Other locations required to meet 2

• If meet criteria, do not need waiver from ODSA to grant

exemptions for intrastate relocations


EZ Basics: Pre-1994 EZs

Pre 1994 (Senate Bill 19)

– Enterprise zones existing before July 1, 1994 have

limited tax exemption authority

– Cannot grant exemptions to businesses involved in

intrastate relocation

– Under ORC 5709.62(E) or 5709.63(D), must be:

• Establishing its first Ohio facility or

• Ohio business establishing a new facility that doesn’t

reduce employment or assets at the other sites or

• Relocation of business from another state or

• Expanding a current Ohio facility or

• Obtain a waiver from the ODSA Director under ORC

5709.633(B).


EZ Basics

Enterprise requirements

– Must be an “enterprise” as defined in O.R.C.

5709.61(B), which broadly includes most business

entities

– Must agree to “establish, expand, renovate or occupy

a facility in the zone and hire new employees, or

preserve employment opportunities for existing

employees”


EZ Basics

Project eligibility (O.R.C. 5709.61(C)):

– Must be a “facility”

– Facilities are: “Place of business in a zone, including

land, buildings, machinery, equipment and other

materials except inventory used in business.

– Facility does not include any portion…used primarily

for making retail sales, unless:

• The place of business is located in an impacted city as

defined in 1728.01 or

• [NEW!!] the city, local, or exempted village school district

within the territory of which the place of business is located

waives the exclusion of retail facilities under O.R.C.

5709.634


EZ Basics

Property eligible for exemption:

– Tangible personal property: Percentage of “assessed

value of tangible personal property first used in

business at the project site as a result of the

agreement”

– Real property: Percentage of “the increase in the

assessed valuation of real property constituting the

project site”


EZ Basics

Exemption parameters

– Municipality: (1) up to 75% and up to 10 years or (2)

average of 60% over term

– Unincorporated area: (1) up to 60% and up to 10

years or (2) average of 60% over term

– Exception with school district approval (up to 100%

for up to 15 years)

– Can “front load” exemption, exceeding allowable

percentages in early years as long as average

remains under 60%


EZ Basics

Granting exemptions:

– Local officials negotiate agreement with business

– Legislation required for final approval of agreement

– File with ODSA and ODT within 15 days


EZ Basics

Annual requirements:

– Every agreement must be annually reviewed by local

Tax Incentive Review Council (TIRC)

– Local administrator must file annual report with ODSA


Why Use EZ?

Encourage new business investment

Increase jobs, income taxes


Monetizing EZ(?)

EZ does not itself produce any revenue

But governments have been able to negotiate

voluntary compensation from developers

For municipal corporations, additional income

tax from added jobs may be an advantage


Combining EZ With Other Tools

Special Assessments


TIF

– Note that EZ could take priority for its term, but once

over, TIF service payments become payable (O.R.C.

5709.911)


Special Assessments

Special: in addition to other real property taxes

and charges, and for a very specific purpose

Assessment: levied against real property for

payment with real property taxes

Note: unlike other economic development tools,

special assessments are very old


Special Assessment Basics

Governments which may implement

– Municipal corporations (O.R.C. Chapters 727,

729; charters)

– Counties (O.R.C. Chapter 6131, 5555, 6117, and

6103)

– Townships (O.R.C. Chapters 505, 515, 521,

5543, 5571 and 5573)



Public improvements for which special

assessments may pay (differs for each

enacting government):

– Streets and sidewalks

– Water and sewer

– Off-street parking

– Lighting

– Trees

– Special Improvement District plans



Amount and term:

– Aggregate amount generally cannot exceed costs

(including soft costs) of public improvements

– Term generally cannot exceed useful life of public

improvements

– Other limits may apply



Apportionment

– Aggregate amount must be apportioned among all

parcels being assessed

– General methods:

• Proportion of “front footage” along improvement

• Proportion of tax valuation

• Proportion to “special benefits” resulting from the

improvements



Petitions

– Generally, levying special assessments takes a lot of

due process for property owners

– Petition submitted by the requisite number of property

owners can waive some of the procedures otherwise

required

– Petitions also can provide substantive benefits (e.g.,

ability to pay 100% of project costs under O.R.C.

727.06)



Special Improvement Districts (O.R.C. Chapter

1710)

– Townships and municipal corporations may form at

request of property owners

– Allows for use of special assessments to pay for all

public improvements and public services contained

within a “plan” adopted under O.R.C. Chapter 1710)



Energy Special Improvement Districts and

PACE Financing

– Special form or special improvement district

– Non-contiguous properties allowed

– Properties may be added

– Special assessments pay for advanced energy and

energy efficiency improvements which may be owned

by private property owners


Why Use Special Assessments

Fund public improvements and public services

Properties which benefit from improvements

and services pay for them

Can support tax exempt obligations


Special Assessment Monetization

General obligation bonds

– O.R.C. 133.17(A)

Bond anticipation notes

– O.R.C. 133.17(B)

Revenue bonds

– May require additional security

Conduit bonds


Combining Special Assessments

With Other Tools CRA

– Replace abated taxes to pay for local improvements

EZ

– Replace abated taxes to pay for local improvements

TIF

– Back up to service payments in lieu of taxes

© 2016 Bricker & Eckler LLP57

Case Study

Pinecrest Development Project

Tax Increment Financing

59

KeyBanc Capital Markets DisclosureKeyBanc Capital Markets Inc. (“KBCM”) is not recommending an action to you as the municipal entity or obligated person; KBCM is not acting as an advisor to you and does not owe a fiduciary duty pursuant to

Section 15B of the Exchange Act to you with respect to the information and material contained in this communication; KBCM is acting for its own interests; you should discuss any information and material

contained in this communication with any and all internal or external advisors and experts that you deem appropriate before acting on this information or material; and KBCM seeks to serve as an underwriter on

a future transaction and not as a financial advisor or municipal advisor. The information provided is for discussion purposes only in anticipation of being engaged to serve as underwriter. The primary role of an

underwriter is to purchase securities with a view to distribution in an arm’s-length commercial transaction with the issuer. The underwriter has financial and other interests that differ from those of the Issuer.

Interest rates used herein are hypothetical and take into consideration conditions in today’s market and other factual information such as the issuer’s credit rating, geographic location and market sector. Interest

rates applied herein are hypothetical, based on current market facts and should not be viewed as rates that KBCM expects to achieve for you should we be selected to act as your underwriter or placement

agent. Information about interest rates and terms for SLGs is based on current publically available information and treasury or agency rates for open-market escrows are based on current market interest rates for

these types of credits and should not be seen as costs or rates that KBCM expects to achieve for you should we be selected to act as your underwriter or placement agent.

Disclosure of MSRB Rule G-23

KeyBanc Capital Markets Inc. (KBCM) is providing the information contained in this document for discussion purposes only in anticipation of serving as underwriter or placement agent to you. The primary role of

KBCM, as an underwriter or placement agent, is to purchase securities, for resale to investors, or place securities with investors, on an agency basis, in an arm’s-length commercial transaction between you and

KBCM and that KBCM has financial and other interests that differ from your interests. KBCM is not acting as a municipal advisor, financial advisor or fiduciary to you or any other person or entity. The

information provided is not intended to be and should not be construed as “advice” within the meaning of Section 15B of the Securities Exchange Act of 1934. You should consult with your own financial and/or

municipal, legal, accounting, tax and other advisors, as applicable, to the extent you deem appropriate. If you would like a municipal advisor in this transaction that has legal fiduciary duties to you, then you are

free to engage a municipal advisor to serve in that capacity.

Disclosure of Trading Party, Dual Employee Status and Related Matters

KeyBanc Capital Markets is a trade name under which the corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC,

and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and by its licensed securities representatives. Banking

products and services are offered by KeyBank N.A.

A number of our corporate and institutional team members are employed by both KeyBanc Capital Markets Inc. and KeyBank N.A. These “dual employees” are licensed securities representatives of KeyBanc

Capital Markets Inc., and they are there to better serve your needs, by making available both securities and banking products and services.

Further, in connection with our effort to deliver a comprehensive array of banking and securities products and services to you in a seamless manner, from time to time KeyBank N.A. and KeyBanc Capital Markets

Inc. will share with each other certain non-public information that you provide to us. Of course, as always, this information will not be shared or otherwise disclosed outside of the KeyCorp organization without

your express permission. Please also be assured that, as with other banks and broker-dealers, KeyBank N.A. and KeyBanc Capital Markets Inc. adhere to established internal procedures to safeguard your

corporate information from areas within our organization that trade in or advise clients with respect to the purchase and sale of securities.

THE OBLIGATIONS OF KEYBANC CAPITAL MARKETS INC. ARE NOT OBLIGATIONS OF KEYBANK N.A. OR ANY OF ITS AFFILIATE BANKS, AND NONE OF KEYCORP’S BANKS ARE

RESPONSIBLE FOR, OR GUARANTEE, THE SECURITIES OR SECURITIES-RELATED PRODUCTS OR SERVICES SOLD, OFFERED OR RECOMMENDED BY KEYBANC CAPITAL MARKETS INC. OR

ITS EMPLOYEES. SECURITIES AND OTHER INVESTMENT PRODUCTS SOLD, OFFERED OR RECOMMENDED BY KEYBANC CAPITAL MARKETS INC., IF ANY, ARE NOT BANK DEPOSITS OR

OBLIGATIONS AND ARE NOT INSURED BY THE FDIC.

60

Overview - Pinecrest Development Project

Upscale Mixed-Use Development A walkable outdoor lifestyle destination conveniently situated

on 80 acres with excellent freeway visibility and access near

the intersection of I-480 and I-271 in Orange Village, Ohio.

L I V E

• 90 upscale residential apartment units

• Future adjacent development with over 300 multi-family units

W O R K

• Over 150K sqft. of Class A office space

S T A Y

• On-site 120-key boutique hotel

P L A Y

• Over 400K sqft. of retail & movie theater

• Variety of dining options

• State-of-the-art fitness center

P I N E C R E S T

61

The Capital Stack

Uses of Funds Sources of Funds (the Capital Stack)

Filling the Gap Tax Increment Financing is an integral part of the capital stack in the

Pinecrest pro-forma that is filling a hole between the amount of private debt

and equity that has been raised and the required capital needed to complete

the project as contemplated.

The TIF Bonds will provide a much needed more than $35 million of net

proceeds for the Project to fund a portion of the cost of public infrastructure

throughout the development (i.e. parking garages, sidewalks, lighting,

streetscape, etc.)

Total Project Cost

>$200 Million

TIF Bond Proceeds

≈ $35 MillionLess

62

Establishing the TIF – Process & ResultsThe Process

A TIF is a common mechanism used to assist real estate

developments by monetizing future property tax revenues to

fund current development. Since the passage of a TIF means

governmental entities forgoing future property taxes in

support of the project, certain approvals need to occur before

the TIF is enacted.

The Result (Terms of the TIF)

Type of TIF: 5709.40 – for public infrastructure improvements

that directly benefit the TIF property

Term: 30 years from when improvements appear on the tax

roll

TIF Exemption Amount: 100% of property taxes that would

have otherwise been paid

Agreement with the School District:

– Compensation Payments equal to 25% of the property

taxes the School District would have received without

the TIF Exemption

– 100% of property taxes from an increase in tax rate

levied by the School District

– Upfront donation to the School District from the

Developer of $300,000

– 41.5% share of new income taxes received by the

Village in excess of $500,000

Projected Financial Benefits*:

Public Support

• Public support was needed to get residents on board with the Project and in support of the TIF

• Flyers were sent out and calls were made to residents to make them aware of the Project and what was needed to make it happen.

Village Negotiations

• The Developer had to negotiate the terms of the TIF and show the need for public assistance for completion of the Project.

• As a result, the Developer met with Village officials and Council members to garner further support.

School Board Approval

• Per Ohio law, any TIF in excess of 10 years or 75% TIF Exemption must be approved by the School District.

• Extensive negotiations took place between the School Board, the Village, and the Developer to arrive at a solution that compensated the School District for approving the TIF.

Council Meetings

• TIF legislation was prepared for reading and approval by Village Council.

• After many rounds of negotiations with all of the parties and numerous public hearings, the TIF was passed on May 6, 2015.

Orange Village Orange City SD

Proposed New Income Tax Sharing** 1,387,090 629,304

New Commercial Phase Property Taxes:

Proposed Annual TIF Compensation Payment (25%) - 902,106

Projected New Property Taxes from School Millage

Increases (No Assumed AV Growth)***- 621,664

Lodging Taxes 191,808 -

Total Projected Annual New Tax Revenues $1,578,898 / yr $2,153,074 / yr

* Represents average annual revenues over the term of the 30-year TIF

** Represents average annual income tax revenue over term of proposed TIF, Income Tax sharing per the Compensation Agreement

*** Assumes a 4.0 Mill levy every seven years, beginning in 2019

63

Estimated Valuation and Timing

Before structuring and selling any debt, we had to derive what the TIF

revenues would be over the life of the exemption. As such, we went straight

to the people who will be valuing the Project for tax purposes once it is built,

the County Appraisal Group.

Monetizing the TIF

Develop Pro-forma Cash Flows and Finalize Project Plans

Present to County Appraisal Group

Receive County Appraisal Group’s projections of Assessed Value and timing of TIF Revenues.

The letter from the Appraisal Group contains

accompanying analyses and a description of the

methodology used to arrive at the values projected in

the letter.

The Appraisal Group worked with our team in looking at the

projected cash flows and design layout, as well as

comparable projects in the area in order to arrive at their

estimated valuation.

Letter from the Appraisal Group

64

Monetizing the TIF (continued)TIF Analysis

Net TIF-PILOT revenues available for debt service

(right-most column) is a function of all of the above

metrics, as well as the agreements with the Village

and the School District (i.e. 100% TIF with a 25%

Compensation Payment to the School District).

TIF-PILOT Revenue Analysis:

Tax

Year

Collection

Year

Total Incremental

Assessed

Valuation on Tax

Duplicate*

Annual TIF-

PILOT Revenue

(100%)

School District

Portion of

PILOT Revenue

School District

Allocation (%)**

School District

Allocation -

25% for 30yrs**

Net Annual TIF -

PILOT Revenues

Available for DS

2015 2016 - - - 25.0% - -

1 2016 2017 6,710,000 565,213 360,829 25.0% 90,207 475,005

2 2017 2018 24,827,750 2,091,350 1,335,107 25.0% 333,777 1,757,573

3 2018 2019 56,609,500 4,768,465 3,044,165 25.0% 761,041 4,007,424

4 2019 2020 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

5 2020 2021 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

6 2021 2022 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

7 2022 2023 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

8 2023 2024 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

9 2024 2025 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

10 2025 2026 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

11 2026 2027 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

12 2027 2028 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

13 2028 2029 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

14 2029 2030 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

15 2030 2031 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

16 2031 2032 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

17 2032 2033 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

18 2033 2034 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

19 2034 2035 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

20 2035 2036 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

21 2036 2037 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

22 2037 2038 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

23 2038 2039 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

24 2039 2040 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

25 2040 2041 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

26 2041 2042 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

27 2042 2043 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

28 2043 2044 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

29 2044 2045 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

30 2045 2046 67,102,500 5,652,337 3,608,424 25.0% 902,106 4,750,231

Total $160,038,115 $102,167,538 $57,870,577 $134,496,230

* Dev eloper / Fairmount Prop EST (May 2015) - - Cuy ahoga County Appraisal Div ision PRELIM Projections (May 2015)

** Pay ment to Orange CSD per TIF Compensation Agreement

Considerations for TIF Debt Structuring

Base Valuation (existing value and property taxes)

Projected Valuation (upon completion of the Project – Appraisal Group)

Incremental Value (difference between base and projected valuations)

Tax Rates (of all taxing districts)

Timing (when the improvements will hit the tax roll)

Terms of the TIF Agreement (e.g. duration and exemption amount)

Investor Negotiating Points

Debt Service Coverage Requirements

Debt Service Reserve Requirements

Interest Rate

Amortization Structure

Treatment of Excess Revenues

65

Debt StructuringMaximizing Project Proceeds

Once we had the TIF Revenues Available for Debt

Service, we were able to structure the debt with the

goal of maximizing proceeds for the Project, all while

working within the structural confines of no additional

security for the Bonds (i.e. Tax Increment Revenues /

Minimum Service Payments only, resulting in a non-

rated, high yield bond transaction).

In structuring the debt, the following steps took place:

– Identify Costs of Issuance and any Annual Fees

– Determine necessary Capitalized Interest (until

TIF revenues are sufficient to cover debt

service)

– Identify a potential conduit issuer (City, County,

Port Authority, etc.)

– Identify and educate the potential investor(s) on

legal mechanics and protections of the TIF.

Year

TIF Revs

Available for

DS

Coverage

TIF Revs

After DS

Coverage

PrincipalCapitalized

InterestDSRF

Net Debt

Service

Excess

Revs

Cap-I 2015 - - - - 553,852 - - -

Period 2016 - - - - 4,178,890 - - -

2017 - - - - 4,178,890 - - -

No Principal 2018 2,065,862 100% 2,065,862 - 2,098,144 14,884* 2,065,862 -

2019 4,174,140 100% 4,174,140 - - 4,750 4,174,140 -

Project 2020 4,750,231 100% 4,750,231 575,000 - 4,750 4,749,140 1,091

Stabilized 2021 4,750,231 100% 4,750,231 620,000 - 4,750 4,749,290 941

2022 4,750,231 100% 4,750,231 665,000 - 4,750 4,745,930 4,301

2023 4,750,231 100% 4,750,231 720,000 - 4,750 4,749,060 1,171

2024 4,750,231 100% 4,750,231 775,000 - 4,750 4,747,900 2,331

2025 4,750,231 100% 4,750,231 835,000 - 4,750 4,747,450 2,781

2026 4,750,231 100% 4,750,231 900,000 - 4,750 4,747,320 2,911

2027 4,750,231 100% 4,750,231 970,000 - 4,750 4,747,120 3,111

2028 4,750,231 100% 4,750,231 1,045,000 - 4,750 4,746,460 3,771

2029 4,750,231 100% 4,750,231 1,130,000 - 4,750 4,749,950 281

2030 4,750,231 100% 4,750,231 1,215,000 - 4,750 4,746,810 3,421

2031 4,750,231 100% 4,750,231 1,310,000 - 4,750 4,747,040 3,191

2032 4,750,231 100% 4,750,231 1,410,000 - 4,750 4,744,860 5,371

2033 4,750,231 100% 4,750,231 1,520,000 - 4,750 4,744,880 5,351

2034 4,750,231 100% 4,750,231 1,640,000 - 4,750 4,746,320 3,911

2035 4,750,231 100% 4,750,231 1,770,000 - 4,750 4,748,400 1,831

2036 4,750,231 100% 4,750,231 1,905,000 - 4,750 4,745,340 4,891

2037 4,750,231 100% 4,750,231 2,055,000 - 4,750 4,746,750 3,481

2038 4,750,231 100% 4,750,231 2,215,000 - 4,750 4,746,460 3,771

2039 4,750,231 100% 4,750,231 2,390,000 - 4,750 4,748,690 1,541

2040 4,750,231 100% 4,750,231 2,575,000 - 4,750 4,747,270 2,961

2041 4,750,231 100% 4,750,231 2,775,000 - 4,750 4,746,420 3,811

2042 4,750,231 100% 4,750,231 2,995,000 - 4,750 4,749,970 261

2043 4,750,231 100% 4,750,231 3,225,000 - 4,750 4,746,360 3,871

2044 4,750,231 100% 4,750,231 3,480,000 - 4,750 4,749,810 421

2045 4,750,231 100% 4,750,231 3,750,000 - 4,750 4,748,370 1,861

2046 4,750,231 100% 4,750,231 8,790,000 - 4,754,981 4,745,639 4,592

Investor Negotiating Points

Debt Service Coverage Requirements

Debt Service Reserve Requirements

Interest Rate

Amortization Structure

Treatment of Excess Revenues


Questions?

66

Matt Stout, Esq.

614.227.8861

[email protected]

Colin Kalvas, Esq.

614.227.4998

[email protected]

Jeffrey R. Rink

Managing Director, KeyBanc Capital Markets Inc.

[email protected]

mailto:[email protected]



Documents

Economic Development Fundamentals September 22, 2016...–Incentive district TIF applies to all parcels within a geographic district ( See O.R.C. 5709.40(C)) • No more than 300 contiguous