OEDA Infrastructure Puzzle Power Point 3-3-15

Infrastructure Puzzle

David J. Robinson, The Montrose Group, LLC Raymond C. Headen, Headen & Co., LLC

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Experience Intro & Role of Infrastructure in Economic Development

Infrastructure Puzzle Model

Local Public Finance Tools

Local, State & Federal

Programs


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Public Policy & Economic Development Consulting $100M Gained for Clients

Multi Industry Corporate Site Location Experience

Multi-State Corporate Site Location Experience

The Montrose Group, LLC


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David J. Robinson ◦ Principal of the Montrose Group, LLC ◦ Adjunct Professor, Ohio State

University, Economic Development Policy

◦ Former Attorney, Large Ohio Law Firms Ohio House of Representative Member Senior Staff, Mayor of Columbus Economic Development Director,

Ameritech General Counsel, Ohio Chamber of

Commerce

https://www.palgrave.com/page/detail/economic-development-from-the-state-and-local-perspective-david-j-robinson/?isb=9781137320674

http://montrose.perfectionpkg.com/wp-content/uploads/2012/01/David_J_Robinson.jpg


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Nate Green Director, Economic Development, The Montrose Group, LLC Vice Chair, Bexley CIC Former:

• Vice President, Piper Jaffray • Manager, JobsOhio • Director, SBID Division, Ohio Department of Development • Executive Director, Pickaway Progress Partnership, a CIC • Corporate Finance Manager, Cleveland-Cuyahoga County Port

Authority • President, Ohio Economic Development Association


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Headen & Co., LLC Headen & Co., LLC is a boutique Ohio law firm offering a range of

legal services. Raymond C. Headen has over twenty-five years of experience

serving as lead counsel in all areas of public and private finance and served as sole

bond counsel, sole underwriter’s counsel, issuer’s counsel and credit enhancement counsel

in all types of State of Ohio, public and private college and university, Ohio local government, port authority, 501(c) 3, healthcare, leasing, special assessment, TIF and economic development tax-exempt and taxable bond financings as well as in commercial real estate financings as lender’s counsel and borrower’s counsel.


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The Montrose Group, LLC’s Infrastructure Financing Experience The Montrose Group, LLC gained over $100M in project and infrastructure

financing for a range of clients facing infrastructure challenges listed below: Broadband: gained funding for multiple regional broadband networks; Brownfields: gained Brownfield redevelopment grants for infill housing

and retail centers; Road, Water & Sewer- gained local, state and federal grants and

negotiated Tax Increment Financing and other public finance tools developed infrastructure funding strategies; and

Workforce: gained workforce development grants for public and private sector clients.


Introduction • Infrastructure & Economic

Development • Impact of Financial Services

Crisis and Real Estate Collapse

• New Model for Infrastructure Development- Infrastructure Puzzle

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What is Infrastructure • Aviation • Bridges • Dams • Drinking Water • Energy • Hazardous Waste • Inland Waterways • Levees • Ports • Parks & Recreation • Rail • Roads • Schools • Solid Waste • Transit • Waste Water

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•Traditional Government Role •State and Local Government •Public Finance Tools •Developer Finance Tools

Role of Infrastructure & Economic Development

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• Links to Industry Targets • Energy Industry- Solid Waste, Bridges, Drinking Water,

Hazardous Waste, Rail, Roads • Global Industry- Ports, Rail, Roads • Service Industry- Aviation, Schools, Transit • Manufacturing Industry- Energy, Inland Waterways, Ports,

Levees, Waste Water • Technology Industry- Aviation, Schools, Parks & Recreation,

Transit


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• National Infrastructure Crisis • ASCE Infrastructure Report Card

• Aviation- D • Bridges- C+ • Dams- D • Drinking Water- D • Energy- D • Hazardous Waste- D • Inland Waterways- D • Levees- D • Ports- C- • Parks & Recreation- C+ • Rail- C+ • Roads- D • Schools-D • Solid Waste- B- • Transit- D • Waste Water- D


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• It is not the 1990’s • Wall Street Investment Bank Collapse • Real Estate Market Contraction • State and Local Government Budget Challenges • Lack of Federal Government Consensus

Impact of Financial Services Crisis and Real Estate Collapse

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• Banks Restricted by New Federal Regulation • Banks Approach to Developer Credit Changed • Local and State Governments Resources

Stretched • Federal Government Less of a Player


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• Infrastructure Puzzle • Multiple Sources of Funding • Project Specific • Takes a Team to Solve


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•Local •State •Federal •Private Sector

Multiple Source Model

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Tax Increment Financing

Developer Funded

Infrastructure

Special Improvement

Districts

New Community

Authority

Local Funding Options

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Tax Increment Financing What is TIF? STEP BY STEP DESCRIPTION:

Step Description Amount 1. Base AV The total assessed value of real property prior to

enactment of TIF legislation. $1,000,000

2. Year One AV The total assessed value five years after TIF was created.

$11,000,000

3. Growth in AV The difference between the Base AV and the current AV.

$ 10,000,000

4. Tax Rate The percentage of AV (property value) that goes to taxes.

10%

5. Increment The growth in property value multiplied by the tax rate - i.e., the new PILOTs that go to the TIF fund.

10%

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TIFs The purpose of using a TIF is to generate payments in lieu of taxes (PILOTs) to pay

for public infrastructure improvements. All existing taxes are unaffected. County treasurer collects PILOTs along with real estate taxes. PILOTs are in the same amount as otherwise applicable taxes. Parcel TIF versus Incentive District TIF School District and overlapping taxing district issues, public notice and compensation TIF Agreement

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TIFs Types of Public Infrastructure Improvements that can be financed with PILOTs: More traditional governmental projects such as roads, water & sewer lines,

storm water, etc. Redevelopment projects (e.g. land acquisition, land preparation,

environmental remediation and demolition) New development projects and related infrastructure improvements, e.g. gas,

electric and other utility type services, e.g. communication, cable, etc. Projects can sometime be located on privately owned properties

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TIFS Converting TIF/PILOT Cash Flow Into Up Front Lump Sum Proceeds Available to Project Costs. TIF PILOTs result in semiannual cash flow to public body. TIF PILOT cash flows commence after completion of construction and

are paid at the time when the increased tax bills would have been paid were it not that the improvements to the real property were “exempted” under the TIF.

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TIFs Converting strategies of TIF PILOT cash flows to a lump sum up front payment available to pay project or infrastructure costs: Cash Advance: Public body can make a cash advance out of its available

funds, with the intent of reimbursing itself out of future PILOTs. State Loan: Public body might seek to obtain a state loan and use TIF

PILOTs to repay the state loan. Public body might issue obligations (such as industrial revenue bonds,

general obligation bonds or other obligations) to pay debt service in whole or in part out the PILOTs.

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TIFs Converting strategies - Continued: Developer Reimbursement. Developer funds initial costs of public

infrastructure improvements and public body reimburses developer for those costs out of TIF PILOTs, usually with interest (which may be tax-exempt in many instances.)

Conduit Financing: Conduit Issuer (i.e. a Port Authority or New Community Authority) may issue debt (often for a fee) that is backed by a pledge of TIF Pilots. Conduit issuers often require letters of credit or other forms of credit enhancement to market the debt.

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TIFs Risk Sharing Distribution Between Public Body and Developer: If a public body issues general obligation bonds in support of TIF

arrangements, there is more risk to public body. However, by assuming this risk it may enable public body to attract more desirable developers, secure better interest rates and thereby stretch TIF PILOTs farther.

A public body may reduce its financing risk by issuing special obligations supported solely by PILOTs. This may increase financing costs/decrease funds available to pay project costs.

Developer may purchase some or all of the debt or enter into a guaranty arrangement or letter of credit.

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TIFs Potential Risks of TIFs: Anticipated real property improvements are not completed or valued at

anticipated level, resulting in lower PILOTs. Real Property improvements are completed, but the improvements are

damaged or destroyed, resulting in lower PILOTs. Real Property Improvements are completed, but the property owner

encounters financial difficulty and lacks ability to make TIF PILOTs. Potential future decrease in level of assessed valuation and/or the level of real

property taxation, resulting in lower PILOTs. One solution Special Assessment Secured TIFs. Developer initiated petition.

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Development Funded Infrastructure Developer petitions for Special Assessment to be levied against real

property and SA’s are certified for collection only in the event PILOTs or other revenues are insufficient.

Developer Advances which are reimbursed with TIF or other project or district revenues.

Guaranties and letters of credit Developer purchases bonds or other obligations Release of Guaranties when project completes construction, TIF or

other revenue collections are more mature

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Special Improvement District A community, neighborhood or business district that desires public

improvements or services beyond the level currently provided may want to create a Special Improvement District (“SID”).

A SID is an area of land or district within which owners of real property pay special assessments for designated services or improvements.

Creation is initiated in one of two ways: 1. owners of at least 60% of front footage (excluding church or government property) petition appropriate legislative authority or 2. owners of at least 75% of land area within the proposed SID petition for improvements.

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Special Improvement District The petition includes a plan that details improvements or services to be

included as part of the District. District is governed by a non profit corporation and the composition of

the board of trustees is governed by statute. The levy and collection of special assessments may be used to support

debt service charges on improvements benefiting the districts. Credit issues such as discussed with TIFs and developer funded projects

are applicable.

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Energy Special Improvement District or Property Assessed Clean Energy (PACE)

An Energy Special Improvement District is a special type of SID that is created by petition of 100% of the property owners desiring to develop within the ESID a special type of improvement called a “special energy improvement project.”

Special Energy Improvement Projects include solar photovoltaic project , a solar thermal energy project, a geothermal energy project, a customer-generated energy project, or an energy efficiency improvement, whether such real or personal property is publicly or privately owned.

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Energy Special Improvement District or Property Assessed Clean Energy (PACE)

The Plan developed by the ESID board of trustees provides authority for the levy and collection of special assessments to pay costs of services and ESID projects included in the ESID’s Plan.

These special assessment are levied and collected as special assessments generally under Chapter 727 of the Revised Code and the revenues can secure or pay debt service on bonds issued to pay the costs of the special energy improvement projects.

Credit issues for the ESID include revenues derived not only from the ESID project but also from the generation of electricity or savings from implementation of energy conservation measures.

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New Community Authority A New Community Authority (NCA) is a separate public body governed

by a board of trustees that may oversee, coordinate, construct and finance public infrastructure improvements and community facilities.

NCA’s are initiated by petition signed by all of the owners of real property to be included within the boundaries of the NCA. The petition must be approved by the NCA’s “organizational board of commissioners” which is generally the board of county commissioners of the County in which the NCA is located.

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New Community Authority A NCA can levy a “community development charge” within its

boundaries to pay for its community development program if permitted by the petition and real property instruments encumbering land within its boundaries.

Community development charges can be determined on the basis of real property, assessed valuation, the income of the residents of the NCA, the profits of businesses within the NCA, a uniform fee per parcel or any combination of the foregoing.

Community development charges can be collected by the NCA or certified to the County Auditor for collection with real property taxes.

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Port Authorities as Creative Financing Tools

• No Prevailing Wage • NO PREVAILING WAGE REQUIREMENT

on construction of Port Authority facilities and revenue bond proceeds

• No prevailing wage from Section 166 state loan and grant programs

• Change allows for significant cost savings to Port Authority projects

Ohio Port Authorities

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Infrastructure Puzzle O

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Port

A

utho

riti

es Flexibility

SALES TAX SAVINGS on construction materials Attractive vehicles for public incentives Exempt from public bidding. Issues taxable, and tax exempt debt Port bond funds offer enhanced credit for qualified borrowers

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• Long-term, fixed rate financing: 30 years or more for certain projects

• Potential for higher loan to value ratio for developers: 90-100% financing

• Little or no out of pocket equity requirement for developers d

• Developer can spend its own capital on private side of project

• Use of TIF proceeds for public (and some private) improvements

• Use Severance Tax to finance infrastructure? Ohio Shale Gas Infrastructure Development Fund…leverage

Infrastructure Finance Defined

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Infrastructure Finance Defined Preserves communities’ long term borrowing

capacity for financing of core assets. Can be done through a private placement,

port authority bond fund, or public offering. Credit of the project determines ability

to borrow and how much. Examples: Sewer and water, roads, fiber

optics, site ready projects, commercial, residential, industrial.

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• Ohio Public Works Commission • State Allocation by District • Locally Driven Process • Driven by County Engineer • Awarded to Local Government

State Funding


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• Ohio Department of Transportation • TRAC Process • Mix of Jobs and Traffic Issues • On and Off Highways

State Funding


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•State of Ohio Capital Bill •Every Two Years •Bondable Projects •Broadband & Workforce

State Funding


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•Ohio Rail Development Commission •Rail Spur/Siding Program •Rail Line Acquisition Program •Rail Improvement Program

State Funding


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• Ohio Water Development Authority • Drinking Water Projects • Sewage and Water Pollution Control Projects • Storm Water Projects • Low Interest Financing • Community Assistance • Village Capital Improvement • Interim Financing • Industry Related Financing • Local Economic Development • Tax Exempt Bonds for Privately Owned Financing • Emergency Assistance • Emergency Relief • Brownfields • Alternative Stormwater Infrastructure Loan Program • Lake Erie Coastal Erosion Control Projects • Dam Safety Projects • Solid Waste Projects

State Funding


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State Funding • Jobs Ohio

• JobsOhio Revitalization Fund • Brownfield and Underutilized Sites • Clean Up and Infrastructure Funding • Job Retention or Creation


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• Ohio Development Services Agency • Manufacturing Energy Efficiency Program

• Phase I- ID energy cost savings • Phase II- development of an energy plan • Phase III- installation of the energy cost savings

measures • Phase IV- measurement energy cost savings measures

Energy Efficiency


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• Ohio Development Services Agency • Energy Loan Fund

• Low Cost Financing • 15% Energy Reduction • 1% Interest Rate for Government • 3% Interest Rate for Private Sector

Energy Efficiency


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• Department of Labor Training Grants • $5M Industry Based Training Grants • Tied to Community College • Built Around a Private Sector

Partnership

Federal Funding


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It Takes a Team •Lawyers-Lobbyist-Investment Bank-Economic Development Leaders


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Funding Monitoring Positioning Partnering Incentive

Negotiations Bond Counsel Bond Underwriting

Project Administration

Montrose Group, LLC Infrastructure Puzzle Approach


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The Montrose Group, LLC Infrastructure Puzzle Approach

Funding Monitoring. The Montrose Group, LLC always watches out for funding opportunities for clients from local, state and federal government sources.

Positioning. The Montrose Group, LLC positions clients with key public policy makers and business leaders to influence potential financing opportunities.

Partnering. The Montrose Group, LLC understands who is part of a grant/loan application is more important than what the application says, and connects partners for client’s project financing.

Incentive Negotiations. The Montrose Group, LLC negotiates local, state and federal loans, tax credits, abatements and infrastructure, workforce, Brownfield grants.

Bond Counsel. The Headen & Co., LLC serves as bond counsel to ensure clients gain the needed public finance to fund essential infrastructure.

Bond Underwriting. A number of national companies serve as the investment bank to gain the needed financing through the bond market.

Project Administration. The Montrose Group, LLC provides project grant/loan administration services that include creating mandated reports.


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Questions? • Contact Info • David Robinson

[email protected] • Ray Headen

[email protected]

mailto:[email protected]

OEDA Infrastructure Puzzle Power Point 3-3-15

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