community reinvestment area€¦ · the cra award process. 5. property tax breakdown....
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COMMUNITY REINVESTMENT AREA
101COMMERCIAL CRA
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COMMUNITY REINVESTMENT AREAIndustrial, O�ce, Commercial, 4+ Residential Units
RESIDENTIAL CRA1–3 Residential Units
WHAT’S THE DIFFERENCE?
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HAVE A PLAN TO DEVELOP VACANT, BLIGHTED, UNDERUTILIZED PROPERTY?
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TAX INCREMENTFINANCING
COMMERCIALCRA
JOB CREATIONTAX CREDIT
RESIDENTIALCRA
LOANPROGRAMS
COMMUNITYCONNECTION
TECHNICAL ASSISTANCE &CITY FACILITATION
COMPETITIVEAFFORDABLE
HOUSING
NBDASSISTANCE
FEDERAL FUNDSMANAGEMENT
HOW CAN DCED HELP?
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WHAT EXACTLY IS AN “ABATEMENT”?
Abatements reduce or eliminate the property tax on the INCREASED VALUE created by an investment for a DEFINED PERIOD OF TIME not to exceed 15 years.
See Ohio Revised Code Sections 3735.65-3735.70
Commercial CRAs are reactive, not proactive. The State of Ohio and Cincinnati City Council policies direct the
Department of Community & Economic Development on the CRA award process.
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PROPERTY TAX BREAKDOWN
PRE-IMPROVEMENTTAX PAYMENT
NEW TAX LIABILITYABATED TAXES
VOLUNTARY TAX INCENTIVECONTRIBUTION AGREEMENT (VTICA)
SCHOOL BOARD
15%
25%
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PROPERTY TAX BREAKDOWN
PRE-IMPROVEMENTTAX PAYMENT
NEW TAX LIABILITYABATED TAXES
VOLUNTARY TAX INCENTIVECONTRIBUTION AGREEMENT (VTICA)
SCHOOL BOARD
15%
25%
PRE-IMPROVEMENTTAX PAYMENT
NEW TAX LIABILITY
ABATED TAXES
VOLUNTARY TAX INCENTIVECONTRIBUTION AGREEMENT (VTICA)
SCHOOL BOARD
15%
25%
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• Reduce current taxes being paid on a piece of property
• Require the City, County or Schools to pay money to a developer or property owner
• Last forever
• Have any value unless a developer/property owner invests money to build something new or refurbish an existing building
ABATEMENTS DO NOT:
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PROFORMA
REVENUE
YEAR 1
REVENUE
ADDITIONAL INCOME
$144,000.00
$1,100.00
TOTAL REVENUE $137,900.00
EXPENSES
MANAGEMENT $54,000.00
YEAR 2
$146,8800.00
$1,122.00
$140,658.00
$55,620.00
YEAR 3
$149,817.60
$1,144.44
$143,471.16
$57,288.60
YEAR 4
$152,813.95
$1,167.33
$146,340.58
$59,007.26
YEAR 5
$155,870.23
$1,190.68
$149,267.39
$60,777.48
YEAR 6
$158,987.64
$1,214.49
$152,252.74
$62,600.80
YEAR 7
$162,167.39
$1,238.78
$155,297.80
$64,478.82
YEAR 8
$165,410.74
$1,263.55
$158,403.75
$66,413.19
YEAR 9
$168,718.95
$1,288.83
$161,571.83
$68,405.58
YEAR 10
$172,093.33
$1,314.60
$164,803.27
$70,457.75
INSURANCE & UTILITIES $11,000.00 $11,330.00 $11,669.90 $12,020.00 $12,380.60 $12,752.01 $13,134.58 $13,528.61 $13,934.47 $14,352.51
TAXES $15,198.75 $15,654.71 $16,124.35 $16,608.08 $17,106.33 $17,619.52 $18,148.10 $18,692.55 $19,253.32 $19,830.92
TOTAL EXPENSES $80,198.75 $82,604.71 $85,082.85 $87,635.34 $90,264.40 $92,972.33 $95,761.50 $98,634.35 $101,593.38 $104,641.18
NOI $57,701.25 $58,053.29 $58,388.31 $58,705.24 $59,003.00 $59,280.41 $59,536.30 $59,769.41 $59,978.45 $60,162.09
RESERVES 0 0 $875.82 $880.58 $885.04 $889.21 $893.04 $896.54 $899.68 $902.43
NOI LESS RESERVES $57,701.25 $58,053.29 $57,512.48 $57,824.67 $58,117.95 $58,391.20 $58,643.25 $58,872.87 $59,078.77 $59,259.66
DEBT SERVICE $71,408.84 $69,408.84 $67,408.84 $65,408.84 $63,408.84 $61,408.84 $59,408.84 $57,408.84 $55,408.84 $53,408.84
CASH FLOW. ($13,707.59) ($11,355.55) ($9,896.36) ($7,584.17) ($5,290.89) ($3,017.64) ($765.59) $1,464.03 $3,669.93 $5,850.82
ACQUISITION
CONSTRUCTION
$80,000.00
$600,000.00
CONTINGENCY
TENANT IMPROVEMENTS
$38,760.00
$7,269.00
PERMITS
ARCHITECTURE & ENGINEERING
$7,592.00
$14,600.00
DEVELOPER FEE
MISC.
$25,000.00
$12,000.00
TOTAL USES $785,221.00
DEBT
EQUITY
TOTAL SOURCES
$628,176.80
$157,044.20
$785,221.00
SOURCES
USES
PROFORMA
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FINDING PROPERTY TAX INFORMATION
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HOW ARE PROPERTY TAXES CALCULATED?
Valuation of Property
Tax Statement/Collection
Millage, Levies, Assessment
TAX BILLTreasurer
TAX CALCULATIONAuditor
PROPERTY VALUE ASSESSMENTAuditor
“The new values are only one part of the taxing process. Taxes are based on the levies (millage) passed by the taxpayer multiplied by the assessed value (35% of the fair market value).” -Hamilton County Auditor’s website
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PROPERTY TAX BREAKDOWN
Fair Market Value $100,000Assessed Value $35,000
Tax Bill $3,272
Fair Market Value $600,000Assessed Value $175,000
Tax Bill $19,631
$1MInvestment
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PROPERTY TAX BREAKDOWN Example
$3,272 PAID TO COUNTY
$4,090 NEW REVENUE PAIDTO SCHOOL BOARD
$2,454 NEW REVENUE PAIDTO NONPROFIT PROGRAMADMINISTRATOR
$9,815 FORGONEABATED TAXES(NET 60%)
VOLUNTARY TAX INCENTIVECONTRIBUTION AGREEMENT (VTICA)
SCHOOL BOARD
FULLYCONTRIBUTING
YEARS 1–10 YEARS 11 +
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CONSTRUCTIONCOMMENCEMENT
APPLICATIONRECEIVED
Applicant provides completedapplication & supporting
documents to DCED for review.Process includes $1,250 non-refundable
application fee to DCED & $750 fee to ODSA.
APPLICATIONREVIEWED
Staff will review all applicationmaterials & review City Council’s
CRA policies.
INCENTIVE NEGOTIATIONDCED will negotiate with applicants
based on Council’s CRA policies.Once an offer is approved by DCED,
staff will inform applicant ofthe incentive the department
intends to propose to City Council.
LEGAL AGREEMENTS& ORDINANCE
Upon agreement of terms, DCED works with the City’sLaw Department to draft an ordinance to provide
to the City Manager or approval & to City Council for a vote.
COUNCILAPPROVAL
Once the City Manager approvesthe offer, the incentive package is
presented to City Council for a vote.This process generally takes about
four weeks from introduction to passage.
COMMERCIAL CRA TIMELINE
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COMMERCIAL CRA TIMELINE Application Received
{00165030-1} Pg. 1City of Cincinnati -- Revised 9/18
APPLICATION FOR COMMERCIAL TAX ABATEMENT
CITY OF CINCINNATI COMMUNITY REINVESTMENT AREA
COMMERCIAL, INDUSTRIAL, MIXED-USE, MULTI-UNIT (4+ UNITS)
Note: After review and recommendation by the Department of Community & Economic Development, all applications must be reviewed and approved by the City of Cincinnati Council before commencing construction. Any projects that start construction before City Council approval will be INELIGIBLE for a Commercial CRA Tax Abatement.
The City requires that the Applicant provide the following documentation with this application: o A detailed breakdown of all Sources and Uses of Funds for the project (templates are available upon
request). A minimum of $40,000 in costs must be documented.o Supporting documentation for ALL sources of funding for the project. For instance, if a bank loan will
be obtained, a letter or term sheet from the bank specifying, among other things, the loan amount and term. A contact person must be identified for each funding source.
o A post-construction operating pro forma for the building and cash flow analysis. NOTE: Please submit a copy of the pro forma used to apply for any bank financing as required and a contact person considering the application for bank financing.
o A $1,250 application fee in the form of check, money order, or cashier’s check payable to “City of Cincinnati”. Note the application fee is nonrefundable.
o Corporate Resolution, Articles of Incorporation, and an Operating/Partnership Agreement for entity applying for abatement showing who is authorized to sign for the organization
o Copy of the Deed or other Legal Description of the Propertyo A copy of the proposed construction plans/rendering/etc.o Estimated pre-construction, and post construction real estate taxeso If this project is seeking LEED or Living Building Challenge (Full, Net Zero, or Petal [must include
“Energy Petal”]) Certification, provide confirmation of registration
SECTION I – Applicant/Project Information
Applicant Information:Legal Name of Property Owner Applying for Abatement: ____________________________
Form of business enterprise _____________________________________ (corporation, partnership,
proprietorship, LLC, non-profit, or other)
Is the Applicant affiliated with a larger developer or development entity? (Yes / No). If Yes, please provide the
name of this developer or development entity: ____________________________
Legal Address of real property owner: ____________________________
Federal Tax ID #(s): ___________________________
Applicant Contact Person: ___________________________________Title: _______________________
Phone:_________________ Main Contact email address: ______________________
Address of subject property_____________________________________________ Zip: 452_____
Hamilton County Auditor Parcel ID#: ____ - _______ - _______ (see page 3 if additional space needed
for multiple addresses or parcel IDs)
City of Cincinnati Neighborhood:
Is any other financial assistance being requested from the City of Cincinnati for this project? _______
If yes, please indicate the Development Analyst you are working with: __________________________
STAFF EVALUATES & VERIFIES:
Sources & Uses of Funds
Supporting Documents for ALL Sources of Funding
Post-construction Operating Proforma & Cash Flow Analysis
Application Fee
Corporate Resolution, Articles of Incorporation, and an Operating/Partnership Agreement
Copy of the Deed
Proposed Construction Plans/Rendering
Estimated Pre-construction, and Post-construction Real Estate Taxes
Confirmation of Registration for LEED or Living Building Challenge (if needed)
APPLICATIONRECEIVED
CONSTRUCTIONCOMMENCEMENT
APPLICATIONREVIEWED
INCENTIVE NEGOTIATION
LEGAL AGREEMENTS& ORDINANCE
COUNCILAPPROVAL
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COMMERCIAL CRA TIMELINE Application Reviewed
APPLICATIONRECEIVED
CONSTRUCTIONCOMMENCEMENT
APPLICATIONREVIEWED
INCENTIVE NEGOTIATION
LEGAL AGREEMENTS& ORDINANCE
COUNCILAPPROVAL
STATE LOCALOhio Revised Code 3735.65–3735.70
City Council Ordinance No.274-2017, 275-2017, & 339-2018
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COMMERCIAL CRA TIMELINE Application Reviewed
APPLICATIONRECEIVED
CONSTRUCTIONCOMMENCEMENT
APPLICATIONREVIEWED
INCENTIVE NEGOTIATION
LEGAL AGREEMENTS& ORDINANCE
COUNCILAPPROVAL
{00165030-1} Pg. 8 City of Cincinnati -- Revised 9/18
CITY OF CINCINNATI COMMERCIAL TAX ABATEMENT TERMS Applications for projects located within the Streetcar VTICA Area (as depicted on the following page) are eligible for a net abatement of up to 75% (less any VTICA contributions, if any) for up to 15 years. Such abatement will be determined based upon job creation, VTICA contributions, project need and other factors that the Department of Community and Economic Development may consider. If the project will be certified LEED Silver, Gold or Platinum or will obtain Living Building Challenge (LBC) Net Zero, Full or Petal (must be “Energy Petal”), the project will not be subject to gap financing analysis. Applications for projects located outside the Streetcar VTICA Area will be scored in accordance with the below point values: “But For” Analysis – 0-3 points (determined by Department of Community and Economic Development Non-LEED, LEED Certified, or Non-LBC Qualified – 0 points LEED Silver – 2 points for new construction; 3 points for renovation LEED Gold/LBC Net Zero – 3 points for new construction; 4 points for renovation LEED Platinum/LBC Full or Petal (must include “Energy Petal”) – 5 points for new construction; 6 points for renovation VTICA – 8 points for 15% VTICA contribution; 1 point for any payment up to but excluding 15% VTICA contribution
Points Term (years) Net Rate*
0 3 25% 1 4 30% 2 5 35% 3 5 40% 4 6 40% 5 6 45% 6 7 45% 7 7 50% 8 8 60% 9 9 60%
10 11 60% 11 12 60% 12 13 60% 13 14 60% 14 15 60% 15 15 60% 16 15 60% 17 15 60%
* Abatement applies to improved value only. The Net Rate of the abatement takes into account Cincinnati Public Schools PILOT Agreement pursuant to which the Applicant must contribute 25% of the gross amount of the abatement, as well as VTICA contributions, if any.
GOVERNING RULES & REGULATIONS
• Environmental, LEED
• Neighborhood
• Financial Need
• Historic, New Construction
• VTICA/No VTICA
• Community Support
NEIGHBORHOOD SCORE CARD
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HAVE A PLAN TO DEVELOP VACANT, BLIGHTED, UNDERUTILIZED PROPERTY?
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$ GAPDEVELOPERFINANCING
(Equity + Bank + Other)
PROJECTCOST
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PRE-DEVELOPMENT PROCESS Multi-Year, “At-Risk”
$3,272 PAID TO COUNTY
$4,090 NEW REVENUE PAIDTO SCHOOL BOARD
$2,454 NEW REVENUE PAIDTO NONPROFIT PROGRAMADMINISTRATOR
$9,815 FORGONEABATED TAXES(NET 60%)
VOLUNTARY TAX INCENTIVECONTRIBUTION AGREEMENT (VTICA)
SCHOOL BOARD
FULLYCONTRIBUTING
YEARS 1–10 YEARS 11 +
Sourcing Capital is a critical priority throughout pre-development. 20
PROFORMA
REVENUE
YEAR 1
REVENUE
ADDITIONAL INCOME
$144,000.00
$1,100.00
TOTAL REVENUE $137,900.00
EXPENSES
MANAGEMENT $54,000.00
YEAR 2
$146,8800.00
$1,122.00
$140,658.00
$55,620.00
YEAR 3
$149,817.60
$1,144.44
$143,471.16
$57,288.60
YEAR 4
$152,813.95
$1,167.33
$146,340.58
$59,007.26
YEAR 5
$155,870.23
$1,190.68
$149,267.39
$60,777.48
YEAR 6
$158,987.64
$1,214.49
$152,252.74
$62,600.80
YEAR 7
$162,167.39
$1,238.78
$155,297.80
$64,478.82
YEAR 8
$165,410.74
$1,263.55
$158,403.75
$66,413.19
YEAR 9
$168,718.95
$1,288.83
$161,571.83
$68,405.58
YEAR 10
$172,093.33
$1,314.60
$164,803.27
$70,457.75
INSURANCE & UTILITIES $11,000.00 $11,330.00 $11,669.90 $12,020.00 $12,380.60 $12,752.01 $13,134.58 $13,528.61 $13,934.47 $14,352.51
TAXES $15,198.75 $15,654.71 $16,124.35 $16,608.08 $17,106.33 $17,619.52 $18,148.10 $18,692.55 $19,253.32 $19,830.92
TOTAL EXPENSES $80,198.75 $82,604.71 $85,082.85 $87,635.34 $90,264.40 $92,972.33 $95,761.50 $98,634.35 $101,593.38 $104,641.18
NOI $57,701.25 $58,053.29 $58,388.31 $58,705.24 $59,003.00 $59,280.41 $59,536.30 $59,769.41 $59,978.45 $60,162.09
RESERVES 0 0 $875.82 $880.58 $885.04 $889.21 $893.04 $896.54 $899.68 $902.43
NOI LESS RESERVES $57,701.25 $58,053.29 $57,512.48 $57,824.67 $58,117.95 $58,391.20 $58,643.25 $58,872.87 $59,078.77 $59,259.66
DEBT SERVICE $71,408.84 $69,408.84 $67,408.84 $65,408.84 $63,408.84 $61,408.84 $59,408.84 $57,408.84 $55,408.84 $53,408.84
CASH FLOW. ($13,707.59) ($11,355.55) ($9,896.36) ($7,584.17) ($5,290.89) ($3,017.64) ($765.59) $1,464.03 $3,669.93 $5,850.82
ACQUISITION
CONSTRUCTION
$80,000.00
$600,000.00
CONTINGENCY
TENANT IMPROVEMENTS
$38,760.00
$7,269.00
PERMITS
ARCHITECTURE & ENGINEERING
$7,592.00
$14,600.00
DEVELOPER FEE
MISC.
$25,000.00
$12,000.00
TOTAL USES $785,221.00
DEBT
EQUITY
TOTAL SOURCES
$628,176.80
$157,044.20
$785,221.00
SOURCES
USES
PROFORMA
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PRE-DEVELOPMENT PROCESS
$$$$ $$
$$
$$
$$
$$ $$
$$ $$
SITE SELECTION
DUE DILIGENCE FEASIBILITY STUDY REQUIRED REPORTS
PROFORMA
PURCHASE CONTRACT
SECURING FINANCING
HIRINGARCHITECTS, ENGINEERS, CONSULTANTS
COMMUNITY OUTREACH& COMMUNICATIONS
MUNICIPALITY SUBMITTAL& REVIEW
CITY PROCESSZONING, PLANNING, UTILITY APPROVALS
PRE-CONSTRUCTIONCOORDINATION
CONSTRUCTION DRAWING/PLAN SUBMITTAL
FINALIZE BUDGET
$$$$ $$
$$
$$
$$
$$ $$
$$ $$
SITE SELECTION
DUE DILIGENCE FEASIBILITY STUDY REQUIRED REPORTS
PROFORMA
PURCHASE CONTRACT
SECURING FINANCING(SHORT TERM > LONG TERM)
$$$$ $$$$$$ $$
SECURING FINANCINGSECURING FINANCING(SHORT TERM > LONG TERM)
ENTER CRA PROCESS
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PROJECT FEATURES Intake to DCED
Example: Nation Restaurant & Bar (Westwood)
• Small
• Vacant
• Blighted
• Distressed
Example: Burke Expansion (West End)
CHARACTERISTICS:• New Construction
• Transformative
• High-competition Factors
CHARACTERISTICS:
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CONSIDERING MARKET CONDITIONSCORRECTING MARKET INCENTIVIZING
STANDARD COMMERCIAL
HIGH RISE
INDUSTRIAL
AFFORDABLE HOUSING
MARKET
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NEHEMIAH MANUFACTURING LOWER PRICE HILL
RECENTLY COMPLETED
50 New Jobs
$12M Total Investment
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CINCINNATI SCHOLAR HOUSE WALNUT HILLS
UNDER CONSTRUCTION
44 Affordable Residential Units
$12.8M Total Investment
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CROSLEY BUILDING CAMP WASHINGTON
CANDIDATE PROJECT
331,958 sq ft
Industrial History
Residential & Commercial Real Estate Unproven in Neighborhood
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COMMERCIAL CRA
QUESTIONS?
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