e4 tax increment financing
TRANSCRIPT
The Art of Tax Increment Financing
John Simone President & CEO
Connecticut Main Street Center
Where Visions are Built
The Art of Tax Increment Financing
Kent Schwendy, P.E., LEED AP, CNU-APresident & CEO
Corporation for Independent Living
Hello. My name is Kent Schwendy…
…and I’m a developer.
Common view of the developer:Developer
Developer’s Minion (typ)
Town, Neighbor, or Consultant
Or, perhaps…
Really?
Corporation for Independent LivingWe are a diverse, nonprofit development organization founded in 1979 to meet the needs of individuals, nonprofit agencies, cities, and towns.
We develop and sustain housing and other community resources that provide affordability, accessibility and independence to those in need.
We create a range of housing opportunities as well as office and program space designed to enhance the quality of services provided.
We strive to create and sustain communities where everyone is not
only allowed, but welcomed.
The Gap
Simple Truths • Projects cost a certain amount
• Projects are worth a certain amount– This is what allows developers to invest/borrow
money
• If a project costs more than it’s worth, there is a “gap”
• Gap financing is the difference between being a dreamer and being a developer
TIF (and other unconventional sources) can help bridge the gap.
First Town Square, Windsor
First Town Square, Windsor
Sherwood Falls, Kensington (Berlin)
Sherwood Falls, Kensington (Berlin)
Jim Burke, AICPDirector of Economic Development
Town of Windsor
The Art of Tax Increment Financing: First Town
Square
PROJECT LOCATION
WHY WAS THIS PROJECT IMPORTANT
• Community planning goal
• Priority site
• Housing the highest and best use - best site for density
WHY WAS THIS PROJECT IMPORTANT
• Historic structure
• Environmental issues
• Large, mostly vacant structure concerns
DECISION MAKING PROCESS• Project Challenges
– Public access– Remediation– Relocation
• Project Feasibility– Market demand– Developer interest– Project size
• Measures of Assistance– Short term repayment– Ratio of public-to-private investment
DECISION MAKING (HOW TO FINANCE)
G.O. Bonds vs. Revenue Bonds
– Interest Rate Assumption 3.65%5.14%
– Issuance Costs$30k $180k
– Reserve Fund$0 $108k
– Projected Total Debt Service $995k$1,384k
DEAL STRUCTURE• Project Cost Estimate (at approval)
$9,499,000
• Anticipated Annual Tax Revenue$175,388
• Town Assistance $884,000
Remediation Grant $800,000
Amtrak Acquisition $84,000
DEAL STRUCTURE (TERMS OF AGREEMENT)
• Grant Amount: $800k• Use of Funds: Environmental Remediation• Installment Payments
• Completion Of Active Remediation $200k• C.O. For Building A $200k• C.O. For Core Bldgs B and C $200k• Final Certification By LEP $200k
• Transfer to Tax-exempt Entity or Leasing Units Prohibited
• Developer to Indemnify Town• Conditions Precedent to Signing Agreement
PROJECT SUCCESSPreserved Historic Building
Leveraged Large Private Investment
Expanded Tax Base
Increased Spendable Income
Environmental Remediation
Gained Support For Redevelopment
The Lofts At Sherwood FallsA Berlin Success Story
Christopher EdgeEconomic Development Director
Town of Berlin
Sherwood Mill2009
The Plan – Town of Berlin• The Town of Berlin in coordination with CIL
creates a Redevelopment Area Plan for the Sherwood Mill
• Objectives:– Eliminate unsafe and blighted condition of property– Stop deterioration of existing structures– Create new market-rate residential units in Berlin– Preserve physical and architectural features of mill– Eliminate hazardous environmental conditions– Reinforce and stimulate additional development in
Berlin
CIL – Their Plan• Create 71 market-rate condos within the 4-story
mill structure and 14 condo units across the street on the other portion of the Sherwood Tool property
• $18.7 million project – Clean-up cost of $2.46 million– CIL funding - $1.36 million– LOOMING GAP - $1.1 million
• Huge challenge to find financing for environmental clean-up
• Town determines it must step in to make the project a reality
The $1,100,000 Answer• Berlin used General Obligation (GO) Bonds in
order to fill the gap in the project (empowered under Chapter 130 in the CT State Statues – Tax Increment Financing)
• Town chose to use GO bond rather than TIF because few TIF precedents in CT.
• GO leads to lower interest rate• Justified the project to the Town Council as we
would a TIF – that the project would pay back the Town’s investment.
Working Together• Agreement between Berlin and CIL• $1.1 million provided by the Town of Berlin• Four installments of $275,000 each
1. Environmental clean-up and building permit for 24 units
2. Demolition of 1 Main Street and COs for 24 units3. COs on 30 more units, inside and outside work
done4. Completion of 14 units across the street from the
mill and the Environmental Land Use Restriction filed with DEEP
To date, CIL has accomplished steps 1 through 3.
Work Underway
Late 2010
“Our recent experience in Windsor has encouraged us to become involved in
this project. We have received tremendous support and cooperation
from the Town of Berlin and look forward to working with the Town on
this exciting project to convert an abandoned factory into high quality
homeownership opportunities,” stated Martin Legault, President and CEO of
CIL.
Why Did Berlin Choose This Route?• Important to the Town’s history and future• Other mills in Connecticut had not yet been
redeveloped due to fires time and weather all significantly complicating the redevelopment process
• TRUST between CIL and Berlin’s Leadership• Windsor was a model – Jim Burke • Part of the project – a financial partner with CIL• Long-term payback in tax revenue to the Town of
Berlin significantly exceeds the $1.1 million investment
• Cost share with DECD - $550,000 in brownfield monies
Completed and Decked Out
Unit
The Lofts at Sherwood Falls - 2015• Property (all units combined) assessed at $9.7
million• Annual taxes of approximately $300,000 • Mill building turned into condos - all but 1 sold• Over 100 residents now call the Lofts home
• CIL has been awarded as our Developer of the Year in:– 2012 (Sherwood Falls)– 2015 (Depot Crossing)
The Lofts @ Sherwood Falls An Amazing Transformation By Working Together
Questions, Answers, and Discussion