BMLPA INNOVATIVE BUSINESS AND DEVELOPMENT FINANCING

Transcription

1 INNOVATIVE BUSINESS AND DEVELOPMENT FINANCING STATE AND FEDERAL NEW MARKETS TAX CREDITS

2 Introduction

3 Important Highlights Economic Boost to Qualified Projects of more than twenty percent (20%) of Project Costs Broad Uses for Operating Capital and Bricks and Mortar Start-ups, early stage companies, established businesses, and not-forprofit entities are all eligible Targeted States and High Quality Projects will be in High Demand Structuring often can assist an initially unqualified project meet requirements Use of One Day Bridge Loans/Bridge Equity and State Programs

4 Background and History Community Renewal Tax Relief Act of 2000 Section 45D of the Code Bipartisan Support First Applications for credit allocation in 2002 First lending in 2003

5 First Decade Early Days = Wild West Major Metropolitan Market Focus Approximately $40 Billion in Allocation Financial Institution Influence

6 Targeted States/Territories Alabama, Arkansas, Florida, Georgia, Idaho, Kansas, Nevada, Tennessee, Texas, West Virginia, and U.S. Islands and Territories

7 Who are the players? Tax Credit Investors Community Development Entities (tax credit conduits) Qualified Borrowers Leverage Lenders

8 World of Acronyms NMTC = New Markets Tax Credits CDFI = Community Development Financial Institutions Fund (Treasury Department) (Q)CDE = (Qualified) Community Development Entity QALICB = Qualified Active Low-Income Community Business QLICI = Qualified Low-Income Community Investment QEI = Qualified Equity Investment NQFP = Non-Qualified Financial Property LIC = Low-Income Community QCT = Qualified Census Tract LIP = Low-Income Person

9 Purpose of NMTC Financing Infusion of Capital into Low-Income Communities Increases Project Economic Viability Promote lending in areas of traditional difficulty Allow for flexible and creative lending structures Assists Projects in filling gaps in capital stacks The greatest untapped markets in the world are right here at home, in our distressed communities - Vice-President Al Gore

10 What if I have no need for tax credits? Tax exempt entities, companies burning through NOLs and start-ups all benefit Tax credits flow upstream to Tax Credit Investors purchasing tax credits for a discount 39% federal income tax credit payable over 7 years (5% for first three years; 6% thereafter) Benefit arising from NMTC Equity flows downstream to Project

11 How CDEs Receive Credits Re-authorization of program Application and allocation by CDFI in highly competitive process Credit Availability Cycles Latest Allocation June 2014 Future Allocation Rounds

12 How NMTC Financing Impacts Projects Approximately twenty percent (20%) net benefit of Project costs The Net Benefit Line of Credit Illustration Operating and Expansion Capital: Soft and Hard Capital Impact on Debt Financing and Loan to Value

13 Dual Beauty Pageants Projects CDEs

14 Attractive Project Features Community Impact Timing Financing, Equity or Balance Sheet Assets in Place Introduction to Concept of Leverage Lender Role in NMTC Leveraged Transaction Model

15 Basic Qualification Low-income Community Census Tract Severe Distress vs. Qualified Primary and Secondary Criteria Average Median Family Income/Poverty Rate/Unemployment Rate Not qualified: Residential Rental Housing consisting of over 80 percent revenue from residential tenants Enumerated list of sin businesses Farms Raw land with no plans for development

16 Basic Qualification Gross Assets Tangible Assets Services NQFP Collectibles Reasonable Expectations

17 Advanced Qualification Targeted Population Regulations LIPs: Generally 80% of Area Median Income Gross Revenue (50%), Ownership (50%), or Employees (40%) Census Tract cannot be over 120% of Area Median Family Income

18 Risk Factors Complexity Recapture/Redeployment Commercial Loan Default Headline Risk

19 State Program Case Study Florida, Alabama, Mississippi, Louisiana, Arkansas, Kentucky, Illinois, Ohio, Maine, Nebraska, Utah, Nevada, Oregon, and Alaska

20 State of Florida New Markets Development Program Act Similar to Federal Program Twelve to fifteen percent net benefit of project costs Qualifying Projects c stack or twin with federal program of upwards of 30 percent net benefit Part XIII of Chapter 288, Florida Statutes Department of Economic Opportunity Less Competitive Key Distinctions: Operating Business Focus Restriction on rentals or lease Wage requirement (115% of federal poverty guidelines for a family of four) $10 MM Cap

21 Complementary and Alternative Financing Programs Super charge NMTC financing through twinning with HTC, State NMTC, ITC, PTC, and R&D tax credits No twinning or use with LIHTC EB-5 Program Governmental Grants and Public Support Conduit Issuance of Tax Exempt Bonds

22 PROJECT DISCUSSION FORUM A FOCUS ON QUALIFIED PROJECT FINANCING

23 Project Examples Community centers; Healthcare facilities; Grocery stores; Manufacturing facilities; Packing plants; Processing facilities; Job training centers; Economic development mixed use facilities; Commercial office buildings/improvements; Shelters; Child development centers; Major transportation hubs or infrastructure; Hotels; Sporting facilities; Restaurants; Small business growth; Renewable product manufacturers; Ship building and ship repair concerns; Aquariums; Museums; Convention facilities; Parking garages; Rural job creation oriented businesses; And food banks and/or food resource centers

24 Projects in Florida and Qualify Projects Past Examples of Quality Projects Mapping Exercise

25 Investing in Tax Credits Advantages of an affiliate investing in the federal income tax credits of a NMTC financing Increased net benefit or subsidy"

26 Project Intake Form Intake and Discuss Next Steps for Attracting Credit Financing

27 NMTC Funding Cycles Federal States

28 NMTC FINANCING MODEL AND CASE STUDY WORKSHOP A FOCUS ON QUALIFIED PROJECT FINANCING

29 The Leveraged Model IRS Notice Most common model in use today Risk mitigation and allows current unwind mechanism Self Investing

30 Upper Tier of Transaction Tax Credit Investor Leverage Lender $1,250,000 Tax Credit Equity $3,750,000 Leverage Loan Interest Only 7 Years Investment Fund

31 CDE Level Fund $5,000,000 QEI Sub-CDE

32 QLICI Loans Sub-CDE $1,250,000 QLICI A Note Interest Only 7 Years $3,750,000 QLICI B Note Interest Only 7 Years QALICB

33 Year 7 Unwind Put Option Call Option COD Income

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35 Questions? James O. Lang Baynard, McLeod & Lang, P.A (Tampa) (St. Petersburg) (Mobile) Mark G. Lawson Mark G. Lawson, P.A. (850) (850) (facsimile) Post Office Box Tallahassee, Florida