Creative Finance Strategies

Transcription

1 Creative Finance Strategies Mary Tiger Chief Operating Officer

2 Creative Finance Strategies

3 Finding the potential in creative finance Four auditions Review by expert panel You vote

4 MINI BONDS

5 The smaller they are, the better they are

6 Better Denver Capital Campaign $12 of $550 million campaign financed through 2014 mini bond sale Available only to Colorado residents Bond sales limited to $20,000 (40 bonds) $6 million sold at 4.38% with 9 year maturity; $6 million sold at 4.89% with a 14 year maturity Used for parks and cultural resources

7 Denver Mini Bonds Since when did government bonds get soldout like they were rock-star concert tickets, or seats at a top sporting event?..i hope they get a chance to do more offerings like this. It is a good way to get folks literally invested in their own govt.

8 Denver Mini Bonds Since when did government bonds get soldout like they were rock-star concert tickets, or seats at a top sporting event?..i hope they get a chance to do more offerings like this. It is a good way to get folks literally invested in their own govt.

9 Many Mini Bonds? + Increase public engagement and awareness

10 Many Mini Bonds? - Record keeping (1,000 public bond holders in Colorado) In NC? Yes, but will still require the approval of the LGC

11 Advertising to Sales Ratio Rule of thumb: 8-10% of projected sales* *Forbes Magazine

12 On a scale of 1-5, how well would Mini Bonds work for you? 1. Very well 2. Pretty well 3. Maybe so, maybe not 4. Not well 5. Dreadfully 15% 44% 24% 12% 6% Mean =

13 SYNTHETIC TIFS

14 Problem The City of Vanderbilt Point has a busy intersection at Biltmore Blvd. & Grove Park Way, but no real business growth there. In polling several local businesses who poked around the of BB & GPW, they all identified flooding, road improvements, & lack of W/S extensions as impediments to business growth. 2 innovative ways to finance: Synthetic TIF (SynTIF) Special Assessment Revenue Bonds (SARBs)

15 Synthetic TIF (SynTIF) What is TIF? Different name in NC (Project Development Fin.) Define an area Build a public asset Pay back with increment What is SynTIF? My short definition: Using another financing mechanism to achieve the ends of a TIF

16 SynTIF: How does it work? 1. Identify the public improvement that may spark private development 2. Devise a financing plan and obtain financing In planning, identify private development expected to occur A SynTIF doesn t create funds by itself it s a financing technique to achieve an end. 3. Identify a repayment plan to repay debt service 4. Monitor increases in revenues around improvement Fleshed out more on our 2/9/15 blog

17 Why Use SynTIF? Why use it? Less formal requirements than TIF No size restrictions TIF is only for Cities + Counties Uses more common 160A-20 Installment or General Obligation Bonds The Local Government Commission views installment differently than TIF: Roanoke Rapids bonds are still good, but public reception is mixed.

18 SynTIF Water/Stormwater Apps. Synthetic TIF can be used for: Stormwater Improvements Water Treatment Plants Water/Sewer Line Extensions Just about any public improvement But may need to be part of another project Only w/ installment financing Essentiality principle of collateral May decrease cost of debt to join w/ Town Hall

19 Chapel Hill SynTIF Example In early 2014, Chapel Hill wanted to improve the Ephesus-Fordham (E4) intersection Improvements needed to be made to: Roads ~1/3 of E4 area in 100-year floodplain Municipal Service District created to provide stormwater revenue stream (operation + maint) Projections for improvements made based on conversations with developers.

20 SynTIF: Example of Increment

21 Any catch? Using installment creates security interest on a local government asset. Non-appropriation clause, but practically If development doesn t occur, bonds still come due.

22 One More Point: Chapel Hill is using a multi-faceted financing plan Part was installment-financing Combined with Town Hall Financing Also using 2/3 bonds What are 2/3 bonds? G.S (f) Unsung heroes of public finance Non-voted G.O. bonds 2/3 of G.O. amount reduced (calc. each year). Have to use in year immediately following reduction

23 On a scale of 1-5, how well would SynTIFs work for you? 1. Very well 2. Pretty well 3. Maybe so, maybe not 4. Not well 5. Dreadfully 38% 32% 15% 15% Mean = %

24 Special Assessments Generally Charges levied against property to pay for public infrastructure projects that benefit that property. Lien on property > all liens except tax lien Pay simultaneously w/ property taxes BUT Not a generally applicable property tax targeted toward a specific property benefitted by the public improvement

25 Special Assessments: Classic + New Classic Special Assessments Small # of Statutory Purposes Generally No Petition Requirement (except streets and sidewalks) Amount of assessment must be based on one or more statutory bases Unit must follow detailed statutory procedures before imposing assessments Unit may not pledge assessment revenue as security for loans Unit must complete public improvement projects before assessments may be imposed Assessments often are paid in up to 10 yearly installments Thanks Kara Millonzi for giving base of this slide + next. New Special Assessments Many Statutory Purposes Petition Requirement Assessment method within discretion of governing board, but must relate to benefit to properties assessed Unit must follow detailed statutory procedures before imposing assessments Unit may borrow money to front the costs of capital projects and may pledge assessment revenue as security for loans Unit may impose assessment before the capital projects are complete, based on estimated costs Assessments may be paid in up to 30 yearly installments Authority EXPIRES July 2015

26 New Special Assessment Bond Process 1. Unit negotiates deal with private developer 2. Unit works with LGC, bond counsel, and financial advisors to determine feasibility of financing and prepare for borrowing (LGC must approve borrowing) 3. Unit receives petition to impose assessments to fund certain public improvements 4. Unit determines scope and estimated cost of project 5. Board adopts preliminary assessment resolution 6. Unit publishes notice 7. Board holds public hearing 8. Board adopts final assessment resolution 9. Unit prepares preliminary assessment roll 10. Unit publishes notice of assessment roll 11. Board holds public hearing 12. Board confirms assessment roll assessments become lien on property assessed 13. Unit borrows money and completes project 14. Unit uses assessment payments to make debt service payments

27 Town of Hillsborough

28 Waterstone Details $4.63 million at 7.75% for 10-year term Funds will be used to establish parks and open space, construct and improve water, wastewater and drainage facilities, construct and improve streets, roads, and rights-of-way in the assessment district Assessments totaled $6.2 million on properties within 210 acre area, with payments over 10.5 years Shameless Self Promotion: Waterstone + 1 year & CED Blog Three-Part Series

29 Another Water/Stormwater Example? Private Dam, needs improvement because lake of lakefront homes is bone dry. Homeowners can t or don t want to obtain financing; town doesn t want to own dam. Town can step in w/ SARBs Can be privately bid, built. Assessments are levied by local government. DOES NOT pledge owned dam as collateral. DOES NOT get paid from property taxes.

30 Downsides? May have higher transaction costs + rates Amount depends on complexity & # of SARBs Also relying on development occurring + assessment revenue stream being paid, so same homework as SynTIF applies.

31 On a scale of 1-5, how well would SARBs work for you? 1. Very well 2. Pretty well 3. Maybe so, maybe not 4. Not well 5. Dreadfully 39% 36% 11% 11% Mean = %

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33 The key reasons DC Water chose to issue century bonds included: Asset-Liability Matching: century bonds permit the Authority to match its long-lived assets and liabilities.. Intergenerational Equity and Fairness: century bonds spread the costs of the project more affordably and fairly to those who will benefit over the next 100 years. Committed, Long-Term, Low-Cost Capital: century bonds allow DC Water to take advantage of historically low interest rates and to lock-in funding costs for a very long-lived asset. Source:

34 On a scale of 1-5, how well would Century Bonds work for you? 1. Very well 2. Pretty well 3. Maybe so, maybe not 4. Not well 5. Dreadfully 34% 23% 26% 11% 6% Mean =