San Francisco Los Angeles San Diego New York Chicago Phoenix Richmond Annapolis Big Bear

TADs in Tough Times

Ken Powell April 11, 2011

2

l  Allow locality to obtain needed infrastructure faster and at reduced cost

l  Add burden (costs) to property, but should enhance value

l  Allow developer / landowner to enhance project / area potential by having higher level of infrastructure in place earlier

l  Place responsibility for venture’s success on developer / landowner

l  Enhance marketability of bonds and allow more competitive pricing and timing flexibility

TIF with Backup Assessments

3

Sample TIF Bond Transaction

S O U R C E S :

P a r A m o u n t o f B o n d s 1 1 ,8 8 2 ,0 0 0$ E s tim a te d In te re s t o n P ro je c t F u n d 6 8 ,4 1 1 T o ta l S o u rc e s 1 1 ,9 5 0 ,4 1 1$

U S E S :

C o n s tru c tio n F u n d 8 ,5 0 0 ,0 0 0$ D e b t S e rv ic e R e se rv e F u n d 1 ,1 8 8 ,2 0 0 C a p ita l iz e d In te re s t 1 ,7 1 4 ,3 8 9 C o s t o f Is su a n c e 2 5 0 ,0 0 0 U n d e rw rite r 's D isc o u n t 2 3 7 ,6 4 0 In i tia l A d m in is tra tiv e E x p e n se s 6 0 ,0 0 0 A d d itio n a l P ro c e e d s 1 8 2

T o ta l U se s 1 1 ,9 5 0 ,4 1 1$

B o n d s A ssu m p tio n s :

D e liv e ry D a te 9 /1 /2 0 1 0C a p ita l iz e d In te re s t th ro u g h 9 /1 /2 0 1 2B o n d C o u p o n R a te 7 .5 0 %E s tim a te d R e in v e s tm e n t R a te s . P ro je c t F u n d (1 2 m o n th in v e s tm e n t p e r io d ) 1 .5 0 % C a p ita lize d In te re s t A c c o u n t 1 .5 0 % D e b t S e rv ic e R e se rv e F u n d 1 .5 0 %

P re lim in a ry S o u rce s an d U ses o f F u n d s

4

Sample TIF Bond Transaction

Locality'sAssessment Bond Less: Total FY2009-10 Real Property

Year Final Year Mkt. Value Sq. Ft. Sq. Ft. Total Base Year 2009 Incremental Real Property Available for IncrementalBeginning Tax Due Ending Per Sq. Ft. (Ann.) (Cum.) Market Value Market Value Value Tax Rate Debt Service Taxes01-Jan-10 5-Dec-10 1-Mar-11 300$ 500,000 500,000 150,000,000$ ($5,172,414) 144,827,586$ 0.76 100% 1,100,690$ 01-Jan-11 5-Dec-11 1-Mar-12 306 100,000 600,000 183,600,000 (5,172,414) 178,427,586 0.76 100% 1,356,05001-Jan-12 5-Dec-12 1-Mar-13 312 0 600,000 187,272,000 (5,172,414) 182,099,586 0.76 100% 1,383,95701-Jan-13 5-Dec-13 1-Mar-14 318 0 600,000 191,017,440 (5,172,414) 185,845,026 0.76 100% 1,412,42201-Jan-14 5-Dec-14 1-Mar-15 325 0 600,000 194,837,789 (5,172,414) 189,665,375 0.76 100% 1,441,45701-Jan-15 5-Dec-15 1-Mar-16 331 0 600,000 198,734,545 (5,172,414) 193,562,131 0.76 100% 1,471,07201-Jan-16 5-Dec-16 1-Mar-17 338 0 600,000 202,709,235 (5,172,414) 197,536,822 0.76 100% 1,501,28001-Jan-17 5-Dec-17 1-Mar-18 345 0 600,000 206,763,420 (5,172,414) 201,591,006 0.76 100% 1,532,09201-Jan-18 5-Dec-18 1-Mar-19 351 0 600,000 210,898,689 (5,172,414) 205,726,275 0.76 100% 1,563,52001-Jan-19 5-Dec-19 1-Mar-20 359 0 600,000 215,116,662 (5,172,414) 209,944,249 0.76 100% 1,595,57601-Jan-20 5-Dec-20 1-Mar-21 366 0 600,000 219,418,996 (5,172,414) 214,246,582 0.76 100% 1,628,27401-Jan-21 5-Dec-21 1-Mar-22 373 0 600,000 223,807,376 (5,172,414) 218,634,962 0.76 100% 1,661,62601-Jan-22 5-Dec-22 1-Mar-23 380 0 600,000 228,283,523 (5,172,414) 223,111,109 0.76 100% 1,695,644

Projected Absorption and Market Value

Projection of Market Value and Incremental Real Property Taxes

5

Sample TIF Bond Transaction

IncrementalReal Property Annual Debt

Bond Year Taxes for Interest @ Administrative Reserve Capitalized Net Surplus/ Special ServiceEnding Debt Service Principal 7.50% Expenses Fund Income Interest Debt Service (Deficit) Assessment Coverage1-Mar-11 1,100,690$ -$ 891,150$ -$ -$ (891,150)$ -$ 1,100,690$ -$ NA1-Mar-12 1,356,050 - 891,150 - - (891,150) - 1,356,050 - NA1-Mar-13 1,383,957 437,000 891,150 30,000 (17,823) - 1,340,327 43,630 - 103%1-Mar-14 1,412,422 676,000 858,375 30,600 (17,823) - 1,547,152 (134,730) 134,730 100%1-Mar-15 1,441,457 759,000 807,675 31,212 (17,823) - 1,580,064 (138,607) 138,607 100%1-Mar-16 1,471,072 849,000 750,750 31,836 (17,823) - 1,613,763 (142,691) 142,691 100%1-Mar-17 1,501,280 946,000 687,075 32,473 (17,823) - 1,647,725 (146,445) 146,445 100%1-Mar-18 1,532,092 1,052,000 616,125 33,122 (17,823) - 1,683,424 (151,333) 151,333 100%1-Mar-19 1,563,520 1,165,000 537,225 33,785 (17,823) - 1,718,187 (154,667) 154,667 100%1-Mar-20 1,595,576 1,289,000 449,850 34,461 (17,823) - 1,755,488 (159,911) 159,911 100%1-Mar-21 1,628,274 1,422,000 353,175 35,150 (17,823) - 1,792,502 (164,228) 164,228 100%1-Mar-22 1,661,626 1,566,000 246,525 35,853 (17,823) - 1,830,555 (168,929) 168,929 100%1-Mar-23 1,695,644 1,721,000 129,075 36,570 (1,206,023) - 680,622 1,015,023 - 249%Total 19,343,659$ 11,882,000$ 8,109,300$ 365,061$ (1,384,253)$ (1,782,300)$ 17,189,808$ 2,153,851$ 1,361,541$

Series 2010 Dated 9/1/2010

Projected Debt Service Coverage

6

Bond Issue: $23,870,000 The Shops at White Oak Village Community Development Authority Special Assessment Revenue Bonds, Series 2007

Location: Henrico County, VA - 6 miles east of City of Richmond’s central business district. Adjacent to I-64, 4 miles from I-295 and 5 miles from I-95.

Development: Grand Opening on October 13, 2008 136 acre open-air regional retail center and outparcel development totaling 900,000 sq. ft.

Anchored by Lowe’s, Sam’s Club, Target, Office Max and J.C. Penney 150-room Hyatt Place hotel

Developers: Forest City Enterprises, Inc. Use of Proceeds: Public infrastructure transportation improvements including mass earthwork, roads, off-ramps,

general landscaping, public plaza landscaping, lighting, parking facilities, retaining walls, traffic lights, turn lanes, sanitary sewers, pavers and sidewalks, storm sewers, utilities, and water lines.

Primary Security: Incremental real property and sales tax revenues and back-up special assessment Special Features: ▪ Alleviates previously underserved retail market in Eastern Henrico County.

▪ Second time that Forest City and Henrico County have collaborated on a CDA.

The Shops at White Oak Village (Henrico County, Virginia), October 2007

7

l  Depending on the state statutes, TIFs have been funded with various incremental taxes, fees, assessments and other streams of income that have included; but not limited to:

l  Real estate taxes l  Sales taxes l  Food / Beverage taxes l  Occupancy taxes l  Utility taxes l  Earning taxes l  Capital taxes l  Connection fees l  Usage fees l  Special assessments l  Parking fees

TIF with Varied Revenue Sources

8

Bond Issue: $92,850,000 Peninsula Town Center Community Development Authority Special Obligation Bonds, Series 2007

Location: Hampton, VA - Southeast Virginia, near Norfolk, located off I-64

Development: 1,154,000 square feet mixed-use development Anchored by J.C. Penney, Macy's, and Target Also, restaurants, office, specialty stores and residential 2,250 parking spaces

Developers: Mall Properties, Inc. and Steiner + Associates Use of Proceeds: Public infrastructure improvements including roads, water and wastewater improvements,

landscaping, parking structure, sidewalks, parks and acquisition of land. Primary Security: Incremental tax revenues (including real property, sales, meals and amusement taxes), special

retail assessment, special property tax and back-up special assessment Special Features: ▪ Saved City of Hampton’s largest taxpayer.

▪ Largest non-rated special district financing in Virginia. ▪ First special retail assessment (sales tax within district) in Virginia. ▪ Unique blend of pledged revenues.

Peninsula Town Center (Hampton, VA), September 2007

9

Peninsula Town Center (Hampton, VA), September 2007

10

Issuer Fairfield Community Facilities Distruct

Rio Vista Community Facilities District

Palm Desert Community Facilities District

Stockton Community Facilities Dist

Mosaic Community Development Authority

Trade Type Secondary Trade Secondary Trade Secondary Trade Secondary Trade New Issue

Metro Area San Francisco San Francisco Palm Springs Stockton Washington, DC

State CA CA CA CA VA

Location Type Suburban Exurban Resort Suburban Suburban

Development Plan 1.1MM SF office & retail 1,272 single family homes 1,052 sing. fam homes

268 multi-family 337 single family homes504k sf Retail; 300 Hotel rms.;

65k sf Office; 853 MF DUs; 114 for-sale THs

Development Status 22% developed & occupied

45% sold to homeowners with 34% of special tax

levy

22% of special tax on developed property

25% built & sold to homeowners

60% leased or sold; portion of infrastructure & one shell

under construction

Developer Type Regional National Regional Regional National

Security Type Special Tax Special Tax Special Tax Special Tax TIF/Spec. Assmt.

Value:Bonds 3.0:1 11:1 2.4:1 5.8:1 1.4:1 as is; 5:1 including committed construction

Delinquency Rate 0.0% 1.2% 1.3% 0.0% Not Applicable

Original Issue Date 04/03/08 01/26/05 05/23/07 12/13/07 06/09/11

Maturity 09/01/38 09/01/35 09/01/37 09/01/37 03/01/36

Trade Date 05/11/11 05/18/11 05/18/11 05/19/11 05/26/11

Trade Amount $1,000,000 $10,000 $5,000,000 $2,930,000 $35,805,0001

Yield 7.72% 7.73% 7.53% 7.27% 6.93%

MMD AAA Index for Maturity on Trade Date 4.40% 4.20% 4.27% 4.27% 4.25%

Spread to MMD 3.32% 3.53% 3.26% 3.00% 2.68%

Earlier Trade Date in 2010-11 9/20/10 04/14/11 None None None

Yield on Earlier Trade 6.84% 7.91% Not Applicable Not Applicable Not Applicable_________

Notes1Full issue was $65.65MM, including shorter term & taxable bonds

Market Trades for Unrated Development District Bonds For Projects under Development (May 2011)

11

Bond Issue: $65,650,000 Revenue Bonds, Series 2011

Location: Merrifield section of Fairfax County

Development: 504,000 square feet of retail anchored by Target 853 multifamily units 114 townhomes 2 hotels 65,000 square feet of office

Use of Proceeds: Spine roads, off-site road improvements, sewer line and related public facilities.

Primary Security: Incremental ad valorem property taxes along with a backup special assessment to cover any shortfalls

Special Features: ▪  Development just underway at time of issuance ▪  Interest rate of 6.93% for final maturity – in market where most comparables in high 7% range ▪  Sale to 17 different institutional investors

Developer: Edens & Avant

Mosaic (Fairfax County, VA), June 2011

12

The Council of Development Finance Agencies (CDFA) has assembled the enabling legislation for tax increment financing in 49 states and the District of Columbia. The state statute collection is part of its research and resource development for the Tax Increment Finance Coalition (TIFC), a CDFA program dedicated to sound practices, education and information sharing in tax increment financing. This website allows you to browse and compare TIF legislation from across the country. It also includes a summary table for all 50 laws represented in the collection of statutes.

http://www.cdfa.net/cdfa/cdfaweb.nsf/pages/tifstatestatutes.html

TIF State Statutes

13

TIF Policy and Guidelines – Broad Considerations

l  To TIF or not to TIF? l  Policies vs. Guidelines l  Most troubles arise from developer financial problems l  Do not create policy, then make exceptions l  Do not adopt for first project only l  Do not make up for shortfalls in other areas – zoning,

permitting, etc. l  Make procedure transparent l  Timing l  Create real “But For” test l  Blight l  “Scholarship” vs. “Entitlement” approach

14

l  Localities can affectively use TIF financing to address issues of reduced revenue and reduced tax base (Peninsula Town Center CDA).

l  In new “world order,” the sale of TIF bonds requires creativity and perseverance (Las Vegas RDA).

Lessons Learned

15

Bond Issue: $85,000,000 Tax Increment Revenue Bonds Series 2009A “A” Rating from Standard & Poor’s

Location: Downtown Las Vegas, Nevada

Development:

Downtown Re-Urbanization World Market Center Union Park – 61 Acres Chelsea Premium Outlets Cleveland Clinic Luo Ruvo Center for Brain Health The Smith Center for the Performing Arts

Developers: Newland Communities and Forest City Enterprises Use of Proceeds: Utilities, roads, curb and gutter improvements for Redevelopment Project, and $45MM for a

portion of The Smith Center for the Performing Arts. Primary Security: Incremental Real Property Tax Revenues Special Features: ▪ Creative structure to complete TIF financing amidst economic downturn

▪ Redevelopment Agency consists of approximately 2,628 net acres ▪ The Smith Center for the Performing Arts will be the largest arts project in Nevada’s history ▪ By 2014, the World Market Center will be the largest home furnishing center in the world, with a complex of 8 buildings on 57 contiguous acres, totaling over $12MM square feet.

City of Las Vegas Redevelopment Agency (Las Vegas, NV), March 2009

16

City of Las Vegas Redevelopment Agency (Las Vegas, NV), March 2009

17

l  Larger TIF districts (area-wide TIFs) can be used in areas in need of revitalization to “jumpstart” a series of specific Tax District Projects (Watkins Centre CDA).

Lessons Learned

18

Bond Issue: $20,000,000 Watkins Centre Community Development Authority Revenue Bonds, Series 2007

Location: Chesterfield County, VA - Intersection of State Route 288 and State Route 60. 20 miles southwest of the City of Richmond’s downtown business district.

Development: 504 acre mixed-use development Retail, commercial, office, and hotel components Target (opened March 2008) SunTrust Bank BB&T

Developers: Zaremba Metropolitan Midlothian, LLC, Watkins Land, LLC, Westchester Office Partners, LLC, Gray Land and Development Company, LLC, BEP LP, and Village Bank & Trust Financial Company, LLC

Use of Proceeds: Public infrastructure improvements including a portion of the transportation infrastructure

necessary to meet the increased demands placed upon Chesterfield County as a result of the development.

Primary Security: Incremental real property and sales tax revenues and back-up special assessment Special Features: ▪ Alleviates growing and previously underserved retail market in Western Chesterfield County.

▪ Strategically located at the interchange of Route 288 and Midlothian Turnpike.

Watkins Centre (Chesterfield County, Virginia), November 2007

19

Watkins Centre (Chesterfield County, Virginia), November 2007

20

l  TIF financing can allow a locality to shift the responsibility of infrastructure costs to developers / landowners.

l  Properly used, TIF can have a positive financial impact in the short and long run.

l  Political, Community and Economic buy-in is essential.

Lessons Learned