3. Infrastructure Puzzle
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Public Policy & Economic
Development Consulting
$100M Gained for Clients
Multi Industry Corporate Site
Location Experience
Multi-State Corporate Site
Location Experience
The Montrose
Group, LLC
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David J. Robinson
◦ Principal of the Montrose Group, LLC
◦ Adjunct Professor, Ohio State
University, Economic Development
Policy
◦ Former
Attorney, Large Ohio Law Firms
Ohio House of Representative Member
Senior Staff, Mayor of Columbus
Economic Development Director,
Ameritech
General Counsel, Ohio Chamber of
Commerce
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Nate Green
Director, Economic Development, The Montrose Group, LLC
Vice Chair, Bexley CIC
Former:
• Vice President, Piper Jaffray
• Manager, JobsOhio
• Director, SBID Division, Ohio Department of Development
• Executive Director, Pickaway Progress Partnership, a CIC
• Corporate Finance Manager, Cleveland-Cuyahoga County Port
Authority
• President, Ohio Economic Development Association
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Headen & Co., LLC
Headen & Co., LLC is a boutique Ohio law firm offering a range of
legal services.
Raymond C. Headen has over twenty-five years of experience
serving as
lead counsel in all areas of public and private finance and served as sole
bond counsel, sole underwriter’s counsel, issuer’s counsel and credit
enhancement counsel
in all types of State of Ohio, public and private college and university,
Ohio local government, port authority, 501(c) 3, healthcare, leasing,
special assessment, TIF and economic development tax-exempt and
taxable bond financings as well as in commercial real estate financings
as lender’s counsel and borrower’s counsel.
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The Montrose Group, LLC’s Infrastructure Financing Experience
The Montrose Group, LLC gained over $100M in project and infrastructure
financing for a range of clients facing infrastructure challenges listed below:
Broadband: gained funding for multiple regional broadband networks;
Brownfields: gained Brownfield redevelopment grants for infill housing
and retail centers;
Road, Water & Sewer- gained local, state and federal grants and
negotiated Tax Increment Financing and other public finance tools developed
infrastructure funding strategies; and
Workforce: gained workforce development grants for public and private
sector clients.
8. Infrastructure Puzzle
Introduction
• Infrastructure & Economic
Development
• Impact of Financial Services
Crisis and Real Estate
Collapse
• New Model for Infrastructure
Development- Infrastructure
Puzzle
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9. Infrastructure Puzzle
What is Infrastructure
• Aviation
• Bridges
• Dams
• Drinking Water
• Energy
• Hazardous Waste
• Inland Waterways
• Levees
• Ports
• Parks & Recreation
• Rail
• Roads
• Schools
• Solid Waste
• Transit
• Waste Water
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10. Infrastructure Puzzle
•Traditional Government Role
•State and Local Government
•Public Finance Tools
•Developer Finance Tools
Role of Infrastructure &
Economic Development
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11. Infrastructure Puzzle
• Links to Industry Targets
• Energy Industry- Solid Waste, Bridges, Drinking Water,
Hazardous Waste, Rail, Roads
• Global Industry- Ports, Rail, Roads
• Service Industry- Aviation, Schools, Transit
• Manufacturing Industry- Energy, Inland Waterways, Ports,
Levees, Waste Water
• Technology Industry- Aviation, Schools, Parks & Recreation,
Transit
Role of Infrastructure & Economic Development
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12. Infrastructure Puzzle
• National Infrastructure Crisis
• ASCE Infrastructure Report Card
• Aviation- D
• Bridges- C+
• Dams- D
• Drinking Water- D
• Energy- D
• Hazardous Waste- D
• Inland Waterways- D
• Levees- D
• Ports- C-
• Parks & Recreation- C+
• Rail- C+
• Roads- D
• Schools-D
• Solid Waste- B-
• Transit- D
• Waste Water- D
Role of Infrastructure & Economic Development
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13. Infrastructure Puzzle
• It is not the 1990’s
• Wall Street Investment Bank Collapse
• Real Estate Market Contraction
• State and Local Government Budget Challenges
• Lack of Federal Government Consensus
Impact of Financial Services Crisis
and Real Estate Collapse
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14. Infrastructure Puzzle
• Banks Restricted by New Federal Regulation
• Banks Approach to Developer Credit Changed
• Local and State Governments Resources
Stretched
• Federal Government Less of a Player
Impact of Financial Services Crisis
and Real Estate Collapse
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15. Infrastructure Puzzle
• Infrastructure Puzzle
• Multiple Sources of Funding
• Project Specific
• Takes a Team to Solve
Impact of Financial Services
Crisis and Real Estate Collapse
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18. Infrastructure Puzzle
Tax Increment Financing
What is TIF? STEP BY STEP DESCRIPTION:
Step Description Amount
1. Base AV The total assessed value of real property prior to
enactment of TIF legislation.
$1,000,000
2. Year One AV The total assessed value five years after TIF was
created.
$11,000,000
3. Growth in AV
The difference between the Base AV and the current
AV.
$ 10,000,000
4. Tax Rate The percentage of AV (property value) that goes to
taxes.
10%
5. Increment
The growth in property value multiplied by the tax
rate - i.e., the new PILOTs that go to the TIF fund.
10%
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19. Infrastructure Puzzle
TIFs
The purpose of using a TIF is to generate payments in lieu of taxes (PILOTs) to pay
for public infrastructure improvements.
All existing taxes are unaffected.
County treasurer collects PILOTs along with real estate taxes.
PILOTs are in the same amount as otherwise applicable taxes.
Parcel TIF versus Incentive District TIF
School District and overlapping taxing district issues, public notice and compensation
TIF Agreement
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20. Infrastructure Puzzle
TIFs
Types of Public Infrastructure Improvements that can be financed with
PILOTs:
More traditional governmental projects such as roads, water & sewer lines,
storm water, etc.
Redevelopment projects (e.g. land acquisition, land preparation,
environmental remediation and demolition)
New development projects and related infrastructure improvements, e.g. gas,
electric and other utility type services, e.g. communication, cable, etc.
Projects can sometime be located on privately owned properties
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21. Infrastructure Puzzle
TIFS
Converting TIF/PILOT Cash Flow Into Up Front Lump Sum Proceeds
Available to Project Costs.
TIF PILOTs result in semiannual cash flow to public body.
TIF PILOT cash flows commence after completion of construction and
are paid at the time when the increased tax bills would have been paid
were it not that the improvements to the real property were “exempted”
under the TIF.
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22. Infrastructure Puzzle
TIFs
Converting strategies of TIF PILOT cash flows to a lump sum up front
payment available to pay project or infrastructure costs:
Cash Advance: Public body can make a cash advance out of its available
funds, with the intent of reimbursing itself out of future PILOTs.
State Loan: Public body might seek to obtain a state loan and use TIF
PILOTs to repay the state loan.
Public body might issue obligations (such as industrial revenue bonds,
general obligation bonds or other obligations) to pay debt service in
whole or in part out the PILOTs.
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23. Infrastructure Puzzle
TIFs
Converting strategies - Continued:
Developer Reimbursement. Developer funds initial costs of public
infrastructure improvements and public body reimburses developer for
those costs out of TIF PILOTs, usually with interest (which may be tax-
exempt in many instances.)
Conduit Financing: Conduit Issuer (i.e. a Port Authority or New
Community Authority) may issue debt (often for a fee) that is backed by
a pledge of TIF Pilots. Conduit issuers often require letters of credit or
other forms of credit enhancement to market the debt.
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24. Infrastructure Puzzle
TIFs
Risk Sharing Distribution Between Public Body and Developer:
If a public body issues general obligation bonds in support of TIF
arrangements, there is more risk to public body. However, by assuming
this risk it may enable public body to attract more desirable developers,
secure better interest rates and thereby stretch TIF PILOTs farther.
A public body may reduce its financing risk by issuing special
obligations supported solely by PILOTs. This may increase financing
costs/decrease funds available to pay project costs.
Developer may purchase some or all of the debt or enter into a guaranty
arrangement or letter of credit.
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25. Infrastructure Puzzle
TIFs
Potential Risks of TIFs:
Anticipated real property improvements are not completed or valued at
anticipated level, resulting in lower PILOTs.
Real Property improvements are completed, but the improvements are
damaged or destroyed, resulting in lower PILOTs.
Real Property Improvements are completed, but the property owner
encounters financial difficulty and lacks ability to make TIF PILOTs.
Potential future decrease in level of assessed valuation and/or the level of real
property taxation, resulting in lower PILOTs.
One solution Special Assessment Secured TIFs. Developer initiated petition.
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26. Infrastructure Puzzle
Development Funded Infrastructure
Developer petitions for Special Assessment to be levied against real
property and SA’s are certified for collection only in the event PILOTs
or other revenues are insufficient.
Developer Advances which are reimbursed with TIF or other project or
district revenues.
Guaranties and letters of credit
Developer purchases bonds or other obligations
Release of Guaranties when project completes construction, TIF or
other revenue collections are more mature
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27. Infrastructure Puzzle
Special Improvement District
A community, neighborhood or business district that desires public
improvements or services beyond the level currently provided may want
to create a Special Improvement District (“SID”).
A SID is an area of land or district within which owners of real property
pay special assessments for designated services or improvements.
Creation is initiated in one of two ways: 1. owners of at least 60% of
front footage (excluding church or government property) petition
appropriate legislative authority or 2. owners of at least 75% of land
area within the proposed SID petition for improvements.
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28. Infrastructure Puzzle
Special Improvement District
The petition includes a plan that details improvements or services to be
included as part of the District.
District is governed by a non profit corporation and the composition of
the board of trustees is governed by statute.
The levy and collection of special assessments may be used to support
debt service charges on improvements benefiting the districts.
Credit issues such as discussed with TIFs and developer funded projects
are applicable.
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29. Infrastructure Puzzle
Energy Special Improvement District or
Property Assessed Clean Energy (PACE)
An Energy Special Improvement District is a special type of SID that is
created by petition of 100% of the property owners desiring to develop
within the ESID a special type of improvement called a “special energy
improvement project.”
Special Energy Improvement Projects include solar photovoltaic project
, a solar thermal energy project, a geothermal energy project, a
customer-generated energy project, or an energy efficiency
improvement, whether such real or personal property is publicly or
privately owned.
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30. Infrastructure Puzzle
Energy Special Improvement District or
Property Assessed Clean Energy (PACE)
The Plan developed by the ESID board of trustees provides authority for the
levy and collection of special assessments to pay costs of services and ESID
projects included in the ESID’s Plan.
These special assessment are levied and collected as special assessments
generally under Chapter 727 of the Revised Code and the revenues can secure
or pay debt service on bonds issued to pay the costs of the special energy
improvement projects.
Credit issues for the ESID include revenues derived not only from the ESID
project but also from the generation of electricity or savings from
implementation of energy conservation measures.
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31. Infrastructure Puzzle
New Community Authority
A New Community Authority (NCA) is a separate public body governed
by a board of trustees that may oversee, coordinate, construct and
finance public infrastructure improvements and community facilities.
NCA’s are initiated by petition signed by all of the owners of real
property to be included within the boundaries of the NCA. The petition
must be approved by the NCA’s “organizational board of
commissioners” which is generally the board of county commissioners
of the County in which the NCA is located.
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32. Infrastructure Puzzle
New Community Authority
A NCA can levy a “community development charge” within its
boundaries to pay for its community development program if permitted
by the petition and real property instruments encumbering land within
its boundaries.
Community development charges can be determined on the basis of
real property, assessed valuation, the income of the residents of the
NCA, the profits of businesses within the NCA, a uniform fee per parcel
or any combination of the foregoing.
Community development charges can be collected by the NCA or
certified to the County Auditor for collection with real property taxes.
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33. Infrastructure Puzzle
Port Authorities as Creative Financing
Tools
• No Prevailing Wage
• NO PREVAILING WAGE REQUIREMENT
on construction of Port Authority facilities and
revenue bond proceeds
• No prevailing wage from Section 166 state loan
and grant programs
• Change allows for significant cost savings to Port
Authority projects
Ohio Port Authorities
34. 34
Infrastructure PuzzleOhioPort
Authorities Flexibility
SALES TAX SAVINGS on construction
materials
Attractive vehicles for public incentives
Exempt from public bidding.
Issues taxable, and tax exempt debt
Port bond funds offer enhanced credit for
qualified borrowers
36. • Long-term, fixed rate financing: 30 years or
more for certain projects
• Potential for higher loan to value ratio for
developers: 90-100% financing
• Little or no out of pocket equity requirement
for developers d
• Developer can spend its own capital on
private side of project
• Use of TIF proceeds for public (and some
private) improvements
• Use Severance Tax to finance infrastructure?
Ohio Shale Gas Infrastructure Development
Fund…leverage
Infrastructure Finance Defined
36
Infrastructure Puzzle
37. Infrastructure Finance Defined
Preserves communities’ long term borrowing
capacity for financing of core assets.
Can be done through a private placement,
port authority bond fund, or public offering.
Credit of the project determines ability
to borrow and how much.
Examples: Sewer and water, roads, fiber
optics, site ready projects, commercial,
residential, industrial.
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Infrastructure Puzzle
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• Ohio Public Works Commission
• State Allocation by District
• Locally Driven Process
• Driven by County Engineer
• Awarded to Local Government
State Funding
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• Ohio Water Development Authority
• Drinking Water Projects
• Sewage and Water Pollution Control Projects
• Storm Water Projects
• Low Interest Financing
• Community Assistance
• Village Capital Improvement
• Interim Financing
• Industry Related Financing
• Local Economic Development
• Tax Exempt Bonds for Privately Owned Financing
• Emergency Assistance
• Emergency Relief
• Brownfields
• Alternative Stormwater Infrastructure Loan Program
• Lake Erie Coastal Erosion Control Projects
• Dam Safety Projects
• Solid Waste Projects
State Funding
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• Ohio Development Services Agency
• Manufacturing Energy Efficiency Program
• Phase I- ID energy cost savings
• Phase II- development of an energy plan
• Phase III- installation of the energy cost savings
measures
• Phase IV- measurement energy cost savings measures
Energy Efficiency
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• Ohio Development Services Agency
• Energy Loan Fund
• Low Cost Financing
• 15% Energy Reduction
• 1% Interest Rate for Government
• 3% Interest Rate for Private Sector
Energy Efficiency
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• Department of Labor Training Grants
• $5M Industry Based Training Grants
• Tied to Community College
• Built Around a Private Sector
Partnership
Federal Funding
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The Montrose Group, LLC Infrastructure Puzzle Approach
Funding Monitoring. The Montrose Group, LLC always watches out for funding opportunities for
clients from local, state and federal government sources.
Positioning. The Montrose Group, LLC positions clients with key public policy makers and business
leaders to influence potential financing opportunities.
Partnering. The Montrose Group, LLC understands who is part of a grant/loan application is more
important than what the application says, and connects partners for client’s project financing.
Incentive Negotiations. The Montrose Group, LLC negotiates local, state and federal loans, tax
credits, abatements and infrastructure, workforce, Brownfield grants.
Bond Counsel. The Headen & Co., LLC serves as bond counsel to ensure clients gain the needed
public finance to fund essential infrastructure.
Bond Underwriting. A number of national companies serve as the investment bank to gain the
needed financing through the bond market.
Project Administration. The Montrose Group, LLC provides project grant/loan administration
services that include creating mandated reports.
