The Abatement Statement – An Update on GASB
Great GASB! Abatement disclosures required by the Governmental Accounting Standards Board are going to have a terrific impact on economic development and incentives. This is a national rule with nationwide effect. However, property tax “abatement” is a local incentive. So, communities are most concerned about what this all means. Answers are evolving, but the latest thinking is contained in this White Paper by Dan McRae. This was Dan’s program materials for a series of recent webinars on the topic.
Accessing Capital In Georgia
This presentation by John Kingery, Credit Manager with the Georgia Department of Community Affairs, focuses on particular programs. Federal programs that DCA administers include the SSBCI (State Small Business Initiative) and EIP (Employment Incentive Program). DCA also administers numerous state programs such as the OneGeorgia Equity loan and grant program, DD RLF (Downtown Development Revolving Loan Fund), JTC (job tax credits) program, and the Opportunity Zones (OZ) program. Insights into special features included the GA LPP (Georgia Loan Participation Program), in which DCA through SSBCI can co-invest in a loan originated by an approved lender. Examples are presented including an actual balance sheet for a commercial/rental project in Milledgeville, Baldwin County, Georgia.
Advancing Redevelopment Through Tax Allocation Districts
Communities can obtain economic development now, without losing existing tax revenues, despite economic “head winds.” TIF (tax increment finance) or TAD (tax allocation district) financings are the tools to make this happen. Cheryl Strickland of Stifel, Nicolaus & Company, Incorporated provides the most current views and how-to’s on this subject.
Bonds and Capital Stacks
This is Dan McRae’s White Paper on financing projects (“Financing Projects with Acronyms”. ) It informs concerning the nature of revenue bonds, what bodies may issue them and when they are tax-exempt, who the participants are and how much time a bond issue takes and what it costs. The White Paper also covers special types of bonds such as PILOT bonds. It is rare these days that a project is financed with just one kind of equity and just one kind of debt. So, this White Paper explains what a capital stack is and what the sources are other than revenue bonds for obtaining all of the capital that the project needs. Dan uses this White Paper to teach financing to groups as various as investment bankers and commercial bankers, bond issuers and borrowers, real estate developers and corporate users, and elected and appointed officials.
Bonds as the Bedrock of Development Finance
With accompanying case studies and examples, this presentation by Cheryl Strickland of Stifel, Nicolaus & Company, Inc. informs regarding market and economic trends in Georgia as well as the national municipal bond market and the role that bonds play in development finance.
Bonds For Title
In Georgia and in some other states, setting up a bond-financed sale-leaseback structure for a project is the key to discretionary incentives such as property tax savings and cash and in-kind grants. This structure is referred to as “bonds for title”, and this White Paper by Dan McRae is the definitive reference in Georgia on the topic.
Bonds for Title Made Simple – an Infographic
Georgia has 159 counties (second only to Texas) and 159 different ways of doing property tax “abatement”. But there is one overarching constant- the “bonds for title” structure. The process involves the issuance of an industrial development revenue bond. In order to de-mystify how this incentive works, Dan McRae has prepared a simple explanation with an Infographic that will be helpful to anyone who is going through the process for the first time.
This White Paper by Dan McRae explains the key role that bonds play in Georgia in both financing projects and in incentives like property tax savings, and cash and in-kind grants. It describes “who does what, when” at each step in the course of the bond issuance process. Through providing a vocabulary, in layman’s terms, of the jargon used in the bond world, it “de-mystifies” bonds. Do you speak “bond”? If not, please read this White Paper! It was the program materials for the “Project Managers 101” presentation on bonds to community and statewide project managers sponsored by Georgia Power Company.
The Calculus of Incentives
Ken Bleakly, President of Bleakly Advisory Group, makes an engrossing presentation on “The Calculus of Incentives”, which addresses Economic Impact Analysis studies and how to interpret them, the EB-5 Foreign Investment Program, redevelopment areas, and Opportunity Zones (OZs).
Combining Property Tax and Incentives for Best Practices
Dan McRae of Seyfarth Shaw and Tam Vo of Grant Thornton used this White Paper to present on property tax abatement at the summer 2015 Annual Conference of the Institute for Professionals in Taxation in San Diego. From the perspective of the economic development prospect, the presentation focused on
- Why incentives are provided
- Understanding when these programs should be pursued
- Knowing what questions to ask in order to access the incentives
- Knowing the process- what you will have to go through in order to successfully obtain the incentives
- Reviewing current property tax credits and incentives programs offered by state and local governments
The presentation also answered the question- Why do Georgia and some other states require a transaction, like bonds for title, in order for the property tax incentive to be provided?
The DNA of your DDA – Understanding Downtown Development Authorities
Within the central business district of a city, a downtown development authority (DDA) can co-exist with a citywide development authority, a countywide development authority, a joint development authority, and more. So, what’s the purpose of a DDA? This White Paper by Dan McRae surveys the three types of DDAs and their special powers that reserve a special role for them in economic development and community development. Among other things, this includes administering programs, carrying out and financing projects for private sector companies, handling public/private partnership projects (P3), and with some DDAs, even handling purely public projects. DDAs can be a useful tool for redevelopment, since they can import powers under the City Business Improvement District Act (BID), the Redevelopment Powers Law (e.g., regarding tax allocation districts, or TADs), and the Urban Redevelopment Law. The White Paper also discusses the types of bonds and other obligations that a DDA can issue. As Georgia becomes more urban, DDAs will become even more relevant. This White Paper is among the program materials for conferences sponsored by the Georgia Municipal Association (GMA) and put on by the Carl Vinson Institute of Government at the University of Georgia.
De-Constructing Development Authorities – Learn Their Rules From How They Function
Development authorities are the premier local authority in the field of economic development. This is a completely new presentation by Dan McRae that informs how a development authority functions by de-constructing two common development authority transactions: documenting discretionary incentives for a project location through a Memorandum of Understanding (MOU); and providing a grant and property tax savings (“abatement”) to a project through a “bonds for title” transaction. The presentation covers statutory development authorities; Constitutional development authorities; citywide, countywide and regional development authorities; purposes and powers; deal structures; intergovernmental agreements; and more. Special rules that can make all the difference to a project are illustrated with insights gathered over decades of experience.
Definition of Solid Waste Disposal Facilities for Tax-Exempt Bond Purposes
These are the Final Regulations that the U.S. Treasury issued on August 18, 2011, on the definition of solid waste disposal facilities for purposes of the rules applicable to tax-exempt bonds issued by State and local governments. The Final Regulations contain many helpful provisions, such as those dealing with biomass to electricity, logs and bark (and are helpful regarding slash), manufacturing (including wood pellets), MSW (municipal solid waste) and landfills, tires, paper recycling, mixed-input facilities, and many others.
Development Authorities-An Introduction
This is Dan McRae’s White Paper on development authorities that covers their internal and external functioning, their stakeholders, and their governmental mission. By comparing and contrasting them to such other bodies as a URA, a CID and a Public Facilities Authority, and to non-entities such as a TAD, Business Improvement District, and special tax district, it illuminates the special role that development authorities have in Georgia. Dan uses this White Paper to teach development authorities to such groups as local authority board members, participants in the commercial real estate industry, investment bankers, commercial bankers, and others.
Douglasville Downtown Development Authority
Developing Downtown – The bar for redeveloping a downtown area is high enough, but it is raised even higher in many cases by forces beyond anyone’s control- change agents, and particularly demographics. This presentation by Jared Lombard of the Atlanta Regional Commission does a fascinating job of bring those forces into focus, centering on Douglasville, Georgia.
EB-5 Funding Solutions
The federal government’s EB-5 program is designed to create jobs in the U.S., and it has also contributed huge amounts of capital for economic development projects across the country. Bruce Nicely, Partner in the Southern States Regional Center, reveals how the program works and concludes that it can provide significant amounts of friendly capital to help get projects off the ground. Does your project qualify? Through this presentation, you will learn what a good EB-5 project looks like.
Economic Incentives and Abatements
GASB’s new abatement statement confronts local governments and local authorities with these questions- Have you agreed to any tax “abatement agreements”? Or were your tax revenues affected by somebody else’s tax abatement agreement? Even if you didn’t consent. And even if you didn’t know. And companies with economic development projects want to know how far into the fray will they and their projects be dragged. The new GASB rules mean big changes for governmental accounting standards- affecting data collection, compliance, intergovernmental relations, the environment for economic development incentives, and more. The ultimate effect depends on a lot of technicalities about how the host state delivers incentives. If you are affected- Who did this to you? How? And when? Find out, by checking out this very readable White Paper on the topic. It’s Dan McRae’s program materials for his presentations this spring to the Georgia Association of Assessing Officials and Association County Commissioners of Georgia.
Energy Finance – Unlocking Innovation
The developer of a renewable energy project, or a host community, may be accustomed to traditional financing mechanisms such as industrial development revenue bonds (IDBs). Unfortunately, IDBs are generally bank-dependent, and reduced bank participation in the renewable energy space means innovative financing techniques are at a premium. This White Paper by Dan McRae identifies sources of capital for today’s renewable energy projects, including equity (private equity funds, hedge funds, sovereign funds, “family offices” and others), balance sheet financings, and non-bank capital such as project finance bonds, EB-5 immigrant investor funding, tax credit equity (PTC, ITC and NMTC), and P3 structures. Types of projects potentially benefitting from one or more of these capital sources include wind, closed-loop or open-loop biomass, geothermal, landfill gas, municipal solid waste, hydroelectric, marine, hydrokinetic or solar facilities, as applicable. Moreover, except for the energy tax credits, these capital sources can be applicable to many other types of economic development projects as well. The White Paper informs accessing these capital sources by comparing and contrasting their essential elements with their counterparts in the familiar IDB financing structure. Limited opportunities for tax-exempt financings through “small issue” manufacturing bonds and solid waste disposal bonds are discussed, as are tax credit bonds (QECBs and CREBs). Finally, the White Paper includes an update on very recent changes to the rules regarding Regional Centers (the “conduit” for EB-5 fundings) that can accelerate funding by removing the requirement for prior USCIS approval for a Regional Center’s industries of focus, its geographic boundaries, its business plans, or its economic methodologies.
Everything You Need To Know About Joint Development Authorities
Joint development authorities have an area of operation that covers more than a single city or county. This White Paper by Dan McRae explains how JDAs are created and operate, including differences between a JDA and a statutory city or county development authority. It covers issues regarding the dissolution, merger, expansion, and contraction of JDAs and other local authorities, and addresses cross-border JDAs. It provides a list of existing JDAs.
A Guidebook to Local Government Construction Projects
This publication by ACCG- explains construction legal requirements, including the Georgia Local Government Public Works Construction Law; discusses construction delivery methods and competitive processes including bids and RFPs; and covers surety bonds; includes copies of Code Sections and sample forms.
GASB Tax Abatement Disclosure Requirements
This is Statement No. 77 of the Governmental Accounting Standards Board. Get used to hearing that citation- it’s going to impact property tax abatements across the country. It works by requiring “governments” to disclose in their financial statements “tax abatement agreements.” It’s effective for financial statements for periods beginning after December 15, 2015, but GASB encourages earlier application.
HB 397 as passed and signed by the Governor
Georgia has a new law, HB 397, that governs open meetings and open records. The bill as introduced in 2011 would have made numerous problematical changes. As passed, the new law makes a number of attractive changes and its problematical provisions are, on balance- not so bad.
Inbound Investment: Key Considerations for Doing Business in the U.S.
Private sector entities involved in cross-border economic development projects, and public sector bodies that facilitate these projects, will find this White Paper by Dan McRae’s law firm helpful in obtaining successful project locations. Subjects covered include corporate, contract and tax law considerations, dispute resolution, real estate transactions, construction, labor and human resources, employee benefits, immigration, and intellectual property rights.
Introduction to ‘Taxable Floaters’
Federally taxable variable rate demand bonds, or “lower floaters”, can be used to finance almost anything. This White Paper by Dan McRae informs regarding the basics of this very useful financing technique, including how to get access to it.
Introduction to Tax-Exempt Bonds
Financing projects through industrial development revenue bonds can be complicated, particularly when the bonds are tax-exempt. This White Paper by Dan McRae “de-mystifies” the process. It provides a readable explanation in a question-and-answer format.
In-Sourcing Capital: EB-5 Loans and Equity; NMTC Tax Credit Equity; and Non-Recourse Project Finance Bonds
This White Paper by Dan McRae takes a comprehensive look at three of the hottest financing techniques today. EB-5 immigrant investor capital funds loans and equity investments in job-creating projects in rural and high unemployment areas on extremely favorable terms. The New Markets Tax Credit (NMTC) program can provide “forgivable loans” for projects in low income communities. When the right techniques are used to “build a bond”, the result is project finance bonds that are highly marketable without support from a commercial bank and even without recourse to the sponsor, and even though the interest on them is taxable. Read this White Paper and think about how to use these capital sources for your project!
Looking at Ca$h and Ca$e$
Developing Downtown – Charles Whatley of UrbanIS addresses public/private partnerships as a tool for downtown redevelopment, and brings the process in Douglasville, Georgia, to life with insights drawn from case studies in other jurisdictions.
Making Projects Possible: Tax-Exempt Qualified 501(c)(3) Bonds
Some nonprofits have access to financing that can be both tax-exempt and in some cases “bank qualified”. This White Paper by Dan McRae explains how federally recognized “501(c)(3) organizations” can use tax-exempt financings for their projects. It includes examples and discussion of “Establishment Clause” issues when a religious organization is involved.
The MOU- the “deal document” for incentives
A document called the Memorandum of Understanding, or MOU, has become the standard for project locations. It is the “deal document” that forms the basis of the bargain between the company and the community. Dan McRae was the author of the first MOU used in Georgia many years ago. Dan’s White Paper on the MOU provides a narrative to the current state of the art, accompanying the Table of Contents for the State’s “winningest” MOU, which successfully located both a large industrial project and its expansion.
New Market Tax Credits (NMTC)
The federal New Markets Tax Credits (NMTC) program has been a boon to low income communities. It typically works as a “gap filler” in the capital stack for economic development and community development projects that locate or expand in the community. A December 2015 law extended the program for 5 years and authorized $3.5 billion worth of credits per year. Dan McRae’s White Paper provides a simple explanation of the complicated process for accessing and closing this financing.
New Market Tax Credit Infographic “What, I got $10 million in New Markets Tax Credits allocation, and only got $2.5 million in free money?” Yes, you really do hear that sometime. And maybe it’s understandable. NMTC is complicated. But now, you have this “flow” of funds Infographic to sort out allocation, credits, sheltered income and unsheltered income, and trace the actual funding. Using it, you can understand the true benefits of NMTC financing. Have fun!
Open Meetings, Open Records, OMG!
This White Paper by Dan McRae addresses the post-HB 397 Georgia open meetings and open records laws, and highlights a number of issues that are important to local authorities, local governments, and private companies that have confidential economic development projects. Critically important is the need for an agency to have a designated records custodian and a proper records retention policy. Other key issues include, for example, when an entity that is not a governmental body is covered, the status of emails and phone conversations, how the procurement process was changed, new exemptions from what is considered a “meeting”, mandatory website postings of meetings, and new rules for executive sessions, including preliminary votes on disposing of (not just purchasing) real estate. A number of material changes affect economic development and community development directly, including a new affidavit requirement for claiming trade secret exemption from the open records rules, and a new exemption for the temporary protection of records of the Department of Economic Development pertaining to an economic development project. This White Paper is the program materials for presentations that include training for some Georgia cities and many local authorities.
Overview of Tax-Exempt ‘Affordable Housing’ Bonds
This White Paper by Dan McRae provides a high level overview of tax-exempt multifamily housing bonds, which are available to developers to purchase, construct or rehabilitate qualified multi-family projects, i.e., “affordable housing”.
View or Download DocumentProject Finance made simple- the ‘Talk to the Spider’ Infographic This White Paper by Dan McRae provides a high level overview of tax-exempt multifamily housing bonds, which are available to developers to purchase, construct or rehabilitate qualified multi-family projects, i.e., “affordable housing”.
‘Property Tax Incentives’ and ‘Bonds’ – Why They Belong in the Same Sentence
It’s not just the “Georgia Way”, it’s also the way that property tax “abatement” is implemented in several other “transaction states.” This presentation will walk you through the “how” and “why” of property tax abatement through bonds. And more- What impact will GASB’s Abatement Statement have on the negotiation of discretionary incentives (not just property tax abatement)? Dan McRae used this White Paper in fall 2015 while presenting to the “corporate GEDA”- the Institute for Professionals in Taxation (IPT).
Public Issues in P3 Project
This presentation by Charles Whatley of the consulting firm UrbanIS takes a critical look at P3 from the perspective of the public sector, while at the same time recognizing what is essential to success for the private sector. Among other things, Mr. Whatley gives new life to the phrase “P3”, ascribing to it “patience, perseverance and persistence”, and adding, to the needs checklist, “productive” and “proactive.”
Public – Private CollaborationSpeaking from a public policy perspective, Brian Williamson, Deputy Commissioner of the Georgia Department of Community Affairs (DCA), addressed how DCA has obtained success in economic development and redevelopment through public-public partnerships with Georgia’s development authorities and downtown development authorities, and through such programs as Opportunity Zones (OZs) and loans and grants (DDRLF & GCF). He also unveiled upcoming initiatives in such areas as broadband, and expanding the powers of local authorities to enter into public/private partnerships (P3).
P3 – Public/Private Partnerships – How Not to Blow It
P3 – Public/Private Partnerships – How Not to Blow It, Dan McRae, Dallas, Texas, February, 2015.
P3 – Public/Private Partnerships Done Right
This is Dan McRae’s White Paper which shows how successful economic development projects have anticipated formal P3 and provides a functional comparison of big, revenue-generating P3 projects to community P3 projects. This White Paper explains how to model P3 partnerships, how the P3 team interacts with each other and with the public sector, what P3 delivery mechanisms are available, and how to finance the project. The White Paper is illustrated by examples of successful, closed P3 projects including a solar installation for a school district (involving taxable bonds), and a private college facility (involving tax-exempt qualified 501(c)(3) bonds); other illustrations include a downtown hotel (involving TIF/TAD funding and NMTC) and a city center redevelopment (involving contract revenue bonds). The presentation includes new concepts in public/private partnerships, such as the military’s P4 model (various other military contract models are also presented), as well as the evolving PPV model used by the University System of Georgia. The White Paper concludes with a discussion of “Best Practices” for P3.
P3- the Second P in Public/Private Partnerships
Public/private partnerships, or P3, are trending as a way for the public sector to provide services or facilities, or to avoid having to cut back on them, when the alternative is to raise taxes. Much of the buzz about P3 focuses on the public partner and overlooks one important factor- the “second P.” Unanswered questions asked by the public partner include- What are the sources of private capital for my project? How to access it? And what are the real costs? With the private partner, the reciprocal questions include, how much of the financial risk should I be expected to bear, what are the best ways for my firm to raise capital, and where are the real P3 opportunities? This White Paper is Dan McRae’s program materials for the spring Atlanta P3 conference. In a few slides, he answers these questions, and includes colorful illustrations of an inventory of private capital sources, and of capital stacks from case studies. The White Paper also includes hard to find information about how EB-5 immigrant investor capital can be a source for both the public sector and the private sector to finance their P3 needs.
Renewable Energy- Start To Finish
These White Papers are the program materials for the Sidebar Conference, “Renewable Energy- Start To Finish”, in Savannah and Atlanta. They were presented, respectively, by Dan McRae of Seyfarth Shaw LLP, John May of Stern Brothers & Co., and Jill Stuckey of the Georgia Center of Innovation for Energy. These presentations focus on the anatomy of a renewable energy project from start to finish, including site location, development, finance, construction, and commercial operations. Their scope covers biomass, solar, and biofuel projects, and includes generation of electricity and production of pellets and biodiesel, as well as solid waste disposal projects. Among specific topics addressed are
- Site location, including what types of renewable energy projects work in Georgia (and what types don’t).
- The three basic ways that renewable energy projects are financed, including sources of equity.
- Using project finance bonds that are non-recourse and off-balance sheet to the project sponsor, and that require low equity.
- How to “build a bond” for debt financing that is customized to the renewable energy project.
- Solid waste disposal bonds, “small issue” manufacturing bonds, and “green” bonds (QECBs and CREBs).
- How to “de-risk” the project to make it financeable.
- The importance of “contracted-for” revenues.
- Mistakes in project contracts that can make the project un-financeable. How the finance team “scrubs” these project contracts to avoid these mistakes.
- The role of the independent engineer (IE).
- Characteristics of the ECP (engineering, construction and procurement) contract, and the need for an “ECP wrap.”
- Layering a capital stack, energy related tax credits/tax credit equity (PTC, ITC, depreciation), New Markets Tax Credits (NMTC) and EB-5 immigrant investor funding. Also, how to make these layers work with project finance bonds, senior and junior debt, and state and local incentives.
Renewable Energy Start to Finish (Dan McRae, Seyfarth Shaw)
Site Incentives, Tax Credits & Tax Strategies…Are They the Difference Between Success and FailureDan McRae’s panel presented this White Paper at ICSC’s RECON Annual Conference on Site Incentives, Tax Credits, Energy Credits, Bond Options, Green Building Incentives, Cost Segregation, and Tax Strategies.
Should We Stay or Should We Go? State and Local Incentives: Developing the Decision-Making ProcessThis is a presentation by Dan McRae’s panel at the Annual Conference of Institution for Professionals in Taxation, or IPT, designed to inform corporations with projects about issues and opportunities with discretionary incentives.
Solar Design & Development
SD&D has completed the development and installation of Georgia’s first utility-scale solar power facility, located in Upson County. Bradley Francis of that company in this presentation explains each step in the critical path to developing a solar project, including project development analysis, project structuring, financing engineering, EPC (engineering, procurement and construction contractor) selection, and implementation. Informing the audience on the economics of a Camilla, Georgia project and the associated public benefit, Mr. Francis presented a balance sheet and revenue statement, and associated economic impacts of construction, with expenditures and annual jobs.
Special Purpose Local Option Sales Tax Guide
This ACCG publication guides public officials on the SPLOST; covers process, county, municipal and state roles, projects eligible for funding, imposition, continuation and termination of the tax, use of proceeds, and accounts, record-keeping, audits and reports; includes copies of the statute, a pro forma timeline, and model documents.
Taxability of Incentives
ISSUES AND ANSWERS …and questions ON FEDERAL INCOME TAXATION OF INCENTIVES
Daniel M. McRae, Partner
Seyfarth Shaw LLP
October 10, 2018
“TIFs and TADs in Tough Times”; TIFs and TADs Questions and Answers”
Communities can obtain economic development now, without losing existing tax revenues, despite the bad economy. TIF (tax increment finance) or TAD (tax allocation district) financings are the tools to make this happen. These White Papers explain how these financings work successfully for both communities and developers, provide examples and a specimen bond model, and list lessons learned. They were used in presentations of these tools by Dan McRae of Seyfarth Shaw LLP, and Ken Powell of Stone & Youngberg.
This White Paper by Dan McRae explains tax-exempt bond financing for an existing facility and its equipment.
Urban Redevelopment- The Tools of the Trade
Developing Downtown- TIFs, or TADs, is the best known redevelopment tool, so what to do when the referendum doesn’t pass and that tool is not in your toolbox? Dan McRae surveys The “Tools of the Trade”, and shows how they work, even without TADs, in this presentation to the Douglasville, Georgia, Economic Development Forum. Dan recommends considering mixing and matching an Urban Redevelopment Agency (URA), an Opportunity Zone (OZ), a downtown development authority (DDA), a Community Improvement District (CID), and a Business Improvement District (BID), among other tools.