E4 Development and the Art of Tax Increment Financing (or DIF in MA)

1. The Art of Tax Increment Financing
John Simone
President & CEO
Connecticut Main Street Center

2. Where Visions are Built
The Art of Tax Increment Financing
Kent Schwendy, P.E., LEED AP, CNU-A
President & CEO
Corporation for Independent Living

3. Hello. My name is Kent Schwendy…
…and I’m a developer.

4. Common view of the developer:
Developer
Developer’s
Minion (typ)
Town, Neighbor, or Consultant

5. Or, perhaps…

6. Really?

7. Corporation for Independent Living
We are a diverse, nonprofit development organization
founded in 1979 to meet the needs of individuals, nonprofit
agencies, cities, and towns.
We develop and sustain housing and other community
resources that provide affordability, accessibility and
independence to those in need.
We create a range of housing opportunities as well as
office and program space designed to enhance the quality
of services provided.

8. We strive to create and sustain
communities where everyone is not
only allowed, but welcomed.

9. The Gap

10. Simple Truths
• Projects cost a certain amount
• Projects are worth a certain amount
– This is what allows developers to invest/borrow money
• If a project costs more than it’s worth, there is a “gap”
• Gap financing is the difference between being a dreamer
and being a developer

11. TIF (and other unconventional sources)
can help bridge the gap.

12. First Town Square, Windsor

13. First Town Square, Windsor

14. Sherwood Falls, Kensington (Berlin)

15. Sherwood Falls, Kensington (Berlin)

16. Jim Burke, AICP
Director of Economic Development
Town of Windsor
The Art of Tax Increment
Financing: First Town Square

17. PROJECT LOCATION

18. WHY WAS THIS
PROJECT IMPORTANT
• Community planning
goal
• Priority site
• Housing the highest
and best use - best
site for density

19. WHY WAS THIS
PROJECT
IMPORTANT
• Historic structure
• Environmental issues
• Large, mostly vacant
structure concerns

20. DECISION MAKING PROCESS
• Project Challenges
– Public access
– Remediation
– Relocation
• Project Feasibility
– Market demand
– Developer interest
– Project size
• Measures of Assistance
– Short term repayment
– Ratio of public-to-private investment

21. DECISION MAKING (HOW TO FINANCE)
G.O. Bonds vs. Revenue Bonds
– Interest Rate Assumption 3.65% 5.14%
– Issuance Costs $30k $180k
– Reserve Fund $0 $108k
– Projected Total Debt Service $995k $1,384k

22. DEAL STRUCTURE
• Project Cost Estimate (at approval) $9,499,000
• Anticipated Annual Tax Revenue $175,388
• Town Assistance $884,000
Remediation Grant $800,000
Amtrak Acquisition $84,000

23. DEAL STRUCTURE (TERMS OF AGREEMENT)
• Grant Amount: $800k
• Use of Funds: Environmental Remediation
• Installment Payments
• Completion Of Active Remediation $200k
• C.O. For Building A $200k
• C.O. For Core Bldgs B and C $200k
• Final Certification By LEP $200k
• Transfer to Tax-exempt Entity or Leasing Units Prohibited
• Developer to Indemnify Town
• Conditions Precedent to Signing Agreement

24. PROJECT
SUCCESS
Preserved Historic Building
Leveraged Large Private
Investment
Expanded Tax Base
Increased Spendable Income
Environmental Remediation
Gained Support For
Redevelopment

26. The Lofts At Sherwood Falls
A Berlin Success Story
Christopher Edge
Economic Development Director
Town of Berlin

27. Sherwood
Mill
2009

28. The Plan – Town of Berlin
• The Town of Berlin in coordination with CIL creates a
Redevelopment Area Plan for the Sherwood Mill
• Objectives:
– Eliminate unsafe and blighted condition of property
– Stop deterioration of existing structures
– Create new market-rate residential units in Berlin
– Preserve physical and architectural features of mill
– Eliminate hazardous environmental conditions
– Reinforce and stimulate additional development in Berlin

29. CIL – Their Plan
• Create 71 market-rate condos within the 4-story mill
structure and 14 condo units across the street on the
other portion of the Sherwood Tool property
• $18.7 million project
– Clean-up cost of $2.46 million
– CIL funding - $1.36 million
– LOOMING GAP - $1.1 million
• Huge challenge to find financing for environmental clean-up
• Town determines it must step in to make the project a reality

30. The $1,100,000 Answer
• Berlin used General Obligation (GO) Bonds in order to fill
the gap in the project (empowered under Chapter 130 in
the CT State Statues – Tax Increment Financing)
• Town chose to use GO bond rather than TIF because
few TIF precedents in CT.
• GO leads to lower interest rate
• Justified the project to the Town Council as we would a
TIF – that the project would pay back the Town’s
investment.

31. Working Together
• Agreement between Berlin and CIL
• $1.1 million provided by the Town of Berlin
• Four installments of $275,000 each
1. Environmental clean-up and building permit for 24 units
2. Demolition of 1 Main Street and COs for 24 units
3. COs on 30 more units, inside and outside work done
4. Completion of 14 units across the street from the mill and
the Environmental Land Use Restriction filed with DEEP
To date, CIL has accomplished steps 1 through 3.

32. Work
Underway
Late 2010

33. “Our recent experience in Windsor has encouraged us to
become involved in this project. We have received tremendous
support and cooperation from the Town of Berlin and look
forward to working with the Town on this exciting project to
convert an abandoned factory into high quality
homeownership opportunities,” stated Martin Legault,
President and CEO of CIL.

34. Why Did Berlin Choose This Route?
• Important to the Town’s history and future
• Other mills in Connecticut had not yet been redeveloped
due to fires time and weather all significantly
complicating the redevelopment process
• TRUST between CIL and Berlin’s Leadership
• Windsor was a model – Jim Burke
• Part of the project – a financial partner with CIL
• Long-term payback in tax revenue to the Town of Berlin
significantly exceeds the $1.1 million investment
• Cost share with DECD - $550,000 in brownfield monies

35. Completed and
Decked Out Unit

36. The Lofts at Sherwood Falls - 2015
• Property (all units combined) assessed at $9.7 million
• Annual taxes of approximately $300,000
• Mill building turned into condos - all but 1 sold
• Over 100 residents now call the Lofts home
• CIL has been awarded as our Developer of the Year in:
– 2012 (Sherwood Falls)
– 2015 (Depot Crossing)

37. The Lofts @ Sherwood Falls
An Amazing Transformation By Working Together

38. Questions, Answers, and Discussion