Dan McRae

Deadline Extension for issuing Recovery Zone Bonds

The Georgia Department of Community Affairs has released rules for requests for extensions of the deadline for issuing Recovery Zone Bonds for public bodies that have filed a Notice of Intent to Issue. Basically, DCA will consider a one-time 60 day extension if the required documentation is timely submitted (no later than June 30, 2010). You can download a copy of DCA's memo here.

GSFIC Presentation on the Georgia Waiver and Re-Al

Georgia counties or large cities with allocations of volume cap for ED Bonds and Facility Bonds need to file a Notice of Intent with DCA by November 2, 2009 in order to retain those allocations. Below is a summary taken from a DCA Memorandum with more information. I have also posted a presentation with details on this website at- http://danmcrae.info/whitepapers.asp

The Recovery Act authorizes ED Bonds as a new way to finance public infrastructure and public facilities. It also authorizes Facility Bonds as a new way to finance economic development projects. Both types of bonds are for financings in Recovery Zones. For more information about these bonds, please refer to my two June 2009 newsletters on this website at- http://danmcrae.info/quicktakes.asp.

Let me know if you have questions or need help with the preparation and filing of the Notice of Intent.

RECON - May 2009

It was a pleasure for me to present at the May 2009 "RECON" conference sponsored by the International Conference of Shopping Centers (ICSC).

ICSC's website describes the organization as "the global trade association of the shopping center industry. Its 70,000 members in the U.S., Canada and more than 80 other countries include shopping center owners, developers, managers, marketing specialists, investors, lenders, retailers and other professionals as well as academics and public officials." RECON is the annual gathering at which ICSC estimates that "approximately 50% of the retail real estate industry's shopping center leases are signed or conceived." My topic was bond and other financings, focusing on how to get money for projects in ways that are leveraged; efficient; and cheaper. For a copy of the powerpoint of the panel's presentation, look for May 2009- ICSC Presentation: "Site Incentives, Tax Credits & Tax Strategies.....Are They the Difference Between Success and Failure" , at http://danmcrae.info/whitepapers.asp.

I am pleased that my presentation was well received. For a copy of ICSC's appreciation letter, go to http://danmcrae.info/credentials.asp.

Stimulus Bonds

The new types of bonds and the new features for existing bond types (collectively, "Stimulus Bonds") created by the American Recovery and Reinvestment Act (the "Recovery Act") have huge significance for economic development and private projects, as well as public projects.

Stimulus Bonds include "Recovery Bonds" (these consist of Recovery Zone Facility Bonds, or "Facility Bonds", plus Recovery Zone Economic Development Bonds, or "ED Bonds"), as well as Build America Bonds ("BABs"), among others. The IRS' June 12, 2009 Notice provided the guidance necessary to jump-start the use of Recovery Bonds, but more is needed on the state level regarding the allocation process. I am a member of a group convened by the Georgia Department of Community Affairs to work on the allocation process for these Recovery Bonds. I will post developments on the "What's New" page of the danmcrae.info website as they become available. For more information meanwhile, please refer to my recent Quick Takes newsletter issues on these topics which are available on the "Quick Takes" page of the website.

Coming to Savannah

I am looking forward to a couple of days of teaching development authority board members in Savannah this week. I will be using a hypothetical multiple-component project to illustrate a number of deal-making and financing techniques, including new bonds and new bond features under the American Recovery and Reinvestment Act, such as Recovery Bonds. We will also talk about some new Georgia law issues, including the re-enacted Redevelopment Powers Law, which re-authorized TAD bonds (tax increment financing). How to use PILOT (payment in lieu of taxes) bonds will also be covered, including the new PILOT Restriction Act. HB 63 both re-enacted the Redevelopment Powers Law, and enacted the PILOT Restriction Act. For your convenient reference, I have posted a copy of HB 63 as signed by the Governor on April 22, 2009, under "Letters and Documents" at the foot of the "What's New" page on this website.

Quality Jobs Tax Credit

http://danmcrae.info/quicktakes.asp

There is much excitement about the changes in Georgia's statutory incentives proposed by House Ways and Means Committee Chairman Rep.

Larry O'Neal that Governor Perdue just announced. The changes relate to a Quality Jobs Tax Credit (which re-purposes the existing headquarters tax credit), the state R&D Tax Credit, the Port Tax Credit, the Retraining Tax Credit, a Discretionary Withholding Option, and Mega-Tax Credit. I updated the recent Quick Takes newsletter issue that outlined key new incentives to include the release relating to this proposal. The updated newsletter is February 2009- Quick Takes: New Incentives Mean New Economic Stimulus.

It can be found at

Development Financing & the Art of Making the Deal

I will be presenting in Columbus this week on "Development Financing & the Art of Making the Deal" at the Fanning Institute's development authorities board members training program for Region 8. It's an understatement to say that doing presentations like this while the General Assembly is in Session is always interesting! One of the new issues that I will be covering is HB 63, which contains proposed changes in the Redevelopment Powers Law, as well as the proposed PILOT Restriction Act. You can download a copy of HB 63 (House First Reader, on January 14, 2009; House Second Reader, on January 15, 2009) at http://danmcrae.info/whatsnew.asp.

The Role of Bond Financing in Cutting Costs and In

This coming week we are sponsoring and participating in a national Duff & Phelps Business Incentives Conference on "Cutting Costs and Increasing ROI." In addition to traditional bond financing opportunities, our presentation will address how to make projects feasible through leveraging public sector support through such mechanisms as tax increment financing (TIF, or in Georgia, TAD, financing), tax-exempt PILOT (payment in lieu of taxes) bonds, etc. In this economy, equity is king, so we also take a look at how tax credit equity (for example, the production tax credit) plays into financing projects, from the prospective of the investor, as well as the developer. For a copy of our presentation, please go to the White Papers page for: February 2009- "Presentation on role of bond financing in cutting costs and increasing ROI".

Development Authority Board Members

I am looking forward to teaching development authority board members on Jan. 14 and Jan. 15 2008 in Thomson, Georgia, at a program sponsored by the University of Georgia's Fanning Institute. Here are the topics I will be presenting-

BASIC:
1/14 - 1:00 - 1:15 - Welcome, Overview and Objective
1:15 - 2:45 - "Ethics, Liabilities, Conflicts of Interest, Open Meetings and Open Records" Presentation
5:20 - 5:30 - Q & A

1/15 10:00 - 12:00 "Survey of Region 7 Authorities and Their Powers" Presentation

ADVANCED:
1/15 - 12:55 - 1:00 Welcome, Overview and Objectives 4:00 - 5:15 - "How to Write Good Development Agreements and Review of Two Regional CaseStudies" Presentation

Among the materials I will be using is the excellent manual on Georgia's Open Meetings and Open Records Laws prepared by the Association County Commissioners of Georgia. You can download a copy on the White Papers page of this website-http://danmcrae.info/whitepapers.asp

Tax-Exempt PILOT Bonds

In the bond world, “PILOT” stands for “Payments in Lieu of Taxes.” PILOT Bonds are revenue bonds that use PILOT payments as the revenue to repay the bonds. PILOT Bonds have already become increasingly important. I expect this trend only to intensify in Georgia if a Constitutional amendment affecting Tax Allocation Districts, or TADs (called tax increment financing, or TIFs, in other jurisdictions), does not pass this month. This Constitutional amendment would restore the option to a Board of Education for it to consent to include its educational millage increment as a source for the payment of redevelopment costs in a TAD. PILOT Bonds are an alternative to TADs, in that they allow for the “monetization” of property taxes. PILOT Bonds have already been used in Georgia to finance, for example, infrastructure for an industrial park, hotels, and the renovation of a convention center. As with other bonds, the interest on PILOT Bonds can be either taxable, or tax-exempt. A new development has just occurred regarding tax-exempt PILOT Bonds. The U.S. Treasury Department released new final Regulations to modify and clarify the tax rules applicable to tax-exempt PILOT bonds. The final Regulations became effective October 24, 2008. For more information about PILOT bonds, visit the White Papers page for "October 2008: Memorandum- Tax-Exempt 'PILOT Bonds'”, and for "March 2008: How to Use 'PILOT Bonds' to Monetize Property Tax ‘Abatement’". You can also visit the Quick Takes page for “October 2008: A Primer on PILOT Bonds.”

Bond Rate Update

We are all aware of the disruption in the financial markets. Bond rates are still elevated compared to what we would typically expect. Nevertheless, the rates I have just posted on the Current Bond Rates page reflect what seem to be improving conditions.

Think Outside the Box

In these times, there is often a gap in the funding necessary for a project. The project can be a traditional economic development facility, such as a building and equipment for a new industrial or commercial company, or a community development undertaking that involves economic development, such as a large mixed-use project. Solution- think “outside of the box.” So, I am starting a new series of Quick Takes newsletter issues, and White Papers, directed at “outside of the box” solutions for bridging this funding gap.

One new solution is to use tax increment financing (in Georgia this is TAD bonds, or tax allocation bonds) to finance economic development. A few years ago, the General Assembly made some changes (HB 409) in our Redevelopment Powers Law that at the same time are both hugely significant and widely unknown. These changes were deliberately intended to “expand the meaning of redevelopment”, and “to change the characteristics of areas eligible for designation as redevelopment areas.” Result- in many cases, new tax allocation districts (“TADs”) can provide funds to bridge that gap. This funding can provide public infrastructure, and, subject to proper documentation and structuring, can even pay for line items on a private developer’s development pro forma if they are eligible. This funding is not limited to blighted areas. To find out more, please download my new White Paper: “New TADs That Can Finance Economic Development.” It’s available on the White Pages section of this website.

Mixed Use Development

Mixed use development and redevelopment are active sectors this year. I was honored to be part of the team chosen for the redevelopment of the Alpharetta City Center. Since then, I have presented to a Breakfast Briefing audience of real estate industry participants on a hypothetical redevelopment with a variety of asset classes (historic hotel, green space, deck parking, HQ office building, tourism and film facilities, shopping center, streetscape and utilities and residential over retail.) The financing techniques included Infrastructure Development District bonds (assuming IDDs to be available based on the referendum passing this November), TAD bonds, savings from property tax "abatement", a HUD Section 108 loan, "taxable floaters", a state grant, senior debt, equity/mezzanine finance, and tax credit financing, including historic rehabilitation tax credits, New Market Tax Credits, and state tax credits (the Entertainment Industry Investment Act and a hypothetical tourism incentive). I presented a variation of this oriented around a large prospect's facilities needs to the Georgia Economic Developers Association at its Spring Workshop in May. For the presentation, please visit the White Papers page.

Tax-Exempt Industrial Development Bonds

Sometimes it makes more sense to "buy, rather than build." In other words, sometimes the most cost-effective use of your money is to purchase an existing asset for use in your business, as opposed to financing the construction of an asset (such as a building) or the purchase of a new asset (such as equipment to be installed in the building). In those cases, the use of tax-exempt industrial development revenue bonds can be an attractive financing alternative, but some special rules apply. I recently updated my White Paper on this topic, "Using Bonds to Buy Business Assets", and you can find a copy on the White Papers page.

New Documents Available

A recent change in federal tax law allowing larger projects to be financed with tax-exempt industrial development revenue bonds has already resulted in many more borrowers taking advantage of this financing technique. You can find a spreadsheet entitled "Bond Use Analysis from Georgia Department of Community Affairs" posted on the What's New page with some interesting statistics relating to this. The "Bond FAQ's" White Paper on the White Papers page will tell you about the new rules for these bonds. However, when the borrower can't satisfy all of the rules for tax-exempt financing, bonds structured as federally taxable variable rate demand bonds ("taxable floaters") can still be used. I just updated my White Paper on this, "Introduction to Taxable Floaters", and you can find it as well on the White Papers page.

Conference Call Meetings

One need that development authorities have had is for a general statute expressly authorizing conference call meetings of their members. To respond to that need, I drafted some possible legislation that appears at the bottom of this page.

A Very Exciting Year

Just came off a very exciting year! In 2007, my Finance Group closed 42 bond transactions, as well as a variety of other finance and incentives transactions, including an exceptionally large CMBS issue with debt in three tranches. For that year, our bond and other financings exceeded $1.7 billion. Also, I was gratified to receive the Development Authority of Fulton County's first ever Bond Counsel of the Year award. But what's most gratifying is the contribution that I and my group were able to make to the public good. The transactions we closed will create an estimated 6,000 jobs in Georgia alone, not even counting jobs preserved in connection with these projects. Getting 2008 off to a good start, I am updating many of my White Papers. Please visit the White Papers page for current versions of such standard references as "Bonds for Title", " Bond FAQ's" and "Introduction to Taxable Floaters."

New White Paper: In The Zone

While I am continuing to study possible incentives on the federal level that might help with projects in rural Georgia, I have posted on the "White Papers" page-"'In The Zone'-Special Financing and Incentives for Enterprise Zones and Enterprise And Renewal Communities.

Catching Up

Well, I can see that I’ve got a lot of catching up to do with this blog. What prompts me now, is that I am posting the Memorandum that was among the materials I used when presenting at my roundtable session at the NAIOP (National Association of Office and Industrial Properties) Annual Meeting in Atlanta in October of this year. The Memorandum, “Better Financing Through New Markets Tax Credits and Tax-Exempt Bonds”, can be downloaded at my “White Papers” page. I think New Markets Tax Credits (“NMTC’s”) offer a lot of overlooked potential to help economic development in the rural parts of Georgia and other states. In fact, I am planning in my next Quick Takes newsletter issue to address incentives on the federal level that might help with projects. Meanwhile, I want to recognize, and thank, Curt Noel, of Eclypse Development Group, for his help with my preparation for the NAIOP presentation.

Good Things Happening

Many good things have happened, and many good things are coming up.

I am on the road a lot in the fall this year.

It was a pleasure on September 18 to meet with economic developers representing most of the 13 counties that are taking a look at forming a joint development authority for their region. The meeting was hosted by the Greater Hall Chamber of Commerce (thank you, Tim Evans!) and took place in Gainesville (yes, in the building that looks like I. M. Pei’s Louvre Pyramid at the main entrance to the Louvre Museum in Paris !). The idea of forming a regional (joint) development authority (JDA) was a RAC (Regional Advisory Council) initiative. This particular meeting was facilitated by David Sargent of the Georgia Mountains Regional Development Center. I presented on joint development authority topics, both legal and practical, including passing on pointers from my colleague, Kevin Brown, who was prevented from attending by a last minute client need. (One of the materials was my White Paper, “Everything You Need to Know About Joint Development Authorities”, which you can download on the White Papers page of this website). The group very wisely focused on identifying a common interest that a JDA could serve. Over lunch, I presented on the hot topic of tax reform. (Most of that presentation is contained in my Sept. 2007 Quick Takes issue, “The state of tax reform in Georgia- 'The Devil is in the details' ”. You can download that from the Quick Takes page of this website.) We all benefited from the presence of, and observations by, Max Burns, Ph. D., a former Congressman, and now Associate Dean. Interim MBA Director, and a Professor in the Mike Cottrell School of Business at North Georgia College & State University.

September Update

From the evening of September 26, through September 28, 2007, I will be in Chicago attending the 32nd Bond Attorneys’ Workshop, with time out to participate in a call with the working group that is helping the Fanning Institute at the University of Georgia organize an assessors' training session to be presented in connection with their meeting in mid-November, 2007.

I will be attending the Georgia Economic Developers Association’s Annual Conference in Savannah, Georgia from Wednesday, September 19, 2007 through Friday, September 21, 2007.

Before I arrive, Tim Evans will cover for me as moderator of a Concurrent Workshop on Wednesday (“Effective Ways To Communicate with Your Elected Officials”), while I represent GEDA in Atlanta at a roundtable discussion on Speaker Richardson’s “GREAT” Plan. The roundtable is sponsored by the Georgia School Boards Association (GSBA), the Georgia Municipal Association (GMA), and the Association County Commissioners of Georgia (ACCG). I am involved in these events as Chair of GEDA’s Public Policy Committee.

On Thursday, I will present a Legislative Update to the Annual Conference at 8:30 a.m.

I am glad to report that prospect activity (new and expanding business and industry investment projects) remains good in Georgia. However, the Wall Street Journal for September 13, 2007, reported that economic forecasters polled by it on average evaluated the risk of a national recession at 36% (an increase of 8% over the previous month).This is tied, of course, to the current credit crisis and its impact on the financial markets. How long will that go on? We are only about halfway through it, according to about 60% of the economists polled.

Georgia's New Procurement Law

The Georgia Local Government Public Works Construction Law potentially affects the construction of projects when a development authority is involved, regardless of whether the development authority is “statutory” or “Constitutional.” In its 2007 Session, the General Assembly changed this law. For a copy of my White Paper that explains the law and these recent changes, please click here for “Everything You Need To Know About Constructing Projects Under Georgia’s New Procurement Law.”