COMMUNITY REINVESTMENT AREA 101 COMMERCIAL CRA 1

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1 COMMUNITY REINVESTMENT AREA 101 COMMERCIAL CRA 1

2 WHAT S THE DIFFERENCE? COMMUNITY REINVESTMENT AREA Industrial, Office, Commercial, 4+ Residential Units RESIDENTIAL CRA 1 3 Residential Units 2

3 HAVE A PLAN TO DEVELOP VACANT, BLIGHTED, UNDERUTILIZED PROPERTY? 3

4 HOW CAN DCED HELP? COMMERCIAL CRA TAX INCREMENT FINANCING FEDERAL FUNDS MANAGEMENT JOB CREATION TAX CREDIT RESIDENTIAL CRA NBD ASSISTANCE COMPETITIVE AFFORDABLE HOUSING COMMUNITY CONNECTION LOAN PROGRAMS TECHNICAL ASSISTANCE & CITY FACILITATION 4

5 WHAT EXACTLY IS AN ABATEMENT? Abatements reduce or eliminate the property tax on the INCREASED VALUE created by an investment for a DEFINED PERIOD OF TIME not to exceed 15 years. See Ohio Revised Code Sections Commercial CRAs are reactive, not proactive. The State of Ohio and Cincinnati City Council policies direct the Department of Community & Economic Development on the CRA award process. 5

6 PROPERTY TAX BREAKDOWN ABATED TAXES NEW TAX LIABILITY VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) 15% SCHOOL BOARD 25% PRE-IMPROVEMENT TAX PAYMENT 6

7 PROPERTY TAX BREAKDOWN ABATED TAXES ABATED TAXES NEW TAX LIABILITY VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) SCHOOL BOARD 15% 25% NEW TAX LIABILITY VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) 15% SCHOOL BOARD 25% PRE-IMPROVEMENT TAX PAYMENT PRE-IMPROVEMENT TAX PAYMENT 7

8 ABATEMENTS DO NOT: Reduce current taxes being paid on a piece of property Require the City, County or Schools to pay money to a developer or property owner Last forever Have any value unless a developer/property owner invests money to build something new or refurbish an existing building 8

9 PROFORMA SOURCES PROFORMA DEBT $628, YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 EQUITY $157, REVENUE TOTAL SOURCES $785, REVENUE $144, $146, $149, $152, $155, $158, $162, $165, $168, $172, ADDITIONAL INCOME $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, USES TOTAL REVENUE $137, $140, $143, $146, $149, $152, $155, $158, $161, $164, ACQUISITION CONSTRUCTION CONTINGENCY TENANT IMPROVEMENTS PERMITS ARCHITECTURE & ENGINEERING $80, $600, $38, $7, $7, $14, EXPENSES MANAGEMENT $54, $55, $57, $59, $60, $62, $64, $66, $68, $70, INSURANCE & UTILITIES $11, $11, $11, $12, $12, $12, $13, $13, $13, $14, TAXES $15, $15, $16, $16, $17, $17, $18, $18, $19, $19, TOTAL EXPENSES $80, $82, $85, $87, $90, $92, $95, $98, $101, $104, DEVELOPER FEE $25, MISC. $12, TOTAL USES $785, NOI $57, $58, $58, $58, $59, $59, $59, $59, $59, $60, RESERVES 0 0 $ $ $ $ $ $ $ $ NOI LESS RESERVES $57, $58, $57, $57, $58, $58, $58, $58, $59, $59, DEBT SERVICE $71, $69, $67, $65, $63, $61, $59, $57, $55, $53, CASH FLOW. ($13,707.59) ($11,355.55) ($9,896.36) ($7,584.17) ($5,290.89) ($3,017.64) ($765.59) $1, $3, $5,

10 FINDING PROPERTY TAX INFORMATION 10

Tax Statement/Collection Millage, Levies, Assessment The new values are only one part of the taxing

11 HOW ARE PROPERTY TAXES CALCULATED? PROPERTY VALUE ASSESSMENT Auditor TAX CALCULATION Auditor TAX BILL Treasurer Valuation of Property Tax Statement/Collection Millage, Levies, Assessment The new values are only one part of the taxing process. Taxes are based on the levies (millage) passed by the taxpayer multiplied by the assessed value (35% of the fair market value). -Hamilton County Auditor s website 11

12 PROPERTY TAX BREAKDOWN $1M Investment Fair Market Value $100,000 Assessed Value $35,000 Tax Bill $3,272 Fair Market Value $600,000 Assessed Value $175,000 Tax Bill $19,631 12

13 PROPERTY TAX BREAKDOWN Example YEARS 1 10 YEARS 11 + ABATED TAXES (NET 60%) $ 9,815 FORGONE FULLY CONTRIBUTING VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) SCHOOL BOARD $ 2,454 NEW REVENUE PAID TO NONPROFIT PROGRAM ADMINISTRATOR $ 4,090 NEW REVENUE PAID TO SCHOOL BOARD $ 3,272 PAID TO COUNTY 13

14 COMMERCIAL CRA TIMELINE APPLICATION REVIEWED Staff will review all application materials & review City Council s CRA policies. LEGAL AGREEMENTS & ORDINANCE Upon agreement of terms, DCED works with the City s Law Department to draft an ordinance to provide to the City Manager or approval & to City Council for a vote. CONSTRUCTION COMMENCEMENT APPLICATION RECEIVED Applicant provides completed application & supporting documents to DCED for review. Process includes $1,250 non-refundable application fee to DCED & $750 fee to ODSA. INCENTIVE NEGOTIATION DCED will negotiate with applicants based on Council s CRA policies. Once an offer is approved by DCED, staff will inform applicant of the incentive the department intends to propose to City Council. COUNCIL APPROVAL Once the City Manager approves the offer, the incentive package is presented to City Council for a vote. This process generally takes about four weeks from introduction to passage. 14

15 COMMERCIAL CRA TIMELINE Application Received APPLICATION FOR COMMERCIAL TAX ABATEMENT CITY OF CINCINNATI COMMUNITY REINVESTMENT AREA COMMERCIAL, INDUSTRIAL, MIXED-USE, MULTI-UNIT (4+ UNITS) STAFF EVALUATES & VERIFIES: Note: After review and recommendation by the Department of Community & Economic Development, all applications must be reviewed and approved by the City of Cincinnati Council before commencing construction. Any projects that start construction before City Council approval will be INELIGIBLE for a Commercial CRA Tax Abatement. The City requires that the Applicant provide the following documentation with this application: o A detailed breakdown of all Sources and Uses of Funds for the project (templates are available upon request). A minimum of $40,000 in costs must be documented. o Supporting documentation for ALL sources of funding for the project. For instance, if a bank loan will be obtained, a letter or term sheet from the bank specifying, among other things, the loan amount and term. A contact person must be identified for each funding source. o A post-construction operating pro forma for the building and cash flow analysis. NOTE: Please submit a copy of the pro forma used to apply for any bank financing as required and a contact person considering the application for bank financing. o A $1,250 application fee in the form of check, money order, or cashier s check payable to City of Cincinnati. Note the application fee is nonrefundable. o Corporate Resolution, Articles of Incorporation, and an Operating/Partnership Agreement for entity applying for abatement showing who is authorized to sign for the organization o Copy of the Deed or other Legal Description of the Property o A copy of the proposed construction plans/rendering/etc. o Estimated pre-construction, and post construction real estate taxes o If this project is seeking LEED or Living Building Challenge (Full, Net Zero, or Petal [must include Energy Petal ]) Certification, provide confirmation of registration SECTION I Applicant/Project Information Sources & Uses of Funds Supporting Documents for ALL Sources of Funding Post-construction Operating Proforma & Cash Flow Analysis Application Fee Corporate Resolution, Articles of Incorporation, and an Operating/Partnership Agreement Applicant Information: Legal Name of Property Owner Applying for Abatement: Form of business enterprise (corporation, partnership, Copy of the Deed proprietorship, LLC, non-profit, or other) Is the Applicant affiliated with a larger developer or development entity? (Yes / No). If Yes, please provide the name of this developer or development entity: Proposed Construction Plans/Rendering Legal Address of real property owner: Federal Tax ID #(s): Applicant Contact Person: Title: Phone: Main Contact address: Estimated Pre-construction, and Post-construction Real Estate Taxes Address of subject property Zip: 452 Hamilton County Auditor Parcel ID#: - - (see page 3 if additional space needed for multiple addresses or parcel IDs) City of Cincinnati Neighborhood: Confirmation of Registration for LEED or Living Building Challenge (if needed) Is any other financial assistance being requested from the City of Cincinnati for this project? If yes, please indicate the Development Analyst you are working with: { } Pg. 1 City of Cincinnati -- Revised 9/18 APPLICATION REVIEWED LEGAL AGREEMENTS & ORDINANCE CONSTRUCTION COMMENCEMENT APPLICATION RECEIVED INCENTIVE NEGOTIATION COUNCIL APPROVAL 15

16 COMMERCIAL CRA TIMELINE Application Reviewed STATE Ohio Revised Code LOCAL City Council Ordinance No , , & APPLICATION REVIEWED LEGAL AGREEMENTS & ORDINANCE CONSTRUCTION COMMENCEMENT APPLICATION RECEIVED INCENTIVE NEGOTIATION COUNCIL APPROVAL 16

17 COMMERCIAL CRA TIMELINE Application Reviewed NEIGHBORHOOD SCORE CARD Applications for projects located outside the Streetcar VTICA Area will be scored in accordance with the below point values: But For Analysis 0-3 points (determined by Department of Community and Economic Development Non-LEED, LEED Certified, or Non-LBC Qualified 0 points LEED Silver 2 points for new construction; 3 points for renovation LEED Gold/LBC Net Zero 3 points for new construction; 4 points for renovation LEED Platinum/LBC Full or Petal (must include Energy Petal ) 5 points for new construction; 6 points for renovation VTICA 8 points for 15% VTICA contribution; 1 point for any payment up to but excluding 15% VTICA contribution Points Term (years) Net Rate* % % % % % % % % % % % % % % % % % % GOVERNING RULES & REGULATIONS Environmental, LEED Neighborhood Financial Need Historic, New Construction VTICA/No VTICA Community Support APPLICATION REVIEWED LEGAL AGREEMENTS & ORDINANCE CONSTRUCTION COMMENCEMENT APPLICATION RECEIVED INCENTIVE NEGOTIATION COUNCIL APPROVAL 17

18 HAVE A PLAN TO DEVELOP VACANT, BLIGHTED, UNDERUTILIZED PROPERTY? 18

19 $ GAP PROJECT COST DEVELOPER FINANCING (Equity + Bank + Other) 19

20 PRE-DEVELOPMENT PROCESS Multi-Year, At-Risk YEARS 1 10 YEARS 11 + ABATED TAXES (NET 60%) $ 9,815 FORGONE FULLY CONTRIBUTING VOLUNTARY TAX INCENTIVE CONTRIBUTION AGREEMENT (VTICA) SCHOOL BOARD $ 2,454 NEW REVENUE PAID TO NONPROFIT PROGRAM ADMINISTRATOR $ 4,090 NEW REVENUE PAID TO SCHOOL BOARD $ 3,272 PAID TO COUNTY Sourcing Capital is a critical priority throughout pre-development. 20

21 PROFORMA SOURCES PROFORMA DEBT $628, YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 EQUITY $157, REVENUE TOTAL SOURCES $785, REVENUE $144, $146, $149, $152, $155, $158, $162, $165, $168, $172, ADDITIONAL INCOME $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, USES TOTAL REVENUE $137, $140, $143, $146, $149, $152, $155, $158, $161, $164, ACQUISITION CONSTRUCTION CONTINGENCY TENANT IMPROVEMENTS PERMITS ARCHITECTURE & ENGINEERING $80, $600, $38, $7, $7, $14, EXPENSES MANAGEMENT $54, $55, $57, $59, $60, $62, $64, $66, $68, $70, INSURANCE & UTILITIES $11, $11, $11, $12, $12, $12, $13, $13, $13, $14, TAXES $15, $15, $16, $16, $17, $17, $18, $18, $19, $19, TOTAL EXPENSES $80, $82, $85, $87, $90, $92, $95, $98, $101, $104, DEVELOPER FEE $25, MISC. $12, TOTAL USES $785, NOI $57, $58, $58, $58, $59, $59, $59, $59, $59, $60, RESERVES 0 0 $ $ $ $ $ $ $ $ NOI LESS RESERVES $57, $58, $57, $57, $58, $58, $58, $58, $59, $59, DEBT SERVICE $71, $69, $67, $65, $63, $61, $59, $57, $55, $53, CASH FLOW. ($13,707.59) ($11,355.55) ($9,896.36) ($7,584.17) ($5,290.89) ($3,017.64) ($765.59) $1, $3, $5,

22 PRE-DEVELOPMENT PROCESS SITE SELECTION $$ $$ $$ HIRING ARCHITECTS, ENGINEERS, CONSULTANTS $$ $$ $$ $$ $$ DUE DILIGENCE FEASIBILITY STUDY REQUIRED REPORTS $$ $$ $$ COMMUNITY OUTREACH & COMMUNICATIONS MUNICIPALITY SUBMITTAL & REVIEW CITY PROCESS ZONING, PLANNING, UTILITY APPROVALS PROFORMA $$ PRE-CONSTRUCTION COORDINATION CONSTRUCTION DRAWING/ PLAN SUBMITTAL PURCHASE CONTRACT $$ FINALIZE BUDGET SECURING FINANCING (SHORT TERM > LONG TERM) SECURING FINANCING (SHORT TERM > LONG TERM) ENTER CRA PROCESS 22

23 PROJECT FEATURES Intake to DCED Example: Nation Restaurant & Bar (Westwood) Example: Burke Expansion (West End) CHARACTERISTICS: CHARACTERISTICS: Small Vacant Blighted Distressed New Construction Transformative High-competition Factors 23

24 CONSIDERING MARKET CONDITIONS CORRECTING MARKET INCENTIVIZING MARKET STANDARD COMMERCIAL HIGH RISE INDUSTRIAL AFFORDABLE HOUSING 24

25 NEHEMIAH MANUFACTURING LOWER PRICE HILL RECENTLY COMPLETED 50 New Jobs $ 12M Total Investment 25

26 CINCINNATI SCHOLAR HOUSE WALNUT HILLS UNDER CONSTRUCTION 44 Affordable Residential Units $ 12.8M Total Investment 26

27 CROSLEY BUILDING CAMP WASHINGTON CANDIDATE PROJECT 331,958 sq ft Industrial History Residential & Commercial Real Estate Unproven in Neighborhood 27

28 COMMERCIAL CRA QUESTIONS? 28

137. Tenancy specific information (a) Amount of deposit paid. (insert amount of deposit paid; in the case of a joint tenancy it should be the total am

137. Tenancy specific information (a) Amount of deposit paid. (insert amount of deposit paid; in the case of a joint tenancy it should be the total am 13Fast Fair Secure PRESCRIBED INFORMATION RELATING TO TENANCY DEPOSITS* The Letting Protection Service Northern Ireland NOTE: The landlord must supply the tenant with the Prescribed Information regarding