Economic Development Downstate Summit

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Economic Development Downstate Summit Creating a
Common Downstate Voice September 29, 2011
Vital Tools and Resources for Downstate (Rural)
Economic Development Part II TIF Districts
Thomas R. Henderson Illinois Tax Increment
Association Thenderson_at_illinois-tif.com (217)
523-4905
James M. Snyder Ice Miller LLP James.snyder_at_icemil
ler.com [phone]
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Existing Vital Tools Used in Combination with Tax
Increment Finance

• What existing vital tools can Leaders of
  Downstate Communities combine with Tax Increment
  Finance to fill gaps?
• While staggering budget challenges are
  confronting most communities in 2011, the most
  determined leaders are discovering innovative
  approaches for creating public/private
  partnerships and deploying creative strategies to
  raise capital and prosper during these difficult
  times.
• Tax Increment Finance
• Midwest Disaster Bonds
• - New financing for most projects in 18 counties
  in Illinois (mostly downstate)
• Qualified Energy Conservation Bonds
• New Markets Tax Credit and other Tax Credits
• USDA Loans / SBA Loans
• Other Tools

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Case Study Kone Center, Moline, Illinois

• 40 Million Kone Center Eight Story Mixed Use
  office building.
• Kone Corp., a Finland based Company that makes
  elevators and escalators will consolidate its
  current Moline, Illinois administrative and call
  center operations. Kone is anchor tenant,
  occupying second to sixth floors.
• Key component of continued successful
  revitalization of Moline Mississippi riverfront.
• Project will retain 375 Kone jobs, add estimated
  53 construction jobs and create 50 new
  permanent positions.

• Vital Tools Utilized
• A 20.2 Million Illinois Finance Authority
  Midwestern Disaster Area Bonds. First Midwestern
  Disaster Area Bonds issued in Illinois.
• City of Moline borrows 7.5 Million and re-loans
  to Developer to purchase property at favorable
  interest rates.
• 7 Million Illinois EDGE) Economic Development
  for a Growing Economy) program. Kone had to meet
  one of five criteria related to the creation of
  retention of jobs in Illinois for example, that
  it had "multi-state location options and could
  reasonably and efficiently locate outside of the
  state."

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Case Study Kone Center, Moline, Illinois
(cont'd)

• Vital Tools Utilized (cont'd)
• The City agreed to create a new 23 year Tax
  Increment Financing (TIF) district (to replace a
  portion of an existing district) that will use up
  to 10.1 million of increased property-tax
  revenue to cover project costs outside of
  construction, including land acquisition,
  interest, and architectural and engineering work.
  Through the TIF, Developer will get back
  substantial portion of the property taxes
  Developer pays from the new development.
• 8 Million New Market Tax Credits.
• 471,000 grant from Illinois Department of
  Commerce and Economic Opportunity for
  installation of 316 kilo watt solar photo voltaic
  system to help earn Leed Certification.
• State of Illinois New Market Tax.

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Existing Vital Tools Used in Combination with Tax
Increment Finance New Markets Tax Credit
Overview

• Federal Program designed to encourage economic
  and social growth in low income areas.
• Used to create Equity in Projects Investors
  receive federal tax credits over 7 years for
  investing in qualifying projects.
• Qualifying projects include manufacturing and
  commercial projects to bring new jobs to the low
  income community as well as essential services
  like health clinics, day care, elderly care and
  education.
• The tax credits provide 18-20 of the project
  cost as "equity" and reduces the cost of
  financing by 30.
• Project must create economic development or
  provide essential services to a community with
  80 or less of State/Metro median ("LIC"). Many
  projects downstate will qualify.
• Set to expire unless extended.

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New Markets Tax Credits Overview (cont'd)
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Existing Vital Tools Used in Combination with Tax
Increment Finance Midwestern Disaster Area Bonds

• Special Provision for up to 1.5 Billion of
  Tax-Exempt Bonds in 18 Illinois Counties affected
  by 2008 Floods
• Most Projects Located in a MDAB Eligible County
  Qualify.
• Each Prospective MDAB Project must either
  constitute
• Non residential real property used in a trade or
  business, including most industrial and
  commercial uses, or
• Public utility property to qualify for MDAB
  financing.
• Timeframe for Issuing MDAB's
• Under the Act, MDAB's may be issued from 2008
  through January 1, 2013.

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Midwestern Disaster Area Bonds (contd)

• The 18 MDAB Eligible Counties designated by the
  Federal Act
• Qualified Projects located in the following
  counties may qualify for MDAB financing

Adams Douglas Lake
Calhoun Edgar Lawrence
Coles Hancock Mercer
Clark Henderson Rock Island
Crawford Jasper Whiteside
Cumberland Jersey Winnebago
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Midwestern Disaster Area Bonds (contd)

• Examples of Qualifying MDAB Projects
• Assuming the other qualification requirements
  described herein are satisfied, the following are
  examples of projects that qualify.
• Example Non-Residential Projects in Private
  Business Use (i.e., Industrial Warehousing/
  Distribution, Commercial/Office projects, and
  Agricultural projects.
• Manufacturing Facilities (particularly helpful
  for projects over 20MM)
• Warehouses/Distribution Facilities
• Retail Businesses/Commercial Property/Hotels
• Office Buildings (including Medical Office
  Buildings and other Medical Facilities)
• Agricultural Facilities and Improvements

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Vital Tools and Resources. ..

• Are our vital tools going to be taken away?
• Federal proposals exist to take away Federal
  tax-exempt status of government bonds. This
  would cost downstate communities 100-250 basis
  points (1 2.5) on future borrowing costs.
• While other states and countries are looking to
  responsibly expand vital tools, certain members
  of legislative body looking to restrict Tax
  Increment Finance (SB 540).
• Ice Miller LLP has acted as bond counsel on many
  TIF transactions downstate. Ice Miller provided
  legal support to the City of Chicago TIF Reform
  Panel on better and more transparent use of TIF.
• City is aligned with downstate on many issues.
• Some issues City would be supportive but
  downstate communities must respond if issue does
  not affect City directly.

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Thank you.

Thomas R. Hendersonthenderson_at_illinois-tif.com(2
17) 523-4905
James M. SnyderJames.Snyder_at_icemiller.com(312)
726-7127