2014 LEAGUE OF ARIZONA CITIES AND TOWNS CONFERENCE

1. 2014 LEAGUE OF ARIZONA CITIES AND TOWNS CONFERENCE Rural Economic Development Tools and Programs Presentation Industrial Development Authorities Dane Fernandes Dane.fernandes@kutakrock.com

2. INDUSTRIAL DEVELOPMENT AUTHORITIES IN ARIZONA • Industrial Development Financing Act, Arizona Revised Statutes § 35-701 et seq. • Four most active of the Industrial Development Authorities (“IDA”) are: • City of Phoenix, • City of Tucson, • County of Maricopa, and • County of Pima • Dozens of other IDAs in the State • According to the Act, an IDA is a non-profit corporation designated a political subdivision of the State of Arizona

3. ELIGIBLE PROJECTS • Manufacturing facilities; • Commercial enterprises for agriculture, mining or industry; • Office buildings for use as corporate or company headquarters or regional offices; • Health care institutions; • For profit housing within the jurisdiction of the IDA; • Repairing or rehabilitating single family homes; • Convention or trade show facilities; • Airports, docks, wharves, mass commuting facilities, parking facilities; • Facilities for sewage/solid waste disposal or for furnishing of electric energy, gas or water; • Industrial park facilities; • Air or water pollution control facilities; • Charter schools; • Research and development facilities; • Commercial enterprises of any kind that are to be located in a designated area; • Public-private transportation facilities; • Any facilities owned or operated by a 501(c) organization; • New or existing correctional facilities within the State; and • Student Loan Programs

4. ADVANTAGES AND DISADVANTAGES OF IDA BOND FINANCING TO CITIES & TOWNS ADVANTAGES • Serves as an integrated financing vehicle that can fund construction and development phases, provide long term financing and fund future capital expenditures • Highly flexible structure – interest-only periods, variable amortization schedule and partial or full prepayment without penalty • Potential off balance sheet treatment • Potential alternative to statutory impediments DISADVANTAGES • Higher cost • Longer timelines • No interest rate advantage

5. TYPES OF STRUCTURES Typical Conduit Revenue Bond • IDA issues bonds and is nominal owner and obligor on indebtedness • Lends proceeds of bonds to the borrower • Acts as conduit with no direct financial responsibility – bondholder must look to project’s ability to pay or payments from obligor Public/Private Partnership Collaboration between public and private entities to structure, negotiate and implement the finance, design, development, construction and/or operation of a project. • Types of Public/Private Partnerships • Major private • Traditional • Major public

6. Loan of Bond Proceeds Bondholder Issuer City/Town Bond Loan/Lease Agreement Bond Proceeds Indenture Bond Payments Principal & Interest Bond Proceeds Trustee Loan Payments SIMPLIFIED STRUCTURE OF TYPICAL CONDUIT REVENUE BOND ISSUE

7. SIMPLIFIED STRUCTURE OF PUBLIC/PRIVATE PARTNERSHIP STRUCTURE Bond Underwriter Issuer Bond Bond Proceeds Loan Agreement Bond Project Owner City/Town Bondholder Lease Agreement Bond Proceeds Bond Payments Principal & Interest Bond Proceeds Trustee Lease Payments

8. CASE STUDIES

9. OFF BALANCE SHEET FACILITIES FINANCING • Need For New Facilities Without Bond Election • Use Of 501(c)(3) as Owner/Borrower • Lease/Leaseback Transaction • Governmental Entity Rating on Bonds • Facilities Deeded to Governmental Entity at the End of Lease

10. ECONOMIC DEVELOPMENT • Solid Waste Recycling Project • New Jobs/Business/Tax Revenues to City • Elimination of Waste from Landfill • License to Operate at Landfill • City Supplier of Waste Stream and Last Buyer of Recycled Material • City Rating on Bonds

11. CITY TRANSPORTATION PROJECT • Roadway Project • IDA Owner of Project • Leased to City • Purchase of Bonds in Installments from Bank • Assistance from State