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Development Agreements and Post-Issuance Compliance

Development Agreements and Post-Issuance Compliance. Iowa Municipal Professionals Institute, 2014 Kristin Cooper Ahlers & Cooney, P.C. What is a Development Agreement?. What will the Developer do? Build a new warehouse Hire 10 new employees Agree to a Minimum Assessment Agreement

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Development Agreements and Post-Issuance Compliance

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  1. Development Agreements and Post-Issuance Compliance Iowa Municipal Professionals Institute, 2014 Kristin Cooper Ahlers & Cooney, P.C.

  2. What is a Development Agreement? • What will the Developer do? • Build a new warehouse • Hire 10 new employees • Agree to a Minimum Assessment Agreement • Promise to keep their property in good repair • Promise to insure their property • Promise to pay their taxes

  3. What is a Development Agreement? • What will the City provide as an incentive? • Tax Rebates (strongly recommended) • Upfront Cash (higher risk) • Forgivable Loan (higher risk) • Public Infrastructure • Property Transfer – 403.8 • Remember the three C’s • Call your realtor – make sure you’re selling at fair value • Competitive bidding • Check the safe harbor – minimum assessment agreement

  4. Why is it so long? • Even small deals can be complicated! • Identify the Minimum Improvements (in detail) • Timing of rebates, grants • Benefit to City (job creation/retention, building) • Non-appropriation language • Memorandum of Agreement • Certificate of Completion • Annual Certification

  5. What if it’s a housing development? • Will the housing be 100% LMI? • If no: • LMI Set-Aside • Reimbursement for only public infrastructure • Limited time for the collection of tax increment (10 or extend to 15) • May have to create new urban renewal area

  6. Drafting considerations: • How to Get Started: • Identify a project the City wants to encourage • Decide which incentives the City wants to provide • Be sure that: • Development Property is in Urban Renewal Area • Specific project authority in Plan (given 2012 legislation) • Grants/benefits will not be cut short by sunset • Ordinance allowing for collection of increment  

  7. Drafting Considerations: • Tell us if you need to borrow money to do the project • Find out the legal name of the Developer • Is it an owner/tenant situation? • Make sure the business is not relocating from an adjacent county or city • Ask if the Developer is also requesting money from the IEDA

  8. Drafting considerations: • More Decisions! • Do you want the Developer to pay for the City’s fees (legal/planning) for the project? • Do you want to give the Developer increment on both the land and the building? • Will the “base” be the current assessed value of the property?

  9. Switching gears… Post-Issuance Compliance

  10. Major takeaway: • Make sure you have a Post-Issuance Compliance Policy! • Procedures should provide for: • Due diligence at regular intervals • Identify the official or employee responsible for review • Provide for training of the responsible official or employee • Address retention of records • Timely identify and correct tax noncompliance

  11. recommendations • Keep records • Consider separate storage and destruction policies for bond related records • Create sub-accounts for proceeds • Keep receipts • Start a tickler system • Keep a list of property bought with bond proceeds

  12. Post issuance compliance • Arbitrage rebate and yield restriction compliance key part of post-issuance compliance • proactively monitor arbitrage rebate and yield restriction • Develop process for identifying private use

  13. Call bond counsel if… • You sell an asset purchased with bond proceeds (before you sell) • If you intend to lease any asset purchased with bond proceeds • If you plan to enter into any management or research agreement relating to a financed asset • If you intend to enter into any agreement to confer special legal rights or entitlements relating to a financed asset (such as naming rights)

  14. Why have a policy? Failure to check the boxes on the Form 8038 / 8038-G may cause you to end up in audit pile

  15. Why have a policy? • Not absolutely required • May be audited (more frequently) • Opportunity to participate in VCAP to address violations • Failure to comply with tax requirements could result in loss of tax-exempt status of the financing • Hurt reputation of borrower

  16. Questions? Kristin Cooper Ahlers & Cooney, P.C. 100 Court Avenue, Suite 600 Des Moines, Iowa 50309 (515) 246-0330 kcooper@ahlerslaw.com

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