Creative Financing

This page was created to discuss different methods of creative financing for commercial development.

Historic Preservation Tax Credit

August 13,2012

Feds Reject Historic-Preservation Tax Incentives for Denver Union Station Remodel

Developers requested 9.6 Million in Historic Preservation Tax Credits.

Major concerns with this project:

  1. Instillation of 16 dormers on the roof of the station
  2. Mezzanines between first and second floors
  3. Certain window and door changes
  4. Removal of historic interior features including historic staircase

This tax credit is awarded to those who invest in historic resources that:

  1. Will be applied to city property taxes
  2. Your building must be a contributing structure within a cities historic district
  3. The properties location determines the minimal required expenditures, which is a percentage of the appraised value
  4. Qualified expenditures include labor and materials for repairs or replacement of the features that help preserve the structure

Interesting links below:

http://downtownontherange.blogspot.com/2012/03/should-historic-tax-credit-go-toward.html

http://www.bizjournals.com/denver/news/2012/08/13/feds-reject-historic-tax-incentives.html?page=all

http://www.nps.gov/tps/tax-incentives.htm ______________________________________________________________________________________

Rehabilitation Tax Credit

Jefferson Hotel Caddo Perish- Louisiana

This tax credit encourages real estate developers to renovate and restore construction on older buildings

  1. Buildings in service before 1936 are eligible for 10% of the credit
  2. Certified historic structures are eligible for 20% of the credit
  3. The credit applies to the buildings rehabilitation and costs
  4. This credit cannot be applied to the cost of purchasing the building or to the repair of sidewalks, parking lots, or landscaping
  5. This credit increases if the building is located in a specific disaster area
  6. There are time restraints on this credit… It must taken within a certain timeframe
  7. Enlargement and reconstruction projects do not qualify for this credit
  8. Only the title holder can claim the credit

Interesting links below:

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Rehabilitation-Tax-Credit—Real-Estate-Tax-Tips

http://smallbusiness.chron.com/tax-credits-building-renovations-10358.html

http://www.thc.state.tx.us/historicprop/hpcredits_vfruit.shtml __________________________________________________________________________________________

Low Income Tax Credit

http://www.enterprisecommunity.com/financing-and-development/low-income-housing-tax-credits

The LIHTC program requires a minimum affordability period of 30 years (i.e., a 15-year compliance period and subsequent 15-year extended use period). Some states require a longer affordability period for all LIHTC properties, and other states may negotiate longer affordability periods on a property-specific basis. Tenant incomes are recertified annually to ensure their continued eligibility. The allocating agency is responsible for monitoring compliance with the provisions during the affordability period and must report the results of monitoring to the IRS. To be eligible for consideration under the LIHTC Program, a proposed project must:

  1. Be a residential rental property.
  2. Commit to one of two possible low-income occupancy threshold requirements.
  3. Restrict rents, including utility charges, in low-income units.
  4. Operate under the rent and income restrictions for 30 years or longer, pursuant to written agreements with the agency issuing the tax credits.

Interesting links below:

http://www.enterprisecommunity.com/financing-and-development/low-income-housing-tax-credits  

http://www.dallasnews.com/news/community-news/oak-cliff/headlines/20120227-oak-cliff-house-first-in-state-to-meet-standard-for-affordable-green-housing.ece

http://www.reporternews.com/news/2012/aug/07/new-low-income-apartment-project-in-abilene-gets/

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Tax Increment Financing (TIF)

Lake Highlands Town Center

Basically TIF says revenue goes through a general fund, yet any increase goes into a separate account.  This extra money can be used for public improvements that are not related to any private projects.  It is a tool local governments use to publicly finance needed structural improvements.

  1. TIF can be used to enhance infrastructures within certain areas
  2. Improvements are typically used to promote viability of existing business and to attract new commercial enterprise
  3. Costs are repaid by the contributions of future tax revenues, and taxing units that levies taxes against the property
  4. Each tax unit can decide to use all, a portion, or none of the tax revenue that is attributed to the increase in property values, due to the improvements within the reinvestment zone.
  5. TIF may be used on a private development for certain specific improvements on particular pieces of a project.

Interesting links below:

http://www.dallas-ecodev.org/wp-content/uploads/2012/04/FarmersMarket_marketing.pdf

http://www.dallasnews.com/business/commercial-real-estate/headlines/20120813-developers-get-loan-to-resume-lake-highlands-town-center-project.ece

http://www.dallas-ecodev.org/wp-content/uploads/2012/04/southwestern_marketing.pdf

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Adaptive Reuse Building Codes

Gas Storage Tanks.
These tanks stored gasoline for the testing that took place in the early years of RETF when gasoline was used as a fuel. In later years, the research focused on liquid hydrogen as a fuel

Buildings built between 1920’s – mid 1970’s may contain asbestos or lead paint, that may need to be updated. Certain buildings may contain underground fuel storage tanks (see picture above) or gasoline storage created to power broilers. Certain buildings may have concerns with assability, such as stairwells, parking, exits and electrical systems. Sample Adaptive Reuse Codes include: Chapter 34 of the UBC (1997) Repairs, alterations and additions necessary for the preservation, restoration, rehabilitation or continued use of a building or structure may be made without conformance to all of the requirements of this code when authorized by the building official provided Chapter 34 of the IBC (2000): The provisions of this code relating to the construction, repair, alteration, addition, restoration, and movement of structures, and changes of occupancy shall not be mandatory for historic buildings where such buildings are judged by the building official to not constitute a distinct life safety hazard.

Interesting links below:

http://www.thc.state.tx.us/historicprop/hpcodes.shtml

http://dfwarttour.com/swiss-avenue/ 

http://www.texasrebusiness.com/articles/FEB10/cover1.html

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Community Development Entities

The purpose is to encourage financial institutions to offer credits and capital to under-deserved markets. Institutions are encouraged to invest in the: Community Developmetnt Financial Institution Programs

  1. Financial Assistance, in the form of grants, loans, equity, deposits, and credit union shares depending on a supportive business plan.
  2. Technical Assistance, which addresses community development and capital access needs of particular native markets.
  3. Bank Enterprise Award Program
  4. New Market Tax Credit Program

Interesting links below:

http://www.areadevelopment.com/taxesIncentives/dec09/new-markets-tax-credit-incentive1103.shtml

http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=10

http://dallascityhall.com/housing/Development/CHDOCBDO/index.html

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New Market Tax Credit

Mane Gulf Mane Research Institute recently received $4,000,000 construction loan, under the federal New Markets Tax Credit Program.

This credit is an incentive for lenders to invest in certain areas, these areas are based on the areas average income, and average income.  The lender can claim up to 40% of the amount they loaned. Texas Community Development Capital, a subsidiary of TXCDC, was awarded $75 million of tax credit authority in October of 2009. The credits are available for deployment for qualified projects and businesses in qualified census tracks within Texas. Approximately 64% of the allocation will be targeted to urban communities. The remaining 36% will be committed to rural areas. The majority of the investments will target businesses and projects located in higher distressed neighborhoods. In certain circumstances, NMTC may be used to finance mixed-use projects, where less than 80% of the gross rental income comes from dwelling units. In some cases, it may be possible to segregate an investment in a mixed-use project to eliminate the issue of the 80% rental cap.

Interesting links below:

http://txcdc.com/news/archives/151 http://txcdc.com/news/archives/37

http://www.enterprisecommunity.com/financing-and-development/new-markets-tax-credits

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Community Development Block Grant (HUD)

Milwaukee County has repaid the federal government $229,000 for improper handling of Community Development Block Grant.

http://www.youtube.com/watch?v=VR-fq82KSec
Click video link above

Major concerns with this project:

  1. The payback was ordered because the local programs primarily served City of Milwaukee residents or the county couldn’t find documentation showing how the money was spent, according to county and HUD officials.
  2. Webb helped create a phony contract for classes to help aspiring minority and female contractors get certified for the county’s disadvantaged business contracting program, according to court records.
  3.  She also participated in a double-billing scheme involving a local contractor and took kickbacks totaling $3,430 from the contractor.
  4. The county’s $28,000 allocation to its minority contracting program was ruled ineligible by HUD because those services went only to Milwaukee residents.
  5. The league’s 2011 annual report says it conducted 16 workshops for the county last year for 27 potential minority contractors.

This tax Credit:

Is ideal for cities wanting to improve housing conditions,  and expand economic opportunities for projects such as job retention for low income people. It is also ideal for projects that are aimed at eliminating hazardous conditions to the public or conditions of a emergency.

  1. In Dallas County cities are allowed to utilize their allocations for what ever they desire as long as they don’t hinder the counties ability to meet HUD’s annual spending requirements.
  2. Most of the money is typically used for code enforcement, and capital improvements.
  3. Dallas County typically allocates it’s home funds towards the down payment and closing cost assistance programs for low income home buyers.

Interesting Links below:

http://www.dallascounty.org/department/plandev/cdbg.php

http://www.jsonline.com/news/milwaukee/county-repays-hud-for-misused-block-grant-funding-1k6aieo-164499186.html

http://dallascityhall.com/financial_services/community_development.html

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Super Fund and Browning Grant

September 24,2012 >>> The U.S. Environmental Protection Agency announced that, with support from the Texas Commission on Environmental Quality, the Circle Court Ground Water Plume in Willow Park, Texas, has been added to the National Priorities List of Superfund sites.
In 2006, routine sampling of a well in the city’s water system showed concentrations of trichloroethene.

October 2012 update-

A drum labeled as TCE and containing residual concentrations of TCE has been located in close proximity to a private water supply well containing the highest TCE concentration at the Site.  The highest concentration exceeding the Safe Drinking Water Act maximum contaminant level (MCL) is present at Circle Drive and Russell Road.

  1. Superfund is the federal program that investigates and cleans up the most complex, uncontrolled or abandoned hazardous waste sites in the country.
  2. The list of hazardous sites in the United States eligible for long term cleanup action financed under the federal Superfund program.
  3. EPA works to identify companies or people responsible for the contamination at a site and requires them to conduct or pay for the cleanup.
  4. For newly listed sites without viable potentially responsible parties, EPA will investigate the full extent of the contamination before starting significant cleanup at the site. It may take several years before cleanup funding is available for these sites.

Interesting Links Below:

http://www.epa.gov/region6/6sf/pdffiles/circle-court-tx.pdf

http://www.epa.gov/superfund/about.htm

http://www.niehs.nih.gov/research/supported/dert/cris/programs/srp/phi/index.cfm

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Transit Oriented Development

http://www.youtube.com/watch?v=vsEWlkSJ0YY
Click Video Link Above

Transit-Oriented Development (TOD) is a land use pattern and development style with unique characteristics based on the proximity and relationship of property to a transit facility, such as a light rail station. Special regulations and plans are developed to take advantage of the development potential in the surrounding area.

One important goal of TOD is to create a pedestrian-friendly environment that encourages people to leave their cars at home and use transit. In order to change commuting habits, a variety of activities—shopping, entertainment, employment and even residential—must be located convenient to the transit facility. This mix of uses should also be designed to extend activities beyond the workday into evenings and weekends.

TOD planning may include:

  1. Directing and performing land use plans, market analyses, and other special studies related to TOD.
  2. Developing, implementing, and monitoring zoning ordinances and development regulations targeted at encouraging TOD.
  3. Facilitating partnerships among landowners, developers, the local transit agency (DART), and the City.
  4. Participating in the development, implementation, and monitoring of Transportation Management Associations (TMAs), special organizations providing additional types of transportation services to transit riders, such as shuttles to work and shopping, carpool and vanpool matching, etc.
  5. Educating the public about the opportunities and benefits of TOD

Interesting links below:

http://www.leandertx.org/page.php?page_id=39

http://www.dallas-ecodev.org/redevelopment/tod/

http://transportationblog.dallasnews.com/2010/03/transit-oriented-development-a.html/

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Pedestrian Oriented Development

Pedestrian oriented development (POD) is a pedestrian friendly policy providing clear, comfortable pedestrian access to commercial and residential areas and transit stops.

1. Successful implementation requires a shift from modern, automobile-dependent development toward more traditional design practices that provide safe, convenient opportunities for walking, biking and otherwise accessing key destinations such as
school or work.

2. This transition to pedestrian- and public transit-oriented development will help to eliminate quality of life impairments, such as congestion and air pollution, loss of open space, costly road maintenance and public health services, inequitable distribution of economic resources, and loss of a sense of community.

3. New residential and commercial developments can and should incorporate pedestrian circulation into site layouts by providing not only sidewalks and walkways, but also human-scale landscaping, lighting and other features that promote a sense of
safety and encourage people to make use of pedestrian amenities.

Interesting Links Below:

http://brighamyen.com/category/pedestrian-oriented/

http://subregional.h-gac.com/toolbox/Transportation_and_Mobility/Bicycle_Pedestrian_Trail/3.1_Pedestrian_Friendly_Design-final.html

http://changelabsolutions.org/childhood-obesity/pedestrian-oriented-building-entries

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2 thoughts on “Creative Financing

Add yours

  1. Wow do I wish I had seen this 3 years ago when you posted it! I would have saved a lot of time! Thank you for sharing from your wealth of Housing experience with the City of Dallas!

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