COMMUNITY REINVESTMENT AREA 101 COMMERCIAL CRA 1
WHAT’S THE DIFFERENCE? COMMUNITY REINVESTMENT AREA RESIDENTIAL CRA Industrial, Office, Commercial, 4+ Residential Units 1–3 Residential Units 2
HAVE A PLAN TO DEVELOP VACANT, BLIGHTED, UNDERUTILIZED PROPERTY? 3
HOW CAN DCED HELP? TAX INCREMENT JOB CREATION FINANCING COMMERCIAL FEDERAL FUNDS TAX CREDIT CRA MANAGEMENT RESIDENTIAL NBD CRA ASSISTANCE COMPETITIVE LOAN AFFORDABLE PROGRAMS HOUSING TECHNICAL ASSISTANCE & COMMUNITY CITY FACILITATION CONNECTION 4
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 3735.65-3735.70 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
PROPERTY TAX BREAKDOWN ABATED TAXES NEW TAX LIABILITY VOLUNTARY TAX INCENTIVE 15% CONTRIBUTION AGREEMENT (VTICA) 25% SCHOOL BOARD PRE-IMPROVEMENT TAX PAYMENT 6
PROPERTY TAX BREAKDOWN ABATED TAXES NEW TAX LIABILITY VOLUNTARY TAX INCENTIVE 15% CONTRIBUTION AGREEMENT (VTICA) ABATED TAXES NEW TAX LIABILITY SCHOOL BOARD 25% VOLUNTARY TAX INCENTIVE 15% CONTRIBUTION AGREEMENT (VTICA) 25% SCHOOL BOARD PRE-IMPROVEMENT PRE-IMPROVEMENT TAX PAYMENT TAX PAYMENT 7
ABATEMENTS DO NOT: • Reduce current taxes being • Last forever paid on a piece of property • Have any value unless a • Require the City, County or developer/property owner Schools to pay money to a invests money to build developer or property owner something new or refurbish an existing building 8
PROFORMA SOURCES PROFORMA DEBT $628,176.80 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 EQUITY $157,044.20 REVENUE TOTAL SOURCES $785,221.00 REVENUE $144,000.00 $146,8800.00 $149,817.60 $152,813.95 $155,870.23 $158,987.64 $162,167.39 $165,410.74 $168,718.95 $172,093.33 ADDITIONAL INCOME $1,100.00 $1,122.00 $1,144.44 $1,167.33 $1,190.68 $1,214.49 $1,238.78 $1,263.55 $1,288.83 $1,314.60 TOTAL REVENUE $137,900.00 $140,658.00 $143,471.16 $146,340.58 $149,267.39 $152,252.74 $155,297.80 $158,403.75 $161,571.83 $164,803.27 USES ACQUISITION $80,000.00 EXPENSES CONSTRUCTION $600,000.00 MANAGEMENT $54,000.00 $55,620.00 $57,288.60 $59,007.26 $60,777.48 $62,600.80 $64,478.82 $66,413.19 $68,405.58 $70,457.75 CONTINGENCY $38,760.00 INSURANCE & UTILITIES $11,000.00 $11,330.00 $11,669.90 $12,020.00 $12,380.60 $12,752.01 $13,134.58 $13,528.61 $13,934.47 $14,352.51 TENANT IMPROVEMENTS $7,269.00 TAXES $15,198.75 $15,654.71 $16,124.35 $16,608.08 $17,106.33 $17,619.52 $18,148.10 $18,692.55 $19,253.32 $19,830.92 PERMITS $7,592.00 TOTAL EXPENSES $80,198.75 $82,604.71 $85,082.85 $87,635.34 $90,264.40 $92,972.33 $95,761.50 $98,634.35 $101,593.38 $104,641.18 ARCHITECTURE & ENGINEERING $14,600.00 DEVELOPER FEE $25,000.00 NOI $57,701.25 $58,053.29 $58,388.31 $58,705.24 $59,003.00 $59,280.41 $59,536.30 $59,769.41 $59,978.45 $60,162.09 MISC. $12,000.00 RESERVES 0 0 $875.82 $880.58 $885.04 $889.21 $893.04 $896.54 $899.68 $902.43 TOTAL USES $785,221.00 NOI LESS RESERVES $57,701.25 $58,053.29 $57,512.48 $57,824.67 $58,117.95 $58,391.20 $58,643.25 $58,872.87 $59,078.77 $59,259.66 DEBT SERVICE $71,408.84 $69,408.84 $67,408.84 $65,408.84 $63,408.84 $61,408.84 $59,408.84 $57,408.84 $55,408.84 $53,408.84 CASH FLOW. ($13,707.59) ($11,355.55) ($9,896.36) ($7,584.17) ($5,290.89) ($3,017.64) ($765.59) $1,464.03 $3,669.93 $5,850.82 9
FINDING PROPERTY TAX INFORMATION 10
HOW ARE PROPERTY TAXES CALCULATED? PROPERTY VALUE ASSESSMENT TAX CALCULATION TAX BILL Auditor Auditor 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
PROPERTY TAX BREAKDOWN $1M Investment Fair Market Value $100,000 Fair Market Value $600,000 Assessed Value $35,000 Assessed Value $175,000 Tax Bill $3,272 Tax Bill $19,631 12
PROPERTY TAX BREAKDOWN Example YEARS 1–10 YEARS 11 + $ 9,815 FORGONE FULLY ABATED TAXES (NET 60%) CONTRIBUTING $ 2,454 NEW REVENUE PAID VOLUNTARY TAX INCENTIVE TO NONPROFIT PROGRAM CONTRIBUTION AGREEMENT (VTICA) ADMINISTRATOR $ 4,090 NEW REVENUE PAID SCHOOL BOARD TO SCHOOL BOARD $ 3,272 PAID TO COUNTY 13
COMMERCIAL CRA TIMELINE LEGAL AGREEMENTS CONSTRUCTION APPLICATION & ORDINANCE COMMENCEMENT REVIEWED Upon agreement of terms, DCED works with the City’s Staff will review all application Law Department to draft an ordinance to provide materials & review City Council’s to the City Manager or approval & to City Council for a vote. CRA policies. APPLICATION INCENTIVE NEGOTIATION COUNCIL DCED will negotiate with applicants RECEIVED APPROVAL based on Council’s CRA policies. Applicant provides completed Once the City Manager approves Once an offer is approved by DCED, application & supporting the offer, the incentive package is staff will inform applicant of documents to DCED for review. presented to City Council for a vote. the incentive the department Process includes $1,250 non-refundable This process generally takes about intends to propose to City Council. application fee to DCED & $750 fee to ODSA. four weeks from introduction to passage. 14
COMMERCIAL CRA TIMELINE Application Received APPLICATION FOR COMMERCIAL TAX ABATEMENT STAFF EVALUATES & VERIFIES: CITY OF CINCINNATI COMMUNITY REINVESTMENT AREA COMMERCIAL, INDUSTRIAL, MIXED-USE, MULTI-UNIT (4+ UNITS) Note: After review and recommendation by the Department of Community & Economic Development, all applications must Sources & Uses of Funds 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. Supporting Documents for ALL Sources of Funding 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 Post-construction Operating Proforma & Cash Flow Analysis 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. Application Fee 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 Corporate Resolution, Articles of Incorporation, 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 and an Operating/Partnership Agreement SECTION I – Applicant/Project Information Applicant Information: Copy of the Deed Legal Name of Property Owner Applying for Abatement: ____________________________ Form of business enterprise _____________________________________ (corporation, partnership, proprietorship, LLC, non-profit, or other) Proposed Construction Plans/Rendering 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: ____________________________ Legal Address of real property owner: ____________________________ Estimated Pre-construction, and Post-construction Federal Tax ID #(s): ___________________________ Applicant Contact Person: ___________________________________Title: _______________________ Real Estate Taxes Phone:_________________ Main Contact email address: ______________________ Address of subject property_____________________________________________ Zip: 452_____ Confjrmation of Registration for LEED or Hamilton County Auditor Parcel ID#: ____ - _______ - _______ (see page 3 if additional space needed Living Building Challenge (if needed) for multiple addresses or parcel IDs) City of Cincinnati Neighborhood: 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: __________________________ APPLICATION LEGAL AGREEMENTS CONSTRUCTION REVIEWED & ORDINANCE COMMENCEMENT {00165030-1} Pg. 1 City of Cincinnati -- Revised 9/18 APPLICATION INCENTIVE NEGOTIATION COUNCIL RECEIVED APPROVAL 15
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