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CDFIS AND INFRASTRUCTURE FINANCING
• Moderator: Matt Josephs, LISC• Panelists:
• Laura Buxbaum, CEI• Michael Carroll, RCAC• Richard Manson, LISC• Dan Marsh, National Development Council
The Role for CDFI’s in Infrastructure Investment
March 2017 | Daniel MarshCDFI Institute
Current CDFI Focused Community Development Discourse
Equitable Economic Development = Opportunity & Access
Capital, Jobs, Services, Education
Affordable Housing
Transportation
Infrastructure & Local Amenities
Emerging CDFI Focused Community Development Discourse
NDC LMI Infrastructure Focus
Activity Anticipated Role Example
Provide systems and rate stability for users*
TA, sponsor, lender Revitalization of existing systems
Increase / preserve efficiency for small scale projects
Lender Long term access to capital with low transaction costs for new spending
Further emerging best practices Sponsor, lender Pay for success - green infrastructure
*NDC has completed projects with development cost in excess of $2.6 billion for office, data storage, housing, educational, infrastructure and parking facilities. Total bond financed projects account for approximately $2.1 billion of the total portfolio.
CDFIs Enhancing Access to Infrastructure
P3 AWARDS PROFILE: MEDICAL RESEARCH PROJECT TRANSFORMS SEATTLE’SSOUTH LAKE UNIONJuly 14, 2014When the University Of Washington School Of Medicine prepared a multi-phase plan to develop a biomedical research campus, it used a P3 to transform an office building in the South Lake Union neighborhood of Seattle, allowing the school to accelerate the building process, save the university millions of dollars and deliver state-of-the-art facilities that have been a catalyst in the area’s redevelopment.To build the new biomedical research campus, UW Medicine entered into a partnership with Vulcan Real Estate, Inc., Perkins + Will and the National Development Council’s Housing and Economic Development Corporation’s Public-Private Partnerships. Together, the group used two forms of tax-exempt bonds (501 (c)(3) bonds and 63-20 bonds) to finance the project.
Current National Infrastructure Conversation Focused On Private Investment
Projects That Do Not Generated Revenue May Not Attract Private Investment
However, in order to attract this capital, U.S. public infrastructure assets will have to support higher rates of return than are currently generated through 100 percent low-cost debt financing in the municipal bond market.Elaine Buckberg, Owen Kearney, and Neal Stolleman.
“Private investments in public infrastructure were on the agenda at a White House meeting on Thursday morning with 24 business and manufacturing executives. The CEO’s and administration officials agreed that public-private partnerships will be the cornerstone of a robust plan to rebuild the nation’s crumbling infrastructure.” Sean Spicer
Long Beach Courthouse Cost $160 Million Too Much
Why It Is Important to Keep The Public In Public/Private Partnerships
"The Administrative Office of the Courts used skewed assumptions to justify building the new Long Beach courthouse under an untested public-private financing scheme, a report issued Thursday ... said."• Cost per square foot $928.30
• First Year Rent $101.00 per SF • 35 year lease• $49 million equity investment
requiring market rate of return
• Fixed Price Delivery Contract
Why It Is Important to Keep The Public In Public/Private Partnerships
Why Does Abu Dhabi Own All of Chicago's Parking Meters?
The City of Chicago has 36,000 parking meters. In 2008, it sold them on a 75 year lease for over one billion dollars.
But as Matt Taibbi reports in his book Griftopia,the state-owned investment arm of Abu Dhabi ended up owning a large share -- possibility a controlling majority -- in Chicago's parking meter system.
Now if city officials want to do anything that might disrupt parking meter revenue -- let's say close down parking for a street festival or parade -- they need to get the approval of those meters' shadowy, foreign owners.
The city lost a lawsuit for $61 million in compensation penalties for street closures.
True Public/Private Partnerships - CDFI Infrastructure Case Study
NDC’s Scranton Parking P3 Transaction
Scranton Parking Financial Structure
On & Off-Street Parking Revenue
ABM – Parking Operator
Community Development Properties, Scranton, Inc.
Trustee
Bond Holder
$29 million to City
Gross Revenue
Gross Revenue to fund OPEX &
Reserves
Debt Service Purchase Price
OPEX
OPEX Reimbursement
How this helps?Primary Act 47 Recovery Plan
Monetize parking assets Monetize sewer assets Refinance debt Raise fees and additional taxes as needed
Desired Outcomes
Firmly place the City on a course to re-establish an acceptable credit rating
Enable the City to pay its employees and its vendors in a timely manner
Maintain the health and safety of residents through adequate level of vital and necessary public services
The International ModelThe NDC American Model ™
CDFI’s Working with Development Nonprofits Can Offer Better Value for Social and Traditional Infrastructure P3’s
Residual Cash Flow To City Residual Cash Flow To Developer
As a Lender, CDFI’s Can Offer Better Value for Social and Traditional Infrastructure P3’s
Sources of Infrastructure Financing
501 (c)(3) & 63-20 Tax-Exempt Bonds
CDFI Bond Guarantee Program
USDA Community Facilities Loan/Guarantee Program
New Markets Tax Credits
Pay-for-Success Bonds
The Number of Experienced National and Regional CDFI’s is Growing
• Over the Last 30 years the industry has grown from a small group of community lenders to a major participant in financing of critical social infrastructure.
• During the Great Recession, the industry grew dramatically as total assets surged 14 percent annually from 2007 to 2014 while increasing from an estimated $25.5 billion to $64.3 billion by focusing on segments that traditional lenders often overlook.
• CDFI’s have long been engaged in financing small business, housing, and charter schools. Social and traditional infrastructure is the next logical extension of their activity.
• Some CDFI’s like NDC’s Community Impact Loan Fund have the capacity to be a lender, as well as a developer, when working through its parent NDC Housing and Economic Development Corporation.
The American™ Model: Our Approach to Public-Private Partnerships
Daniel MarshPresident & CEONational Development CouncilOne Battery Park Plaza, Suite 710New York City, New York 10004
www.rcac.org
MISSION:
Rural Community Assistance Corporation (RCAC) provides technical assistance, training and financing so rural communities achieve their goals and visions.
RCAC Community Development Program Areas
RCAC
HOUSING
FINANCEENVIRONMENTAL
• Alaska• Arizona• California• Colorado• Hawaii• Idaho• Montana • Oregon• Nevada• New Mexico• Utah• Washington• Wyoming
RCAC’s 13 Western State Service Area
Environmental Services
• RCAC water, wastewater and solid waste
• TMF- Technical, Managerial and Financial
• Focus on Regionalization Populations of 1500
and median income levels around $30K
Tribes in AZ and CA
RCAC Loan Fund• Established in 1988
• Designated Community Development Financial Institution (CDFI)
• Capitalized at $130 million; $61 million in loans currently deployed
• Financial resource for rural community development projects (pop. 50,000 or less)
Loan Fund Program Areas
• Small Business• Environmental Infrastructure – Water, Wastewater,
Solid Waste Systems• Affordable Housing - Single Family & Multi-Family• Community Facilities
Environmental Infrastructure Loan Program
Borrower EligibilityEnvironmental Infrastructure Loan Program
• Non-profit organizations• Government entities• Federal or State recognized tribal entities
Project EligibilityEnvironmental Infrastructure Loan Program
• Water, wastewater, solid waste or storm water facilities
• System must primarily serve a low-income community
• MHI of system’s service area must be less than County or State MHI, whichever the greater
Environmental Infrastructure LoansSHORT TERM (1-3 years)
• Feasibility: Preliminary Engineering Reports (PER), Environmental Reports
• Predevelopment: engineering, legal, bond counsel, etc.• Construction
Intermediate Term Loans Environmental Infrastructure Loan Program
• Smaller capital needs, normally not to exceed $100,000
• Up to 20 years repayment• Max 5% interest rate
Household Water Well Loans Environmental Infrastructure Loan Program
• USDA program – 1% 20 year term. $11k limit• Supplemented by RCAC up to $18k • CA program – grants and loans 1-3% • CA program - $45k max
InvestorsCompanies
Philanthropy
Banks
Government
Local Community Development Organizations
Capital
Grants
Loans
Equity
Technical Assistance
HomesBusinessesJobsSchools
Healthy Neighborhoods
Great Places to Live
San Antonio
LISC TOD by the Numbers
$464M in Direct LISC Investments$112 million in loans and grants$325 million in Low Income Housing Tax Credits$27 million in New Markets Tax Credits
Which Has Leveraged Nationwide:$2.4 billion in total development activity
What We’ve Accomplished:8,830 Affordable Homes and Apartments1,258,000 Sq. Ft. of Commercial Space
What is TOD?
Transit-Oriented Development, or TOD, is a type of community development that includes a mixture of housing, office, retail and/or other amenities integrated into a walkable neighborhood and located within a half-mile quality public transportation.
Benefits of TOD• Reduction of green house gasses• Increased transit ridership• More housing choices• Improved access to jobs
Equitable TOD ensures that these benefits directly result in more opportunities for low-income people and families.
• Fostering increased and sustained resident engagement –creating a sense of ownership and accountability – relational organizing model
• Developing and implementing a comprehensive neighborhood plan with clear goals, action steps and outcomes
• Connecting a broad base of implementation partners and working across silos – collaboration is value added
• Targeting multiple investments in concentrated areas
• Broadening the engagement of public and private partners as funders and systems change advocates
What Does it Take?Key Elements of eTOD
LISC’s Role
Strategic Leadership• Underwriting/Financial Modeling• Broker/Convener (who needs to be at the table?)• Risk/Patient Capital• Advocate for Social Equity & Environmental Justice
Land Use Planning• What problems are we trying to solve?• Best practices nationwide• Shaping local interventions• Assess & recommends options
Direct LISC Investment• Predevelopment• Debt • Equity
Philadelphia: Paseo Verde
Philadelphia: Paseo Verde
BudgetAcquisition $ 1Construction $ 34,700,000Soft Costs $ 8,400,000Fees $ 5,500,000
$ 48,600,000Sources
Hard Debt $ 9,500,0002nd Position Debt $ 3,000,000NMTC $ 8,000,000LIHTC $ 11,000,000Grants for NMTC $ 7,500,000Grants for LIHTC $ 4,520,000Additional Grants $ 2,600,000Reinvested Sub Loans $ 2,500
$ 48,600,000
Developers: Association de Puertoriquenos En MarchaJonathan Rose Companies
Description:Mixed use, mixed income residential and commercial development120 residential units, (53 affordable/67 market sale), 30,000 sq ft. of commercial space
Location: Adjacent to the (9th and Berk Regional Rail Stop)
Total Dev Costs: $48.6 Million, $291/unit
Boston: 157 Washington Street / AB&W Building
Boston: 157 Washington Street / AB&W Building
BudgetAcquisition $ 1,300,000Construction $ 5,250,000Soft Costs $ 2,250,000Fees $ 800,000
$ 9,600,000Sources of Financing
MAP 1st $ 600,000City of Boston $ 1,100,000DHCD Home $ 550,000Sponsor Loan $ 700,000DHCD- AHTF $ 1,100,000GP Equity $ 100,000LIHTC $ 4,800,000Deferred Dev. Fee $ 100,000
$ 9,6000,000
Developer: Codman Square Neighborhood Development Corp.
Description: 24 low income tax credit rental units in conjunction with tenant-established limited equity cooperative
Location:1.5 blocks from the proposed Four Points Fairmount Commuter Station
Total Development Costs: $9.6 million, $405K/unit
Phoenix: Divine Legacy
Phoenix: Divine Legacy
BudgetAcquisition $ 1,000,000Construction $11,000,000Soft Costs $ 2,000,000Fees $ 1,700,000
$15,700,000Sources of Financing
AZ Multi Bank $ 1,300,000City of Phoenix $ 3,000,000AZ Dept of Housing $ 1,000,000AHP $ 750,000Developer Com $ 50,000GP Equity $ 100,000LIHTC $ 8,900,000
$15,800,000
Developer: Native American Connections
Description: 65 Unit mixed income residential dev (6 market, 54 LIHTC)
Location: Central & Campbell Light Rail Station
Total Development Cost: $15.7M / $244K per unit
