Agenda - 05-15-2014 - 2 - Laserfiche WebLink

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N FINANCING EPHESUS FORDHAM PUBLIC IMPROVEMENTS February 2014 Glossary of Terms ❖ Tax Increment Financing (TIF) aka Project Development Financing —A method of financing economic development projects by pledging the anticipated growth in tax base as a source of repayment. The theory is that the project being financed is enabling the tax growth and therefore the project is, in some respects, self- financing because if not for the project the tax growth would not have occurred. In North Carolina the enabling legislation is called Project Development Financing. ❖ Synthetic TIF —The use of an informal pledge of incremental growth in tax revenues to pay debt service for debt secured by other means. Typically, a synthetic TIF uses installment financing that is secured by an asset. This form of financing avoids the statutory requirements of the Project Development Financing and is less expensive. ❖ Two - thirds General Obligation Bonds - General obligation (GO) bonds are secured by the full faith and credit of the issuer and, with the exception of two - thirds bonds, require a public vote for approval. Under State Law GO bonds can be issued in an amount up to two - thirds of the reduction in prior year outstanding GO bond principal without a public vote. ❖ Installment Financing — A form of debt financing that is secured by a physical asset, similar to a mortgage or a car loan. ❖ Collateral — Physical asset that stands as security for a debt obligation. Failure to pay the obligation may result in the forfeiture of the collateral to the debt holder. ❖ Debt Management Fund — In FY2008 -09 the Town established the Debt Management Fund to pay the debt service for the Town's outstanding debt. The Debt Fund receives a dedicated portion of the Town's property tax rate. The purpose of the fund is to better manage the Town's growing debt load by separating the expenses associated with debt from the rest of the Town's operating expenses. ❖ Backstop —A secondary means of security should the primary prove to be inadequate. For the financing of the Ephesus Fordham Public Improvements the anticipated tax increment is the primary source of debt repayment and the Debt Fund is the secondary source or backstop. ❖ Municipal Service District — Under North Carolina Law, subject to some restrictions, cities and towns can form Municipal Service Districts to provide specific services to a defined geographic area. A property tax can be levied on the district to fund the cost of providing services. ❖ Capital Improvement Program (CIP) — Each year the Town Council, as part of the annual budget process, approves a capital improvement plan. The plan lists the Town's capital needs for the next 15 years. TOWN OF CHAPEL HILL I BUSINESS MANAGEMENT DEPARTMENT i 4