Orange County NC Website
2 <br />11 <br />6 <br />7 <br />8 <br />9 <br />10 <br />11 <br />12 <br />13 <br />14 <br />15 <br />16 <br />17 <br />18 <br />19 <br />20 <br />21 <br />22 <br />23 <br />24 <br />25 <br />26 <br />27 <br />28 <br />29 <br />30 <br />31 <br />32 <br />33 <br />34 <br />35 <br />36 <br />37 <br />38 <br />39 <br />40 <br />41 <br />42 <br />43 <br />44 <br />45 <br />46 <br />47 <br />48 <br />49 <br />50 <br />"Synthetic Tax Increment Financing (TIF) ": <br />The portion of the debt used for the Ephesus Fordham public improvements will be repaid by <br />the incremental increase in tax revenues resulting from redevelopment. In other words, the <br />redevelopment we are hoping to generate through the Ephesus Fordham Renewal Project will <br />increase property tax receipts from the area. Those tax receipts, over and above the base level <br />of tax receipts that existed prior to the project, will be dedicated to pay off the debt for the public <br />improvements. Although this method of financing economic development projects is fairly <br />common in North Carolina, it is the first time that the Town has used incremental tax receipts as <br />a primary source of debt repayment. <br />Synthetic versus "traditional" TIF: In 2004 the State Legislature approved Tax Increment <br />Financing (aka: Project Development Financing) legislation that enabled local governments to <br />finance economic development projects with a pledge of future additional (incremental) tax <br />revenues from an established TIF district. Because of the cost, complexity and length of the <br />process for approval there have only been two traditional TIFs approved in North Carolina in the <br />last 10 years. Part of the reason for the unpopularity of traditional TIFs in North Carolina is the <br />availability of an easier, faster and less expensive alternative. Many local governments in North <br />Carolina have opted for installment financing that uses a physical asset as collateral and <br />repayment from a tax increment to finance economic development projects. This accomplishes <br />the same thing as the traditional TIF, but is less expensive (lower interest rate) and takes less <br />time to issue. The Ephesus Fordham project does not have an asset that can be used as <br />collateral for an installment financing and therefore we have planned to combine the financing <br />with the Town Hall Renovation Project. By combining the projects in one financing the Town <br />Hall property can be used as collateral for both projects. This practice of sharing collateral <br />among projects is a common way of reducing the cost of borrowing for municipalities by <br />providing the best possible security for installment debt. <br />Backstop: There will be a time gap between when we issue the debt and when the <br />redevelopment will begin to generate a tax increment sufficient to pay debt service. To the <br />extent possible, we will structure the debt for the Ephesus Fordham Public Improvements to <br />defer debt payments to match the anticipated timing of incremental tax revenues. However, it <br />may be impossible to avoid a gap between the tax increment and the debt service payments in <br />the early years of the project. The Debt Management Fund has sufficient balance to cover the <br />mismatch in the timing of available tax increment and we plan on using the Debt Management <br />Fund to backstop debt service on the Ephesus Fordham Public Improvements portion of the <br />debt. Any amounts used would be restored to the Debt Fund once the tax increment surpasses <br />what is needed for debt service. One of the possible consequences of using the debt fund for <br />this purpose is the delay of planned capital expenditures such as the Public Safety Facility and <br />the Transfer Station. <br />Stormwater Management Costs <br />In addition to the $1.2 million of initial investment in stormwater facilities to serve the Ephesus <br />Fordham Area, the Town is planning to establish a Municipal Service District to finance <br />additional improvements and ongoing stormwater management costs. The planned Municipal <br />Service District will impose an annual property tax of 4 cents. <br />Ken Pennoyer said with public improvements in this area they are looking to finance <br />through installment financing which will be paid back in the incremental pay back of property <br />