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51 <br />The Debt <br />Two - thirds General Obligation Bonds $ 1,700,000 <br />Installment Financing 10,000,000 <br />Total Planned Debt issuance 11.700.000 <br />Debt Management Fund: The portion of debt used for Town Hall and CIP projects will be <br />repaid through the Town's Debt Management Fund. The Debt Fund was established in 2009 <br />with a dedicated property tax to provide a source of funds to pay off Town debt obligations. <br />"Synthetic Tax Increment Financing (TIF) ": The portion of the debt used for the Ephesus <br />Fordham public improvements will be repaid using the incremental increase in tax revenues <br />resulting from redevelopment. In other words, the redevelopment we are hoping to generate <br />through the Ephesus Fordham Renewal Project will increase property tax receipts from the area. <br />Those tax receipts, over and above the base level of tax receipts that existed prior to the project, <br />will be dedicated to pay off the debt for the public improvements. <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, on its own, does not have an asset that can be used <br />as 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 />Financing Team: The Town is working with Bob Jessup of Sanford Holshouser LLP as Bond <br />Counsel and Davenport & Company LLC (Ted Cole) as Financial Advisors on this project. We <br />have had a preliminary meeting with the LGC staff to discuss the structure of the financing as <br />described here -in. There was general agreement that the proposed structure is the best option for <br />accomplishing the Town's goals with regard to financing both the Ephesus Fordham and Town <br />Hall Projects. <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 extent <br />possible, we will structure the debt for the Ephesus Fordham Public Improvements to defer debt <br />payments to match the anticipated timing of incremental tax revenues. However, it may be <br />impossible to avoid a gap between the tax increment and the debt service payments in the early <br />years of the project. The Debt Management Fund has sufficient balance to cover the mismatch <br />