Audio: https://connectdot.cosocloud.com/pt04o10zyfe6/
November 14, 2023
Event: FHWA - Value Capture Series
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>> Your conference will begin momentarily. Please continue to hold. Your conference will begin momentarily. Please continue to hold.
>> Ladies and gentlemen, thank you for standing by. At this time, I would like to turn the conference over to Pepper Santalucia. Please go ahead.
>> Pepper: Thank you. Hello, everyone. On behalf of the Federal Highway Administration and its everyday counts initiative, I'd like to welcome to you today's webinar on value capture and tax-exempt debt financing strategies. As the operator said, I'm Pepper Santalucia. I work at the Volpe Center in Cambridge, Massachusetts, and I'll be facilitating today's webinar. The webinar will run up to two hours until 3:00 p.m. Eastern Time. We are recording the event today and that recording will be posted on the FHWA website. The speaker slides will be available for download toward the end of this webinar, and if you intend to use your attendance today toward continuing education or other training requirements, you can request confirmation of your attendance at today's event from FHWA and we will provide information on how to do that toward the end of the webinar.
I'm just going to give you a quick orientation to the webinar room in case you haven't joined us for one of these in the past. In the top left corner of the screen, you will find a window or box labeled audio information. That has a toll-free phone number in case you want to listen to the webinar by phone instead of through your computer speakers. If you do decide to use your phone to listen to today's event, also have the option of requesting questions verbally. If you choose to listen through your computer speakers, we won't be able to take questions orally from you, but you're welcome to put questions and comments in the audience chat window in the lower left corner of your screen.
We will field questions at the end of each of our three presentations, and we will also have time for additional Q&A at the end of the webinar: If you would like to view closed captioning. Look for an icon with the letter CC toward the top of your screen. If you click that, you see icons and you will have a drop-down menu and an option to show captions.
I will now turn this over to our moderator for today, Mr. Sasha Page, for a few comments before we start the first presentation. Go ahead, Sasha.
>> Sasha: Thank you, Pepper. Welcome all to this webinar, value capture and tax-exempt debt financing strategies. During this webinar, we look forward to providing you some highlights of how projects can be financed through value capture and tax-exempt related projects. We'll discuss financing techniques and statistics and show how they're used in three case studies. First, Rick Rosenberg will highlight financing at the Assembly project in Doraville, Georgia. He'll focus on how tax increments and special assessments have worked together to make that project a success. Then Nate Betnun will cover a way to finance both garage improvements and flood control infrastructure in Annapolis, Maryland. And finally, I will discuss a mixed-use road-oriented project in the Virginia suburbs of the Washington metropolitan area that uses both TIFs and special incentives as well. I'll also talk about useful bond ratings, statistics, and structuring approaches.
So, we hope this all gives you a good idea or a clear idea of the key issues and risks you may need to be aware of should you be involved in value capture financing. Time permitting, we will entertain questions after each speaker finishes and at the end of all the presentations. And again, as in past webinars, as Pepper mentioned, feel free to put your questions in the chat box or press 1 and 0 on your phone. Pepper, thank you.
>> Thank you, Sasha. I'll now go ahead and introduce our first presenter, Mr. Rick Rosenberg. Rick is the Managing Principal for the Development Planning & Financing Group's Texas Region. In this capacity, Rick provides strategic planning, investment analysis, financing advisory services, and workout advice at both the project and entity level. In this work covers recapitalizations, restructuring, and the sourcing of new equity and debt capital for investments and developments. Rick has over 43 years of extensive real estate and finance experience encompassing the investment analysis, acquisition, deal structuring, equity sourcing, asset management, and financing of commercial and residential real estate investments and operating companies, at both the entity and project level across the country.
With that, Rick, I'll turn things over to you.
>> Rick: Thank you very much, Pepper and Sasha. A pleasure to be here today. Just a quick note about DPFD. We are a National consulting firm. We represent the developer side of the equation and about 90% is optional in financing solutions for the funding of infrastructure and developing projects, principally infrastructure of public improvements and the like. Most involves a special District. We do a lot of work involving tax I know yes men, as we'll talk about today, and we've been in business for over 30 years and over $16 billion of completed transaction we've advised our client on. My group and tech cover Texas and the nearby states and we've been involved in almost a billion dollars of Texas specific projects in the last 10 years. We'll talk today about TIF tax increments, how it works, what's good and bad about using the TIF. How you can work with the TIF with additional tools, and how we believe the best benefit combined are available when you combine different tools to take -- we'll use an example called the Assembly in Doraville, Georgia, as an example. And just a reminder, tax increment is a very basic concept that says if I build the project and I generate more property taxes, more sales taxes, more hotel taxes, that I, as the developer, negotiate an agreement with the city or county or other jurisdictions to share with the city or county shares the most additional tax revenues that they would have, that would otherwise not be available, and we share them back with the developer to help them fund costs that have to be incurred to build the project. The concept is very basic. The example you hear today is going to be perhaps a little at times complex, but it is a great mechanism and has been in use for many years throughout the country.
The reality of a TIF and every state has its own acronym, but we're using tax increment fund as our basic acronym today. It says if you build something that generates economic value, you get rewarded. We're not putting an extra tax or an extra burden on property owners, and you can either get money each year through the life of the project or there are ways to sell that income stream in some type of bond sale or private transaction.
On the downside, generally, there is no funding up front available from the TIF program, because no value has been created. You can ask for credit enhancement from a municipality or a county to help support some type of financing up front, but quite frankly, most of these counties will not provide that. The whole idea is that they do not want to put the credit at risk for these kinds of investments. If you are not successful in generating the value you anticipate, the funding you will get will be diminished and anything else in real estate, there are political aspects to it. In many communities, there is a perception that a TIF is a give away to a developer and my response, quite frankly, is if they don't build it, they don't get it. If they don't build it, there's nothing to give away. So, the keyword is incremental benefit, and it's the sharing of that incremental benefit to everyone's satisfaction.
We do a lot of work with tax increment tools. We also find to maximize the benefits to mitigate some of the disadvantages is to combine other tools that are out there for the public financing. And the two things that we'll talk about most often are special assessment financing districts where we put assessments on the property that backstops financing mechanism with the TIF to be part of that financing mechanism or we do a special taxing District where we put an extra property tax or sales tax on a project and generate additional revenues that can help finance the project. In some cases, you can also utilize revenue bonds through a city, through a County, through an Economic Development Corporation that can have bonds issued and then use TIF money to help pay off those bonds. So, it's our belief that combining these tools provides the biggest benefit to a developer and to the project and mitigates and minimizes any specific risk that a city or county or other jurisdiction would take, because quite frankly, all of these mechanisms that we describe today are not ones that require a city, county, or other jurisdictional guarantee. The project is the source of the funding. The project is the source of the repayment. So, we're not using the general obligation credit of a political entity to backstop any of these financings.
From a municipality standpoint, the reason that they are comfortable combining TIF with these tools is that these special assessment tools, these special taxing districts often are greater risk for the developer. So, the community is transferring more of the economic risk to the developer and not totaling dependents upon the distribution of incremental tax revenues. And it does provide funds up front, which are critical in today's environment with interest rates being higher and private debt being more expensive if available at all. The building combined public financing mechanism to fill the gap, we're going to help fund the type of public improvements, roads, utilities, like wilt help projects get off the ground that otherwise would not.
These mechanisms are great tools to help generate economic development benefits. We'll talk about those in Doraville where the use of these tools brought about a major corporate relocation that would otherwise have not come to the project. So, the ability to attract and satisfy the needs of users by getting the project constructed at a reasonable cost generates economic development benefits to the community. And from a developer's standpoint, our ability to bring these mechanisms into play and get access to funds earlier in the process ensures a higher degree of economic success, because we reduce the need for high-cost equity. In today's world, our clients are faced with, to the extent that commercial or lenders want to finance development, they're doing it at 13, 13.5%. Equity investors are charging 25 or 30%. These public financing mechanisms are seven or 8%. So economically, it just makes more sense that you can lower the overall cost of capital.
Special assessment districts are a tool to finance public improvements. We bring private dollars to institutional investors to pay for the public improvements. I'm old enough to remember when cities and counties would actually just fund infrastructure for development. That doesn't happen anymore, but the city or County involved in the special District has control but are not taking any cost of financial exposure. Depending on the state, depending on the eligible tools, we can very often, and this go what we do a lot in Texas, is investors will not buy the bonds as part of the construction of the development, because the assessments are illegal lean on the property, and they don't really need a development to make the payments.
Use of special assessment districts are non-resource to both the developer and the jurisdiction they're very conservatively underwritten, typically one-third to one-half of appraised value. The assessment is a property tax lean. It will be ahead of private mortgages. This is very critical. We do not need any credit enhancement from a city or county to support the issuance of these bonds. The jurisdictions are not taking any risk to bond rating or capacity. Only the people who benefit from these assessments are paying the assessments. If you live or work outside the boundaries of a District, you have no obligations, no commitments. One night thing in my mind of using special assessments is even each as taxable value of a home or building increases, the payments stay the same, unlike a property tax. We have very high property taxes in Texas. We try to mitigate that risk in any way we can. So, to be able to tell a property owner to tell the property owner the district has a flat payment, despite an increase in value is a big win from the user standpoint. We want to align interest. All project needs infrastructure. The project pays for the infrastructure. The people who benefit pay for the benefits. The more you benefit, the more you pay. The real estate is what benefits. The payments run with the land, not the property owner. If you sell property, you are not obligated to pay those off. They go to the new property owner. If you're building long term infrastructure, you want to build long term debt. For our clients, very often the source of the debt is to pay for 30-year life road is a three or four-year loan. And that just ask a skewing of the asset liability mixture that one learns in school. And we have a massive win from the developer in today's world. So, when we combine the TIF with special assessments, you typically do it in two ways. We may have separate funding -- excuse me, a special assessment as a separate financing and then we have a separate TIF, providing two different funding sources for the same project or increasingly what we're doing is we're using the TIF money to pay off the annual payments on the special assessment, and that even allows us to increase bonding capacity or lowering the pass-through cost to the users. And obviously, the option that is chosen does depend on project and ownership structure. We also will combine TIF with special taxing districts. A little bit different, because the TIF is used to reduce property taxes generally in that case.
The project I want to describe to you today is called the assembly in Doraville, Georgia. It was originally a general motors assembly plant. It is a Class A prime plus location. And anyone that's familiar with the Atlanta market, interstate 285 and existing station, rapid transit system and the Peachtree corridor. It was purchased by the partners of the integral communities and Macauley and Schmit to be redeveloped as a mixed-use town center. A couple visuals from the original plan for the project, the development program as originally anticipated, it's a film studio that is now built, an automobile demeanor ship that is in operation. Office space, retail, entertainment, hotel rooms, and residential units, both rent and for sale. The mixture overtime has obviously changed a little bit, but it is still being developed continually as a mixed uses development. It had been quite successful to date.
We did an economic and fiscal benefit analysis of the project and we identified that at balanced out, all the development would generate $2.7 billion of taxable value. 4400 construction jobs and probably 9000 permanent jobs. And the incremental tax revenues to the community would be $28 million a year.
The challenge of building a project of this nature, besides the cost that they had to send to tear apart the existing manufacturing plant, the GM plant, the $60 million to construct a direct connectivity from the project to the station involved a crossing of interstate 285. Millions of dollars for park green space, water, sewer, stormwater, as well as major road construction. The most critical factor was the MARTA activity. Anyone familiar with the landmark eight knows the land is very successful. What was learned by other projects in the Atlanta market before this project got involved is if you weren't believe able to walk without having to cross a highway, a street, or light to MARTA, it wasn't a very good benefit. Other mixed-use projects built in Atlanta had nearby connectivity to MARTA, but they had to run shuttle buses, and it wasn't very desirable from a user standpoint. We created a financing program that was based on a community improvement District, basically a special taxing District, an additional tax of 25 mills. We also create their version of a TIF, tax allocation District, which was a 35% tax abatement, and then we created a special services District that basically was a special assessment District that provided that to the extent that the community improvement District and the TIF did not provide enough funds to service the debt, that they would levee an additional tax or assessment to provide those funds, and the developers took that responsibility on in order to generate the funds necessary to build this development.
Now, one thing in Georgia, these mechanisms are not available for residential, so all this was just based on the commercial uses. In other jurisdictions, it is more typical, quite frankly, for these mechanisms to be used in residential projects. Increasingly, the combination tool is used on town centers, mixed use projects throughout the countries. Who we were able to put in place with the financing team, with the community, with the developer team was a $53 million bond issue, improvement District, assessment bonds, and a 7% interest rate. That funded a direct connectivity. Not a tunnel, but a bridge across the project to MARTA, and as you because of that, Serta bedding, representing 500 employees, relocated their corporate office to the assembly, and they made very clear to the development owners absent that MARTA connectivity, they would not have moved to this location, so there is a direct, immediate benefit from putting in place this financing mechanism.
With that, I'll open it up for any questions and I thank you for your time.
>> Thank you, Rick. Much appreciated. Yeah. Like I said, there's one question from Stephen Thomas Hatez. I don't know if it's something you work with. The question is, does anyone have any experience in incorporating U.S. Census Bureau into projects and financing? I don't know if your work incorporates Census data. Probably does in some form. Do you have any thoughts on that, Rick?
>> It doesn't directly impact the financing. We're generally working on project specific data. I will say when we look at an economic benefit analysis of the direct impact and indirect impact, those factors are part of the assumption built into those planning models.
>> Thank you.
>> Rick: And I see the question from Morgan.
>> Yeah. I'm read this. Does TIF [inaudible] the issuance of debt and who makes the decision to issue bonds? Rick?
>> Rick: TIF does not require the additions of debt. You can have an annual payment each year for the life of the project, incremental value, and it's shared until you've been reimbursed for the cost. If we're not doing a bond program, we would want to have some kind of carry interest factor, so developers are getting time value benefit of the money, but very often, a few years into the project when it's a stable project, we will go back to a city and say, hey, this TIF is stable. We want to cash out now. Please issue bonds and if they're issued by the city, the approval is up to the city. But by that time, they could be issued as tax exempt, non-recourse bonds, revenue bonds to the city off County and the developer could get money out quicker and move on with their project.
>> Great. And we have a question from MA. What do you mean when you write mills.
>> Rick: Mills would be the equivalent of a tax rate. Different jurisdictions have different terminology. In Texas, it is a dollar of taxes per $100 of assessed value. So, if I have a dollar tax rate, it's 1% of the assessed value. 25 mills would typically be 25 cents per $100 of assessed value. The mills are just a term in the real estate world. My apologies.
>> Great. I think Morgan has another question. How does TIF affect property owners or homeowners in or near the TIF District?
>> Quite frankly, it is to their benefit, because they're not making any extra payment to the TIF. They're not raising taxes, the tax rate to pay for the TIF as an existing tax rate, but because the developers get room reimbursement, it lowers the cost to their development, and they can sell homes, lease space at a lower cost and make it more successful. We believe these tools are all designed to make development more affordable, more cost efficient to the benefit of the users. Any mechanism, any program you put in place has to be successful for the developer, the community, and for the users.
>> Pepper: Rick, I do know in some communities, not all of the TIF moneys that are raised in that district go to that district's infrastructure fund or funding projects. What was the case with assembly?
>> Rick: So, in this case, the 35% tax abatement if I understand were dedicate to a project fund to pay the debt. Same thing with the community and improvement District funds. Those were dedicated to project fund per the indenture of bonds. To the extent those funds were not enough to pay the annual debt service on the bonds, the developer would have to come out of their pocket for additional funds to make up the difference on the debt service.
>> Sasha: Uh-huh. So, if I understand that correctly, the bonds that were issued for this were not investment grade. We can talk about that later. Did the special assessment make them possible, period? And in the future, if they would refinance, would they be able to get the same ratings do you think?
>> Rick: Yes. So, these bond programs in general are not investor grade. They're non-rated bonds. There are institutional investors who like these because they are sold at a higher yield. At 7% when this deem was done several years ago, the underlying market for municipal debt was probably 3%. So, at some point when the project is more available or completely built out and it's a very stable situation, very afternoon, we can go out and say we want to refund or refinance the bonds outstanding, and at that point, they can be investor grade. And then the benefits all go to users by lowering their payments.
>> Okay. Rick, I'm struck by the fact that, you know, Serta said that they required transit at that location to make their rye location. I mean, just looking at the map, I think it's on the Outer Belt way. There’re two or three major highways there. It's a great location for transportation access, but not necessarily for transit. And knowing Atlanta, it's a large city with a lot of suburban sprawls, as many cities are. Why was it so important for Serta? I've seen this in other location as well in my region in Washington, D.C. I think two, if not three hotel companies have moved their headquarters near transit recently. Even though they're also certified very good road transportation.
>> The fact is from an economic perspective, you need to offer as many options to your employees to get to their place of Employment as possible. For a lot of folks in Atlanta, they do have a very extensive, you know, train system. And that is an attraction. And you may have employees coming from south Atlanta who need to get to Doraville, which is on the north side. Traffic in Atlanta is not good. And for a lot of folks, it's just easier to take public transit. So, we need to have both options. And Serta was bringing people from out of town to Atlanta, but also relocating from other parts, other offices they had throughout Atlanta. They needed to make sure that they offered all the kind of options to keep their employees happy.
>> Okay. So, I have one more question for you here, Morgan, and then I may have one more question, then we'll turn to Nate. Morgan says, do TIF districts hurt the school districts? Also, can a TIF District successfully coexist with school districts? Rick, do you want to answer that?
>> Rick: Yeah. The good thing is typically, school districts do not participate in TIF so that we don't hurt the school districts. You can ask. The answer is generally no, we don't have the money to give it away. So, we don't even bother asking in Texas for school districts to participate in our TIF programs. It's a city and county program pretty much only.
>> Thank you. One last question. So, interest rates have increased significantly in the last year. This was financed several years ago in a low interest rate environment. How would this project, how would it have fared in the current environments? And how do you think other projects that you're involved in, or you see in the marketplace are faring this environment? Other value-capture projects?
>> I would think in today's world, the interest rates might be nine to 10% for this kind of a financing. But it would still be viable, because the cost otherwise would be much higher than that. What I would say in today's world, we're not happy with the higher interest rates. Our clients, we're doing bonds at 3.5% two years ago and now doing it at seven. It's not as much fun. But it is still cheaper than the cost of private bet or equity. And what I would also say is for a lot of projects that felt they didn't need to use these public financing mechanisms in the past, they're now coming to the table saying we can't make our project work without them. So, it's still a pretty -- we're not slowing down our work. Let's put it that way.
>> Yeah. Thank you. I think there's a question on, last question from Lila Klopfenstein. Why are schools not involved in TIF districts? And I think my simple answer, and Rick, please jump in here, is it varies enormously by region of the country, but do you have more insight on this?
>> Mostly because they just feel like they are not in a position to economically make -- you know, if you build a new development, it creates more demand for schools, and they're not getting enough money in the tax revenue in a TIF to pay for that incremental usage. So, it's just -- it's a political unviable approach. To say we want a school district to support a commercial development.
>> Right. I think also Atlanta and Chicago, it's one pot of money and the legislative body decides how to allocate those moneys. Atlanta belt line, for instance, there was an issue about how much of the TIF can be used to fund that transportation project and how much should remain with the school districts to fund their body? In Chicago, for instance, which also has a lot of TIFs. They do allocate only a portion of incremental moneys in District 2, the transportation project, and the rest goes to other services, like schools, but also police and fire.
Okay. Thank you very much for this, Rick, and your comments and questions. I'd like to suggest that we turn to Nate Betnun, who will talk about the Hillman Garage and City Dock.
>> Rick: Great. And I'll just do a quick intro, Nate, and let you get started. Nate has over [inaudible] years of experience in public finance during which he served as the lead banker in several billion dollars of bond financings for real estate projects in 12 states and the district of Columbia. Nate is currently a consultant after having retired from a position as managing Director for a National investment bank. He served as a financial consultant to the City of Annapolis for the projects that he'll be discussing today. He holds a PhD from the Massachusetts Institute of Technology in urban studies and planning. He has been a resident of Annapolis for the last 48 years, so he knows a lot about this community he'll be discussing towed, and he is also serving now as the Vice Chair of the resilience authority of Annapolis in Arundel County.
Nate, I'll turn things over to you. Please go ahead.
>> Nate: Thank you, Pepper. As you mentioned, Pepper, I had been in Annapolis for 48 years, and in order to acquaint people with Annapolis, so they can understand what that's about, let me tell you a little bit about Annapolis. Annapolis is the state capital. [inaudible] the session for 90 days once a year, looking at a lot of lobbyists and developers. Annapolis is the home of the U.S. Naval Academy, which clearly has a big impact on the community. Annapolis has a very quaint Main Street with lots of shopping and that brings a lot of tourists, as well as people from around the Baltimore/Washington area. It is a bedroom community for both Washington, D.C. and people commuting to Washington, as well as people commuting to Baltimore. Annapolis is the boating capital of the East Coast. It has the world's largest in-water sailboat show and the world's largest in-water powerboat show, as well as quite a number of people throughout the year that come in their boats to visit Annapolis.
Annapolis is a historic community. It was the U.S. capital from 1783 to 84. It has homes still standing for writers of the Declaration of Independence. And it has more 18th Century structures than any other town in the country. Annapolis also has a different kind of history. It is a place where there is a slave trade and that picture on the top right is Alex Haley talking to kids. This is where Kunta Kinte from Roots was optioned. It also had been quite a bit of Annapolis is tied in with the waterman on the Chesapeake Bay and there's one house left on the city dock that the Burtis House, emblematic of a historic tie to the City Dock.
You can see that everything talked about is within the distance. The house there in red, the Naval Academy in blue, Main Street in orange, the City Dock in green, and then the yellow is the Hillman Garage, which is two blocks away, which would still be the focus of this talk.
Annapolis, however, has a couple of things that make it less than the [inaudible] that it would like to be or more stellar. One is City Dock flooding. And while in 1969, there were only four floodway bays per year. Currently, there is over 50 and by 2065, every day would be a flood day without improvements to the city dock. Even the Naval Academy has been the subject of flooding with nine flood days in 2021 and 115 expected by 2050. The academy has started construction on flood walls. A $37 million project that started and other projects will complete the circling of the Naval Academy and will pry into the city's flood control efforts.
The other problem that makes Annapolis not as nice as it could be is the sea of parking on the City Dock's prime waterfront. There’re now 282 spaces along the sea dock that could be used for more productive uses.
Another problem, though, with getting rid of those spaces was the Hillman Garage, the parking garage two blocks away from the City Dock which was built in 1972 with 425 spaces. By 2021, the brick facade was cracked. There were rungs plastered over by periodic repairs. Stains on the walls. Elevators not working for years. Rusting at the outer stairwells and untreated water runoff.
In the early 21st Century, there were three or four different committees that were put together to try and deal with the parking garage and led to no action. There were also multiple City Dock improvement attempts to try and deal with the excess parking and to deal with the flooding, and that led to minimal action: Merchants were saying don't take away our parking. The taxpayers were saying, we're not going to pay for this. Historic Annapolis, a powerhouse in the city, the Burtis House, the African-American community was going to make downtown available to our community and remember our history. And the boat show owners were saying don't put you have any barriers that make it difficult for us to use the city dock for our boat shows.
In 2019, a new Mayor, Gavin Buckley, put city dock at the top of his agenda and recruited nearly 100 residents, experts, and stakeholders to form the city dock action Committee. And after nearly a year of meetings, the Committee issued a report that recommended rebuilding the garage in conjunction with the redevelopment of city dock and recommended forming a public/private partnership. The City Council approved in concept that approach and the city issues an RFP for developers and development team and in 2021, selected AMRP, which is a group of individual companies, including Amber Infrastructure, which is owned by the Hunt Companies of El Paso, Texas. They're the developer team leader overseeing construction of the garage. Maintenance of the garage and define construction of the city dock project. They were chosen in conjunction with Whiting-Turner, a Major General contractor. BCT Architects and Premium Park in garage operator.
In order to make the bond tax exempt, the team realized that there needed to be either a nonprofit or a governmental entity that would be what was called the concessionaire and would make a concession payment to the city in return for design and construction of the garage operation and maintenance, charge and go collecting parking fees, and financing the garage. In this case, issuing bonds for the project. They chose MEDCO for that role. It's the Maryland and Economic Development Corporation. And MEDCO was put in between the city and the developer entity. So, in other words, the developer, while initially working for the city, once MEDCO was brought in, the developer worked for MEDCO and the developer, rather than getting a profit is getting a fee. Both construction monitoring and oversight and design. And not as a profit.
MEDCO issued bonds for the project which was bonds of about a little over 45 million. And subordinate bonds. But the senior bonds were revenue bonds based upon parking revenues and this was parking revenues for both the garage and for some of the street lots and parking meters. They had to add those to revenue, because, partly because of supply chain problems that came up during that time, as well as the fact that and people weren't using cars as much during the pandemic. And they had to cut the amount of projected usage. And a four.8% average rate with 2053 file maturity. The develop team, particularly the developer, was proposing subordinate bonds, about 25 million, in addition to the developer group was going to buy the bonds and, in fact, did buy the bonds. By the city, these bonds were going out and went out at a rate of 10 and a quarter percent. And we had recommended that they do away with the subordinate bond and after threatening to not move forward with the deal, the developer agreed that the bonds could be paid off in the first couple of months so that they were paid off and the city issued general obligation bonds based upon the city's bond rating of Aa1, AA+, which is a high bond rating, and they got a 4.35% average rate. That lead financing saved the city $8 million or more present value.
The cash flows on the project were that the revenues, including those for the garage, the street meters, and the downtown lots, started close to $6 million, and overtime, projected to go up to about 12 million. With debt service coverage on the senior bonds better than two times, so that revenue exceeded the debt service on bonds two-to-one. And this is what was the primary driving force, Moody's providing the rating. Debt service on the general obligation bond, that provided for one. Two times coverage or better in each year on the coverage of the total Detroit with the city being able to keep any excess. You'd think there is a profit to the developer. The developer would have been keeping it. But you're the city. Under this structure, you're able to keep the profit, so to speak, and with a billion dollars the early years and up to $5 million per year at the end. But the new Hillman Garage was delivered this past summer with 588 parking spaces. That's 163 more than previously. And with a number of 21st Century improvements, including gateless entry and access charging stations, solar panels on the roof and space counter indicators at the entrances. What was part of the funding from the parking garage, and I'll go back to that, under uses apart from paying for garage construction, there was 18 million, plus another two and a half million predevelopment costs for the City Dock, so all together, effectively, the payment was 24 and a half million.
That 24 and a half million from the garage is being used as leverage to convince the State and the fed to put up more funds. 15 million of state funds, 10 million of committed federal funds, and the city has been led to believe that they will get another 32 million from FEMA. That close to 83 million will be used. On the north side, we'll talk about the north versus the South in a moment, but 59 million on the south side, 29 million, so 88 altogether. They're short 5 million at the moment, but the project, particularly the north side, which will come first, is in segments. They can have a couple years until they need to tax that extra 5 million. And they can move forward with the project in the meantime. What the city, new city dock provides is green space that's on a berm, interactive fountain, a pergola stage. Shade trees that are movable when the boats come, they can move the trees and have a flat space for the boat show. There's all a very kind welcome center with the Harbormaster's house. The visitors center. The boaters lounge, and it would be connected with the Burtis House where the Watermen's Museum would be. And in this slide, you can see on the north side is where the parks all the city improvements are going to be, and that is largely city owned land. Across the Eagle alley is the south side where it's largely privately owned those improvements can come in the second stage.
The areas marked AE are determined to be flood zones and it's those areas, the edges of those areas will be built up each seat in one way or another. In the case of the park, it will be a raised berm and other prices, they will be either concrete or class seawalls maybe of three or 4 feet and then flip up or pop-up panels that will be in the ground but will pop up or flip up automatically in the event of flooding. The project will celebrate diversity of the city's history. The Burtis House will be improved and saved and moved to a different part of the City Dock and serve as a waterman's Museum. They'll be in ground and above ground, historic commemorations of the city's history and its culture.
So, the results of all of this is that take homes, that there's disparate groups together. There is a 24 and a half million dollars concession payment that the city has leveraged. So, 15 million at state. 10 million of Federal funding with another 32 million expected. It's a 21st Century garage completed under budget and ahead of schedule. 163 added spaces in the parking garage, but 120 fewer spaces on the City Dock. City Dock is becoming a flood resistant and more attractive to residents and tourists. With that, I'm open to questions.
Thank you, Nate. Very interesting. I'm going to ask you one question and we'll go to guest number 2. You say [inaudible] for many years. I guess in 2019, it finally came together. What was the reason why it came together? Was there any sort of catalytic moment or was there a flood?
>> Nate: Well, yeah. The floods were getting worse and worse of the city, or the parking Hillman Garage was falling apart. And there is a new Mayor who made that his to have priority and pushed it forward.
>> Okay. So, guest two has a couple questions here. I'll begin with the first one. What year were senior bonds issued and when were revenues collected? Also, the same thing for subordinate bonds. What was the actual amount collected from both senior and subordinate bonds?
>> Nate: Let's go back. The bonds were issues in 2022. The revenues -- well, the revenues were continuing to -- well, there were no revenues collected in 2022 or in 2023 from the parking garage, because it was under construction. Until this past summer. Bond payment, interest payments were made from capitalized interest. It was part of the issue.
>> Thank you. I guess the answer to guest two's other question, yes, you can get the presentation, as Pepper said, at the end of the meeting. They'll be made available. And I think a lot will end up on the value capture website.
>> Nate: Yes. But with regard to the perks going forward, everything is not set in Stone in terms of machining and for future, as well as exactly what things are going to look like. They're still in the drawing.
>> Okay. That's a good point I think you show that $5 million still needs to be raised for the flood control improvements? I think as we discussed, the city can go ahead with some of the improvements that are funded and when the money for these other improvements, they will be raising those funds from a variety of sources. Right?
>> Yeah, yeah, yeah. The city could afford that 5 million themselves if need be. We expect they'll come from I think the State is expected to provide some additional money, potentially the county. And potentially private developers, private owners of the properties on the south side.
>> So, I think the important point here, I assume the garage is a project financing. In other words, you can't find the funding for 90% of it. Either 100% or not. With the [inaudible] improvements, you can do it project by project to a certain extent. Right?
>> Nate: Yes, yes.
>> Okay. Great. The last any chance for geo-foam material for the roadway, spaces, and City Dock as flood resistance materials. I don't know if you know any of those questions. They may not be your purview.
>> Nate: No, that's not my purview. I'm sorry.
>> Chris cane asks, crate example --
>> Nate: Although I should say -- I'm sorry. I should say that certainly the grassy areas are permeable and that helps out in that respect.
>> Thank you. Chris' question is when will the flood protection be completed?
>> Nate: They're expecting at least on the north side in 2025 and the South side 2026.
>> Okay. Scott has a question on. Is the concessionaire AMRP responses for operations and maintenance? If so, what is the term of that contract in.
>> Nate: Well, the concessionaire is technically MEDCO, but -- AMRP is working for MEDCO. MEDCO, it's their bonds, so they're in for the 30-year term. But AMRP can be fired, and I can't remember whether -- I think annually, but I'm not sure. I don't remember for sure.
>> Okay.
>> Nate: But they certainly can be fired. Yeah. I think it also depends upon the reason.
>> Uh-huh, okay. So, I have a question. So, it seems like the parking revenues, the concessionaire payment is kind of the financial glue, but the transaction doesn't fund all the city dock improvements, but it looks like a good third of it. Could you have done this with another financing instrument like a hotel tax or tourism tax or sales tax? I assume that would be possible. Right?
>> Nate: Yeah. Early discussions were that there would be a tourist hotel tax and there was opposition from the visitors Bureau because they were getting that tax and they didn't want to water it down. That never got approved. It was sufficiently large. They could use that for the concession payments.
>> Of course, they didn't want to water it down. Okay?
>> Nate: Right.
>> Enough of that. Okay. Good. Lila has a question on here. What approvals were needed to get the bonds? City Council? Et cetera?
>> Nate: Yeah. City Council had to approve it. MEDCO had to approve it. The planning commission, Historic District commission. There were lots of approvals required.
>> How long did it take to do that?
>> Nate: A couple years.
>> Okay. Is this a good model for other communities looking at climate change issues? Flood control and other types of facts? Could this be re-complicated elsewhere?
>> I imagine so, although the source, I don't know if other communities would need a new parking garage, but certainly the techniques for the various types of mechanisms for flood control certainly work in other communities. That is the flip up barriers and the berm and as well as barriers, concrete, or glass barriers.
>> Uh-huh. Okay. So, you mentioned the issue about the subordinate debt tranche and the issues there. Is that something that you think, is there a different way that communities should not consider the subordinate death tranche? It did play an important role in getting equity like moneys into the project.
>> Nate: Well, I think it's a question on of what kind of rate you could get on the financing and we thought that the effectively 10 and a quarter percent rate was too high and at the time there are better ways of doing it.
>> Okay. That leads me to my last question. It's about interest rates. I asked this of Rick. Interest rates, of course, have gone up. I think this deal was done in 2022. And really, you know, interest rates have zoomed up in the last year. Although they were already high here. Could you have done this deal today?
>> Nate: Well, you needed to get to two times debt service coverage on the senior debt. My guess is that senior debt would have been rather than 4.8% toes might be five and a half, something like that. So, there would be less debt that could be issued, and maybe the city would have is to -- well, they would have to either fund more from GO debt or have a lower concession at the same time and would have to seek other sources of financing. Perhaps more the State or from their own general fund.
>> Okay. Thank you. And I think guest two has another question. Let's just do this quickly. I think the question is, you know, what do the bonds fund, if I understand the question correctly? You're asking if there's a formula, an accounting technique, how do you provide the base cost amount? And you include direct and indirect cost for the capital construction. So maybe just discuss what did the bonds in this case, the senior bonds, what did they fund and what were they allowed to fund as per bond regulations? The direct cost?
>> Nate: Well, they funded direct cost. I got my page up there. You can see they funded 42.6 million, which was the cost of the garage, the full cost. They funded the concession payment and predevelopment cost, which if it's GO, they're allowed to fund on a tax-exempt basis anything that's [inaudible] general expenditures. If the city could pay out a cash for a use, they could fund it. And the other things were capitalized interest, debt service reserve, and escrow and cost of issuance, as well as the mobility payment.
>> Okay. Good. Thank you. Thank you, Nate. Appreciate that. And I think in time, it will give you a chance to discuss these issues after I present on the case that I'll be printing.
>> Nate: Yep. Go ahead, Sasha. Please proceed.
>> Sasha: So, I'm going to be talking about the Mosaic case, which is another mixed-use development, but it's with value capture moneys. Also talk about some rating agency frameworks. You've already heard Rick and Nate discuss some of the ratings and the requirements the agencies have, or the market has, and then I'll talk also about structuring consideration. How do you structure the financing and structure the bonds to accommodate the cash flows of the project and the overall needs of the project, and we'll have conclusions work timely make to the financing of the project as well.
So, I'll first talk about the Mosaic case. The Mosaic case is a mixed-use project. I call it a wood project, as opposed to assembly, which is more of a transit-oriented project. In northern Virginia in the Washington, D.C. suburbs, which was financed with TIF and supported by special assessment. So not a dissimilar structure as the assembly project but had some differences as well. Again, the site here, as you can see, outlined in White, it is between two large arterials. It's actually not very far from a major interstate, I66, and also the capital beltway. So, it's very much a Classic piece of property in a suburban location. Semi industrial. Auto shops nearby. Not the most attractive part of Fairfax County at the time. There is a metro stop about .9 miles away, but you have to cross a big highway. Not a classic transitory development, but that is going to be changing and it has changed to a certain extent. And to make this mixed-use project work, there is a $68 million financing for infrastructure, which is roads, packing, parks, stormwater improvements, et cetera, that was accomplished in the 2000s. So, here's a better look at the project. It has target. It has about 500,000 square feet of retail. A lot of housing. Thousands of units of housing and rental and townhouses and a small hotel and some office. In comparison to assembly, it has more retail and less office and also a lot of housing as well. So, the project was planned in the early 2000s. And then before the great financial crisis, a developer came with the existing landowner, began to develop the project, sought the permits to make this what it is, and began construction in 2012 seeking and issuing bonds that were supported by tax increments and a special assessment District. Not dissimilar to what was -- how assembly worked, but with some other tweaks.
So, the developer hired a technical adviser to do an estimate of the future incremental value of the property. The property at the time was worth maybe $40 million or so and the expected incremental value at the completion of it, roughly eight or nine years later, would be under the best-case A, about $425 million. However, they also looked at [inaudible] cases, notably scenario six, which had no inflation growth and no tax rate growth and less retail. And this is very common to do this type of feasibility study. And this study is part, essentially, of the offering documents that were offered to investors as part of the bond financing. So, they demonstrated that in this downside case, scenario C, the most extreme downside case, that using the special assessments, essentially, an additional tax on the properties in the district would generate around $40 million of value until 2041 and fill the gap, so to speak. Missing money to pay for debt service for this project. So, this was essential and here is another nice graphic of this to demonstrate this very clearly. You can see the TIF moneys are available the first five years in blue, but then thereafter the TIFs moneys are flat, because we've assumed the assessments and the necessity, therefore, the district special tax assessment. So that's sort of the premise that the finance ET went into with the marketplace. They were able to obtain a non-rated financing list. Municipal bonds, but they are not rated. The assumption is they're most likely to be below investment grades and they'll talk about that in the future. As Rick said, it's very common for bonds like this to initially be non-rated or below investment grade and purchased often by large institutional investors. So, moving ahead to 2020, a couple years after the project was complete, it has been a success. It was completed successfully and is a vibrant District with well frequented shops, restaurants, green space, apartments that are full, which is kind of unusual for the Virginia suburbs at that time, maybe less so now. There's not that much density in this area. And the occupancy of the retail right before Covid was 96% and the office was 100%.
So, the value of the property increased for 40, $50 million to roughly $673 million. Enormous compound or annual growth rate of over 18%, and this resulted in a value to bond ratio, the value of the assessed value to the actual bonds of approximately 12, which is very high and well over what the rate agencies require.
So, the developer sought to refinance the project, because the bonds it had issued back in 2011 were at 7%, but the current market was much, much lower. It demonstrated to its potential buyers that it had been accurate in its projections. Here is the projection in orange of the incremental revenues, which are the key revenue source, the TIF revenues increasing from zero to a couple million dollars per year to now up to $7 million per year. And so, they were robust in the projections, although there's -- the pinch points a little bit around 2016 where they came close to be the actual projections. This is a great story to tell. The other story to tell was the fact that the structure allowed for excess TIF revenues to be kept in the reserve Fund, which was a downside, sort of a rainy-day fund in addition to the normal reserve funds that are very typical. And then lastly, they prepared some scenarios for Covid. What happens if the Covid had an impact on their ability to represents out some of the spaces or housing and they get a scenario saying the assessed value, the revenues that came in, because the assessed values went down, were down by 10%. Again, they were able to show that the coverage ratio, which was about one point five, was reduced to 1.32. Still giving -- you see the lower right-hand chart here that the projected revenues are well in excess of the annual debt service. Luckily, as history showed, there is a bit of a downturn in their revenues, but the coverage ratio only went down to 1.44 from a .5, so much less than expected. And so, the future bonds were fully funded.
So, when they went out to the marketplace, just back to whether they actually issued the refinancing bonds, the Moody's did a rating analysis of why they provided an A2 rating to this bond, which is a very healthy investment grade rating. And the reason was that it was a moderately sized growing tax base. It was a positive. There's good debt to service ratio, 1.5 and increasing. And I mentioned this [inaudible] be imposed, just like an assembly, and there was also a special reserve fund as well.
The factors that could be negative in the future was if there's too much concentration, the top taxpayers, but that's not the case. Overall, there's a stable outlook. The SER is strong. Incremental property tax value, and also good oversight from Fairfax county. So, this is a nice case study of weak financing of an older project in assembly, I think another nice example of how these projects can be financed in this way.
Now, in this case, also, there is a special assessment, which is a backstop. As I mentioned before, they could have used potentially a sales tax or some other type of tax, as Nate said. There's controversy about those kind of things, because often those other taxes, are sales taxes, et cetera, gas tax have been used or allocated to other sources. So, you're taking four funding sources away from another user.
I'm going to turn to a couple of techniques to summarize key frameworks that's helpful for those of you, again, who are new to value capture, maybe new to municipal financing. These are helpful tools and frameworks. First of all, the ratings scale is shorn in this chart here, and the respective nomenclature of some of the major rating agency, S&P, Moody's, and Fitch. There are other similar ones as well. This is a similar type of rating scale with AAA being the best, highest rating, and CCC and below being the words. Everyone wants to, of course, be a AAA student, but not everyone can be. Places like Annapolis, as we heard, are rated AA+ very high. High grade, if you will, it means that the probability of those bonds failing to pay interest or principle are very, very low. They're very low risk, whereas the lower grade category, the triple E minus, the Baa3, home and garage I believe was in that category. There's a higher risk. It's still smaller, but there's a higher risk that that will happen. There's this line here between BBB minus and below or BBB+ -- BB+ rather, where below that category, these are non-investment grade or below investment grade ratings. And in general, because most municipal bonds are sold to retail investors, people with the person on the street, so to speak, it's important that the risk is relatively low. And most bond fund focuses on retail investors that are in this investment grade category. So, in order to take advantage of this large, large group of buyers, issuers want to obtain the lowest possible interest rates and try to make the bond investment grade.
Now, as you see, it's not possible for the start-up projects, like assembly and like Mosaic, but in Mosaic's case, they were able to refinance to take advantage of them, of an investment grade rating and, therefore, the competence rat, much lower interest rate that was possible. I think this is a helpful measure here.
So, when you're -- most bonds that are seeking to be in the municipal market, think did getting a rating, as I said, initial project, value capture project probably may not be unless they have a strong support mechanism such as special assessment District or other type of backing.
The other thing that rating agencies look at carefully is the debt service coverage ratio. Essentially, if you take revenue that accrues to the district or accrues to the bonds minus the cost of any operating costs. District, that equals cash available for debt service, and that, divided by debt service, is the ratio. Obviously, you're seeking the ratio of one. Able to pay the debt services in that period of time. Really every six months or every year, every quarter, every month. On time. That's critical. Often the rating agencies will look for a buffer, a coverage of 1.one, 1.two. Ideally even higher than that. 1.5, which is -- as they discussed, it has the coverages for the Hillman Garage investment grade bonds were quite high, too, at least. And that gave a lot of comfort to the rating agencies.
In the assembly case, as you see in the next chart, the coverage ratios that they were cycling, the base case was 2.11 or 2.11%, and so those are the very attractive. And the downside case where they were not able to obtain that, special assessments moneys would come in and raise the moneys available for payment of for debt service to 1.one. And that's important marker there. Mosaics, coverage ratios currently are over 1.5. And as I mentioned during Covid, they were only up to 1.44.
Another key statistic, or maybe someone less used, but is also relevant, is the value to bond ratio or value to lead ratio. This is the ratio between the appraised value of the properties to the district to the value of the bonds. And kind of a minimum is a ratio of three to one. In other words, three times appraised value to one time of the amount of the principal outstanding. Assemblies was over eight, and Mosaic was closer to 12 most recently.
Here is a summary of some other key metrics that the rating agencies use when they provide their rating. Size of the tax base is important. Volatility of the tax base. How much are you expecting this property to increase in assessed value? The district size is important for special assessments. Number of parcels. If it's a small District, they're concerned about that. The taxpayer concentration. Are you really relying on one or two major taxpayers? That's a concern. Is there a history of tax delinquencies? Do people pay their taxes?
Not generally an issue in most communities, but it is in some, and that raises concerns. Debt to service coverage ratio, as we just discussed. That's important. Growth trends. How quickly are the tax increments expected to increase? Leverage, value to lean ratio, you want that as high as possible. Unemployment is important as well. Of course, there is a mind for health, how strong the economy is in the area. Similarly, income level has to be compared to the U.S. median. And initial bonds. Does the bond documentation allow the issuer of bonds to issue additional bonds on the same lean if they need to? Let's say there's additional capital costs. Can they simply go out and say we want 10% more bonds that are funded by the same cash flows? In general, you, as a bond holder, wants to limit that, but you may be flexible for a little bit of additional bonds where possible.
So, all of this information, where we got this from, comes from several Moody's guidance documents, and we have links to them at the end of the presentation.
So lastly, I want to talk about structuring here. I want to talk about amortization structure. This is how the principal is repaid. One way in these projects, the early years have sensitivities, as you see with Mosaic and also for assembly. You don't quite know how the market is going to react, how quickly you'll get new tenants to buy the condos or buy the townhouses, et cetera. So, delaying the repayment of principal helps to alleviate the pressure in those early years, and that's a form of restructuring or structuring, rather.
Another form is to push back the repayment of principal towards the end of the bond life. I'll talk about that in the example. Another option is to capitalize interest. That, again, gives some breathing room in those early years and several of the transactions we've mentioned, like assembly and Hillman and Mosaic as well give interest in the early years to give breathing room to the financing. So, there wasn't an obligation that could have threatened the project.
And the third is called take-out financing. In some projects, not the ones I mentioned, where once the construction is complete and the risks of non-completion of the project are over, in some projects, there is a refinancing with a long-term financial structure at a lower rate. In the Mosaic case I just mentioned, there is a form of take-out financing that really happened in year 10. It's a refinancing and of course they did get better terms in that case and took advantage of the positive success of the project. So, here's an example here of amortization. In the case of the assembly project, the repayment of the debt service in a mortgage style or a level debt service or noted type of debt service in the last column, total debt service, it's pretty much flat. It's about 4.4 billion in change each year after the first couple of years and you can see, the principal is not paid for five years. That's generally acceptable in most markets.
What this means is pretty much in year floor oh four, you as the sponsor have to have that money available to repay your principal. This is probably the most conservative approach in Banks and bondholders like this because they know up front you have the capital and most likely with inflation, you'll be able to fund the future payments as well.
A more back loaded structure was used in Mosaic, and that structure, the principal increases over year by around 2%. As you can see, the total principal increases, so it's upward sloping. It takes into account the fact that incremental revenues are increasing overtime and therefore, we can afford more principal towards the end. A bit more risky, but it's also very appropriate for this kind of financing.
I'm going to covering here and then we'll maybe take a couple more questions. I see some in the chat room. A couple questions here. When you're using value, use it carefully. Conduct downside analysis. Understand what will happen under various scenarios. No growth at all in value or a recess, like the great financial crisis. Understand highway these shops work. Make sure, also, that these revenues are ring fence or firewall. There's clear accounting of where the moneys are coming into the District.
Second of all, it's important to check the legislation. Is a District allowed to be created? Can you use TIF or special assessments or different techniques that is typical for value capture financing? And does the local municipality, will they accept doing this? Will you have a partner like Fairfax County that allows this to occur? Can you work with the MEDCOs of the world to use them as conduit? Under look at ways to decrease cash flow start-up pressure. Otherwise, to eliminate debt service in the early years when the project is very sensitive to ups and downs in the marketplace. Can you collateralize or over collateralize moneys and reserve funds or coverage ratios higher than obligations or build up catch tall early on to withstand ups and downs in and then use a backstop where possible, credit worthy sources. Like special assessment District or any other type of an investment grade worthy sales tax. And then manage the transaction effectively. Make sure that there's good documentation. Understand that these things take a long time, as Nate was saying. Getting consent. Getting approvals took several years in Annapolis. So, these things do not happen overnight. At least the types of ones that we have discussed. There are a couple of sources when you download these slides. You'll see the rating methodology for Moody's. Discussion about assessments. I think Pepper has put materials in the chat box as well. And I think lastly, here are the official statements, links to the official statements of these three transactions that we've all discussed. These are publicly available. These are what's called official statements that summarize all the key financial, legal, and technical data of the transaction. It's great reading. It's a little bit cumbersome in some areas but provides all the details of the transactions and it's a great way to build a good understanding of these kinds of deals.
Good. I'm going to stop there. And see if there's any additional questions that I or others can answer? There's a question on about the availability of slides. I guess we'll provide that. Nate, if you're available, on the Annapolis project, consensus building among [inaudible] critical success and file United States, did the Mayor engage a third-party? Did the process he used to do that -- is the process he used available somewhere? Nate, could you answer that?
>> Nate: [inaudible]
>> Sasha: I think you are available, Nate. Maybe if you can unmute yourself.
>> Nate: Yeah. I'm sorry. I needed to unmute.
>> Sasha: No problem.
>> Nate: There is a person that was hired by the city. She had been involved in similar transactions and a few different jurisdictions across the country, and that was, I think, critical. Yeah. I mean, I think it related to the ability to get it done, partly the leadership of the Mayor. Partly the [inaudible] of the person that was hired with those ingredients. It could be used elsewhere.
>> Sasha: Thank you. Morgan has a question on. How were the assessments, the SAD determined? Who is typically doing the analysis and how much flexibility is there in terms of what the assessment to be levied on? Does it skew more toward sidewalks and street improvements and other benefits? I think I'll take this. Nate, jump in if you have something. First of all, I want to make clear that special assessment Districts, the assessment is generally based on the current tax rates and essentially like in Mosaic, it's $1,157 per, you know, 100, and they're allowed to increase the assessment by .25. So maybe 20% increase in local taxes. So, there was no different assessment for the special assessment. Fairfax County does its normal assessments of --
>> CAPTIONER: I seem to have lost audio.
>> -- increase in taxes. In terms of the, you know, does it skew more little again, the assessments of property, typically what is done in accepting properties, the size of the buildings, the location, other attributes to that. I don't have -- I don't know specifically if sidewalks are street improvements are taken into account specifically.
>> There’re two different types of assessed value for tax purposes that would go to a TIF and go to the municipality for the general taxes, and that, in most states, is based upon the market value of the property and whether it had any sidewalks or better streets, increase the value of the property, then that would be taken into account. But whatever a willing buyer is willing to pay for the property and a willing seller is willing to sell it for, that would be the fair market value.
With regard to special assessment districts, there is a maximum assessment that is the amount of the bond debt service or sometimes 110% of that amount. And that's a mixed amount that's set from the beginning based upon the debt service that has to be paid, and then it's divided up among all the different properties in the district. Typically based upon some percentage for residential, different factor for commercial property, different factor for industrial, and so that's allocated, the amount, the total amount would equal debt service or a little more is allocated Among the various parcels in the district.
>> Sasha: Right. Thank you for that. I want to ask you one question. Just about the financing process. Once the powers that be, the city decided, yes, we have a financial package. We want to do this. We like this. What's the process from this pointed to actually issuing the bonds? Maybe you could just describe briefly what happens there and how long it takes?
>> Nate: It typically takes anywhere from four or five months to a few years. And usually, the delays would come just because there's issues related to the development of the project. Typically, it would take six to nine months. There needs to be a financial plan put together. A projection that needs to be appraisal in the project and the bond payments have to be put together. In particular, the most critical documents are an indenture, which lays out the responds of the various parties, and the operating statement. The official statement that Sasha was talking about or also known as the prospective. And that, again, as Sasha said, that lays out all the terms of the deal and as well as the projections. And there needs to be a bond council hired that is an opinion that the bonds are validly issued and tax exempt, assuming they're tax-exempt bonds. There's an underwriter, an underwriting firm who will agree to buy the bonds and then resell them to investors. The underwriter will have a council. There will also be an entity that that does the projections. And does projections based upon various assumptions, and that will be included in the offering statement. Those are, I think, the key elements.
>> Does it take longer or are there those unique to value capture sources?
>> Value capture sources are typically more complicated than if it were just a general obligation bond. Like the City of Annapolis. When they did their general obligation bond, they just do them every year or so. But they can put it together in the course of a few weeks.
>> We have a question from guest two. When you have the financial plan and design, and estimates are completed is the environmental document required for a bond to be prepared? How does this issue affect these bonds? I think that's what they're saying. Do you want to address that, Nate?
>> I'm not sure what he or she means by the environmental document.
>> Let's use Hillman. We're there. Was there an ESA or any EIS required for the work, the flood control work? Or permits?
>> No. No, there wasn't anything like that. But I mean, clearly if an -- okay. Now I understand what he means by environmental document or she. If that's a requirement for the project to go forward, then absolutely, it needs to be done before the bonds are issued. If it's not required for the project to proceed, then it's not required for the bonds.
And I would expect government legislation would not approve a city project unless the environmental documents were available, and they probably couldn't obtain permits either. That is the prerequisite.
>> Nate: Sure.
>> Sasha: I think guest two may be typing. Let's see if we can get this last question, but then we really have to -- okay. Thank you. Good. Okay. Thank you all for attending, and your questions and your interest. And Nate and Rick, thank you for participating. I will turn it over to Pepper to complete the webinar.
>> Pepper: Thank you, Sasha, Rick, and Nate for your time, being part of this today. We just want to remind you that we still have two more webinars in this series before the end of the calendar year. You can see we're really working right up until the holiday season at the end of the year. These are two remaining webinars. And you can register for those webinars at the link provided on the slide. As I put into the chat, you can request confirmation of your attendance at today's event by e-mailing value capture at D OT.gov. That's value capture, all one word. And there are a couple, in addition to the slides available in the share window, there are a couple of links. The first web link says register for future value capture webinars in 2023 is the same one you see on the slide that's showing.
The second web link is to a value capture implementation manual, which is a general resource that covers the full gamut of value capture techniques. I believe Sasha had a hand in developing that resource. As I mentioned in the chat during the course of the webinar, we also have printers on nine or 10 different value capture techniques. I can also find your way to those once you get to the FHWA website. And with that, we invite you to provide feedback using the evaluation tool that you should see in the center of the webinar room. We also appreciate your feedback that you're seeing in the audience chat. You can also e-mail us feedback, positive or negative, to value capture@DOT.gov. With that, again, We want to thank our presenters for their participation today and we also want to acknowledge the ongoing support of the FHWA conferencing office and the past support of our FHWA everyday accounts program. And with that, we will conclude today's webinar. Thank you again for being part of it. Have a great day.
>> Thank you. Ladies and gentlemen, that does conclude our webinar for today. Thank you for your participation. You may now disconnect.
[Event Concludes]
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