DEVELOPMENT
AGREEMENTS AND
POST-ISSUANCE
COMPLIANCE
Iowa Municipal Professionals Institute, 2014
Kristin Cooper
Ahlers & Cooney, P.C.
WHAT IS A DEVELOPMENT AGREEMENT?
 What will the Developer do?
 Build a new warehouse
 Hire 10 new employees
 Agree to a Minimum Assessment Agreement
 Promise to keep their property in good repair
 Promise to insure their property
 Promise to pay their taxes
WHAT IS A DEVELOPMENT AGREEMENT?
 What will the City provide as an incentive?
 Tax Rebates (strongly recommended)
 Upfront Cash (higher risk)
 Forgivable Loan (higher risk)
 Public Infrastructure
 Property Transfer – 403.8
 Remember the three C’s
 Call your realtor – make sure you’re selling at fair value
 Competitive bidding
 Check the safe harbor – minimum assessment agreement
WHY IS IT SO LONG?
 Even small deals can be complicated!
 Identify the Minimum Improvements (in detail)
 Timing of rebates, grants
 Benefit to City (job creation/retention, building)
 Non-appropriation language
 Memorandum of Agreement
 Certificate of Completion
 Annual Certification
WHAT IF IT’S A HOUSING DEVELOPMENT?
 Will the housing be 100% LMI?
 If no:
 LMI Set-Aside
 Reimbursement for only public infrastructure
 Limited time for the collection of tax increment (10 or extend to 15)
 May have to create new urban renewal area
DRAFTING CONSIDERATIONS:
 How to Get Started:
 Identify a project the City wants to encourage
 Decide which incentives the City wants to provide
 Be sure that:
 Development Property is in Urban Renewal Area
 Specific project authority in Plan (given 2012 legislation)
 Grants/benefits will not be cut short by sunset
 Ordinance allowing for collection of increment
DRAFTING CONSIDERATIONS:
 Tell us if you need to borrow money to do the project
 Find out the legal name of the Developer
 Is it an owner/tenant situation?
 Make sure the business is not relocating from an adjacent county or city
 Ask if the Developer is also requesting money from the IEDA
DRAFTING CONSIDERATIONS:
 More Decisions!
 Do you want the Developer to pay for the City’s fees (legal/planning) for the project?
 Do you want to give the Developer increment on both the land and the building?
 Will the “base” be the current assessed value of the property?
SWITCHING GEARS…
Post-Issuance Compliance
MAJOR TAKEAWAY:
 Make sure you have a Post-Issuance Compliance Policy!
 Procedures should provide for:
 Due diligence at regular intervals
 Identify the official or employee responsible for review
 Provide for training of the responsible official or employee
 Address retention of records
 Timely identify and correct tax noncompliance
RECOMMENDATIONS
 Keep records
 Consider separate storage and destruction policies for bond related records
 Create sub-accounts for proceeds
 Keep receipts
 Start a tickler system
 Keep a list of property bought with bond proceeds
POST ISSUANCE COMPLIANCE
 Arbitrage rebate and yield restriction compliance key part of post-
issuance compliance
 proactively monitor arbitrage rebate and yield restriction
 Develop process for identifying private use
CALL BOND COUNSEL IF…
 You sell an asset purchased with bond proceeds (before you sell)
 If you intend to lease any asset purchased with bond proceeds
 If you plan to enter into any management or research agreement
relating to a financed asset
 If you intend to enter into any agreement to confer special legal rights
or entitlements relating to a financed asset (such as naming rights)
WHY HAVE A POLICY?
Failure to check the boxes on the Form 8038 / 8038-G may cause
you to end up in audit pile
WHY HAVE A POLICY?
 Not absolutely required
 May be audited (more frequently)
 Opportunity to participate in VCAP to address violations
 Failure to comply with tax requirements could result in loss of tax-
exempt status of the financing
 Hurt reputation of borrower
QUESTIONS?
Kristin Cooper
Ahlers & Cooney, P.C.
100 Court Avenue, Suite 600
Des Moines, Iowa 50309
(515) 246-0330
kcooper@ahlerslaw.com