Economic Development Authority Meeting   12/13/2022

George, can we give you one to read?

Can we give you one to read versus a closed motion?

Yeah, J.T.

That's the important thing.

And she talks to Lisa and she had a few comments last week.

Like my comments can get us out.

Right.

Which means she loved it and she didn't want you to come.

It's okay to spend it.

It's okay to spend it.

It's okay to spend it.

It's okay to spend it.

It's okay to spend it.

It's okay to spend it.

It's okay to spend it.

It's okay to spend it.

I don't think I've had a lot back in California, especially because of the security issues I've been talking about.

But you're right.

I don't have a status for a president here.

All right, so I'll call the meeting to order.

And we do not have any remote participation today.

So we do have a formal response.

We should be here shortly.

Matter from the public.

There are none.

Did anyone have any comments on the minutes?

All in favor?

Aye.

All right.

Financial report.

Should we defer that until it's here?

So on to new business.

The staff is with Roger.

Directly to be a party.

Roger Johnson, Economic Development Director.

We have three items that we want to provide you some information on today.

It's the Virginia Business Ready Sites Program for BBRSP.

Mr. Newberry is going to provide you an update on that.

As you may recall, we have the Envision Grant, which is something Robbie Rasputin spoke to us about a couple of months ago.

Thanks, Roger.

Just wanted to brief the authority on how the very last meeting on this grant went.

This is a process we've been in since September.

where we're working with the University of Virginia Foundation to ready 31 and a half acres within North Fork.

And I'm happy to say that it went extremely well.

Chair Long attended the discussion electronically.

Here you can see Roger presenting.

We posted a delegation of site selection consultants and folks from the VEDP at the state level

to answer their final questions about our grant application.

We're asking for about seven and a half million dollars to ready that 31 and a half acres.

And so the state plans to assemble all the information from all their site visits in this month, make a recommendation to the governor, and then we should hear sometime either by the end of the year or early in the new year,

about what the governor's approved and

Regardless of the outcome, I think it's important to note that we had just a lot of great teamwork.

We had RWSA here, ACSA, the university, the foundation, our EDA chair.

We had Rappahannock Electric co-op.

So this was, regardless of the outcome, I think just a great exercise for us, a real step in our evolution towards

Redding sites for significant economic investment in the future.

Yeah, so the grant itself was broken into three different steps.

And that allows the state to fund a partial version of the grant if they choose to.

But it would be pre-development work.

So some more specific surveying and stormwater planning.

Then the second tranche would be clearing and grading the site.

There'd be significant cut and fill based on the topography information that we have right now.

And then the third part would be making it fully pad ready, including constructing an access road and stubbing in utilities.

So that would bring it to a tier five level under the state's rubric for readiness.

That would be the highest.

Now, will the user on that slide have to go through the typical county approval process?

Yes, I mean, assuming that if it was a legislative action, it would have to go back to the Planning Commission.

But if it's a fits under the existing zoning of North Fork, which is industrial, then it would just be ministerial site plans.

That sort of thing to get going.

Sure.

Thank you.

By bringing everybody together, did you guys learn anything about sort of this process?

Because I think this is kind of the biggest one of these sorts of things you guys have done.

From my standpoint, I think it was building the relationships and understanding.

Everybody learned a little bit more about everybody's processes.

So by working with ACSA and RWSA, we heard directly from them, you know, here's our plan for 2070 to plan water and sewer infrastructure.

We'd love to connect with you on a more regular basis so you can be a part of our long term planning.

It certainly seemed to be helpful to have, I mean, just from what I was hearing, to have people who could answer those questions right away instead of having to go away somewhere else.

I'll add that as a result of this meeting and other things that were happening

Board level about strategic plans and how we need to work together for making sure that we have all the necessary infrastructure in place to meet the goals in the board's strategic plan.

We have scheduled some regular recurring meetings with Albemarle County Service Authority and the Banded Water Service Authority.

In particular, their plans impact where growth can happen the most.

Readily, for lack of a better term, and how we can go about doing that.

And then we can inform them of the county's plans, which will inform their capital improvement plans.

So they can plan what order they should prioritize their work during the 2070 plan that J.T.

mentioned.

So their plans align with ours and vice versa.

So it's not just a collaboration, it's also that we need to be involved in.

Any other questions from the floor?

Oh, I forgot.

We actually have some photos to show.

We got out on ATVs and shuttled the folks visiting us up to the high point of the site so they could really experience what the scenery looked like, what the photography was.

On the top left-hand corner, you can see the chief administrative officer from the foundation, Deborah Van Eersel, going over some

some plans that have been prepared by Timmons of how that site could develop if the state was to award the grant and so

Thanks to the County Parks and Rec for having the ATVs there.

Also thanks to Perot Robotics for providing an autonomous shuttle to show the delegation the entire North Fork before going to this specific site.

Thank you J.T.

I've got the next topic and it's the Envision Grant.

And just by way of a reminder, Robbie Rasputin was here a couple of months back and talked about a trumpet of people or organizations coming together to create a minority business grant to help businesses grow.

As you may recall, the Chamber already has a small minority business alliance and a grant program.

That's about sustainability.

This program's about growth, whether it's by Cliffmad or by affordable brick and mortar place or something of that nature.

We agreed and you kind of agreed in principle to the idea of supporting this.

We have now completed a performance agreement or contract that lays out the terms for how this grant would work.

And it is essentially a two year pilot program whereby the city would provide $50,000 annually.

The county would provide $50,000 annually and the United Way would provide $50,000.

So there'd be $150,000 in grants given to minority businesses that qualify for the thresholds.

And basically they are been in business and paid taxes for at least twice.

So it's not really startups.

We're not trying to help the startups like the chamber is.

We're talking about brick and mortar businesses that need access to capital.

We'll give it a two-year pilot program.

If things go well, we'll take it to a board to see if it's something we want to fund on a regular recurring basis.

I think you answered all the questions at the original time, but I'll be happy to address any questions you may have on the program.

Yep, yep, it'll be, the max will be $20,000, probably the minimum will be $10,000.

Again, I don't want to say that's going to be next year as well because we really, this is our first year, we want to have the flexibility to make certain whatever we do makes sense and get a reasonable ROI.

There will be an application review committee that will be made up of folks from United Way,

The Minority Business Alliance, and some other nonprofit organizations who will make the initial screening of that.

And then there will be a second review, which will be represented from our Economic Development Office, the United Way Leadership, and the Charlottesville Economic Development Office.

Ours is not about funding levels or trying to make certain that they make good decisions at the first letter level.

Ours is more about audit and having a second set of eyes to make sure any errors and omissions are recognized and to make sure that there was a no malfeasance where somebody awarded their brother something.

Ours is not about doing the judging of the application score.

This is new funding that would be in the recommended budget that's coming soon for action.

This would be money that's coming out of our economic opportunity fund, which is already in our budget.

It would be set aside for the pilot program.

The only time it would compete at the board level is after these two years of pilot program.

We don't sustain things with our economic opportunity funds.

Pilot test those out to see if they work or not.

We leverage existing grant programs and if they work we take them and they compete across the board for funding long term.

So what we have is we do have a draft agreement.

I'm not real clear on the source of the funding.

And you say it comes from the economic innovation fund.

Okay, so we do have draft agreements.

Also have a resolution.

I don't know if that was included in the packet.

I don't think it was.

I want to make sure I address any questions that you may have before we ask for a resolution.

If you need more time, we're happy to provide you more time to review the contract, whatever the case may be.

If you're ready to vote, then I would say resolutions.

If it's appropriate, I'll make a motion to approve the resolution.

I had it.

Why don't we do this?

Could we get a copy of the resolution while we're doing some of this other stuff and then pass that around and then we can bring it back up?

That's right.

Okay, my local campaign update, just a quick brief update.

It's obviously a very busy shopping time of year and the campaign really pushed out some promotions towards the end of November.

And we were very, very pleased to get a lot of feedback from the press and had a couple opportunities to get on some of the local TV programming and

This is an example of NBC 29's coverage of the campaign.

Next Community Conversation, we are joined by Ashley Hernandorena, Economic Development Management Analyst for Albemarle County.

Thank you so much for having me.

We are excited to have you.

We are talking about, we've talked about it before, but you can't talk about it too much.

That's what I like to hear.

Yes, the Buy Local Campaign.

Well, the Bi-Local Campaign is a joint campaign in partnership with the City of Charlottesville and helping all Peyani's Offices of Economic Development.

And the goal of the campaign is really just to support all those wonderful organizations with the City of Charlottesville and helping all Peyani's Offices of Economic Development.

And the goal of the campaign is really just to support all those wonderful local small businesses here in our area and educate the community on why it's just so important to buy local.

And there are a lot of reasons.

Obviously it's good for the economy.

It creates jobs.

Local small businesses are more often likely to reinvest back into the community.

So it creates a ripple effect.

They buy their supplies from local retailers and their services from local providers.

So it really does just have a multiplying effect.

Another important reason is it's really good to maintain the unique characteristics of our community.

We are really lucky, as I'm sure you know, to have just a wealth of really wonderful, unique varieties of small businesses from

Just amazing food and beverage local businesses to specialty shops to just a wealth of minority women veteran and small businesses that if we don't support them, they're really going to struggle.

Yeah, they really are who kind of what make our community what it is.

Well, I don't know if you've heard, but there's some shopping in the future over these next couple of weeks.

So as we're approaching the holiday season, we've got Black Friday coming up after Thanksgiving.

And then of course the most important in my mind is Small Business Saturday, which is this Saturday.

And so we really just want to encourage people to just honestly get out and shop locally when they're making their holiday gift list.

Head out there and just support some of those local businesses.

And it's really not that hard.

There's some really easy ways to do it.

Just changing up your behavior.

your purchasing behaviors just a little bit instead of clicking add to cart, maybe get in the car and go down to one of your local retailers or one of your favorite restaurants and pick up a gift card.

Gift cards are the best way, the easiest way.

Honestly, grab a couple next time you're out and keep them at the house and you can give them for gifts all through the year, not just during the holiday season.

And they're great too because that's instant funding for that business and it generates continued business.

It's also a great way to

Maybe try out any place that you haven't tried before.

Really?

Yeah.

Definitely.

Well, we really want to connect with the businesses out there and we're here to support them and if there are any local

Small businesses that have a brick and mortar presence here in Albemarle County or Charlotte.

So we really encourage them to reach out to our website and it's showlocallove.org.

And if anybody just wants to get some more information, that's also a great resource to just check out and get some inspiration for their holiday gift giving lists.

And also check us out on social media.

I think you guys are probably going to provide the links, but we're on Facebook and stream.

Alright, good stuff.

Thank you so much for being here.

Thank you so much.

We'll have you back soon.

Nice to meet you all.

It's like it's like Superman.

Would you present your first time doing something like that?

I'm pleased to introduce Dr. Patio, who's responsible for

Most, if not all, the housing authorities, I mean, the housing takes place in our county.

By way of introducing this topic, we're going to talk a little bit about the Brookdale Apartments.

For those of you who haven't been on our EDA for a long period of time, we have an existing agreement with the Brookdale apartment that we authorized Don to execute on once Dr. Padilla approves all the thresholds have been met for repayment, including taxes and other things.

And I guess it's a 16 year

19 years that we have an agreement.

Thank you.

Welcome.

Thank you for having me.

My name is Stacey, not necessarily Dr. Pettie or Dr. Stacey if you want to be slightly formal.

So we are going to talk about the Brookdale Apartments.

I'm going to go to the next slide.

it's real quick overview because I don't want to take up a lot of your time so we're really going to look at free project background a little bit about the low-income housing tax credit program and why that's important to the county the performance agreement itself for the Brookdale project and then just a real quick look at what Brookdale apartment is

And so this really was built somewhere between 2018 and 2020.

It's located on a five and a half acre site in the southern western neighborhood development area.

It was zoned R-15 already.

So this was really a buy right project.

They did use the 30 percent bonus density for affordable housing to get the density they needed.

And I do believe all of you did 11 million text exempt bond to support the project itself on top of the performance agreement.

And you go to the next slide.

and it really supported a low-income housing tax credit or LIHTC project.

The LIHTC program, I'm not an expert, so this is my basic understanding of how it works.

It was enacted in 1986 under the Tax Reform Act and it supports the construction and rehabilitation of affordable housing.

So the federal tax credits are sold to private investors, so they are given to non-profit or for-profit developers of affordable housing.

They sell them on to get that funding.

The funding is provided over a 10-year period, and the program does restrict the rents on those units for a period of 15 to 30 years.

In Virginia, they have over the last two years, I believe, really encouraged and pushed LIHTC developers to get to that 30-year affordability period.

So they've extended it out even more.

And LIHTC is really the largest funding source for affordable housing in the country.

And it's been used to support the construction and rehabilitation of more than 2 million units.

So it is the biggest affordable housing program we have.

Next slide, please.

I know I can see it down there.

I can actually look at all of you.

So the performance agreement was approved by the Board of Supervisors in 2017.

And it was to provide approximately one and a half million dollars in support of the project.

And that was really to fill a funding gap that they had.

It is a typo.

It is 19 year term, not 20.

I apologize for that.

It really comes out to be about $530 per unit over that 30-year period, so not a bad investment.

And the rebates to date have become around $200,000 so far.

And so a little bit about the project itself.

It was originally proposed as a 96-unit building.

I do believe they've reached about 106 units instead, so we got 10 more than we had

Thought we were going to get those units are available to households with incomes between 40 and 60% of area median income.

It sounds like your segue directly into the question I was gonna ask.

Area median income, or AMI, is this year $111,200 per household.

That's in general.

And I thought I had written it down, but I didn't.

So if you look at 80% of that, that comes out to be about $82,000 something for a four-person household.

So you can go down from there.

It does have a 30-year compliance period, so they will be affordable for that entire 30 years.

The amenities in the community include a clubhouse that's open to not just residents, but the broader community, a resident-only fitness center.

They have an onsite management team.

All of the units have walk-through and dryers, so it's pretty good value for money for rent.

In terms of what they are paying for rent, it is an average of

$719 per month for all residents, and that includes their utilities.

And most of the units are one and two bedroom.

That takes about 50%, 58% of the units are one and two bedrooms, so really looking at smaller families.

And the average household income is about $27,000 per year.

So this is really competing those

Residents of the county who really worked in retail and the retail sector, so those lower income ones.

And that's the really quick overview.

And I'd like to thank all of you for supporting that.

All right, are there any questions?

I don't know.

I don't know what that waiting list is.

I will also say that the county, the Housing Choice Voucher Programs in the Office of Housing does have some project-based vouchers in there.

I don't know how many.

That is a separate waiting list.

So there's a couple of different waiting lists going on.

It depends upon which part of that program you're looking at.

The units that, it's fairly new, so I can't say exactly how long they turn, how quickly they turn over.

At the moment, most of the residents have been there that entire two, two and a half years since they moved in.

It is hard and many people don't, many people, it really depends on who they are.

Some people move a lot just because of family circumstances.

You kind of hinted to this, but I think it's important to talk about, we don't have a housing authority in our community.

Our EDA is currently our,

mechanism to make affordable housing performance agreements.

So she said, you know, thank you basically for our future support.

I think that's very well justified.

both within our economic development strategy and for the common sense of county departments with different tools being able to work together.

Very good economic development reasons for poor workforce to be able to live nearby from minimizing traffic on the roads for people to be able to live closer to their jobs.

Maintaining this diversity of housing stock is very important to the local economy and your plans like that.

And I didn't think about bringing it with me.

I apologize for this, but Virginia has done some research into the economic development side of fly tech projects.

All right.

Thank you.

All right.

So next is the industrial revenue bond discussion.

I'd like to invite our Chief Financial Officer, Nelson Burch.

You can sit up front.

I'm going to sit back.

You're front and center.

Does it make sense?

Should they be up here or down there?

It's better for folks on Zoom if they can be right up here.

Hi everybody, I'm Nelsie Burch, I'm the Chief Financial Officer for the county.

It's nice to be here in person, I think I've seen some of you before we've come to the EDA for our lease revenue bonds that we issue every other year, typically.

I'm here today, I think

Courtney Rogers is actually on Zoom.

He is the county's financial advisor with Davenport.

So he is the person that we work most closely with in all of our bond structures.

And then Chris Gulp, who I'm going to turn this over to, is our bond counsel.

And so he was asked to join today to really talk

through the dos, the don'ts, the yeses, the nos related to industrial development bonds.

Before I move forward, I do want to, I'm going to call out one of my team members, Daniel Green.

He is our chief of treasury.

So Daniel is the staff person who works alongside Courtney.

and Chris when we're doing bond financing.

So he does all of our bond cash and debt and investments work for the Department of Finance and Budget.

So I just wanted to call that out.

And without any further ado, I'm going to turn it over to Chris.

All right.

Thank you all.

Thanks for the opportunity to be here.

And I had the pleasure of working with the county for a long time now and

That's the sort of financing, the governmental financing that you all are very familiar with, assisting the county in their financing needs.

But Roger and Nelsie had asked me to sort of help give you a better overview of sort of the industrial development revenue bond context and some other types of bonds that you might be asked to assist with.

And I'm sent out

or included part of the agenda, sort of a handout giving some overview and happy to sort of walk through it.

But if you all have any particular questions right now you'd like to hit me with, we can start with those.

But there are different types of revenue bonds that the EDA can be asked to issue.

starting with the name of the bonds.

You know, the industrial development bonds and most of the names of development authorities back in the day was industrial because that was really the focus is manufacturing and industrial uses.

And prior to the 86 Tax Act, all sorts of things could be financed with tags and bonds, Hardee's restaurants, medical office buildings, it was quite quite an array and it led to a lot of abuse.

And so

Congress thought that in 86 it was a good time to reform the use of tax and bonds and limited the uses to a much more narrow sort of group of purposes and benefiting certain aspects of the economy generally that would serve a public purpose.

You have governmental bonds and a lot of EDAs, particularly in Virginia, sort of help counties access the tax and markets with governmental bonds, financing projects like administrative buildings, schools, jails, and so on.

There are the housing bonds that we heard talked about where the IAEA can be a conduit to access that tax-cent market for low-income housing.

Small manufacturing is another category that's loud, but that is really geared towards small.

A million dollars in

In certain cases, and up to 10 million in other cases, the amount of bonds that can be issued because it's really geared towards small manufacturing.

Other housing bonds, student loan bonds is another category.

And then there's something called exempt facility bonds, which is a list of types of bonds that the IRS, because of the public nature and the public purpose behind these bonds can be financed on a tax debt basis.

I'll give you just

Some examples, airports, mass commuting facilities, water facilities like private water companies, sewage facilities, solid waste, a number of sort of trash related landfills have been financed on a taxon basis, high speed inner city rail, some hydroelectric generating facilities,

Some broadband projects and then a number of other sort of public purpose related projects have been given sort of access to the tax exempt bond market.

Another type of category that you would have definitely helping access the market is for 501c3 nonprofits, which can be anything from hospitals to private schools, private colleges, universities, senior living facilities like the Westminster, Canterbury, and Blue Ridge uses tax and bonds.

And so those facilities can benefit from the low cost

Longer term financing that type CIMS public bond market can offer.

So another area where you all get involved, which you've been talking about, obviously, earlier was through the

economic sort of development and incentives and performance agreements where you're taking money that the county is appropriating to you.

And since they can't necessarily or more, they can't as easily give that money under state law to private businesses.

The EDA can do that and offer grants, low cost loans or forgivable loans.

And so you all serve as that convert role for incentive grants.

The interesting, under state law, this is on pages two, three, two and three of the handout, there are a number of other

Projects that are identified specifically in this oftentimes is the result of particular groups that want to lobby the General Assembly looking for some help.

Museums, equine facilities other than racing,

Industrial parks, those also can be financed sometimes on a tax in basis.

So if I may interrupt that.

Yes.

So you said earlier that it was a 10 million dollar cap on small manufacturing for industrial.

This number nine, the industrial parks,

No, that doesn't have a cap necessarily.

And that is for bonds proceeds to be used for the purpose of like buying the land and then getting it pad ready.

Related to that, I'm familiar with the local government's debt limit as a factor in the real estate tax case.

Well, not really, no.

I mean, other than, and I'll talk about it in a second, bank qualification, which is an issue that affects 501c3 bonds, in particular, and governmental bonds.

You're not limited by an arbitrary dollar limit on bonds.

So you can issue as much as the credit behind it can afford.

Right, so, you know, a large senior living facility can do $90 million, $100 million if the credit behind it in the lender or the public market supports that.

But, you know, another, you know, 501c3 smaller school, for example, may not be able to

afford that, and so they themselves would have a limit, but you wouldn't necessarily have a limit on that.

For governmental bonds and 501c3 bonds, the EDA and the county are limited if somebody wants to issue bank qualified bonds, which is a subset of tax exempt bonds.

So you have in the interest rates sort of thresholds, you've got taxable rates,

Tax-exempt rates, regular tax-exempt rates, and then you have bank qualified tax-exempt rates, which are a little bit less than a regular tax-exempt rate because the banks can deduct the cost of carry of those bonds.

But Congress has limited the dollar amount of those bonds in account a year to 10 million.

So the county and the EPA are treated as one issuer for that purpose.

And so always accounting makes it challenging for

I just wanted to quickly ask so in the purpose of that calculation the tax exempt rate

that the county is getting the tax exempt, that that amount of bonds is added together for the purpose of that $10 million with the bank exempt.

County bonds and EDA bonds are aggregated for coming up with as if they're one issuer for purposes of figuring out whether you're exceeding the $10 million limit.

So it makes it

That's why you see a number of nonprofits sort of chopping their issuances to some of the jurisdictions around them, a smaller locality that may not be in the bond market very much.

They can access their EDA.

I'd like to offer a layman's understanding of tax-exempt bonds, and could you validate that I understand it correctly?

So a bank is able to access capital, I guess from the Federal Reserve or whatever it is, at a tax-exempt rate, so they therefore don't have to pay taxes on that, and they pass that savings on to whomever may qualify under these, so they maybe get a point and a half or two points or two percent

He's the FA to give you some sense of differences in taxable and tax exempt rates.

But oftentimes, because, I mean,

The lender is lending a set amount of money and they're purchasing a bond in returns and the interest on that bond is either tax exempt or is tax exempt income to that recipient, to the bond holder.

And so

It is certainly a benefit to any holder to have interest income that's tax exempt.

And so because they're not paying tax on it, then they can offer a lower interest rate to the issuer of that bond.

So yet, Roger, it has to do with exactly what Chris is saying.

It has to do with the bank's taxable situation.

And so in today's world, when the tax rate changed several years ago, where banks are now paying less and corporations in general paying less in taxes, the benefit actually has shrunk to almost nil.

We may see a benefit of five to 10 basis points to zero benefit.

Sometimes we'll send an RFP out when we do bank deals and say, give us a BQ and what we call non-BQ rate.

And sometimes there's no difference.

So what's the difference between a, if we're talking about non-bank qualified, but tax exempt bonds, what's the difference?

The spread is, again, it's dependent upon the bank's individual tax situation.

Lately, we've been seeing a difference of maybe no more than 15 basis points.

So I'd say zero to 15.

But back in the day, when the tax rates were higher, we could see as much as 50 basis points or a half of 1%.

Differential.

So it used to be substantial.

One thing that for those who may recall after the Great Recession, 08-09, there was the Stimulus Act, which one, increased BQ to $30 million and made it borrower based, not issuer based.

That's where a number of schools and hospitals and retirement homes all of a sudden could have a $30 million access to 30 million BQ.

And so a number of deals were done on a BQ basis that way.

I was really disappointed that didn't carry over in the law because the $10 million limit has been that case for decades now and hasn't been adjusted.

And there was a lot of hope in the bond community that that sort of fix, which I think is really more fair.

It's, you know, focusing it on the borrower and not on the issuer.

So it's, you know, it causes the

the EDA shopping that goes on.

But anyway, it didn't carry over.

And so we're still stuck with the 10 million dollar as the amount and then the way the IRS requires you to calculate it and aggregate the issuers.

So what would you say is probably more of a corporate question?

I mean, what's the benefits of, you know, if we wanted to finance a development of some land, what are the benefits of doing it through the bonds as opposed to just going out and borrowing the money if the spread is so small now?

Well, there are still benefits.

I mean, Courtney, the spread between taxable and regular tax exempt is still there.

Because that's what I was asking.

I'm sorry if that wasn't clear.

The difference between taxable and non-taxable.

I thought what you said it was more like five to 10 basis points.

No.

So the difference between taxable and tax exempt is much greater.

Also, so that doesn't have anything to do with the banks and paying taxes.

So this is more of a market issue.

So when interest rates were so low several years ago, I guess not that long ago, but a couple of years ago, we saw that spread narrow where we may see only about 60 basis points as rates started going up, sorry, I'm losing my voice.

We actually saw that spread go up to about 120.

That's where the benefit is.

If you get the extra benefit of BQ, that's great, but you certainly are getting the benefit of doing tax.

Another reason, you know, why would a 501C, you are providing, as the governmental issuer, you're the one required to be the

I'm going to be there by the IRS to give them the access to tax exempt rates.

But again, why would they want to, sometimes going to the public markets will allow them to get a longer term fixed rate than doing, you know, just a bank loan and, you know, number of schools and

Private schools and senior living facilities, 501c3 nonprofits, have access to public markets and have been able to get longer term financing than they could just even taxable commercial loan term wise as well as just the benefit of the interest rate cost as much less.

Well, I was just going to say, so going back to the taxable spread, since someone bailed me out with some water here, going back to the taxable spread, that's more about the market than it is the individual credit or anything like that.

Whereas the BQ again was more about the individual bank situation.

The spread between tax flows and tax exempt is more kind of a general market thing.

and where people are putting their money, where investors want to put their money.

The other thing I'll just throw out, and this is really more Chris's side, but the big part of this discussion today is what you can and can't do between tax exempt and taxable.

And as Chris kind of outlined at the beginning with the Tax Act going all the way back to 1986, a lot of the things that you all are going to be looking at are probably going to be more on the taxable side.

Whereas the things that we work on with the county

Our county general purpose, public purpose type projects that are going to be tax exempt that we sometimes will issue through you all as the conduit issuer, but it depends on what the project is for.

There are, you know, as a means of providing incentives, there are ways that they can, obviously you have to have cooperation and be sort of directed by the county, but a way for a county to incentivize somebody to locate here is to say, well, we might either

make sure that some of the infrastructure that's necessary to support the development is in place and we'll help finance that through the EDA.

Roads, water, sewer, some of the basic public infrastructure that is necessary for them to operate but is still the public infrastructure that's going to support somebody locating in a new location.

And that could be tax exempt if it's restricted to the public infrastructure.

It could be tax exempt if they fit the criteria there.

It's a very complicated sort of criteria about how they operate their business and the capital investment of their business.

Now, typically, you know, they would come to you with a team and say we've identified, you know,

This particular financing project, we've got our bond counsel and we've got our financial advisor and we've secured this lending.

You know, we're either going to go public or we're going to have a bank and they come to you and say, help us by being the issuer of that bond.

They ought to know you're not the bank and you don't sit on your own pot of money that you can just lend them, you know, $10 million, but you are the means by which they can access the tax exempt market.

But they, they have to secure their own financing because the basics of the financing, how long it's going to be and what the ultimate rate is, whether it's taxable or tax exempt is based on their bank's analysis of their credit criteria.

that company.

Now, if they can meet the criteria about small manufacturing, then that could be tax exempt.

And I'll add to that.

I mentioned earlier just the difference between tax exempt and taxable.

You also are gonna have a credit spread in there.

So in Chris's example, this company is not gonna have as good a credit

as if the county, let's say, was borrowing on a taxable basis.

So let's say the county was gonna do something such as if you were gonna borrow money to purchase property for economic development purposes, it's not public purpose, so it's gonna be taxable.

The counties generally have a better credit than a corporation.

And so as a result, that taxable spread might be 80 basis points instead of 120 basis points, let's say.

And again, there's going to be market, part of that is market driven, part of it's credit driven.

I had a quick question.

When?

You may want to come up and see the microphone.

This is Daniel Nguyen.

A group has a proposal for the Economic Development Authority to consider.

And they say it's going to be tax exempt and they want to try to use the EDA as the conduit.

What is the EDA's responsibility to make sure that it meets the Virginia rules?

Or how would a procedure like that work?

Typically, they would be putting together their team before they come to DBA and their bond counsel would be the one giving the opinion that it's one duly authorized and fits within state law and is tax exempt.

So it's really on that law firm who's serving as the bond counsel.

Now, whether it's Richie's office or Jim Bowling's office or working together, typically,

You know your council is certainly going to review the documentation and make sure that from a state law standpoint, you know all the meetings have been held correctly and the votes conducted correctly and that just from a basic contract standpoint that and you know they'll be asked to give an opinion that they

The bonds have been duly authorized and the loan agreement is binding but the tax analysis is really is particular to the bond council and and they no one in the group should be looking at your EDA council or county attorney's office to

to provide the final say on that.

Obviously, they can weigh in on it and ask questions and say, well, are you sure it qualifies?

Or we want to check it out on our own and so on.

And that's legitimate.

Thanks, Mr. Cohen.

Kristi, another thing I would add is, you know, we're trying to structure our bond issuances to really coincide every other year.

It's kind of the goal.

We're working through that right now to make that possible.

But if this is something that the EDA wants to engage in in that off year,

where you want to access that $10 million.

The advanced refundings used to count, but since we can't do advanced refundings now, current refundings typically do not.

Just, you know, there's going to be, like, we're going to issue in calendar year 2023.

We issued this year, was it this year?

Earlier this year?

Is that what we did?

Yeah, that's correct.

Yeah.

And even better, some of those types of bonds like

IVBs on the industrial development bonds for manufacturing actually don't count against that $10 million limit.

Got it.

I'm so sorry, Trevor.

It is very confusing.

So BQ,

in and of itself as a category is limited to no more than $10 million in a calendar year.

And when you look to see what else is gonna be issued in the calendar year, you're looking at what the county's doing and what the EDA would do for nonprofits.

You don't have to count against that $10 million limit for BQ small manufacturing bonds.

So that a $10 million small manufacturing bond could still be done and a $10 million BQ bond could be done.

Correct.

So the other question I have, and this is something that we're going back and forth right now with Courtney Rogers, who's on the phone.

When it comes to bank qualified and how all that counts, I look to Chris.

As he said, it is very, very complicated.

This is the one I would say qualifier.

Tax and financing can take many forms, whether it's a bond, a note, and there's a line of credit agreement.

So if the county intends to structure a line of credit,

Could I throw one idea in there?

Is there a distinction between you issue it versus when you draw down on it?

It is to have a tax-exempt issuance

You have to draw at least $50,000 on a drawdown basis.

You have to draw at least $50,000 and then all of it counts as of that day, even though you're only drawing 50.

Thank you.

I want to talk to a hypothetical situation to make sure that we're clear on this.

We don't get the opportunity.

This is new territory for the CBA.

I apologize we're nascent in this.

But let's say that it's a year that the schools need to build something and they're going to eat up to $10 million that we're talking about.

That same year, a true manufacturer comes to us and said, we do not want to spend our capital on equipment.

We want to spend it on getting our facility up and running.

We'd like to borrow money tax exempt to the industrial development revenue bond.

That is a situation as long as it's less than 10 million dollars and all the bond council agree that it qualifies.

With all those assumptions, that could all be done.

That's their bond council that needs to look at that.

Correct.

That category of bonds, just not

Hinder, the county civility or the EVA's ability to do other financing of any dollar amount.

If you want to do a BQ, everybody's limited to 10, except for the manufacturer.

But there is, there's no, there's also there's other than BQ, there is no limit per se on tax exempt EDA, again, can issue in a year.

I think it's also helpful for this in sort of explaining into the public about the type of incentive that it is, that using our sort of organizational aegis on bond issue creates a, it's a big number, but it's a gentler incentive than a direct grant or a direct loan because the money's coming from elsewhere.

So it

I think the communication of it is important because these can be really large numbers, but where the monies come from.

works differently.

So in your manufacturing example, you're still using the economic development strategic plan for are we going to justify this?

But if it were a weapons manufacturer and someone said, I'm ethically opposed to government supported this weapons manufacturer, I think it matters that it's a different source of money than if it were some of the other kind of we're paying out direct incentives at a smaller scale.

Even though up to $10 million, the number here is much bigger.

That's a fair point, because what's the source of funding?

Whose money?

Whose money?

In most bond issuance contexts, you're talking about the bondholders have basically left their money.

and then thus through to the company to undertake the project.

In Senate projects, other sort of EDA related projects are often using public funds that the county has appropriated or the state has appropriated to the EDA to then grant or offer low cost loans to various more public oriented or public purpose situations.

And as related to that on the first couple of pages of the outline, it is important for constitutional purposes that the EDA and the county have identified public purposes behind their programs and what they're doing and who's benefiting for that and make findings of that because that supports

the use of public monies.

It's not the lending of credit to a private business if the dominant animating purpose behind a particular program is the public purpose of serving low-income housing or employment opportunities or broadening the tax base and that sort of thing.

And so those sorts of

OK. And then if we're talking about, for instance, a project, we want to build some infrastructure to support potential development, one of the industrial departments, say.

Then we can go out and raise, let's say you need $50 million.

We could do a bond issue for $50 million.

It's a real question.

situation is who's going to pay for it and where the money is coming from.

Right.

That's really a county EVA combined project and decision to support that particular project because the bondholder wants to get paid.

So they know the EVA is not a bank of its own.

Right, so we're talking about, so there's sort of two categories.

There's the category of we've got somebody who's coming here and they want to borrow money to do something and we have a way of giving them cheaper money than you might have thought with it.

Just a follow up on it.

And that might be the best.

And then

In terms of the public markets, are there sort of thresholds that you need to have sized in order to kind of go out to the public market or do we need to follow?

I know there are some state has bigger pools of funds that are available.

Are there thresholds you need to be thinking about in terms of doing that?

Less than $10 million is really, nobody in the public market's likely to have a willing to be more bank-directed.

I think it's a analysis.

There's a lot of issuance costs related to a bond financing, and so you don't want that to overwhelm the benefit of doing financing.

And so,

There's a lot of issuance costs in particular related to a public offering because you're putting together a disclosure document.

No, there's not really a rule of thumb.

As Chris said, there are a number of different things that go into it.

Cost of issuance is one.

Another is how many people are going to actually be players.

If we needed to borrow $100 million, there's only so many banks that are going to be interested in lending $100 million.

You know, you may be down to two or three.

And so we want that pool of investors to be as large as possible to try to get as many, you know, to get the best bid.

So that anything like that's going to be a public market issue.

There's also just a differential in any given day that what banks are willing to lend their money in terms of at a given rate versus the public market may be different.

There's also the how long are you going to amortize it?

The banks may be willing to only give you a fixed rate for 10 years when you maybe won't advertise at 20 years.

And that change is dependent upon the market.

So there's a lot of different factors that go into it.

And that's part of the decision.

That's part of what we do on behalf of the county.

The county says, hey, we need to borrow X million.

How are we going to do this?

Part of our analysis is to go out and look at it and say, OK, right now what we're seeing in terms of bank indications is this.

Here's the public market.

We run it with the different cost of issuance and find out which one's better in the long run.

So that's part of it.

The other thing that I wanted to just to this different kind of going back to Roger, you asked about BQ and stuff is again, keep in mind that BQ in today's market is not, there's not a big benefit.

So I wouldn't let that make a decision right now of, Oh my God, you know,

We're only gonna let this one entity come in because it's BQ and not do anything else for the rest of the year.

You may be only talking about five or 10 basis points.

But that could change if Congress goes back and raises taxes on corporations, then all of a sudden that bank differential, the banks are paying more taxes, then they're gonna have more benefit they traditionally have passed on in the interest rate side.

So that's another thing depending upon

That's another thing that enters into our decision on whether, if the county was only gonna issue $8 million, then we need to figure out, are you gonna borrow anything else for the rest of the calendar year?

Is anything going through the EDA that might conflict with that number?

And what is the benefit?

Is it 10 basis points?

Is it worth 10 basis points to lock yourself up for the rest of the year?

Other questions?

Yeah, I think it's clear, Mr.

Chair, why it is that we engage professionals like that and for it, and our blind counsel, so because it is complicated.

And every circumstance is going to be unique and have its own characteristics that are going to be informed by what they're seeing in the market and what the laws are.

But I think what we do want to, and this may take some time, but I think it would be helpful for us to develop maybe some frameworks so that the EDA, the Economic Development Office, knows what might go in what buckets.

So as people approach them, they can say, well, this is something that we might be able to do.

Yeah, we can certainly work with the county to sort of put together a little outline of sort of buckets, as you're describing, that are eligible types of projects or purposes for tax exemption.

Again, they need to come together with their team, sort

If we're talking about companies that are talking about borrowing $10 million, I think there are circumstances where their level of sophistication may not be at a point where they realize that that's an option.

Being able to say, you need to go out here.

And I do want to say, I think it's great if the county can reach a decision and say, look, this is our plan for where we're going to go and give some opportunities to potentially raise, allow

And so a little bit of, I guess, proactive outreach on that.

Yeah.

I think you've helped us a lot with educating us on things that we have limited knowledge of.

Thank you.

Thanks, Courtney.

A lot of information.

Have to come back and thank you for all the questions.

All right, so next is a closed session.

Thank you, Mr. Chairman.

I move that the Albemarle County Economic Development Authority go into a closed meeting as authorized by the Virginia Freedom of Information Act, Section 2.2-2.

37118, Dakota, Virginia, under subsection 506, consider effective business for industries located in Almora County and or the expansion of existing Almora County businesses, projects EGLE and projects HATCH, where no previous announcement has been made of their interest in locating or expanding their facilities

Is there a second?

Yes.

All right.

Aye.

Director Ray?

Aye.

Director Lawless?

Aye.

Is that everybody right?

It's unanimous.

Yeah, back in.

Please.

Oh yeah, let's do that.

So we also have

to go back to the, which one is this?

InVision.

InVision, yeah.

So the resolution has been circulated.

Can I just make a comment?

I just wanted to point a clarification because it's important for reasons that aren't obvious.

But one of the things I wanted to emphasize in terms of Roger's discussion of this particular grant is that he emphasized how down the road it's kind of a pilot and then it's going to fit within the EDA's evaluation of all its grant policies

So the important thing, there's two things that this EDA needs to realize and find and that's what the resolution is doing is that one, it's not a program that the EDA is administering.

It's a grant to the United Way for them to administer their program.

Two, it's a grant that fits within the EDA's program.

an entire portfolio so that there's support for things like Woolen Mills, Perrone Robotics, and other grants that come to the EDA's attention.

This is part and parcel of Project EMAIL.

And the resolution does touch on that.

OK?

OK. All right.

So there's a new second.

Clarifications.

Do we need a roll call?

I think there's four here.

All right.

Oh, you're not.

Yeah, but we've got, I mean, I can recuse this.

Quorum stays.

It remains, so I'll do a roll call.

So we met back in September and the owner, Tim Potter, spoke to you all about the expansion happening down on the Broadway quarter.

I just wanted to make it clear that we're going to be routing the actual agreement itself in the coming weeks for signature.

I know there was just a little delay.

There were some legal documents that got sent that were consolidated with the help of our attorney's office and the attorney general's office where that would have been a couple of documents, performance agreements is now one performance agreement and it sort of is going to be better up long term for management administration programs.

The last item under unfinished business are the 2020 meeting dates.

There was a draft distributed at the November meeting.

The only difference between that one and the list you see here is we've added next year's January 2024 date.

That's the annual meeting of the EDA.

By adopting next January 24, that means we won't have to take action until the next annual meeting to adopt our meeting dates.

Unless there are any concerns or further discussion, we could, my understanding is, Richie, is we could do a voice vote to approve the 2023 meeting.

I think July has been the, July is usually not August.

It's easier to cancel a meeting than it is to schedule one at the last minute.

Second?

All right.

All in favor?

Aye.

All right.

Thank you.

Meeting dates are approved.

No, I just hope everybody has a happy holiday.

And also please help yourself to a delightful buy local reusable shopping bag for all of your shopping needs.