1. Alternatives to Financing Lake Development Infrastructure in Mississippi Public Improvement Districts and Tax Increment Financing February 4, 2009 Lucien L. Bourgeois Butler Snow, O’Mara Stevens & Cannada, PLLC Phone: (601) 985-4553 Fax: (601) 985-4500 Email: lucien.bourgeois@butlersnow.com@butlersnow.com Website: www.butlersnow.comwww.butlersnow.com

2. Public Improvement Districts Developers in Mississippi may take advantage of significant economic incentives for the financing of basic project infrastructure. Typically developers have to accept the risks associated with “out-of-pocket” expenses related to the construction of such infrastructure. For example, developers have been forced to rely on traditional financing to finance infrastructure which would be repaid as lot sales are completed with financing over a maximum of five to seven years. With the creation of the Public Improvement District Act (the “Act”), developers may reduce these risks associated with traditional financing by creating an independent public body known as a Public Improvement District (“PID”).

3. What is a PID? A PID is a political subdivision of the State which can be established by a city or county at the request of a developer to qualify to finance basic infrastructure via tax-exempt revenue bonds – thus providing an economic development incentive through a lower tax-exempt interest rate. Enabling Legislation: Section 19-31-15, et seq. of the Mississippi Code of 1972, as amended (the “Act”). A PID can be established to undertake the following developments: Residential Commercial Industrial A PID is empowered to finance the following type of public infrastructure: Streets/Roads/Sidewalks Water/Wastewater Facilities and Lines Bridges and Drainage Improvements Water Management & Control Facilities Also, with the consent of the affected local government (i.e. one creating the PID), the PID may finance the acquisition or construction of other infrastructure, including parks recreational facilities, and fire prevention facilities and equipment.

4. PID Financing A PID is authorized to issue tax-exempt revenue bonds to finance qualified infrastructure. Revenue Bonds issued by the PID are payable solely from the levy of special assessments by the District on benefited land within the PID and other sources that may be available. Interest rates, maturity and terms and conditions of any revenue bonds will be based on the strength of the developer, the type of development and specifications of the bond purchaser. The bonds may be sold as bank-qualified, tax-exempt (if less than $10 million per year, however the stimulus package being considered by Congress raises this threshold to $30 million during 2009-2010) at a substantial interest savings, or to investors as nonrecourse or recourse debt at market rate (subject to underwriting restrictions). In addition, a PID has the authority to enter into Contribution Agreements with government entities to provide additional security and/or other incentives to directly benefit the project.

5. Creation of PID Petition to City/County Governing Body by the Developer.  If land within the PID is entirely within City then petition should be provided to municipality. If land within the PID is within County, then petition should be provided to County Board of Supervisors. If portion of land is within City and portion within County, then County would accept petition, but City would have to approve of the Petition and creation of the PID. Petition shall contain:  Description of the boundaries of the PID.  Written consent of all (100%) of landowners in the PID.  Designation of five (5) persons to be initial members of the Board of Directors.  Proposed name of the PID.  Map of proposed PID, showing existing infrastructure, if any.  Proposed timetable for construction of infrastructure and estimated cost. Public hearing by City/County Governing Body.  Public hearing requirement within 45 days of filing of petition  Public notice of hearing required to be published in at least once a week for four (4) successive weeks immediately prior to hearing. Once established, a PID is a political subdivision of the State and is subject to the same requirements as other political subdivisions and local governments (i.e. open meetings, public bid laws, etc.).

6. PID Does Not A PID does not impact or affect: State and local regulations regarding development. Zoning Regulations. Impact Costs. DEQ and Other State Agencies’ Regulations/Permits.

7. Potential Applications of PID Industrial Parks: The State of Mississippi, its cities and counties are under constant pressure to furnish industrial parks to provide property for industrial and commercial prospects. An incentive which can assist private developers in undertaking development of industrial parks is the availability of setting up a PID by a local government. The PID would allow the infrastructure (streets, water and sewer improvements, drainage, street lights) to be financed on a tax-exempt basis as allowed by the federal government. The PID (Industrial Park) is allowed ongoing maintenance – if wanted or needed. The security for debt issued by the PID would be land and improvements in the PID and special assessments on benefited property within the PID.

8. Potential Applications of PID (cont.) Commercial Developments: An incentive for urban, suburban, and rural areas to assist developers in providing qualified infrastructure (streets, water and sewer improvements, drainage, street lights) which can be financed on a tax-exempt basis. Commercial and retail developments provide employment and generate economic activity. In addition, Sales Taxes are generated for our cities and counties. Security for debt issued by the PID would be land and improvements in the PID and special assessments on benefited property in the PID. Debt is not backed by City, County or State of Mississippi.

9. Potential Applications of PID (cont.) Residential Housing Developments: An incentive for residential housing developers trying to provide a quality development which meets city/county development requirements. Streets, drainage, water/sewer improvements, street lights, sidewalks and parks can be financed on a tax-exempt basis. A traditional residential housing development financing would be repaid as lot sales are completed with the financing usually maturing in five to seven years. Some improvements such as parks, etc. may be repaid over a longer period of time. Again, the security for the debt issued by the PID would be land and improvements in the PID and special assessments on benefited property within the PID. Debt is not backed by City, County or the State of Mississippi. The residential lots are assessed based on benefited property. Special assessments appear on residential tax bills, just like ad valorem taxes, but show up as special line items on the tax bills.

10. PID Additions Recent amendments to the legislation allows PIDs to:  Finance (and levy assessments) for up to 40 years.  Enter into Development/Reimbursement Agreement with developer of the project---creating easier private financing for front end construction.  Be created that actually cross County jurisdictions.

11. Tax Increment Financing (“TIF”) What is a TIF? Tax Increment Financing Bonds: Cities or counties may issue tax increment financing bonds to finance public infrastructure improvements in connection with redevelopment projects without the necessity of issuing general obligation bonds. Enabling Act: Cities and counties are authorized to issue tax increment financing bonds pursuant to Section 21-45-1, et seq. of Mississippi Code of 1972, as amended. Tax Increment Financing Plan: Under the Enabling Act, the local government shall prepare the tax increment financing plan which describes the public infrastructure improvements to be financed and the economic development project to be constructed by the private company. After the publication of a notice of the tax increment financing plan as provided by the Enabling Act, the local government shall have a public hearing for the tax increment financing project.

12. Tax Increment Financing (cont.) Eligible Expenditures: Public infrastructure improvements (i.e. roads, utilities, and drainage). Rate: Bond issue rate (tax-exempt rate for eligible public improvements and taxable rate for other projects). Term: Maximum of 30 years. Collateral: Tax increment financing bonds are limited obligations of the local government secured solely by the additional ad valorem taxes and/or sales taxes generated by the development of the economic development project described under the tax increment financing plan. Economic Development Incentives: Local governments may issue tax increment financing bonds to provide public infrastructure improvements to encourage private companies to develop economic development projects within areas designated for redevelopment.

13. TIF Advantages Type of project: TIF works best with significant increase in ad valorem and sales tax revenue over what property generated prior to development. Debt Limits: TIF bonds not subject to statutory debt limits. Limited only by amount of TIF Revenue available to support debt service. No Tax Increase: Debt service only from increase in tax revenue generated by new development. The full faith and credit of city and county cannot be pledged, i.e., no special tax can be levied to support the debt service. Not Subject to Protest: A public hearing is required, but TIF bonds are not subject to protest or election. Developer Driven Schedule: The TIF Act enables the city or county flexibility to contract with a developer to construct an entire project, including public infrastructure, with the agreement that upon completion of the project developer will be reimbursed.

14. TIF Process General Plan: City must have General or Comprehensive Plan. Redevelopment Plan: City must prepare Redevelopment Plan for the acquisition, reconstruction, rehabilitation, or future use of a redevelopment project area. TIF Plan: City must prepare a TIF Plan specific to a particular project. Must include:  Statement of Objectives  Statement indicated need and proposed use in relationship to Redevelopment Plan.  Statement of costs estimates of redevelopment projects and sources of revenue, including tax increments and amount of indebtedness to be incurred.  List of all real property to be included in the TIF Plan.  Duration of TIF Plan  Statement of estimated impact of TIF plan on revenues of taxing jurisdictions  Statement requiring that a separate fund be established to receive ad valorem taxes and proceeds of other financial assistance.

15. TIF Process (cont.) Planning Commission: Prior to adoption and implementation, planning commission must review and determinae proposed redevelopment plan in conformity with existing general plan. Public Hearing: Prior to adoption and implementation, a public hearing must be held on the proposed Redevelopment and TIF Plans. Agreements: Once TIF Plan has been approved, a development and reimbursement agreement is entered into with the developers, and, if applicable, interlocal agreements between participating city and county may be approved. Issuance of TIF Bonds: TIF Bonds generally issued upon completion of the development.

16. Questions?