Stimulus Funding and Creative Finance How to Construct Parking Structures During Tight Financial Markets Peter Flotz, AICP Principal Lansing Melbourne Group, LLC Steven Hayward, AICP, PCP Director of Development + Planning Charter Township of Lansing

Why Act Now?

Market Update  Credit Markets are loosening  Investors are still paying attention to the credit quality of issuers  Rated Issues v. Non-rated  Municipal Bonds continue to price at near- record lows 3

Market Update  The Federal Open Market Committee maintained its position to keep their benchmark interest rate near zero for an “extended period” due to economic conditions, low rates of resource utilization, subdued inflation trends and stable inflation expectations.  The implied consensus is that until employment and housing see consistent strength, the Fed may side with staying with low rates for an ‘extended period of time.’  4

Build America Bonds Build America Bonds - Subsidy Option ■ Eligible Projects ─ New money capital projects ─ No refundings of non-BABs ─ Not available for 501(c)(3) ■ Key Elements ─ Issuer receives 35% cash subsidy in 2010 on each payment date from federal government ─ Subsidy not subject to future appropriation risk ─ May be possible to monetize subsidy payment stream Build America Bonds - Credit Option ■ Eligible Projects ─ New money capital projects ─ Refundings permissible ─ Not available for 501(c)(3) ■ Key Elements ─ Bondholder receives 35% non-refundable tax credit on each payment date ─ Credit may be carried forward ─ Issuer can “strip” credit from bonds to appeal to broader group of investors ■ Permitted Issuers ─ State and local governments ─ No private activity ■ Eligibility ─ Extension contemplated thru 04/01/2013 ─ No limits on issuance ■ Key Elements ─ Taxable Bond that provides either interest subsidy to issuer or federal tax credit to bondholders ─ Otherwise could be tax-exempt ─ No more than de minimis original issue premium 5

6 BABs: Direct-Pay / Subsidy Option  Eligible Projects  New money capital projects only  No refundings  Key Elements  2% limit on costs of issuance Expenses above 2% limit must be paid directly by the Issuer  The Issuer receives a direct-pay/subsidy from the US Treasury equal to 35% of the interest payment due to the bondholder This subsidy is not subject to future appropriation risk Treasury payment is to be made “contemporaneously” with interest payment It may be possible to monetize the subsidy payment stream to support the issuance of additional bonds Leveraging the subsidy will depend on bond covenants and documents

7 BABs: Tax Credit Option  Eligible Projects  New money capital projects  Refunding of existing bonds  Providing working capital  Key Elements  Bondholder/purchaser receives a non-refundable tax credit equal to 35% of the interest payment due from the Issuer BABs are not structured to be a 0% interest financing mechanism  The credit may be carried forward for one (1) year in the event that the credit holder does not have a tax liability in a given year The credit may be “stripped” and sold to a different investor other than the bondholder/purchaser  This option is seldom used

BABs Benefit Comparison of AA-Rated Yield Curves (as of March 23, 2010) 8

Build America Bonds (“BABs”) and Recovery Zone Economic Development Bonds (“RZEDBs”)  More than $85 billion of BABs have already been issued since late March, 2009  Additional Considerations  Direct subsidy presents most economically advantageous structure in the current market  Greater interest cost savings on the long end of the BABs or RZEDBs yield curve Potential to structure short tax-exempt bonds and long BABs or RZEDBs Benefit from taxable investor interest because they offer an alternative to corporate debt issuers 9

■ BABs may be issued for ─ Refunding of tax exempt bonds and ─ Working capital purposes ■ RZEDBs may be issued to promote development in a designated Recovery Zone ─ A Recovery Zone is an area designated because of significant poverty, unemployment, rate of home foreclosures or general distress or economically distressed because of military base closure or realignment or any area which a designation as an empowerment zone or renewal community is already in effect Build America Bonds (“BABs”) and Recovery Zone Economic Development Bonds (“RZEDBs”) 10 ProvisionVolumeAllocationPermitted IssuersEligible ProjectsSummary Tax Exempt Bondsna Governmental and 501(c)(3)s All projects that qualify for tax exemption (including 501(c)(3) issues) Provides governmental and 501(c)(3) borrowers with lower cost financing structure Build America Bonds (BABs)na State and local government issuers All projects that would otherwise qualify for tax exemption (with the exception of 501(c)(3) issues) Provides governmental borrowers with an additional structure through a subsidy/tax credit Recovery Zone Economic Development Bonds (RZEDBs) $10 Billion Proportionate to state employment decline Counties and cities with populations in excess of 100,000 All projects that would otherwise qualify for tax exemption (with the exception of 501(c)(3) issues) that benefit a "Recovery Zone" Provides governmental borrowers with an additional structure through a subsidy/tax credit

Build America Bonds (“BABs”) and Recovery Zone Economic Development Bonds (“RZEDBs”) 11 – Direct Subsidy Only for new money financings Not subject to future appropriation risk

Recovery Zone Economic Development Bonds (“RZEDBs”) Comparison of AA-Rated Yield Curves (as of March 23, 2010) 12

Recovery Zone Facility Bonds  RZFBs are allocated to each state based upon proportion of each state’s employment decline as compared to the national employment decline (Michigan highest)  95% of the bonds must be spent on Recovery Zone Property (with the exception of “bad projects” such as liquor stores, country clubs, gambling)  Cannot be spent on land.  RZFBs are similar to private activity bonds in that an allocation is made by the state to the issuer 13 ProvisionVolumeAllocationPermitted BorrowersEligible ProjectsSummary Recovery Zone Facility Bonds (RZFBs) $15 Billion Proportionate to state employment decline Private entitiesPrivate depreciable property Provides tax exempt structure for the private sector

New Market Tax Credit Investment Bill Signed 12/21/2000 Purpose - Attract $15 Billion in Investment to Low-Income Communities $2.5 Billion Allocated for 2001 and 2002 $3.5 Billion Allocated for 2003 and 2004 $2.0 Billion Targeted for 2005 $3.5 Billion/Year in 2006, 2007, 2008

39% Investment Tax Credits to Investor for Over 7 Years  First Three Years = 5%/Year  Next Four Years = 6%/Year  Total = 39% Funds Used to Invest Almost Any Businesses Located in a Low Income Census Tract Tax Credits Allocated to a Community Development Entity (CDE) by US Treasury Cash Flows to CDE as Qualified Equity Investment  Must Stay in Deal For 7 Years  Flows In as Equity, Flows Out as Equity, Loan or Loan Purchase Deals May Be Pooled or Pass-Through Investments Tax Credit Goes to Investor Regardless of Investment Success or Failure New Market Tax Credit Investment

Census Tract with  Poverty Rate > 20% or  Greater of the Following Two: Median Family Income < 80% of MSA Median Income or Median Family Income < 80% of Statewide Median Family Income  95% of Financing Must Have Additional Levels of Distress, Poverty Rate > 30%, Median Family Income < 60%, Brownfield, Urban Renewal Area, Enterprise Zone, etc. Go to MMF1.org to Verify Census Tract New Market Tax Credit Investment

Case Studies  Eastwood Parking Deck – Lansing Township, MI  Hyatt Place - Melbourne, Florida

Why Act Now?

Eastwood – Lansing Township, MI

Hyatt Place – Melbourne, FL

Question & Answer Stimulus Funding and Creative Finance How to Construct Parking Structures During Tight Financial Markets Peter Flotz, AICP Principal Lansing Melbourne Group, LLC Steven Hayward, AICP, PCP Director of Development + Planning Charter Township of Lansing

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