1. 2014 LEAGUE OF ARIZONA CITIES AND TOWNS CONFERENCE Rural Economic Development Tools and Programs Presentation Industrial Development Authorities Dane Fernandes Dane.fernandes@kutakrock.com

2. INDUSTRIAL DEVELOPMENT AUTHORITIES IN ARIZONA  Industrial Development Financing Act, Arizona Revised Statutes § 35-701 et seq.  Four most active of the Industrial Development Authorities (“IDA”) are: City of Phoenix, City of Tucson, County of Maricopa, and County of Pima  Dozens of other IDAs in the State  According to the Act, an IDA is a non-profit corporation designated a political subdivision of the State of Arizona

3.  Manufacturing facilities;  Commercial enterprises for agriculture, mining or industry;  Office buildings for use as corporate or company headquarters or regional offices;  Health care institutions;  For profit housing within the jurisdiction of the IDA;  Repairing or rehabilitating single family homes;  Convention or trade show facilities;  Airports, docks, wharves, mass commuting facilities, parking facilities;  Facilities for sewage/solid waste disposal or for furnishing of electric energy, gas or water;  Industrial park facilities;  Air or water pollution control facilities;  Charter schools;  Research and development facilities;  Commercial enterprises of any kind that are to be located in a designated area;  Public-private transportation facilities;  Any facilities owned or operated by a 501(c) organization;  New or existing correctional facilities within the State; and  Student Loan Programs ELIGIBLE PROJECTS

4. ADVANTAGES  Serves as an integrated financing vehicle that can fund construction and development phases, provide long term financing and fund future capital expenditures  Highly flexible structure – interest-only periods, variable amortization schedule and partial or full prepayment without penalty  Potential off balance sheet treatment  Potential alternative to statutory impediments DISADVANTAGES  Higher cost  Longer timelines  No interest rate advantage ADVANTAGES AND DISADVANTAGES OF IDA BOND FINANCING TO CITIES & TOWNS

5. Typical Conduit Revenue Bond  IDA issues bonds and is nominal owner and obligor on indebtedness  Lends proceeds of bonds to the borrower  Acts as conduit with no direct financial responsibility – bondholder must look to project’s ability to pay or payments from obligor Public/Private Partnership Collaboration between public and private entities to structure, negotiate and implement the finance, design, development, construction and/or operation of a project.  Types of Public/Private Partnerships Major private Traditional Major public TYPES OF STRUCTURES

6. SIMPLIFIED STRUCTURE OF TYPICAL CONDUIT REVENUE BOND ISSUE Issuer Bondholder City/Town Bond Loan of Bond Proceeds Loan/Lease Agreement Trustee Loan Payments Bond Proceeds Indenture Bond Proceeds Bond Payments Principal & Interest

7. SIMPLIFIED STRUCTURE OF PUBLIC/PRIVATE PARTNERSHIP STRUCTURE Issuer Bond Underwriter Bondholder Project Owner City/Town Trustee Bond Bond Proceeds Bond Payments Principal & Interest Lease Agreement Lease Payments Loan Agreement

8. CASE STUDIES

9. OFF BALANCE SHEET FACILITIES FINANCING  Need For New Facilities Without Bond Election  Use Of 501(c)(3) as Owner/Borrower  Lease/Leaseback Transaction  Governmental Entity Rating on Bonds  Facilities Deeded to Governmental Entity at the End of Lease

10. ECONOMIC DEVELOPMENT  Solid Waste Recycling Project  New Jobs/Business/Tax Revenues to City  Elimination of Waste from Landfill  License to Operate at Landfill  City Supplier of Waste Stream and Last Buyer of Recycled Material  City Rating on Bonds

11. CITY TRANSPORTATION PROJECT  Roadway Project  IDA Owner of Project  Leased to City  Purchase of Bonds in Installments from Bank  Assistance from State