Archive for Grants Central

$280 M in ODOT TRAC Requests Creates Substantial Competition and Interest in P3s and EB-5 Transportation Funding

Funding for “major new capacity projects” with the Ohio Department of Transportation (ODOT) are awarded through the Transportation Advisory Council (TRAC). Applications for TRAC funding were due on July 31, 2017, and 13 projects filed for a total of $280 M. The Ohio Transportation Budget, House Bill 26, recently enacted allocated $59.5 M in funding for Major New Program funding per year in the FY 2018-FY 2019 biennium, considerably less than the amount spent in this area during FY 2017. The high demand for state transportation funding will create substantial competition through the TRAC process as well as interest in exploring alternative P3 funding options.

 

While the number of TRAC applicants is down the loss of the Ohio Turnpike proceeds for major new highway construction projects has dropped the funding allocation for TRAC projects by two-thirds the previous total (as illustrated by the chart below). In fact, the Cuyahoga County I-90 bridge project awarded TRAC funding in 2016 cost more than all the current TRAC applications put together.

First, communities hoping to gain funding for their transportation project through the ODOT TRAC process need to fully implement a project financing program. Successful project financing strategies will involve advocating aggressively for TRAC funding, increased ODOT support for the TRAC budget, forming Transportation Improvement Districts (TIDs) and alternative funding sources from private infrastructure financing through Public-Private-Partnerships (P3s) and EB-5 funds.

Highway transportation project financing needs to start with efforts to gain TRAC funding. TRAC funds Major New Capacity projects greater than $12 million which increase the capacity of a transportation facility or reduce congestion, impact economic development, have local financing and a strong overall financing plan. All projects that cost ODOT greater than $12 million, request Major New funding, and add capacity to a transportation facility must come before the TRAC. This definition includes all new interchanges proposed for economic development or local access, any significant interchange modifications, bypasses, general purpose lane additions, intermodal facilities, major transit facilities, or Intelligent Transportation Systems (ITS). TRAC put out specific limiting criteria for this round of funding focused on projects with non-ODOT funding commitments in the amount of 30% or greater of the total project cost and:

  • Projects that are an existing TRAC funded project (Tier I, II or III) and additional funds are needed to advance the project to the next stage of development; or
  • new projects that demonstrates significant impact to jobs, regional economic impact and has significant non-ODOT funding commitments.

ODOT Program Management Staff reviews the applications submitted and scores applications in accordance with TRAC policy to provide a draft project score based upon four factors- transportation, economic, local investment and project financing. Draft scores are shared with project sponsors to determine if any additional information is needed. Once a final score has been assigned, ODOT Program Management Staff provides the information to TRAC for their evaluation and consideration. Also, the TRAC will hold public hearings around the state in September and October, providing project sponsors with the opportunity to convey information about their respective projects that may not be captured as part of the on-line application process. After the public hearing process, TRAC will develop a DRAFT funding list which is published for public comment. Once public comment has been received and reviewed, TRAC will move to adopt a FINAL Major New Construction Program Funding List. From application submission to adoption of a FINAL Major New Construction Program Funding List is approximately six months to allow for sufficient time for review, questions, and public comment.

The fact is TRAC is not allocated the funding it needs to support all the applications filed. In fact, the TRAC applications nearly total the entire highway construction budget for ODOT. TRAC funding could be support by additional funding from the Ohio Turnpike Commission. ODOT is planning on $250 million in Turnpike infrastructure bond funding in the Major New projects area in FY 2019. Additionally, ODOT has pursued the financing of large Major New projects through P3 agreements in recent years. This has led to the private financing and building of the Portsmouth Bypass, estimated to cost $1.2 billion. This financial arrangement allows the state to make payments over a negotiated period of time, reducing the amount of upfront outlays needed to pay for these types of projects. P3s are driven by global private infrastructure companies that fund highway construction projects. The Portsmouth Bypass proves they will work in Ohio and P3s are an option for major highway construction projects.

Forming a Transportation Improvement District (TID) could also provide additional major highway financing options. Multi-local governmental entity reaching agreement on funding for a specific transportation project. TIDs fund improvements to streets, highways, parking facilities, freight rail tracks and necessarily related freight rail facilities, or other transportation projects that are newly constructed or improved as well as the administrative, storage, and other buildings or properties, and facilities the district needed for the operation of the TID. The recently passed ODOT budget has funding for TID projects but it is capped at $250,000 per project. However, TIDs ability to develop local financing options through a multi-jurisdictional revenue model offer substantial funding sources.

Finally, major transportation projects have been funded by EB-5 funds in Pennsylvania that may provide a new model for transportation funding in the Buckeye state as well. Entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card (permanent residence) if they: make the necessary investment in a commercial enterprise in the United States; and plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers and transportation projects have qualified for EB-5 investments as construction jobs qualify as job creation. A major interstate project in Pennsylvania was funded through the use of EB-5 funds and may provide a model for major highway financing for Ohio projects searching for funds.

JobsOhio Helps Drive Down the Cost of Brownfield Redevelopment

Infill and urban development is becoming increasingly popular as the Millennial generation choses to live and work in walkable, new urbanist communities. Despite that trend, a greenfield site is much easier to sell and less costly to develop than a brownfield-infill site. A greenfield site with all the infrastructure in place may sell for $45,000 an acre while a competing brownfield site may need to sell for twice that much to cover the considerable costs of environmental assessment and remediation and demolition. In many instances a public-sector partner is needed to help drive down the costs of the brownfield site to make it compatible cost-wise with a greenfield site.

JobsOhio, the private sector economic development corporation for the state of Ohio, has helped many companies, developers, and public agencies develop brownfield sites through its JobsOhio Revitalization Loan and Grant Program, and its JobsOhio Revitalization Phase II Grant Program. From June 2016 through May 2017, JobsOhio invested $19,200,000 of loan proceeds, $23,107,858 in grants, and $1,230,928 in Phase II grants into 56 projects that leveraged $239,956,277 of private capital investment. Because of these investments 2,194 jobs will be created with a cumulative payroll of $105,487,317 and the retention of 10,344 jobs.

JobsOhio Revitalization Loan and Grant Program projects must have an end user in mind that is willing to commit to the creation of jobs and payroll, the retention of jobs and payroll and capital investment. Loans range anywhere between $500,000 and $5,000,000 and grants can be up to $1,000,000. The Phase II environmental assessment program is a grant program that can cover some of the costs of the environmental assessment.

Through the JobsOhio Revitalization Loan and Grant Program companies, developers and public agencies can turn former productive facilities into job generating, revenue generating and tax generating operations. Through this program JobsOhio is helping to solve one of the main issues and challenges with redeveloping brownfield sites, the considerable cost.

AT&T Creating $200 Million VC Fund

AT&T recently announced that it has formed a partnership with venture capital firm Coral Group to invest up to $200 million in a new venture fund. The fund will seek to identify technology start-ups focused on connected services and platforms and to more quickly develop solutions for AT&T and other carriers.

AT&T’s venture capital fund will provide investments into technologies that are running on the Open Network Automation Platform, an operating system for software-defined networks. ONAP is rapidly becoming the standard for virtualized networks and is the result of a platform created in AT&T Labs and an open source existing effort.

AT&T and Coral Group will work together to identify other companies to potentially invest in the fund and to share connected services and platforms solutions developed through their partnerships. Coral Group, based in Minneapolis and the fifth largest VC firm in Minnesota, will run the fund.

This new $200 million fund represents AT&T’s latest innovation program and builds on the company’s current AT&T Labs and Foundry innovation centers.  Launched in 2011, the Foundry innovation centers work closely with the start-up and open source communities to develop solutions for a host of technology-driven businesses and industries, including automotive, healthcare, and sensors. AT&T’s centers include the IoT Foundry in Plano, Texas; the Drive Studio in Atlanta; and, the Healthcare Foundry in Houston.

JobsOhio Targets Funding of Middle-Market Companies

Growing and prosperous companies in the middle market, defined as those companies with annual revenue between $100 million and $1 billion, face numerous challenges as they decide to expand their business and market. The two most often sited challenges to growth by these companies is:

  1. Financing their expansions
  2. Recruiting and retaining talent

JobsOhio, the private sector economic development corporation for the state of Ohio, has helped many middle market companies solve the first challenge, and grow in Ohio through its JobsOhio Growth Fund Loan. From June 2016 through May 2017, JobsOhio invested $37,700,000 of loan proceeds into 12 projects that leveraged $453,551,994 of private capital investment. Because of these investments 1,632 jobs will be created with a cumulative payroll of $59,204,836 and the retention of 814 jobs. The average loan size was $3,140,000.

Through the JobsOhio Growth Fund Loan Program, middle market companies can utilize other sources of capital, from both internal (cash) and external (banks) sources to generate more jobs and capital investment than would otherwise be possible without funding from JobsOhio. Through this program JobsOhio is helping to solve one of the main issues that middle market companies have experienced since the Great Recession, access to capital.

Three Reasons Planning and Lobbying for Your Next State Capital Bill Community Projects Should Start Now

The hangover from the state of Ohio operating bill has not even really started but it is too soon to begin planning regional community projects as part of next year’s state capital budget? Three reasons indicate the answer to this question is yes.

First, let’s have a primer on what is a community project in the state capital bill. Community projects must be capital in nature and connected to a state agency either in the form ownership, partnership or through a joint use agreement. Most years, community projects include initiatives built around agriculture, arts and museums, economic development, health care, infrastructure, parks, police and fire, social services, sports, telecommunications, veterans and workforce projects. Applicants for funding still range from local governments to university to community colleges and for profit and not for profit organizations.

Now, three clear facts suggest planning and lobbying should begin right away for state capital budget bill community projects.

  1. State Capital Bill Community Project Funding is Accessible all Over Ohio. There is no reason to plan and lobby for a state capital bill community project if your region has no chance for funding. Past state capital bills illustrate, community project funding was accessible all over the state in urban, rural and suburban counties with community projects located in 77 of the 88 Ohio counties in the last state capital bill. As with most capital budget bills, Cuyahoga received the largest amount of community project funding but Hamilton and Franklin Counties were close behind. Don’t feel too bad for rural communities as they did much better in the last capital bill for community projects than in the previous capital budget gaining a full 10% more in funding than in the previous capital bill.
  2. Competition is Fierce for Community Project Funding. The previous state capital bill had over $1.25 B in legislative requests submitted by members of the Ohio General Assembly to their Finance Committees. With only $200M traditionally available for community projects, demand for funding is likely to exceed the supply of funding in the upcoming capital budget bill. The competition gets so fierce many successful community project funding requests hire Statehouse lobbyist to develop project requests and community with the executive agency and legislators about the economic value of the request for the state and community. In fact, over 1000 registered lobbyist were engaged in the last state capital bill (excluding state executive agency lobbyists).
  3. Quality Community Projects Take Time to Plan. Finally and most importantly, work should begin now on developing a regional arts, sports, workforce, health care, parks, infrastructure, social service or other state capital bill community project because quality requests take time to develop. While funding is accessible for projects all over the state, competition is fierce for everyone. Urban community requests far exceed the regional allocation of dollars. Rural communities compete for a smaller pot of funding. While hiring a lobbyist to gain funding helps, developing a quality project with a strong business plan tied to future funding that illustrates a sustainable project is the most appealing attribute for a community project request. Developing a sustainable community project request that address an important community challenge takes time to create.

The state of Ohio capital bill offers a critical opportunity to address regional challenges but work needs to begin now if communities want to succeed in gaining this in-demand funding.

Downtown Housing and Tax Abatements

Urban centers have been booming with the growth of multi-family residential units. Look at Ohio:

  • Downtown Dayton has 204 units are under construction and another 432 units are in the development phase;
  • Downtown Columbus has over 5700 residential units constituting a growth in residents of 132% since 2000;
  • Downtown Cleveland has over 8000 residential units; and
  • Downtown Cincinnati leads them all with over 8200 residential units.

Many of these urban communities are benefiting from a desire of Millennials to move back to the urban core but they are also using tax incentives to create a level playing field with the less costly suburban housing market. Urban centers are typically complex development sites with existing buildings, property owners and struggles to find the parking and other amenities that are cheap and easy to build when transforming a field of corn into homes. Also, the development of housing and mixed use developments in the urban core benefits the entire region as it breathes new life into downtowns which serve the entire region as a central business district and often a regional or national entertainment center. The public policy and economic benefits of homeownership in urban, downtown centers is even stronger. Homeowners traditionally are more connected to the success of their community as they are invested in the value of that neighborhood. Clearly, supporting the development of downtown housing is a confluences of the current residential market, good public policy and smart economic development.

How can communities big and small create a downtown housing marketplace. The solution generally starts with determining the best tax incentive scheme to use. The Ohio Community Reinvestment Area (CRA) program is an economic development tool administered by municipal and county government that provides real property tax exemptions for property owners who renovate existing or construct new buildings and is the prime economic development tool driving downtown housing growth. Community Reinvestment Areas are areas of land in which property owners can receive tax incentives for investing in real property improvements. The program is delineated into two distinct categories, those created prior to July 1994 (“pre-1994”) and those created after the law changes went into effect after July 1994. The CRA Program is a direct incentive tax exemption program benefiting property owners who renovate existing or construct new buildings. This program permits municipalities or counties to designate areas where investment has been discouraged as a CRA to encourage revitalization of the existing housing stock and the development of new structures. Local municipalities or counties can determine the type of development to be supported by the CRA Program by specifying the eligibility of residential, commercial and/or industrial projects.

For a post 1994 CRA, the tax exemption percentage and term for commercial and industrial projects are to be negotiated on a project specific basis. If the proposed exemption exceeds 50%, local school district consent is required unless the legislative authority determines, for each year of the proposed exemption, that at least 50% of the amount of the taxes estimated that would have been charged on the improvements if the exemption had not taken place will be made up by other taxes or payments available to the school district. Upon notice of a project that does not meet this standard, the board of education may approve the project even though the new revenues do not equal at least 50% of the projected taxes prior to the exemption.

Many downtown residential tax abatement programs are beginning to approach the 15 year mark of their life. Recently, Ohio law was changed to permit the period of the tax exemption for a dwelling to extended by a legislative authority for up to an additional ten years if the dwelling is a structure of historical or architectural significance, is a certified historic structure that has been subject to federal tax treatment under 26 U.S.C. 47 and 170(h), and units within the structure have been leased to individual tenants for five consecutive years. However, this change to state law does not help many other apartment and condo owners who will struggle to compete without their current tax abatement.

First Quarter 2017 Venture Capital Investments Grow

Access to venture capital is a critical measure of a region’s success with technology based economic development as early stage technology companies struggle to gain funding from traditional sources such as banks. U.S. venture capital investments saw signs of growth in First Quarter 2017 versus investments in Fourth Quarter 2016 based upon reports from PricewaterhouseCoopers LLP, the National Venture Capital Association, and PitchBook.

In Quarter 1 2017, venture capitalists deployed $13.7 billion to start-up companies through 1,104 deals, up fifteen percent in dollars and two percent in deals over Quarter 4 2016. An increase in mega-round funding (investments over $100 million in size) helped contribute to the growth in quarterly dollars invested, although the $13.7 billion is the second lowest quarterly total over the past two years. Regional trends were mixed, with LA/Orange County being one of the few major hubs experiencing an increase in both dollars and deals from Quarter 4 2016. Seed investments continued its two-year decline as a proportion of all deals, coming in at 25% of all deals in Quarter 1 2017, while later-stage deals were at eleven percent of all deals. Additionally, the Internet sector deal share decreased to a two-year low of forty-four percent during Quarter 1 2017 while Healthcare increased to a two-year high of seventeen percent and surpassed Mobile and Telecommunications as the second place sector for deal activity.

A summary of Quarter 1 2017 shows:

  • Regions – The Midwest came in eight out of the eighteen regions, preceded by San Francisco in first ($3.47 billion), Silicon Valley, New England, New York Metro, LA/Orange County, Southeast, and the DC Metroplex. In order, Colorado, Northwest, Southwest, Texas, San Diego, North Central , Upstate New York, Philadelphia Metro, Sacramento/Northern California, and South Central rounded out the rest of the regions.
  • Sectors – Internet, Healthcare, Mobile and Telecommunications, Industrial, and Computer Hardware and Services comprised the top five investment sectors. The additional twelve investment sectors include Business Products and Services, Software (non-internet/mobile), Electronics, Automotive and Transportation, Consumer Products and Services, Energy and Utilities, Food and Beverages, Leisure, Financial, Media, Agriculture, and Risk and Security.
  • Development Stages – Expansion Stage led with investments of $5.352 billion followed by Later-Stage ($4.844 billion), Early-Stage ($2.47 billion), Other ($760 million), and Seed ($433 million).
  • States – Top 10 investment states were California ($7.379 billion) followed by Massachusetts, New York, Colorado, North Carolina, Maryland, Texas, Washington, Virginia, and Utah. Ohio came in at nineteenth, with $81 million (down from $142 million in Quarter 4, 2016).

Exit activity continued to be slow, with 169 VC-backed exits during Quarter 1 2017, with corporate acquisitions and buyouts continuing to be the leading exit routes. Software, biotech, and commercial services sectors accounted for approximately seventy-three percent of the total exits. Finally, venture capitalists raised $7.9 billion across 58 funds in Quarter 1 2017, down approximately twenty-four percent from last year’s Quarter 1. Nine first-time funds were closed during this quarter, the most in the last five quarters.