New Community Authorities as a Tool for Economic Development New Community Authorities as a Tool for Economic Development

New Community Authorities as a Tool for Economic Development

New Community Authorities

A new community authority or “NCA” is a special unit of government authorized under Chapter 349 of the Ohio Revised Code. NCAs are to be created “for purposes of encouraging the orderly development of well planned, diversified and economically sound new communities and of encouraging the initiative and participation of private enterprise in such undertakings; and encouraging cooperation between the developer and the community authority to carry out a new community development program.” 
 
Projects that have been or are being financed utilizing new community authorities include the Village of New Albany; Bridge Park in the City of Dublin, Ohio;  Pinnacle Golf Club in Grove City, Ohio; Tanger Outlets in Delaware County, Ohio; and Liberty Center in Liberty Township, Butler County, Ohio.
 
Formation
 
In order to form the new community authority, the property owner within the proposed district is required to petition an “organizational board of commissioners” (the “OBC”) for the formation of the new community authority[1]. Unless the area included within the community authority will exceed 1000 acres, or unless at least half of the area within the new community authority is contained within a joint economic development district or JEDD (to be formed by the governing township and an eligible municipality), the entirety of the property to be contained within the new community authority must be contained within a municipality. The petition itself must be signed by the “proximate city,” which may be (depending on a number of factors) the most populous city in the county in which the proposed district is to be located, the municipal corporation in which any portion of the district is located or the township containing the greatest portion of the territory in a JEDD which includes at least 50% of the territory of the NCA.
 
The Petition
 
In order for a petition to be properly filed, the private entity filing the petition must own or control through leases of at least 75 years duration, options or contracts to purchase, the entirety of the land within a new community district. In the case of a private entity that holds options to purchase, there is no requirement for consent of any fee holder for the creation of the new community authority. 
 
The petition to be filed must contain the following information:
 
  1. The name of the proposed new community authority;
  2. The address where the principal office of the authority will be located or the manner in which the location will be selected;
  3. A map and a full and accurate description of the boundaries of the new community district, a description of the properties to be included within the district and a description of any properties not to be included in the new community district.
  4. A statement setting forth the zoning regulations proposed for zoning the area within the district;
  5. A current plan indicating the proposed development program for the new community district, the land acquisition and land development activities, community facilities, services proposed to be undertaken by the new community authority under such program, the proposed method of financing such activities and services, including a description of the bases, timing and manner of collecting any proposed community development charges and the projected total residential population of, and employment within, the new community.
  6. A suggested number of members of the board of trustees of the new community authority (between 7 and 13);
  7. A preliminary economic feasibility analysis, including the area development pattern and demand, location and proposed new community district size, present and future socio-economic conditions, public services provision, financial plan and the developer’s management capability; and
  8. A statement that the development will comply with all applicable environmental laws.

Approval Timeline 

Upon submission of the petition to the OBC (assuming the petition is signed by the proximate city), that board is required to hold a public hearing on the petition not less than 30 and not more than 45 days after the petition is filed. Approval is to be given after that public hearing, with the NCA’s board of trustees being appointed within ten days after formation.

Governance of the New Community Authority
 
Upon the establishment of the new community authority, the OBC is required to appoint at least three but not more than six citizen members of the NCA Board and one member on the Board to serve as a representative of local government. The private developer is required to appoint members equal in number to the citizen members of the Board. The citizen members may represent present and future employers within the district and any present or future residents of the district.
 
While the initial board serves a combination of one year and two year terms, successive members of the board may either be elected by the citizens within the district or may be appointed in a manner set forth in the petition. In such a case, it is generally preferable to provide for the appointment of successors rather than popular.
 
Community Development Charges
 
Community development charges are normally assessed by new community authorities upon real property in accordance with authority granted in the declaration establishing the new community authority.[2] They may be levied on the basis of the value of property. In addition, they may be levied on business revenues, including, for example, hotel stays, retail sales or even parking within the district. Once received, they can be used for any eligible purpose of the new community authority, including, but certainly not limited to, the payment of debt service on bonds issued by the new community authority.
 
The lien of a community development charge on property is on a parity with property taxes with respect to real property (unlike the assessments securing Mello-Roos Bonds in California, which have a lien status lower than real property taxes). This means community development charges are to be collected and paid prior to obligations owed to any mortgage holder. This is a significant advantage from a prospective bondholder’s point of view.
 
Typically community development charges, to the extent they are based on the value of property or on debt service, are usually supplemental to other sources of repayment (for example, tax increment finance payments or lease payments). As a practical matter, this means bonds issued by NCAs are typically secured by the TIF or lease payments, with community development charges providing a back-up.
 
Eligible Property for NCA Financing/Ownership
 
Under R.C. 349.06 NCAs are empowered to own, finance and construct community facilities. Community facilities include virtually any kind of public improvement within the district and include facilities that are used in furtherance of community activities (“cultural, educational, governmental, recreational, residential, industrial, commercial, distribution and research activities.”).
 
These provisions are broad; they permit the NCA to finance any public improvements that would benefit the NCA. Additionally, they permit the NCA to own any property within the NCA and further to finance property beneficial to the NCA. In addition, to the extent property is constructed under a contract that would place ownership or use with the NCA, such property may be eligible for an exemption from sales taxes on the construction materials included in any structures (just as materials incorporated into real property owned by port authorities is so excluded).
 
Advantages
 
When compared to other financing tools, NCAs may make sense in certain circumstances.
 
  • Community development charges are an additional charge on property. Unlike TIFs or general obligation bonds, NCA financing usually does not require a diversion of local resources from political subdivisions.
  • NCAs can be formed with an indefinite life. Other tools, like business improvement districts or even special assessment financing, have statutory limits on the duration of bonds issued to finance improvements.
  • Community development charges may be based on economic activity, rather than on property value. This means entities that are more successful economically (in the case of a retail development) will pay a larger share.
  • NCAs can be utilized by municipalities and other subdivisions as a source of financing for public improvements, thus preserving debt capacity and limiting direct financial responsibility for such financing.
  • NCAs can be used by private entities, such as developers, to finance portions of the development through the capital markets, potentially providing long term financing that may not have the same restrictions as financing provided through conventional sources.
  • In the case of public improvement financing, NCAs offer advantages over special assessment financing as the plans and specifications of property financed through NCAs may be changed during the process. The special assessment process, on the other hand, includes many formal obstacles that limit this flexibility.
Conclusion
 
Developers and political subdivisions alike may wish to consider forming an NCA to undertake important developments. For more information, please contact Kip Wahlers or another member of the Ice Miller Municipal Finance Group.
 
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.


[1] In the case of a proposed district located entirely within a municipal corporation, the organizational board of commissioners is the municipal corporation. In the case of a proposed district located in a single county, the organizational board of commissioners is the board of county commissioners.
[2] NCAs are authorized to levy charges on the income of residents within the district. Such a levy would be unusual.

View Full Site View Mobile Optimized