Pub. 5 2014 Issue 3

fall 2014 13 West Virginia Banker Carrie J. Cecil is an associate attorney in the Charleston office of Spilman Thomas & Battle. Her primary areas of practice are public finance and general corporate and business law. She can be reached at 304.340.3880 or ccecil@spilmanlaw.com. or ordinance detailing the project plan and establishing the TIF district, which may exist for a maximum of 30 years from the date of its creation. County Economic Opportuni- ty Development Districts Act The West Virginia Legislature enacted the County Economic Opportunity Develop- ment Districts Act (W.Va. Code §7-22-1 et. seq.) (the “Excise TIF Act”) in 2003. The Excise TIF Act permits a county commis- sion to create an economic opportunity development district and capture increas- es in sales taxes in the district to finance development projects within the dis- trict. Similar to the TIF Act, the county commission must hold a public hearing regarding the proposed district and after the public hearing must submit an application to the WVDO. However, the WVDO may not approve an application unless the amount of all development expenditures proposed to be made within the first 24 months following creation of the district will result in capital invest- ment of more than $75 million in the district. Once the application has been approved by the WVDO, a county com- mission must receive authorization from the West Virginia Legislature to levy the special district excise tax on the privilege of selling tangible personal property and rendering select services within the pro- posed district. After the county commis- sion received authorization from the West Virginia Legislature, it may then enact an ordinance creating the district. Funding TIF Projects TIF projects are commonly funded either through the pay-as-you-go method or the issuance of TIF bonds. The pay-as-you- go method uses the tax increment to pay for projects as they are constructed and is most often used for streetscaping and other small projects. Alternatively, the county or municipality may choose to issue TIF bonds. The proceeds of the TIF bonds are then used to finance the projects set forth in the project plan. TIF bonds are con- sidered tax-exempt by the State of West Virginia and may be tax-exempt for federal income tax purposes. TIF bonds are most often secured solely by the tax increment pledged for their repayment, but in some cases, other revenues may be pledged with the tax increment to produce a better cred- it. If the tax increment grows faster than originally anticipated, TIF bonds may be retired early or the additional increment may permit the financing of additional projects using TIF funds in the particular project area or district. Opportunities for Lenders Since the new development in a TIF district creates the conditions for the new tax revenue, newly created TIF districts will not have demonstrated historic tax increment revenues to support repayment of the TIF bonds when issued. As a result, developers are often willing to purchase the TIF bonds with the intent that once the tax increment is demonstrated to be in amounts sufficient to pay debt service on the TIF bonds, such bonds may be refund- ed. Under this structure, a developer may borrow funds from a bank and pledge the TIF revenues paid to the developer as the holder of the TIF bonds to the bank as col- lateral. When the TIF bonds are refunded, such bonds are generally privately placed with banks. n