The Economic Development Corporation of the City of Ann Arbor (“EDC/A2”) was formed under Michigan's Economic Development Corporation Act in 1978. Its purpose is to assist in the attraction, relocation, retention and expansion of profit and non-profit organizations which provide employment and which are considered desirable and beneficial to the City. It has carried this out primarily by its issuance of tax-exempt revenue bonds. This has permitted borrowers to realize substantial savings in financing costs due to the difference between taxable and tax-exempt interest rates.
Board of Directors
|Milton Dohoney, Jr., |
City Administrator, City of Ann Arbor
|Larry Eiler, President, Eiler Communications||
|Jen Eyer, City of Ann Arbor, Councilmember|||
|Sally Hart Petersen,|
Community Affordability Advocate and Former City
|Dale R. Leslie, Retired, President, Leslie Office Supply, Inc.|||
President and CEO
Ann Arbor SPARK
Tim Marshall, President and Chief Executive Officer, Bank of Ann Arbor
Jan Davies McDermott, President and CEO, ECHO Enterprises, LLC
Founder, Managing Education and Employment Training Services
What does the EDC/A2 do?
While our primary statutory purpose is to help lower financing costs by issuing tax-exempt revenue bonds, we have also assisted the community in other ways. To date this assistance has included:
- Referral and ombudsman services to the public.
- Working cooperatively with the City, other area economic development corporations and similar entities involving matters of common interest.
- Encouraging programs that attract or retain businesses and employment.
- Subject to the availability of funding, providing loans and grants to assist companies and non-profits in the City.
We welcome and encourage suggestions from the pubic on how we may provide additional services related to economic development to the community.
What is revenue bond financing?
An EDC/A2 bond is issued on behalf of the qualified applicant which is then purchased by the applicant's lender. The proceeds are then re-loaned by the EDC/A2 to the applicant for its project. The bond purchaser (i.e., the lender) will thereafter look to the project itself and the applicant for repayment. It is because of the EDC/A2’s role in the financing that permits the interest to be tax-exempt (in whole or in part) in the hands of the bond purchaser. This will mean substantial savings in financing costs over the life of the project.
An EDC/A2 bond will be repayable only from the revenues of the project that is being financed. The bond purchaser/lender will usually be secured by a first mortgage on the project among other collateral such as letters of credit. Under no circumstances will either the EDC/A2 or the City of Ann Arbor be obligated to pay the bond indebtedness.
Who can use EDC/A2 bond financing?
Current tax law limits EDC/A2 bond financing to manufacturing projects and projects being undertaken by Section 501(c)(3) non-profits.
What are some examples of prior projects that have utilized EDC/A2 revenue bonds?
The EDC/A2 has issued bonds totaling almost one hundred fifty million dollars since its inception. Industrial projects include Climax Molybdenum, Parke Davis, G. T. Products, Ann Arbor Computers and Ervin Industries. Non-profit projects include The Ann Arbor YMCA, Greenhills School, ERIM, and the Industrial Technology Institute. And while tax law now precludes their use for these purposes, EDC/A2 bonds have also been used to finance hotels (Weber’s Inn, the Boardwalk Sheraton) and office/retail buildings (Kerrytown, Plymouth Park, the Pretzel Bell building, The Earle building, the First National Trust building).
How does the bond financing process work?
As tax-exempt obligations, our bonds are governed by Federal laws and regulations which are quite complex. Interested parties should therefore consult with their financial advisors and bond counsel (i.e., attorneys who specialize in bond finance). Early consultation is strongly encouraged in order for a potential applicant to determine whether EDC/A2 financing will make sense for its intended project.
Project financing typically starts with a private company or non-profit proposing a project within the City to the EDC/A2. Our Board then requests City Council to appoint two additional directors from the neighborhood likely to be affected by the project. The EDC/A2 then works with the applicant to develop a proposed project plan and identify the project area and project district area. The plan is then submitted to Council. After a public hearing and review, Council decides whether to approve the project or not. If approval is given, we and the applicant proceed to closing in accordance with the project plan.
See “Summary of the Bond Issuing Process,” below, for more details.
Following consultation with its financial advisors and bond counsel, an applicant for EDC/A2 bond financing assistance should submit an application in the form set forth below.
A prospective applicant and its advisors are invited to contact us by phone (734.668.4100 or 734.417.2445) or via email ([email protected]) with any questions.
Bond financing assistance from the EDC/A2 requires payment of the following fees:
1. EDC/A2 Filing Fee: $650 due at initial application.
2. EDC/A2 Project Completion Fee: One-quarter percent of the principal amount of the bond or $5,000, whichever is higher, due at closing.
3. EDC/A2 Counsel Fee: Actual time and costs for services performed related to the project after the date of adoption of the initial EDC/A2 inducement resolution.
4. EDC/A2 Bond Counsel Fee: Amount, timing, method of payment to be identified and agreed between applicant and bond counsel at the time of initial retention.
Summary of the Bond Issuing Process
A. The Board Inducement Resolution
The first step is adoption by the EDC/A2 Board of the inducement resolution. This resolution essentially approves the concept of the project, names bond counsel, establishes the project area (i.e., the site of the project) and recommends a project district area (i.e., that area which is expected to be substantially affected by the project which in practice is typically the same as the project area). The applicant may nominate proposed bond counsel for the Board's consideration.
Before acting upon the resolution, the Board requires the following:
1. Information from and about the applicant including:
a. A completed application.
b. A brief written description of the project (an elaboration on what is included in the Application).
c. A description of the background and qualifications of the law firm proposed as bond counsel.
d. Recent financial statements for the applicant, a statement of net worth, evidence that the bonds have been presold or other evidence of the financial feasibility of the project.
e. Such other information as may be reasonably requested by the Board.
2. Copy of the draft resolution from bond counsel or EDC/A2 legal counsel.
3. A legal description of the project area and project district area.
4. The $650 filing fee.
The applicant should have a representative present at the meeting of the Board at which the resolution is to be considered.
B. The Council Resolution Appointing Additional Directors
After Board adoption of its inducement resolution, City Council has its first opportunity to consider the project. The resolution considered by Council confirms the project area designation, establishes a project district area and appoints two temporary directors to the Board to serve only for consideration of the particular project. The applicant should have a representative at the Council meeting to answer any questions about the applicant and/or the project.
C. The Board Resolution Recommending Project Plan
After City Council has appointed the temporary directors, the applicant must prepare a project plan. This is the document describing many aspects of the project in detail. It should be prepared by the applicant with the assistance of its legal counsel and reviewed by bond counsel. It will be considered by the Board which then adopts its resolution recommending the project plan to Council. The applicant should have a representative at this meeting of the Board.
D. The Council Scheduling Resolution
City Council now adopts its resolution setting a date for a public hearing on the project plan. This will be scheduled so as to permit adequate time to post, mail and publish the notice of the hearing at least fourteen days in advance. Typically this will be the only meeting at which the applicant will not need to have a representative in attendance.
E. The Notice of Hearing
The notice of the hearing must be published in the Washtenaw County Legal News and mailed to all property owners in the project district area and posted in ten places in the project district area.
F. The Public Hearing
The public hearing on the project plan and adoption of the City Council resolution approving are typically scheduled for the same meeting. The applicant must have a representative at this meeting.
G. The EDC/A2 Bond-Authorizing Resolution
The EDC/A2 meets to approve the issuance of its bond. This resolution approves the final financing arrangements before the sale of the bonds is consummated. The applicant and bond counsel should be present at the meeting to explain these arrangements. Upon adoption, the applicant and its bond purchaser may proceed to close.