2016-05-09-minutes-public-works-study-session

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Financing L1 Mtroduction Over the past several years there has been a significant decline ;n the number of LID projects financed in the state of Washington. At the same time, underwriters have shifted toward the institutional investor as apposed to the individual investor. As a result of this comb,nation of events, there is a reduced market for LID bonds at a time when, due to shrinking resources, L1Ds make sense as a method of imprcving infrastructure for those that will directly benefit from it. Picking a financing team with experience is more important now than ever before. The entire LID process is about financing infrastructure improvements, not constructing them. The construction is only possible if financing can be obtained. Consequently, a determination if an LID project can be financed should be made prior to formation of the LID. As a result of this determination, additional costs necessaryto attract investor or lender interest inthe financing can be included in the preliminary assessment roll, avoiding a surprise for the property owner at a later date. LID processes lead, ultimately, to loans or the safe of bonds to investors and the retirement of that financing via annual payments by the property owners within a district. Goals of the LID process are twofold: to present a financing to investors or lenders that will enticethem to invest at as low a rate of return as possible; and to assess property owners as fairly as possible in relation to the special benefit received. Financing LIDS Stratugic Planning Is Key to Successful UD Project Financing Projects that provide benefit to property owners that are well received by the owners, that are well secured for the investor, and that meet all statutory requirements and protect the funds of the municipality, are usually well received by the financial institutions and the bond marketwhen f nancing is required. Projects that provide marginal benefit to the property owner, that are not well secured for the investor, that put the municipality's funds at risk and that present legal challenges, may find it difficult if not impossible to get financing. Consequently, it is important to strategically plan the LID financing prior to the formation hearing to determine the viability of the financing that will be obtained when the project is completed. Planning ahead will allow the municipality to change the nature of the project or the repayment sources if necessary, to assure successful financing. LID financing typically involves two different lenders. One provides the construction financing after the district is formed. The other provides permanent financing after the project is completed and the assessment roll is finalized. The lender for the construction or "interim" funding is usually a bank. The iender for the permanent financing is usually investors to which an underwriter sells the LID bonds. The bonds can also be purchased by a bank for its own loan 42 focal and Road Improvement districts Manual for Washington Stats Sixth EdRion