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Acquisition Districts, Developer Keeps 100% Control Over Project, While Still Using Bond Financing

 

The Acquisition District

The Developer Borrows the Money From The Bank, Builds the Public Improvements And Is Paid Back Upon Public Dedication, This is another form of Developer Financing through the issuance of Tax Exempt Municipal Bonds.

The formation process of an Assessment District can be accomplished through two different procedures. The first and most popular method of forming an Assessment District is to publicly bid the project. Upon acceptance and verification of the bids the developer progresses through normal procedural channels for the formation of the district and at conclusion the bonds are sold prior to construction. The second method, which is gaining in popularity because of the benefits it provides to the developer is the utilization of the Acquisition type assessment district.

The major difference between the acquisition type of assessment district and public works district is that the developer has much more control over major areas related to the construction of the improvements. This is because the developer builds them, rather than going through the public works department for construction. The same engineering, designing, and approval is required, however tax exempt bonds are sold once the project has been built and accepted by the political entity reimbursing the developer for all out of pocket expenses directly related to the construction of the public improvements.

Some entities will also reimburse the builder for a portion of their cost to carry during the build out of the improvements. The developer has much more control over the project since he is building the improvements and they are not being constructed by the city public works department. By control we are talking directly about the costs of implementation, and as importantly, the timing of the project. By utilizing this acquisition type of formation process the issue of timing i. now in the control of the developer subject to the receiving of all proper approvals from the engineering department.

Once the improvements are constructed and accepted by the city the bonds are sold. The formation process for the acquisition type assessment district echoes the formation process of a public works assessment district except for the utilization of the acquisition agreement. This agreement is a binding contract between the city and the developer in which all the procedures and preliminary costs of the improvement are identified; also stated are the rights and obligations of the contractual parties.

Once the document has been approved by a vote of a council or a board the developer can begin construction. Upon completion of construction and approval of the public improvements by the public works department, the normal resolutions occur. The final step is the marketing of the tax exempt bonds of the Acquisition District reimbursing the developer for his out of pocket expense of the developer financing portion of the project.

 

   
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