The past year was a landmark for both CFFA and the Columbus Region. The $587 million in bond and other financing we provided was double our total from previous year. And 2021 closed with the big Columbus Region news about Intel’s transformational commitment to invest $20 billion in semiconductor manufacturing here.
In our annual interview with Finance Authority President Jean Carter Ryan, we discuss the Intel deal, CFFA’s priorities for the year, the benefits of long-term bond financing in a time of rising interest rates, and more. Development projects in Ohio, she says, are uniquely situated to receive public support through innovative port authority financing. The challenge is making sure clients understand how CFFA can help make it happen.
The Columbus Region will benefit from two exciting new economic developments, Hyperion and the historic Intel project. What do projects of this size and notoriety mean to the Finance Authority? What roles might you play in these types of projects?
Jean Carter Ryan: The Intel investment is indeed historic. The manufacturing growth implications of both Hyperion and Intel are significant. There will be many opportunities to assist with financing.
The Intel project is in Licking County, which is served by the Heath-Newark-Licking County Port Authority (HNLCPA). We are tangential to them. We haven’t done a project there, but we work closely with HNLCPA President & CEO Rick Platt. His organization is sophisticated and does a fabulous job. To the extent they are unable to meet a project need, they have the ability to invite us into the community to work with them and their client. We’ve had a number of conversations — we’re colleagues and friends. I’m confident Rick knows who we are and what we can offer.
One way we could help is providing infrastructure financing through our Central Ohio Bond Fund. There are plenty of times we’ve seen a large infrastructure project need more than one port authority’s involvement. For example, our Board just approved $7.4 million in bond financing for a big redevelopment happening downtown at the PNC Plaza. Further down the street is another redevelopment associated with that same big project. The infrastructure needs were so great that we asked both the Southwest Ohio Bond Fund and the Northwest Ohio Bond Fund to come in to help us pay for public infrastructure improvements, which they agreed to. We did a similar structure up in Summit County, and a couple in Cincinnati. That’s just something that our port authorities do as we each get limited by individual capacity — we help each other fund important projects around the state.
We can play a role as Intel’s suppliers grow — there’s going to be growth in Franklin County as well Licking County and other surrounding areas. If Intel suppliers need assistance with energy-efficient construction or improvements, we can provide an energy-efficiency loan through the Property Assessed Clean Energy (PACE) program. Or we can finance fixed asset investment through our Neighborhood Improvement & Small Business Loan program or tax-exempt manufacturing bonds.
In terms of collaboration, there are more than 50 port authorities in Ohio. Of those, six ports have formed five bond funds and are not limited to conduit financing. I can’t attest to what happens other places in the country, but I do know that our state’s port authorities are very collegial. Many of us have become friends because of our strong work relationships.
Will you proactively reach out to developers once you get a sense for who’s coming and when things are going to be built, or will you wait for them to find CFFA?
It’s not particularly important who initiates the communication but rather when that communication occurs. We’d love for existing and new developers in the market to fully understand the range of our resources. Our hope is that we can interact early in the development process so that we may be considered in the capital stack where we may have significant bottom-line impact.
In light of these massive developments, are you thinking differently about CFFA’s program offerings? Are these projects so significant that you might need to add services or people to the organization?
There’s no question that Intel is a huge launching point for the region. Yet we were already one of the fastest-growing regions in the country, and the fastest-growing in the Midwest. What our staff and the Board think about, constantly, is how do we increase our impact? When we look at our wheelhouse of financing programs, are there things that we need to be doing differently? Are there tools we need to add to our portfolio to help our community remain a great place to live and work? We are always thinking creatively about how we can help our economic climate remain as robust as it is, so it continues to accelerate.
Those exciting opportunities aside, what are the Finance Authority’s priorities for 2022?
We remain very much in lockstep with our community’s priorities, which are pretty consistent with last year. We are still working to play our role in the affordable housing crisis in Columbus Region. Affordable housing projects are being undertaken but we’ve got a long way to go to meet demand. It remains a priority to do all we can to help. We’re starting to work with some nationally renowned developers in this space.
In support of equity and prosperity for all, we created our new Neighborhood Improvement & Small Business Loan Program to bring development financing to neighborhoods in decline and small and minority-owned businesses. It’s still in its nascent stages. We are looking for small businesses or nonprofits with fixed-asset financing needs.
And, of course, our core competency is issuing bonds. I’m very proud of the work that we’ve done in that space, and we’re going to continue to do it and do it as professionally and as efficiently as we have in the past. It’s had a huge impact. We issued a record number of bonds in 2021. We expect demand to continue to grow.
One CFFA goal is to grow the Central Ohio Bond Fund reserve. Why is that important?
Over the past few years, as the Columbus Region continued to grow, infrastructure needs also grew exponentially. And there’s just not enough funding available from traditional local government sources to pay for infrastructure associated with the large development projects taking place. Our Central Ohio Regional Bond Fund is currently rated A- by S&P. Among the factors used by S&P to determine our rating is the risk associated with our portfolio of projects. One way we manage risk is by retaining a dedicated reserve for each project so that in the event of default, we are able to pay bondholders. That reserve is a certain ratio of dollars to outstanding bonds. As you might imagine, the more projects we finance, the larger the required reserve. If the reserve fails to grow, we basically will reach a limit to our bonding capacity. We must regularly invest into those reserves to ensure that we have funding available for these critical infrastructure or community needs.
CFFA did a massive amount of business in the second half of last year. Did you encounter bonding capacity limitations? Did you have to cut things off because the reserve wasn’t sizable enough?
A couple things happened last year with the reserves. Number one, we went back to our letter of credit provider, Huntington Bank, and we increased our letter of credit by $5 million. Additionally, JobsOhio, to their credit, recognized the outstanding work of Ohio’s five bond fund programs and committed an additional $10 million to each of us for our reserves, if required. It’s a major commitment that has allowed us to continue to invest in our community.
Interest rates are expected to rise to counter inflation. Do you expect that to slow development activity? How does that impact what CFFA offers clients?
I don’t see rising interest rates impacting development activity in the short term, and it doesn’t impact our ability to serve the Columbus Region. In fact, what we offer is long-term, fixed-rate financing. If people are worried that rates are going to continue to climb, they can come to us, fix a rate, and have it there for a significant period of time. We help mitigate that risk of rising interest rates. Depending on how we finance the project, whether it be tax-exempt or taxable, our rates are very attractive and they’re always going to be attractive compared to the market because of the nature of the Bond Fund. Our rates will go up as the market does, but they’re still going to be attractive rates.
In terms of the need for affordable housing, does ESG (Environmental, Social, Governance) scoring factor into your evaluation of projects to finance?
Increasing our impact has always been about ESG. We talk about it in-house all the time and when we meet with our Board of Directors. While we don’t have formal ESG goals, ESG is a part of the very mission and air that we breathe at the Finance Authority. An investment in our bond reserve is an easy way to make an ESG investment. The benefits are the jobs and capital investments, such as affordable housing, associated with whatever projects we support. When we support very large projects, they have a very big impact on Central Ohio. It covers all our priorities: Providing jobs for people, facilitating capital investments for both for-profits and nonprofits, and for looking for ways to help pay for public infrastructure when local communities have other demands for their funds.
The Finance Authority is known for its robust partnerships with developers, clients, and communities. How do you grow those relationships with such a small team?
Part of the reason our reputation is so strong is because we have strong partners that help us. First, we have a great Board of Directors. Next, our financial advisors, DiPerna Advisors — and outside counsel, Greg Daniels of Squire Patton Boggs — are phenomenal. We also work with Bricker&Eckler and Roetzel & Andress, and all of them do really great work. They represent us well to our clients, so people feel confident about working with us.