A Billion-Dollar Financier

The National Development Council becomes a powerhouse for financing major projects under the radar.

By Michael Hood | April 2010 | FROM THE PRINT EDITION

Credit: Photograph by Hayley Young

John Finke, director at the
National Development Council, has been a behind-the-scenes presence in many
public development projects.

In terms of city skylines, ribbon cuttings and large public
works in Washington, John Finke (rhymes with pinkie) may be the most influential
man you’ve never heard of.

He and the National Development Council, the nonprofit he’s
worked for since 1983, have been at the forefront of local community
development for decades and wildly successful in structuring public-private
partnerships to finance big-ticket public projects.

“Wildly” may not be the word to describe anything about the
soft-spoken, wonkish eastern Washington native, but his steadfast approach to
securing tax-exempt bonds is a local bright spot in an economy where
traditional financing is costly and tough to get.

In 15 years, NDC and the creative skills of Finke’s team
have financed and built more than 20 projects with more than $1.8 billion in
direct development costs for their client governments, both inside and outside
Washington state.

Greg Johnson, president of real estate development company
Wright Runstad, has partnered with Finke many times. “Public-private
partnerships help now even more than in robust economies by bringing private
processes and private perspective to enhance public projects,” says Johnson.

Finke has made
the IRS Rule 63-20 an instrument of choice for issuing tax-exempt bonds for
nonprofits, though he’s also a virtuoso of conventional financial devices such
as Section 108 and Community Development Float lending; SBA guarantees; New
Markets and Historic Tax Credits; HOME funding and regular bank financing.

Created
originally in 1963 for projects like public hospitals, 63-20 was the original
process that enabled not-for-profits to gain access to tax-exempt bonds. But,
Finke says, “One of the awkward elements of that ruling is that when debt was
paid off, the ownership of the facility must revert unencumbered to a public
agency.”

When alternative means (conduit financing) came along, most
developers migrated away from 63-20s. But, Finke says, “About 15 years ago, we,
and others, realized they’ve [63-20s] got great potential for building public
buildings.”

The 63-20s are tax exempt and essentially have the same rate
as bonds issued by governmental agencies. “It is lower-cost debt, yet that debt
is running to a private not-for-profit,” says Finke, “and the building is owned
for the private not-for-profit as long as the debt’s on it. And because it’s
private debt and because it’s private ownership, it’s a private debt, it’s a
private project.”

That’s good because, he says, the private and public sectors
approach development very differently. Government development has no reward for
efficiency, since there often is