City Finance Director Dick Barker is proposing a finance plan for the Community Maritime Park that will cost $92.6 million and have level annual payments of $3.3 million (finance-agenda-4-6-09_164134-2).
The bond market is tight and municipals are paying a premium –more than we think the CRA/City should pay.
We are proposing that the City/CRA take advantage of the Gulf Breeze Loan Pool Bonds that have a low interest rate, but sunset in 2017. $26 million are available. The rates have varied from a high 4.63% in Oct. 2000 to 0.9089% in March 2009. Our schedule uses a 30-year amortization and a conservative 2% rate. Annual payments are $1,160,898.
We are proposing the balance be borrowed from the City Pension Plans at the market rate of 5.25 percent – using 30-year amortization. The City/CRA can do them as insured bonds and pay $1.5 million issuance cost or the CRA/City may be able to save some money here. Annual payments $1,179,410.95.
Anytime between 2009 and 2017, the City/CRA can go into the bond market and refinance the outstanding principal.
In 2017, the City/CRA will have to get bond financing for the GB Loans. We project that the City/CRA will enter the conventional bond market. However, the City Pensions could buy the bonds.
We peg the bonds for 22 years at 5.25%, the rate used by Barker in his protections. Those Annual payments which start 2018 are $2,889,002.
The total cost of this finance plan is $82,280,510.16 – a savings of over $10 million. The annual payments are also less.
Our financing plan schedule uses the conservative TIF Revenues projected by Dick Barker. It also uses an increasing CRA operating budget that he projects. There are only two years where the CRA budget will have to be cut—2010 ($40,854) and 2011 ($88,252).
We also hold ECUA to the interlocal agreement and only make payments for the demolition of the Main St. Plant when CRA funds are available. The debt will still be paid off by 2027.
Pros:
The TIF revenue are very conservative – flat for two years, then 5% increase. Both land that the Main St. plant occupies and the Studer office building will be on the tax rolls within five to six years.
CRA operating expenses could be cut further if TIF revenues fall below Barker estimates.
Both total cost of borrowing and annual payments are less.
We can build the park at time construction costs are down.
Cons:
Can’t determine what the conventional bond market will be like in 2017. However the pension funds could buy the bonds if the bond market is still tight.