The bond financing plan recommended by staff and approved by the council uses New Market Tax Credits which will allow UWF to get $12,256,785 for the maritime museum (if the NMTC portion is approved in November). The bonds includes the interest payments for the first 3 years (called capitalized interest). This will allow the City to accumulate funds to help make the bond payments while the CRA builds its revenues as the Studer office building ($12M), the CMP private sector and the redevelopment of the ECUA Main Street property kick in.
Here is the table for the period 2010-2020 presented to the City Council Finance Committee on Oct. 5, 2009:
FISCAL……TIF…….Maritime Park..CRA Operating….WWATER…….NET……..CUMULATIVE
YEAR …REVENUES…Net Debt…..& Existing.Debt……PLANT……..AVAILABLE….AVAILABLE
2010…$ 4,392,949……..$0………..$2,120,914……….$0………..$2,272,035….2,272,034
2011…. 4,392,949……..$0…………2,168,312……….$0………….2,224,637…..4,496,671
2012…. 4,612,597……..$0…………2,218,426……….$0………….2,394,171…..6,890,842
2013…. 4,873,457…2,571,884…….1,842,069…..1,300,000…….(840,495)……6,050,347
2014…. 5,117,130…2,575,484…….1,898,317…..1,300,000…….(656,671)……5,393,676
2015…. 5,372,987…2,573,084…….1,958,030…..1,300,000…….(458,127)……4,935,549
2016 ….5,641,636…2,574,884…….2,021,505…..1,300,000…….(254,753)……4,680,795
2017…. 5,923,718…3,000,684…….2,089,070…..1,300,000…….(466,036)……4,214,759
2018…. 6,219,904…2,998,484…….2,140,553…..1,300,000…….(219,133)……3,995,626
2019…. 6,530,899…3,001,135…….2,193,796…..1,300,000……….35,968…….4,031,594
2020…. 6,857,444…3,002,045…….2,248,873…..1,300,000………306,526……4,338,120
As you can see, the CRA makes no payment from CRA funds on the Maritime Park bonds or to ECUA for the demolition of the Main St. plant until 2013. Meanwhile, Mr. Barker has predicted no increase in CRA fund for two years and only a 5% per year after that. The CRA can cover its budget and build up funds to help pay the bonds and ECUA for the period 2013-2018 and still have an additional $4,031,594 in reserve (labeled “Cumulative Available”).
So what is the issue for Marty Donovan? There is a clause in the bond financing that says the bonds will have a back up pledge of a covenant to budget and appropriate non-ad valorem general fund revenues—meaning if the downtown Pensacola collapses and doesn’t grow at a minimum of 3.33% per year from 2012-2020, the city will have to use revenues from the Energy Services or from other non-property tax sources to help pay the bonds. No such funding is anticipated but there is a pledge. The City Council could also vote to cut back CRA operations and put that $1.4 million annually towards the bonds.
So the bond financing is different than a CRA-only obligation, but we are getting an additional $15 million for the maritime museum by funding the bonds this way.
This amortization schedule is based on a bond issuance of $45,675,000 — by the time the petition drive is over and if a referendum is needed, the actual bond issuance could be more or less. There is no way to predict it and is why the council resolution says not to exceed $48 million.
Here is the actual resolution passed by the City Council:
REDEVELOPMENT REVENUE BONDS, SERIES 2009 – BOND
RESOLUTION
Recommendation:
That City Council approve a resolution authorizing the issuance of Redevelopment Revenue Bonds, Series 2009 and approve all actions necessary to complete the sale. Further, that Bonds be issued in an amount not to exceed $48 million.
The motion passed 9-1. Council Member Wu dissenting.
Here is the report from Al Coby to the Council:
TO: Mayor and City Council
FROM: Alvin G. Coby, City Manager
DATE: October 5, 2009
SUBJECT: Resolution No. 33-09 – Redevelopment Revenue Bonds, Series
2009
RECOMMENDATION:
That City Council approve Resolution No. 33-09
SUMMARY:
The Resolution and Preliminary Official Statement have been drafted to provide flexibility in utilizing BABs and/or NMTCs along with tax-exempt governmental bonds. The final structure of the Redevelopment Bonds will be determined at pricing when the market is assessed. The Bonds have a pledge of tax increment financing (TIF) revenues of the Community Redevelopment Agency (CRA) with a back up pledge of a covenant to budget and appropriate non-ad valorem general fund revenues of the City. It is anticipated the Bonds will have a component of capitalized interest allowing the interest component of debt service to be paid from bond proceeds during the construction period. Principal payments will commence in April 2013 with a final maturity of April 2040. The exact annual debt service amount and interest rate will be unknown until pricing/closing. Assuming a 30 year hybrid issue of tax exempt governmental bonds and BABs with a 10 year call feature and coupons ranging from 4 %-7 %, the net annual debt service payments will be approximately $3.0 million after rebate from the federal government. The final pricing structure, and the decision to use BABs, will be based on market conditions at the time of sale. Should the City financing team decide to use BABS, the bond documents provide for an extraordinary call feature in the remote possibility that the federal government’s policy will change regarding the rebate.
The current timetable is to price the bonds the week of October 12, 2009 with closing scheduled for October 29, 2009. It is the opinion of the City’s Financial Advisor, Mitch
Owens of RBC Capital Markets, that the market is favorable and it is a good time to sell bonds.
,
Because of the pending status of NMTC, the City will issue bonds and hold the proceeds for a period not to exceed six (6) months awaiting a determination on the amount of available supplement proceeds from NMTCs. Cost of Issuance associated with the bonds will be disbursed; however, the $40 million construction fund and capitalized interest monies will be set aside pending a decision to move forward with NMTCs. The City/CRA will continue to cash flow the Maritime Park expenditures until such time that it can be reimbursed, not to exceed six months from the date of closing the bonds.
Wells Fargo Securities (formally Wachovia Bank) is the lead underwriter working in
conjunction with Loop Capital Markets, LLC and First Southwest Company to sell the bonds.
PRIOR ACTION: 1) Resolution of Intent to Finance – October 12, 2006
2) Financing Team Information Item – May 29, 2009
3) City Council consent to delay the issuance of bonds – August 27, 2009
FUNDING: Budget: $ 40 million Maritime Park construction funds
Actual: $ 40 million Maritime Park construction funds
FINANCIAL IMPACT:
The City will issue a par amount not to exceed $48 million which will provide a $40 million construction fund. Approximately $2.1 million of the $40 million will reimburse the CRA for expenditures already spent on the project. The remainder will be used for the construction of public improvements. The bonds are secured by a pledge of tax increment financing revenues with a back up pledge of a covenant to budget and appropriate non-ad valorem general fund revenues. Annual debt service (net) payments are estimated at $3.0 million over thirty (30) years.
The senior pledge of TIF revenues to the Redevelopment Bonds for the Maritime Park and the annual commitment to Emerald Coast Utilities Authority (ECUA) starting in 2013 for the movement of the wastewater treatment facility will consume CRA’s TIF revenues for approximately twelve (12) years based on current projections. During this time period there will be no funds for projects from TIF revenues in the CRA area.
ATTACHMENTS: Resolution No. 33-09
STAFF CONTACT: Richard Barker, Jr., Director of Finance; Thaddeus Cohen,
Community Development Director