By Mary Wilson
The Grandview Board of Aldermen unanimously approved the second amended Tax Increment Financing (TIF) plan for Truman’s Marketplace on Tuesday, March 24. Because the City of Grandview is backing bonds with its general fund appropriation authority, the liability to the city has decreased significantly.
According to Assistant City Administrator Kirk Decker,
Grandview’s credit enhancement helps reduce the interest rate of the bonds, as
bondholders have security that the city would supplement any debt service
shortfall with an appropriation from its general fund.
“Both of these numbers are the worst case scenario; that is,
the entire project failed and no businesses produced any PILOTS (property tax
increments) or EATS (sales tax increments),” said Decker.
In the original agreement, Grandview’s maximum potential
debt service payment was $5.3 million.
In the second amended agreement, the City’s maximum liability is $425,000. This liability is also lessened because the
city’s general fund appropriation obligation is secured by a Community
Improvement District (CID) assessment on the property within the district
($1.00 per square foot), rather than PILOTS or EATS associated with new
businesses.
“Overall, it was a 92% decrease in liability and the bonds
are backed by the most reliable revenue stream,” said Decker. “So, even though
the project took longer than anticipated, the passage of time has been to the
City’s, and subsequently its taxpayers’, advantage.”
The city will also receive a $125,000 payment semi-annually
through the TIF due to additional costs, which was designed to off-set the
costs that have been incurring due to the lack of development in the shopping
center. These funds will continue to accrue on a sliding scale until stores
open that produce $12.5 million annually in sales.
“At that point, that payment goes away,” said Joe Lauber,
special counsel to the City of Grandview. “The developer worked really well with
us in order to get that taken care of, and we’re appreciative of that.”
It was recommended to the board that they allow the
developer to complete the purchase of the Truman Corners property after the
approval of the amended bond documents, but within three days of the
preliminary offering statements are mailed for the purposes of marketing the
bonds.
“When they will actually purchase the shopping center will
occur in a window,” said Lauber. “We think that this provision ends up being a
good compromise and allows the developer and its bank the maximum flexibility
that they can have high confidence that the public side of financing is going
forward, but it also allows for the reality that the bond market may not look
favorably at that timing.”
According to Lauber, the closing on the property has been
the hardest piece of the Truman’s Marketplace puzzle to put together. Once the
developer has purchased the property, a ground-breaking ceremony will take
place and construction will begin.
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