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.