City Council will be asked to consider whether to issue bonds from the South Tax Increment Fund to extend the life of the district, which will allow for more financing opportunities for major projects in the future.

The Billings City Council created the South Billings Urban Renewal District on December 10, 2007. Montana Code Annotated 7-15-4292(4) states that bonds secured by a tax increment provision may not be issued after the 15th anniversary of tax increment provisions. This means that the City Council has until December 10, 2022 to issue tax increment bonds in the South TIF District in order to maximize the life of the District. Issuing bonds for an eligible project will extend the life of the district to approximately 2046. If nothing is done, the District will terminate when the final current bond payment is made in fiscal year 2041, 5 years short of the maximum possible under statute. 

Currently, the CIP contains plans for building a Recreation Center in the South Billings Urban Renewal District. Estimated costs from the 2019 Rec Center Feasibility Study range from $35.4M - $102M. One of the major anticipated funding sources for this project is Tax Increment Bonds. Currently, it is anticipated that bonds for the Rec Center will not be issued until 2024, after the December 10, 2022 deadline. If no bonds are issued within the next 12 months, when it comes time to issue bonds for the Rec Center Project, the City will only be able to issue bonds for approximately 17 years, as the final debt payment will have to be in FY2041, when our current debt expires. If the City issues a small bond now for an eligible project and extends the life of the district, the City will be able to issue approximately 23 year bonds for the Rec Center in 2024.

If 17 year term bonds are issued for the Rec Center, the estimated amount that could be available to the City would be $30 million. If, by extending the life of the District, the City issues 23-year term bonds, the estimated amount available would increase to $40 million.

In order to maximize the amount of available financing for the Rec Center, City Council will need to issue a small bond for an existing project to extend the life of the District.

If City Council desires to keep the most financing options available for the Rec Center and extend the life of the District, Council should direct staff to begin the process to issue a small bond for the FY2022 Unimproved Streets Project. A reimbursement resolution will be brought to City Council on Nov. 22, which will be the first of multiple Council actions to issue bonds.

If Council does not want to have the most financing options available for the Rec Center and extend the life of the District, cash will be used to pay for the FY2022 Unimproved Streets Project, as originally planned.

Issuing a small TIF bond for the Unimproved Streets project, instead of using cash on hand, will cause interest expense to be incurred that otherwise would not be. If an estimated $3M in bonds were issued, the City could incur interest expense in the amount of $1.8 million over the life of the bonds. All debt service payments would be made from the City's South Tax Increment Fund. It is important to also acknowledge that by not issuing a small TIF bond now for the streets with some interest cost and not extending the life of the District, the City could be missing out on approximately an additional $10 million in funding for the Rec Center that would have to be made up from another funding source.