|
Item 1.M.
|
| City Council Regular | |
| Date: | 10/10/2022 |
| Title: | Resolution Authorizing the Issuance and Setting the Parameters for Tax Increment Bonds |
| Presented by: | Andy Zoeller, Finance Director |
| Department: | Finance |
| Presentation: | No |
| Legal Review | No |
RECOMMENDATION
Staff recommends approval of the parameters resolution, authorizing staff to issue tax increment revenue bonds from the South TIF district.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
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.
Additionally, if the district life is not extended, future financing from the district will be limited to a term that ends in 2041, reducing future borrowing capacity.
On 11/01/2021 City Council received a presentation with the following information.
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 by December, 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 $20-25 million. If, by extending the life of the District, the City issues 23-year term bonds, the estimated amount available would increase to $30-35 million.
On 11/22/2021 City Council approved a resolution allowing for the unimproved streets project to be reimbursed through a future bond issuance.
This resolution will authorize staff to issue bonds within the parameters outlined, reimburse for street construction projects, and extend the life of the South TIF district. The annual debt payments for these improvements will be paid from the tax increment funds from the District.
A parameters resolution has been submitted for approval to set the limits for the principal amounts, the interest rates and the maturity of the bonds.
Additionally, if the district life is not extended, future financing from the district will be limited to a term that ends in 2041, reducing future borrowing capacity.
On 11/01/2021 City Council received a presentation with the following information.
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 by December, 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 $20-25 million. If, by extending the life of the District, the City issues 23-year term bonds, the estimated amount available would increase to $30-35 million.
On 11/22/2021 City Council approved a resolution allowing for the unimproved streets project to be reimbursed through a future bond issuance.
This resolution will authorize staff to issue bonds within the parameters outlined, reimburse for street construction projects, and extend the life of the South TIF district. The annual debt payments for these improvements will be paid from the tax increment funds from the District.
A parameters resolution has been submitted for approval to set the limits for the principal amounts, the interest rates and the maturity of the bonds.
ALTERNATIVES
City Council may:
- Approve; or,
- Not Approve the resolution. Not approving the resolution would mean that construction costs are paid for using existing cash on hand within the TIF district, and the life of the district would not be extended.
FISCAL EFFECTS
The interest rate will be determined at the time of the pricing of the bonds, which will drive the total cost of borrowing. The parameters authorized by this resolution limit the aggregate principal to $3,000,000 with max interest rate of xx%.