Item 4 - Ordinance on Downtown Urban Renewal Plan Amendments

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There is a factor in the concept for the cost of utilities and off-site improvements, such as sidewalks. The developer proposed that the City/URA pay these costs. As the scope of these items is refined, there could be additional costs to the City/URA. Any costs for transitioning or relocating existing businesses have not been factored into the estimates. There is always a risk of future legislative changes with urban renewal programs. As the West Broadway redevelopment project scope is refined and cost estimates are solidified, the minimal amount of maximum indebtedness increase of $40 million may constrain the Agency’s ability to take on additional project costs or to conduct the property transactions in the most effective manner for the developers and the Agency. The $40 million increase in maximum indebtedness also does not include sufficient authority for the Agency to spend new property taxes generated by the West Broadway redevelopment pro- jects on any future redevelopment efforts. This means that the council will need to amend the urban renewal plan to revise the maximum indebtedness limit in the future if another develop- ment project is to be undertaken with tax increment financing. District Termination Date The Downtown District is scheduled to terminate on June 30, 2024. If the district entered into a new debt obligation (after substantially amending the plan) in FY08, the district would have 16 years to repay the debt obligation. In order to increase the borrowing capacity of the district to take on the West Broadway redevelopment project, staff recommends that the termination date be extended to June 30, 2030. This would allow the Agency to maximize a debt issuance with a 20 year final maturity. Holding all else constant, a shorter district termination date would mean a smaller debt capacity for the Agency. Preliminary calculations indicate that the debt capacity reduction could be in the 15% to 20% range. The amount of lower debt capacity could range from $2 to $3.5 million, depending on the future revenues of the Agency, interest rates, and lender requirements around debt protection measures. If the City/URA wanted to issue the same amount of debt, but with a shorter repayment schedule, the annual payments would be higher than in the longer repayment scenario. The revenue cushion (amount of revenue above the annual debt payments) would, therefore, be smaller. As a result, banks would be likely to ask for additional security from the City/URA for the borrowing. The City/URA could respond by (i) requesting use of other City resources outside of the urban renewal district; or (ii) pledging additional security for the borrowing, such as a guarantee from the City’s general fund. The additional security would probably be a pledge of the City’s general fund resources. The City did this with the library financing. The City issued debt that was to be repaid by the Urban Renewal Agency. In the event that the Agency did not have sufficient revenues to pay the debt, the City’s general fund would make up the difference. There is, however, a practical limit to the amount of debt that the Agency can take on based on the level of projected revenues, even if the City guarantees the debt.