Item A: Downtown Development Financial Tools

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Urban Renewal Agency may also decide to send the plan amendments and report to the Planning Commission, but this is not required City sends out special City-wide notice Urban Renewal Agency meets to receive the revised plan and report on the plan City Council holds a public hearing on the plan amendment ordinance City Council meets to approve ordinance amending the plan Current Debt Obligations of the Downtown District The Urban Renewal Agency does not currently have any bonded debt outstanding. The Downtown District has an obligation through an Intergovernmental Agreement to pay the City an amount equal to the principal and interest payments on the debt issued to fund the new library construction pro- ject. On June 1, 1998, the City Council amended the Downtown District urban renewal plan to state that * a new library was to be the only new project in the district. The Urban Renewal Agency and the City entered into an Intergovernmental Agreement that committed the Agency to make the debt service payments on $18.5 million of City debt obligations for the library and to provide additional cash contributions to the project, if excess urban renewal revenues are available in future years. The resolution authorizing the City Manager to sign the Intergovernmental Agreement was approved by the Council and the Agency on February 28, 2000, along with the resolution author- izing issuance of the debt obligations. On April 27, 2000, the City issued $18.5 million of debt that was to be repaid from Agency resources. The debt was to be repaid in annual amounts of about $2.5 million and the final maturity is on December 1, 2009. In the event that urban renewal revenues are insufficient to pay the bonds, the City has pledged to ã make the debt service payments out of the Citys General Fund. There are two ways in which the City designed the library financing to protect the General Fund from having to make payments on the bonds. First, the Agency carries a reserve (currently equal to one year of principal and interest payments) that may be used to make debt service payments in the event there is a shortfall in urban renewal revenues. Second, the financing plan was developed so that the urban renewal fund would ßà maintain a debt coverage factor in the expected level of revenue collections. Urban renewal revenues have exceeded the amount needed to pay principal and interest on the debt obligation in each year since the debt was issued, and it is anticipated that urban renewal revenues will continue to be sufficient to make the principal and interest payments, pay for administrative costs of the district, and fund additional projects in the downtown area. Future Debt Obligations of the Downtown District As explained above, the Downtown District currently has the ability under its ?maximum indebt- edness? figure to enter into a maximum of approximately $4.6 million of additional debt or spend- ing. In order to increase that amount, the City Council must substantially amend the Downtown District plan. Once the Downtown District plan is amended, it would be possible for the district to enter into obligations of greater than $4.6 million. Urban renewal borrowings are considered more risky than general City type of borrowings because the nature of tax increment revenues is less predictable than the City?s property tax revenues. Lenders typically require a ?debt coverage? ratio * As mentioned previously, the City Council subsequently amended the urban renewal plan in 2004 to allow for additional projects to be undertaken in the Downtown District.