|
A potential financing plan for the Large-Scale Development example is included in the
<br />chart below. Given the assumptions made in the example, the Downtown District has the
<br />resources to pay for the costs of this development through the use of urban renewal funds
<br />and BEDI grant funds only, without any additional support or contribution from the City.
<br />
<br />Hypothetical Large-Scale Development
<br />Development Financing Plan
<br /> FY08 FY10 Total
<br />SOURCES OF FUNDS
<br />HUD Section 108 Loan* $7,895,000 $0 $7,895,000
<br />BEDI Grant* 2,000,000 0 2,000,000
<br />Urban Renewal Revenue 0 5,500,000 5,500,000
<br />Bonds
<br />Urban Renewal Cash 330,000 6,725,000 7,055,000
<br />Other Funds 0 0 0
<br /> Total Sources $10,225,000 $12,225,000 $22,450,000
<br />
<br />USES OF FUNDS
<br />Land Assembly $10,000,000 $0 $10,000,000
<br />Public Parking (turnkey 0 12,000,000 12,000,000
<br />purchase)
<br />Borrowing Costs 225,000 225,000 450,000
<br /> Total Uses $10,225,000 $12,225,000 $22,450,000
<br />
<br />*HUD Section 108 loan would be repaid from urban renewal resources. The BEDI Grant must be used in
<br />connection with a HUD Section 108 loan.
<br />
<br />The Large-Scale Development financing plan relies on two different borrowings, a HUD
<br />Section 108 loan and an urban renewal revenue bond financing. In this hypothetical
<br />scenario, the borrowings are paid entirely from existing urban renewal revenues, and do
<br />not rely at all on the incremental property taxes generated from the Large-Scale Develop-
<br />ment. In this way, the risk to the City/URA and the lenders is mitigated because the
<br />revenues are already existing and known amounts.
<br />
<br />In the worst possible case where this development did not perform as expected over the
<br />financing period, the City and the lenders would not be relying on revenue from the
<br />Large-Scale Development project. Risk is also mitigated by using a 1.5 times debt cover-
<br />age ratio and a debt service reserve fund, as explained in Attachment A. The financings,
<br />however, are not risk free, even with these protections in place. Tax increment revenue is
<br />less predictable than the City’s property tax revenues, and therefore, urban renewal bor-
<br />rowings are considered more risky than general City borrowings. The protections built
<br />into the Large-Scale Development example provide a cushion in the event that one of the
<br />major taxpayers in the district relocates outside of the district, other property values signi-
<br />ficantly decrease, or in the case of a recession and the subsequent failure of businesses in
<br />the district.
<br />
<br />
<br />
|