CR 91-116 TIF Loan - Mainstreet Project
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May 13, 1991
Council Report 91-116
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TIF LOAN - MAINSTREET PROJECT
ProDosed Action.
Staff recommends adoption of the following motion: Approval
for HRA to undertake the issuance and delivery of $411,000
taxable Tax Increment Revenue Bonds Special Series 1991.
Approval of this action will, allow the transaction to be
completed and facilitate the transfer of funds from Tax
Increment District 1.1 to Project Area 2. lI'his action only
provides for an internal bond issue/loan transaction to
accomodate the portion of the financing plan for the
Mainstreet project.
Overview.
As part of the Mainstreet Project, $1,000,0000 of tax
increment funds have been allocated to facilitate this
project. The City/HRA presently has funds available bnlyin
Tax ~ncrement District l.l to undertake this activity (the
Downtown pre-1979 Tax Increment District). The source of
these funds is as follows;
o 1990 Redevelopment Bond Issue
o Excess tax increment dollars
The Mainstreet improvements not located between 7th and 12th
Avenue are not within Tax Increment District 1.l. In order
to expend tax increments from TIF District l.l for
improvements outside of the District, legal counsel is
recommending that funds be borrowed from 'r'IF District 1.1
with the tax increment from the TIF districts outside of the
downtown being used for repayment of the loan from TIF
District 1.1.
Legal counsel has recommended that the transfer of funds be
structured as an internal bond issue. The note as proposed
would accomplish such a transfer.
Primary Issues to Consider.
o What is the purpose of this action?
o What are the specifics of this action?
o What is the impact of this action? '
o Has legal counsel reviewed this matter?
o H the City Attorney reviewed the proposed action?
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mic Development Director:'
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CR: 91-116
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Analysis of Issues.
Based on the actions recommended by Staff, the City/HRA has
the following items to consider:
o What is the purpose of this action
.
The purpose of this action is to provide a source of funds
to facilitate the Mainstreet improvements being financed
with tax increment dollars outside of the areas located
between 7th and 12th Avenue . This internal borrowing will
provide a source of funds without undertaking a . normal
public bond sale. '
o What are the speoifics of this action?
Of the $1,000,000 in ,TIF funds to be utilized for the
Mainstreet Reconstruction Project, $410,724.00 will be spent
outside of the area between 7th and 12 Avenue. 'This project
area, which has three tax increment districts, would borrow
this amount of money from the TIF District 1.1 located
between 7th and 12th Avenue. The note as proposed would
require that this money be repaid to Tax Increment District
1. 1 by the thr'ee existing tax increment districts located
outside of the downtown. The terms of the loan would be as
follows:
o Repayment period - lO years '
Total amount of loan - $411,000.00
Interest Rate - 7%
Of the tax increment districts outside of the downtown, the
only district which is presently generating any increment is
2.1, which is the, R. L. Johnson property. Therefore, on a
short term basis, TIF funds from this district would be used
to pay the note on an annual basis. Should redevelopment
occur in the other districts, any increment generated and
available could also be utilized to repay the debt.
o What is the impaot of this transaotion?
.
Basically, the only impact of this transaction is to
obligate some of the increment being generated from the TIF
districts outside of the downtown to the repayment of this
bond. At the present time, these districts generate
approximately $223,000.00. Based upon the structuring of
the note, approximately $180,000.00 would remain available
for other eligible uses within the defined project area.
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CR: 9l-116
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o Has leqalcounsel reviewed this matter?
The, preparation of the bond note and the structuring of this
transaction was done by Holmes and Graven. They feel the
transaction as proposed meets all statutory requirements.
o Has the City Attorney reviewed the proposed action?
Both the City Attorney and an attorney from Holmes & Graven
have been provided all of the documents as related to this
trans~ction. Based upon their review, they feel comfortable
with 'the City proceeding with this ,project.
Alternatives.
The City/HRA has the following alternatives regarding this
issue.
1.
Approve the action as recommended by Staff.
will allow the note to be completed and
subsequent transfer of funds.
This
the
2.
continue for further information. Al though this
is an alternative, Staff is recommending that the
Council undertake action on this matter at the May
21 meeting. Legal Council has stated that the
transaction is completed prior to June 1, it will
help to strengthen the argument that the recently
created tax increment districts outside of the CBD
are grand fathered under the pre-1990 statutory
requirements.
3. Deny the request. Under this alternative, if the
ci ty wished ^ to fund the Mainstreet Improvement
Project as previously approved, another 'source of
funds would need to be secured i.e., public bond
sple in order to provide dollars to undertake the
TIF finance portion of Mainstreet project outside
of the area between 7th and 12th Avenue.