Fiscal Note
This resolution authorizes the acquisition of the first phase of the Block 89 parking structure by the developer (the "tenant" under the lease). The lease agreements between the City, the CDA and the developer required that the taxes generated by the incremental value of the Block 89 development be used to repay the $20.7 million in CDA bonds issued to finance the parking structure. These bonds were refinanced in 2008 to take advantage of lower interest rates. The provisions in those bond indentures allow the bonds to be called (repaid in full) on or after January 1, 2014.
Under the lease agreement, the incremental property tax revenues are due to be paid to the bond trustee through 2018, at which time the bonds are scheduled to be fully retired. The amount of tax increment to be paid to the bond trustee in 2013 is $569,042. The incremental taxes represent approximately one-third of the annual debt service on the bonds, with the developer required to make up the difference through lease and parking revenues from the Block 89 development.
Under the resolution, the City would pay the bond trustee the net present value of the estimated TID increment from 2014 through 2018. This amount is calculated to be $2,533,300 (assumes a discount rate of 4%). Based on current municipal bond market conditions, a traditional refinancing of the bonds would have generated an economic savings of $443,300. Given that the TID increment represents one-third of the current debt service, the calculated TID increment through 2018 was reduced by approximately one-third of the economic savings of a refinancing, or $146,300. As such, the amount to be paid to the bond trustee to reflect the value of the projected TID increment through 2018 is $2,387,000 ($2,533,300 minus $146,300).
Exercising the option to purchase the parking structure will result in the developer paying the City an amount based on a calculation methodology established in the option. Under the option,...
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