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5 <br />FINANCING EPHESUS FORDHAM PUBLIC IMPROVEMENTS February 2014 <br />time to issue. The Ephesus Fordham project does not have an asset that can be used as collateral <br />for an installment financing and therefore we have planned to combine the financing with the <br />Town Hall Renovation Project. By combining the projects in one financing the Town Hall <br />property can be used as collateral for both projects. This practice of sharing collateral among <br />projects is a common way of reducing the cost of borrowing for municipalities by providing the <br />best possible security for installment debt. <br />Backstop: There will be a time gap between <br />when we issue the debt and when the <br />redevelopment will begin to generate a tax <br />increment sufficient to pay debt service. To the <br />extent possible, we will structure the debt for <br />the Ephesus Fordham Public Improvements to <br />defer debt payments to match the anticipated <br />timing of incremental tax revenues. However, it <br />may be impossible to avoid a gap between the <br />tax increment and the debt service payments in <br />the early years of the project. The Debt <br />Management Fund has sufficient balance to cover the mismatch in the timing of available tax <br />increment and we plan on using the Debt Management Fund to backstop debt service on the <br />Ephesus Fordham Public Improvements portion of the debt. Any amounts used would be <br />restored to the Debt Fund once the tax increment surpasses what is needed for debt service. <br />One of the possible consequences of using the debt fund for this purpose is the delay of planned <br />capital expenditures such as the Public Safety Facility and the Transfer Station. <br />Stormwater Management Costs <br />In addition to the $1.2 million of initial investment in stormwater facilities to serve the Ephesus <br />Fordham Area, the Town is planning to establish a Municipal Service District to finance additional <br />improvements and ongoing stormwater management costs. The planned Municipal Service <br />District will impose an annual property tax of 4 cents. <br />TOWN OF CHAPEL HILL I BUSINESS MANAGEMENT DEPARTMENT 3 <br />x <br />