Minutes 05-15-2014 - Laserfiche WebLink

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Debt Management Fund: The portion of debt used for Town Hall and CIP will be repaid through the Debt Management Fund. The Debt Fund was established in 2009 with a dedicated property tax to provide a source of funds to pay off Town debt obligations. "Synthetic Tax Increment Financing (TIF)": The portion of the debt used for the Ephesus Fordham public improvements will be repaid by the incremental increase in tax revenues resulting from redevelopment. In other words, the redevelopment we are hoping to generate through the Ephesus Fordham Renewal Project will increase property tax receipts from the area. Those tax receipts, over and above the base level of tax receipts that existed prior to the project, will be dedicated to pay off the debt for the public improvements. Although this method of financing economic development projects is fairly common in North Carolina, it is the first time that the Town has used incremental tax receipts as a primary source of debt repayment. Synthetic versus "traditional" TIF: In 2004 the State Legislature approved Tax Increment Financing (aka: Project Development Financing) legislation that enabled local governments to finance economic development projects with a pledge of future additional (incremental) tax revenues from an established TIF district. Because of the cost, complexity and length of the process for approval there have only been two traditional TIFs approved in North Carolina in the last 10 years. Part of the reason for the unpopularity of traditional TIFs in North Carolina is the availability of an easier, faster and less expensive alternative. Many local governments in North Carolina have opted for installment financing that uses a physical asset as collateral and repayment from a tax increment to finance economic development projects. This accomplishes the same thing as the traditional TIF, but is less expensive (lower interest rate) and takes less time to issue. The Ephesus Fordham project does not have an asset that can be used as collateral for an installment financing and therefore we have planned to combine the financing with the Town Hall Renovation Project. By combining the projects in one financing the Town Hall property can be used as collateral for both projects. This practice of sharing collateral among projects is a common way of reducing the cost of borrowing for municipalities by providing the best possible security for installment debt. Backstop: There will be a time gap between when we issue the debt and when the redevelopment will begin to generate a tax increment sufficient to pay debt service. To the extent possible, we will structure the debt for the Ephesus Fordham Public Improvements to defer debt payments to match the anticipated timing of incremental tax revenues. However, it may be impossible to avoid a gap between the tax increment and the debt service payments in the early years of the project. The Debt Management Fund has sufficient balance to cover the mismatch in the timing of available tax increment and we plan on using the Debt Management Fund to backstop debt service on the Ephesus Fordham Public Improvements portion of the debt. Any amounts used would be restored to the Debt Fund once the tax increment surpasses what is needed for debt service. One of the possible consequences of using the debt fund for this purpose is the delay of planned capital expenditures such as the Public Safety Facility and the Transfer Station. Stormwater Management Costs In addition to the $1.2 million of initial investment in stormwater facilities to serve the Ephesus Fordham Area, the Town is planning to establish a Municipal Service District to finance additional improvements and ongoing stormwater management costs. The planned Municipal Service District will impose an annual property tax of 4 cents.