Loading...
03/16/2015 Community Redevelopment Agency Meeting Minutes March 16, 2015 City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 e d s w r' �mu Meeting Minutes Monday, March 16, 2015 1 :00 PM City Hall Chambers Community Redevelopment Agency Page 1 City of Clearwater Community Redevelopment Agency Meeting Minutes March 16, 2015 Roll Call Present 4 - Chair George N. Cretekos, Trustee Doreen Hock-DiPolito, Trustee Jay E. Polglaze, and Trustee Bill Jonson Absent 1 - Trustee Hoyt Hamilton Also Present - William B. Horne 11 - City Manager, Jill S. Silverboard -Assistant City Manager, Rod Irwin - CRA Executive Director/Assistant City Manager, Pamela K. Akin - City Attorney, Rosemarie Call - City Clerk, Nicole Sprague - Official Records and Legislative Services Coordinator To provide continuity for research, items are listed in agenda order although not necessarily discussed in that order. 1. Call To Order— Chair Cretekos The meeting was called to order at 1:11 p.m. at City Hall. 2. Approval of Minutes 2.1 Approve the minutes of the December 1, 2014 CRA meeting as submitted in written summation by the City Clerk. Trustee Hock-DiPolito moved to approve the minutes of the December 1, 2014 CRA meeting as submitted in written summation by the City Clerk. The motion was duly seconded and carried unanimously. 3. Citizens to be Heard Regarding Items Not on the Agenda — None. 4. New Business Items 4.1 ULI Recommendation 34 - CRA Bond Issuance The recently completed Urban Land Institute (ULI) Advisory Panel Report indicated the CRA should consider a more aggressive approach to the bonding of TIF (Tax Increment Financing) revenue to "leverage an income stream to generate significant capital to invest in redevelopment projects." The ULI Panel further concluded that the CRA "could generate $18 million to $20 million if the CRA is willing to accept some risk." Page 2 City of Clearwater Community Redevelopment Agency Meeting Minutes March 16, 2015 As with a recommendation of this nature, it requires a sensitivity analysis to identify pros, cons, risk and reward to the issuing agency. To that end, CRA staff felt it was timely and appropriate to have the CRA Financial Advisor, with input from Bond Counsel, review the recommendation from a local financial and operational conditions perspective. CRA and Finance staff would offer the following summary comments/considerations: 1. The issuance of TIF bonds is an established and legal technique for the redevelopment toolbox under the appropriate conditions and risk evaluations. The most frequent redevelopment scenario lending itself to TIF bond issuance is large parcel redevelopment where additional, significant ratables are projected to offset and underwrite the added debt service. The argument for issuance of debt is also strengthened by a strong market condition whereby the proposed development has a strong likelihood of financial success, thus assuring the revenue stream to satisfy debt services. Use of TIF bonds for other commercial projects, as part of a redevelopment package of incentives, is entirely appropriate, as long as the CRA recognizes and acknowledges the risk profile of the credit supporting the debt service. ULI acknowledges this risk/reward consideration in their report. Should the project not materialize, or fail to generate sufficient additional funds to support debt service, the CRA must be prepared to carve out the debt service from existing CRA funds. It then also becomes an opportunity cost calculation vis-a-vis other CRA programmatic demands. Nonetheless, it is quite possible that catalyzing a project like The Strand could require a significant CRA financial participation to make the numbers work but with a much higher risk to the CRA than has been the comfort level of the Board to date. This willingness to accept a greater risk tolerance seems to be the thrust of the ULI report on bonding. Examples, in a case like The Strand, could involve traditional equity investment as a mezzanine tranche; balloon loans repayable upon refinance with accrued interest; or property acquisition and discounted re-sale to a third party, etc. All intended to make the numbers work for a private developer to redevelop the parcel. TIF bond issuance could also be useful for a large public capital need which could not be underwritten by the CRA annual revenues. CRA has not faced that situation in the recent past, but projected large-scale investments in Coachman Park, Intermodal Center and/or a Downtown Parking garage could present such a condition. A dedicated debt service from TIF revenues would be required. 2. To date, CRA has been able to underwrite large financial transactions through loans from the City, thus avoiding the interest premium and Page 3 City of Clearwater Community Redevelopment Agency Meeting Minutes March 16, 2015 costs of issuance of a bond issue. The interest rate differential between the borrowing of city funds and an unsecured bond issue would be in the 200-300 basis point range, thus saving the CRA 2%-3% interest payments and freeing up TIF revenues for other CRA programs. For example, the CRA financed the $3.4 million Economy Inn acquisition with a loan from the Central Insurance Fund at the backward-looking interest rate equivalent to the investment return on money market investments by the City. The interest rate spread and avoidance of issuance costs were significant. Use of this internal financing strategy has proven to be preferable where conditions allow. Staff would consider a bond issuance only after internal opportunities have been fully vetted. 3. ULI indicated the CRA could issue $18-20 million in TIF bonds. At the same time, the Financial Advisor's White Paper concludes that this level of issuance could only be supported by TIF revenues if annual collections reached $2.5 million and the CRA committed 100% to TIF debt service. However, TIF revenues (City + County-DDB) over the past 10 years have averaged only $1.7 million, with annual collections varying between $1 million and $2.3 million. The CRA Financial Plan anticipates only modest TIF growth over the foreseeable future. The take away is that the $20 million ULI issuance opportunity projection is unlikely to be realizable and the wide fluctuation in collection history over the past economic cycle warrants caution. Furthermore, the debt service availability must be reduced by the $500,000-$600,000 needed to underwrite the CRA operating budget and expenses. Without a significant change in the CRA Work Program, it appears that only $300,000-$500,000 would be available for debt service, resulting in a bond issuance of$2 million-$3M million if the full County share is available. Without the certainty of the County share, a much smaller issuance would be feasible. Furthermore, a bond issuance utilizing the County share would require County concurrence as to purpose and use. As recommended in the White Paper, no bond issuance should include County share availability until the length/terms of extension of the County share part 2019 is determined. 4. As highlighted by the Financial Advisor, the CRA likely has the ability to issue bonds at a competitive rate, with a pledge of TIF tax collections but without a backstop or credit guarantee from the City. Nonetheless, the Financial Advisor prudently raises the caution that it is indeterminate what effect a default by the CRA would have on the broader credit position of the City. The City/CRA Financial Advisor will be available to address questions at the March 16 CRA meeting. Page 4 City of Clearwater Community Redevelopment Agency Meeting Minutes March 16, 2015 In response to questions, Stifel, Nicolaus, and Company Financial Advisor Matthew Sansbury said the charts included in the White Paper do not include data from the City of Clearwater but rather depicts the TIF issuance ratings for other cities nationwide. The City has not done a TIF issuance. Mr. Sansbury said bond insurance is no longer available. TIF provides a fine deal. There is more stability when the developer has a project in hand and there is an agreement. Stifel does more TIF deals than anyone in the country. Without a city backing, one can get a 888 or low A TIF rating, with 5-6% interest rate range in today's market. With a city backing, the interest rate could be 3.5% or lower. Assistant City Manager Rod Irwin said Economic Development is finishing the marketing materials that identifies key city parcels and underdeveloped private parcels. The marketing initiative will include advertising in Florida Trend magazine and another magazine with nationwide distribution. Staff has shared the TIF assumptions with the Clearwater Marine Aquarium. The CMA is requesting to use the County TIF in a different way. they are interested in using a stream of revenue to issue debt for a discounted revenue stream. The City Attorney said if the County allows the use, the CRA will still have the ultimate decision. Pinellas County has some control over how the TIF funds are used. Mr. Irwin said most of the City's TIF is used for operating and community policing expenses, which are not bondable expenses. The CMA wants to assume the county TIF funds in 2016, $650,000 for twenty years, which will require an early commitment from the County on the TIF extension through 2034. Mr. Irwin said this requires the County Commission to make a decision on whether to allow, or not, the use of the TIF funds for a discounted cash flow. If allowed, some of the county TIF funds earmarked by the CRA for current projects will not be available. The City Attorney said the CMA has not come to the CRA for TIF funds. Mr. Irwin said staff has begun the TIF extension process and is half-way through. Staff has not received a definitive request from the CMA for TIF funding. The TIF extension matter will not come back to the CRA until the CMA request has been clarified as it may impact the TIF extension. The TIF extension would be from 2019 to 2034. In response to questions, Mr. Irwin said the state allows TIF for thirty years. The City's portion of the TIF is approximately$850,000. The City has obligated approximately$500,000 for operating costs and $150,000 for community policing. Mr. Irwin said the City may bond up to $3 million without a major change in the current program direction, which includes the projects identified in the 5-year financial forecast and East Gateway Action Plan. The two major portions in the county TIF portion are the debt service for the Economy Inn, which will be paid off this year, and the East Gateway Plan Implementation. The City Page 5 City of Clearwater Community Redevelopment Agency 5. Adjourn Meeting Minutes March 16, 2015 Manager said staff typically would not bring a high risk option; if the Trustees are inclined to riskier options, direction must be given. Staff was directed to provide information identifying the properties within the CRA that are tax - exempt. It was suggested that staff update council with status of marketing efforts and include updates on social media. The meeting adjourned at 1:45 p.m. City of Clearwater "c'qg rc\'*05 Page 6