I waited 4.5 hours just to here this portion of the meeting. They heard from the public for less than 30 minutes and then talked about minute, boring details for hours, before they got to the important part – and spent (relatively speaking) little time on it. While asking questions after the meeting, there was still lots of confusion by alders, media and on-lookers. But, here was the explanation we got and the answers they got.
Dave Schmiedicke, the Finance Director for the City walked them through his 6 page memo on the finances. I swear it made sense to me while I was listening and taking notes, but when I tried to explain it to others after the meeting . . . FAIL!
How do you get to $67M?
The table on the first page shows the private and public sources that total $200M overall project, which includes the public elements which includes the replacement of government east and city fleet parking and the bike center. If you look at those percentages about 2/3 of the way down the table you can see the debt component which the developer is raising, the equity shares which the developer and his investors are bringing to the project and the public share of each building component and the
– contributions from TID 25, which total a little less than $43M,
– the use of parking utility reserves, which total about $13M (that is the equivalent of building parking utility stalls as if it was above ground ramp
– the remainder of the parking costs are being covered by TID 25 and land sale proceeds
– other portions of the land sale proceeds are being put back into the TID to pay for the bike center, the city fleet and undergrounding portion.
i.e.
$42,937,000 TID 25
$13,066,480 Parking Utility Reserves
$11,000,000 Land Sale Proceeds (given back to the developer who bought the land)
$100,000 2015 Capital Funds
______________
$67,103,480
(Yes, this isn’t a $43M contribution by the city, its $67M)
Parking Payments to the City
$115,000 will be paid for lease parking stalls to the CDA and over time, combined with the $4M for the ramp the developer pays for (in 27 years), its about preent value of about $6M.
(Ask yourself, if the city and the private parking are each about half the stalls, why is the private parking 1/3 the price of the public parking.)
Sale of City Land
The city is going to sell its land for development, and how the transaction works is the developer will bring $15 of equity to the developement in a “like-kind” transfer allowed in the 1031 IRS Code – that purchases the city’s land and development rights for the private development portions of block 88 and 105. We will keep that $15M and it will flow to the city, and then we will return some of it with a grant back to the developer, so in the end the developer can only fund $1.1 M of the land costs, so how do we get the money back into the deal is listed in the table on page 2. There is an equity return grant for TID 25, which will pay a grant of $9.7M and we use a portion of that $15M or $4.2M to pay the $13M back to the developer.
i.e.
Developer pays us $15M for the land.
We give them $4.2M back
We give them $9.7 out of the TIF
They really pay $1.1M for land worth $13 – $15M
Good deal if you can get it!
We will still have the $15M paid to us, where does it go? The next chart explains that we get $15M and $4.2M is appropriated to TID 25, which is combined with the $9.7M to total $13.9M they get back. We still have $10.8M left of the $15M – $4.5M goes to the parking utility for its portion of the land that is sold on block 105. That combines with its $13M of parking utility reserves to pay for its share of the ramp. We still have 6.3M left of the $15 million – see page 3 – $1.3 goes to city fleet parking costs in the new parking garage, they are replacing 40 stalls they currently have – building inspection vehicles. Bike Center costs $1M. So they have $4M back, they deposit part of it into the General Fund to offset the loss of PILOT (payment in lieu of taxes) associated with the closure of Government East ramp for 17 months, which is about $200,000. $3.8M remains in the city’s capital project fund, either as a reserve for the project or other pruposes.
i.e.
Developer’s $15M they pay for the land goes to the following:
$4.2M back into TID 25 so we can grant it back to the developer (plus $9.7M more)
$4.5M to parking utility so that they can pay for their portion of the parking ramp (add their $13M in reserves)
$1.3 goes to City Fleet to pay for 40 parking stalls
$1M Bike Center
$200,000 pays for the Parking Utility PILOT
$3.8M goes into the general fund for unknown purposes
(Ask yourself, how does the private parking cost $6M for 600-650 parking stalls and 40 parking stalls costs $1.3M)
Pre-development Costs
i.e. costs to the city we’re not getting back
In the event the city does not proceed with the project, the city commits to paying for costs of designing parking utility portion of the ramp, the total amount estimated through December will be $667,200. We will have to pay $187,200 for the work that has been done to date.
Capital Budget Decisions
These are the costs they will see in the capital budget and deliberate on at the Board of Estimates in September and at the full council in November.
$17.6M Parking Utility Contribution for its stalls ($13M in reserves, $4.5M from land sales and $400,000 from TID 25)
$20.8M Private Accessory Parking which the CDA is building and will lease to the private developer for 27 years and end up with $6M (a gift of $14M in present value, much more in 27 years)
$12M in a GRANT to Exact Sciences for the Jobs
$13.9M “Equity Return Grant” (The money we give back to the developer after they buy our land for $15M) which comes out of TID 25
$1.3M Fleet replacement parking of 40 stalls
$1M Bike Center
__________________________
$67M in the capital budget
PLUS
$10M in short term borrowing, right now we have about $27M of cash sitting in TID 25, we will spend all of that, and a large share of the parking utilities revenue so from a cash flow perspective, we may have to do some short term (no more than 3 years) borrowing to make up for the fact that we are spending down cash we have had in place for a number of years now, the estimated interest cost is a little less than $800,000 ($775,000). That would be paid back from the TID if we do the borrowing.
TID 25 Impacts
The graph shows you what is happening 2015 – 2022 (statutory TID closing date) and we still collect another year of increment in 2023.
December 2014 = $19,481,318 in TID 25 after paying off remaining debt
2015 – 2023 – For the remaining 8 years if they just keep it open they would get another $38M in revenues – without doing this project. The combination of what is thrown off by the project, assuming the hotel gets built in 2017, combined with $4.2M deposit from the land sales = $14M. So we have about $52M of revenues from 2015 – 2023
The costs will be as follows
$4.6M costs we have right now in the TID – staffing and other costs.
$20.8M is the ramp
$13.9 “Equity Return”
$12M Jobs Grant
$400,000 to parking utility costs
$738,008 in interest
So he says we end with roughly the same balance, assuming the balance we are projecting comes on line and the mill rates we are projecting – which they are conservative with – they showed droppping mill rates even though the last few years they saw rising mill rates.
Assuming all that happens in 8 years = $400,000 less than where we started
$19,089,430
(remember, that is 8 years later and we will have less than the present value and we won’t be spending money on affordable housing, giving the money back to the school district or doing anything else with the $38M we would have collected for other purposes over those years.)
Schmiedicke says this doesn’t include if the city holds the TIF open for one more year for affordable housing (chances of that happening – wanna guess?)
Land Value Estimate
He says that they calculated $13.2M value for block 88 and 105 based on $150/per square foot and the value of the land we are retaining is $2.3M for a net value of $10.8 and we get a net payment of $1.1M, so the amount we plan or request from TID 25 as the portion of the payment back to the developer.
$13.2M Land Value
– $2.3M Value of land we keep
– $1.1 the developer actually pays
____________
$9.7 we ask for from the TID
(Is it just me, or is this roughly what we need to “loan” to the school district, meanwhile, we are borrowing $10 short term)
DOES ANY OF THIS MAKE ANY SENSE?!?!?!?!
I think, once again, I understand where all the money is going and why. But ultimately, I don’t understand, WHY? What are we getting out of all the baloney? Considering the additional costs will will have of 17 months of parking, moving our staff and other hidden costs, the fact that we end up with less money in the TID after 8 years IF all goes as planned and we end up with other additional costs. What are we gaining from all of this?
