Study: Area can tap $350 million for projects—if it wants that much debt
February 1, 2016
Study: Area can tap $350 million for projects -- if it wants that much debt
With $42 million in state "Regional Cities" funds awaiting a local match and riverfront development, a proposed downtown arena and other big-ticket projects in various stages of development, Fort Wayne and Allen County will need a lot of money in order to realize officials' goal of increasing the region's population to 1 million by 2031.
According to a new "confidential and deliberative" study of potential funding sources for economic development projects completed for Greater Fort Wayne Inc., that potential already exists in the form of borrowing capacity that exceeds $350 million -- and that doesn't include tax increases already proposed by the economic development organization.
"These scenarios should be considered preliminary at this juncture, but they should give GFW a sense of what is possible, but not necessarily optimal," stated the report by Sycamore Advisors, a copy of which was obtained by The News-Sentinel. Despite its preliminary nature, however, the report is likely to be considered as officials consider the feasibility of several big-ticket proposals for which full funding has not yet been identified.
"There's more money available in our community than I thought," said Sweetwater Sound founder Chuck Surack, who heads the committee studying a proposed $63 million downtown arena. The committee could make a recommendation to Mayor Tom Henry within 30 to 60 days, Surack said.
"Our desire is to see best practice bonding structure for our community. This study is just the first step," explained GFW CEO Eric Doden. "Best practice includes tying bonding to the life of a project, so today’s taxpayers aren’t paying in full for a project that future taxpayers are benefiting from . . . The good news from this study is that we now know our community can afford a downtown arena, and other big projects that will help grow wages and increase job growth."
The study identified several sources that could be used to repay bonds sold to fund economic development projects, including local income taxes, local restaurant and hotel taxes, tax increment financing (TIF) districts, county professional sports and convention development areas, community revitalization enhancement districts (CRED) and the city's Legacy fund, created through the sale of the old City Light electric utility.
Because of current obligations and other factors, the study concludes that the county economic development income tax (CEDIT) "is the most obvious and first choice of revenue." The city already earmarks about $23.7 million from CEDIT annual to pay debt service, and the county also uses the tax for economic development, with a balance of nearly $18 million at the end of 2014, along with $13.5 million in its rainy day fund. Because of existing debt, the study suggests the short-term possibility of bolstering available CEDIT revenue with Legacy funds.
The study also noted that, under the Regional Cities initiative, participating counties can enact a "regional development authority" tax that would increase CEDIT by 0.05 percent, raising about $4.5 million in its first year. Longer-term funding sources could also include an increase in the local option income tax (LOIT) and the consolidation of TIF districts, some of which are inactive. Taxes collected within TIFs can be used to fund projects in the district, and the study notes that 10 city TIFs have no debt but will collect about $5.6 million this year.
More money could become available as current debt expires, and restructuring of existing debt could also free up cash for other uses, the study added, suggesting that adoption of city food and beverage tax also be considered.
In addition to public funds, private dollars are also expected to help underwrite various projects and provide a match for Regional Cities funds. Foundations have already pledged millions to riverfront development, for example, and Surack has said millions more have been offered toward construction of the downtown arena.
When asked about potential funding sources for the arena, mayoral spokesman John Perlich said, "We aren’t going to speculate on funding options for a project that may or may not happen."
Last month, 18 local elected officials -- all Republicans -- sent Doden a letter questioning the agency's alleged use of public funds to lobby for increases in local sales and income taxes. The letter was signed by majorities of city and county councils -- bodies that have authority over city and county debts.
"Everybody knows the way I approach finances. I try to avoid bonding as much as possible," said City Council President Russ Jehl, R-2nd, who signed the letter.
Doden, however, disagrees.
"Successful municipal financing ties debt structure to the useful life of the asset. If you do not have the appropriate debt structure, you greatly reduce cash flow, putting citizen services in jeopardy," he said. "Just like most people don’t try to pay their house off in five years, you don’t fund large projects like this without an appropriate debt structure in place.
"We’ve appropriately bonded the Coliseum, we’ve appropriately bonded the Grand Wayne Center, we’ve appropriately bonded our bridges, and these projects are no different."