Leaders from the Carmel Redevelopment Commissions unveiled their vision for phase two of the Carmel City Center, including a parking garage which would be paid for through a city-backed bond.
In order to dissuade concerns about taking out more debt, CRC Director Corrie Meyer laid out several layers of protection to avoid financial risk to the city. Most prominent of these protections is a guarantee from Pedcor, the City Center developer, to make up the shortfalls.
But some city councilors were concerned about the final layer of protections: a special benefits tax.
“Well, the reality is that a city-backed bond means the potential of a special benefits tax,” Meyer said. “I live in Carmel and I certainly don’t want that happening. I know that you take that to heart as well. So what we have done is worked with the developer to develop a series of stop gaps, so there are several guarantees before a special benefits tax would ever have to be issued.”
The special benefits tax has been the center of some discussion. It would be added to all households to help pay off city debt. It could be as small as $5 a household, but those numbers have been speculative. To some people, such as Mayor Jim Brainard, it’s a mechanism in order to get a better interest rate, but not something that is likely to actually happen. Lenders see the strong affluence in Carmel and that such a tax would easily cover the costs so it provides security. Brainard and many who agree with him, such as councilors Ron Carter, Kevin “Woody” Rider, Sue Finkam, have said they do not fear that a special benefit tax would be instituted.
Yet others, such as City Councilor Rick Sharp, said the special benefits tax could be a reality if irresponsible spending occurs.
“It’s not something to ignore,” he said. “We are the fiscal body and we cannot say yes to everything.”
Carter has said that worrying about the special benefits tax is a “Chicken Little” situation where certain city councilors are trying to get everyone worried about a non-issue because of elections.
It’s important to note that the special benefits tax is the final protection in a long line of guarantees to make sure the city can pay its debt.
The breakdown goes as such, in the proper order:
•Tax increment finance money would pay back the bonds
•Each building will be individually guaranteed by Pedcor if there are TIF shortfalls
•A reserve account built up through “payment in addition to taxes”
•Pedcor guarantees to make up any TIF shortfalls for the aggregate
•If an issue arrives with Pedcor, there’s a “letter of credit” from Pedcor that can be used
•Other city resources, if City Council chooses
•Special benefits tax
The TIF money would help support city-paid infrastructure, including not only the parking garage, but sidewalks, a gathering area and Spanish stairs.
The parking garage would be owned by the city, but maintenance is paid for by Pedcor. This is guaranteed for life and even if Pedcor sold the land the new owners would have to honor this deal.
The parking garage would have about 470 to 625 with about 75 percent of those dedicated for public use. The wide range is because if the city gets a better interest rate on its bonds it might add more parking spaces. The cost could be around $17 million, but that hasn’t been finalized.
The next step is for the City Council to vote on whether to create new TIF districts for this project so funds can be captured. If that is approved, then Meyer expects bond allocations in November with construction starting as early as 2015. The parking garage would be first on the list with each of the 10 plus mixed-used buildings undergoing construction through 2017.
Rider said he is optimistic about Meyer’s proposal because there so many layers of protection.
“The SBT is only being used to get the rate down,” he said. “We have no intention to ever letting it get to that point. By having all of these guarantees in place, we don’t think that would happen. And if anyone has questions about that, please call us because we’re happy to explain how it works.”
And he doesn’t expect that there’s much chance it would ever get past Pedcor’s guarantee to make up the shortfall. That would involve a major shakeup or financial problem at Pedcor, which he sees as a strong company.
“With the number of projects they have across the country, I feel very safe about Pedcor,” he said.
The bill will be sent to committee and some, such as Councilor Luci Snyder, are waiting to learn more before deciding if they’ll support the deal.
“I’m open-minded, but I’ll have to look at it,” she said. “We can’t just open our pocketbooks without careful consideration. We will see.”