By David Slone
WARSAW – The issuance of tax bonds for the Warsaw Marketplace reached a new milestone on Tuesday, April 19, with the Warsaw Economic Development Commission’s approval of a resolution authorizing the necessary steps to be taken.
The Commission’s action came less than a day after the Common Council approved a resolution for a development agreement between the City of Warsaw, the Warsaw Redevelopment Commission and Sullivan Wickley, the mall’s developers; and an ordinance – in first reading – authorizing the City to issue economic development revenue bonds in connection with the Marketplace.
Randy Rompola, attorney at Barnes & Thornburg, told the Commission on Tuesday, “What you have before you is a resolution approving the issuance of bonds by the city and recommending that city council approve the bonds by ordinance. The city and the redevelopment commission spoke to the developer, Sullivan Wickley, about the Warsaw Market Square and the developer came here.
Sullivan Wickley took possession of the Marketplace in October and wants to renovate it and find new tenants to make it viable again, Rompola said. SW spoke to the city and the Tax Increase Funding (TIF) Revenue Access Redevelopment Commission to help them do this.
“So what’s in front of you is the resolution. The Council heard the order on first reading. The Redevelopment Commission and Council have both approved a development agreement. This development agreement provides for the city to issue bonds that would be payable out of TIF revenues from the market allocation area,” he said.
The market was in a larger TIF area – the Winona Interurban – but the Redevelopment Commission carved out the market allocation area from it.
“So any improvements to this Marketplace site will increase the rateable value, and by creating the allotment area, the Redevelopment Commission will be able to capture the taxes that will be generated by increases in the rateable value – in effect, what is the tax increase. This TIF will be pledged for the payment of these obligations,” Rompola explained.
Lake City Bank stepped up and agreed to buy the bonds.
The development agreement provides for the issuance of approximately $1,711,000 of bonds. The city will issue the bonds. Proceeds from Lake City Bank’s purchase of the bonds will go to benefit the developer. The bonds will be redeemed from the tax increment generated by the market allocation area.
Lake City Bank requested that for the first 10 years of the bonds they wanted additional security, Rompola said. Thus, during the first five years, the promoter will guarantee these obligations; for the next five years, the Redevelopment Commission promised an additional TIF from the Consolidated Northern Economic Development Zone to pay the bonds. Then, for the last 10 years of the bond issue, “it would be payable only from the Marketplace” tax increase.
“The bonds would not be a general obligation of the city. There would be no tax levy that the city would be required to pay. The only obligation of the city and the Redevelopment Commission would be to ensure that any tax increases generated in this market arena would be used to pay these obligations,” he said.
During years 5 through 10 of the bond, if there is a shortfall in the market tax increase, the Redevelopment Commission would also use the consolidated Northern Economic Development Zone.
He explained that there is a particular law that involves the Economic Development Commission. “Because under this law the city can issue bonds, provide the proceeds to a developer or a private company and that proceeds can be used by the developer and not be a bond of the city,” a- he declared.
Commission Vice Chairman Dan Robinson asked if Lake City Bank would have a lien on the property if the bonds defaulted. Rompola said no.
“The taxes themselves – the non-payment of taxes – would create a lien that could go to the tax sale,” Rompola said, but the bank would rather take over paying the taxes than let a property go to the tax sale. tax sale. “It’s those tax payments that become the tax increase.” Lake City Bank would not have a mortgage or lien on the property. Rompola said the bank wants the first 10 years of the bonds to have additional security to ensure they are developed, leased and operated appropriately.
Warsaw’s director of economics and development, Jeremy Skinner, said Sullivan Wickley received no income until the leases were signed. Big Lots will move into the old Pier 1 and Dunham location by October, and Planet Fitness will open in July. Two other retail establishments are considering leasing space, but have yet to be publicly announced – one of which will move into Carson’s former location.
Commission Chairman Tom Allen asked about the length of the leases, and Warsaw Mayor Joe Thallemer answered 10 years. Rompola said, if he remembered correctly, (Sullivan Wickley) had 30 months to sign leases.
“So effectively if they got to the end of the period and there was some sort of streak that wasn’t leased, the bond proceeds that were in the escrow would just go back to the bank and the remaining part would simply be reduced,” Rompola said.
To clarify a question Robinson had about the amount of bond, Rompola said the amount of $1.711 million is the amount of bond that should be issued; the bond ordinance sets a parameter of no more than $1.9 million with an interest rate of no more than 7% in the “just the off chance” that the deal with Lake City Bank fails and that the developer would have to go find another bank to buy the bonds. The interest rate quoted by Lake City Bank is 5.55% for bonds.
Rompola said, “We will not issue more bonds than can be handled by the TIF Marketplace.” Baker Tilly, the city councilman, made a report showing that the TIF would back the $1,711,000 in bonds.
Robinson said that while it was in the community’s interest for the market to become viable again, he asked if they were giving developers an unfair advantage over existing businesses.
Rompola said as part of the report that one of the required legal conclusions was whether there was an adverse competitive effect.
“I think when you look at retail business development there is definitely significant development in and around that area, but I think when you look at retail business development you generally see…if you raise Marketplace to this that it can be a thriving retail space, which will simply attract more people in Warsaw, Warsaw residents and people from surrounding areas, to this great shopping area. So we don’t think…we don’t see there’s a negative competitive effect just because more retail begets more retail,” he said.
A public hearing was held on funding, but no one was there to oppose it.
The Commission approved the resolution to move forward. The Communal Council will proceed to the second reading and approval of the bond ordinance at its next meeting.