Twin Lakes Financing
In response to Council member Amy Ihlan's recent letter [in
the 4/19/05 Roseville Review]. I would like to explain, how I understand the financing on the Twin Lakes redevelopment project works and who will bear the risk and costs.
First of all, there is no 40 million pot of money out there that the city currently has. Nor do we have the opportunity to decide whether or not to use TIF dollars for a redevelopment project or instead use TIF monies: for the nature center, renovation of city hall or for the police and fire department, the Oval or a community center. The laws regarding TIF simply do not allow us to use TIF dollars for these needs.
The next question then is where is all this money or so called subsidy coming from and who bears the risk in doing this project. This is what this project currently looks like: 31 million dollar will come from Tax Increment Financing. Now, how is that created? It is created and only comes into existence if the developer builds the project and even then it is not created in one lump sum but over a number of years. What TIF dollars are is the new taxes that are generated by the project, because of the increased value of the property, as a result of the redevelopment. It is these new tax dollars that the city can use to reimburse a developer for costs he has already paid in building out a project. Furthermore there are a limited number expenses that are eligible for reimbursement, generally they include such things as, the cost of building roads, sewers, cleaning up pollution and demolishing substandard buildings and site preparation.
Who bears the risk? In this project the developer will pay all of the costs of building out this project. Then once the project reaches certain levels of construction he can ask the city to issue either TIF Revenue Notes or Bonds. These bonds or notes are supported only by the revenue generated by the underlying asset in this case the housing and commercial property that has been built. These are revenue bonds not general obligation bonds, neither the city nor it citizens bear any liability for the repayment of these bonds. If they go into default the bondholder only recourse is against the asset producing the revenue.
The other projected sources of subsidies are 3million in environmental grants and 3 million in transportation grants. These grants will come from either the State or Federal government. The developer may or may not get these grants, if he does they will help with the clean up and roads, if he does not get them he will be expected to absorb these costs.
In summary, the developer puts up all the money to build the project and assume all of that risk in building it out. Then if the project is successful, he will ask to be reimbursed for some of his costs. These dollars will come from the very project he has built. I hope this give everyone a better understanding of how the financing on Twin Lakes would work.
Dean T. Maschka
Roseville City Council Member