urbanSTL

Doug wrote:Why should he have our full faith and credit?

Is he asking for that? The City's given it on a few rare TIF projects in the past (i.e., St. Louis Marketplace), but most TIF projects are secured only by the incremental revenues generated by the redevelopment project, to the extent that they ever actually exist.

Thanks for excellent explanations of the TIF. Best I've seen. This is closer to what I thought TIFs should be used for, vs. suburban shopping malls.

Gary Kreie wrote:Thanks for excellent explanations of the TIF. Best I've seen. This is closer to what I thought TIFs should be used for, vs. suburban shopping malls.

No problem. I agree with you that this is the type of thing that TIF's should be used for. Its not a perfect tool (and does impact property tax dependent taxing districts like the schools the most), but its probably the right choice for this project.

True and true - thank you for posting actual information that helps us understand the choices before us and their implications.

Doug wrote:This is unprecedented.

And therefore should not be considered and may actually be evil. Apparently there have been developments in our metro area of 2.4M people that have been a bust. Wow - who knew.

Doug wrote:

South Compton wrote:

Doug wrote:Why should he have our full faith and credit?

Is he asking for that? The City's given it on a few rare TIF projects in the past (i.e., St. Louis Marketplace), but most TIF projects are secured only by the incremental revenues generated by the redevelopment project, to the extent that they ever actually exist.

They want 200,000,000 of it to be backed by general revenue. We just made our first 400,000 payment on the city backed TIF for St. Louis Centre, and that was only for the acquisition as nothing was developed.



This is unprecedented.

So how does this work when the developer who got the money goes bankrupt? Does the city own part of St. Louis Centre? Or is the new developer obligated to develop something?

Doug wrote:You support $ 200,000,000 being backed by tax revenue? Do you know anything about our annual budget?

In theory. I think it's worth considering. Yes.

You're theory would be wrong since fact shows that this process has only left the City with debt to repay on failed projects. We already refused to back BPV bonds. We will back McKee instead?

Doug wrote:You're theory would be wrong since fact shows . . .

This is why I and others can't stand listening to you.

From the Ballpark Village thread regarding the TIF's backed up by KC for Cordish' P&L district.



Grover wrote:

For all the positives, hasn't P&L left KC in debt? Isn't the city paying for the gap in expected v. real tax revenue? I guess the deal is different here, but that has to THE negative for P&L.

I don't understand why you are applauding the city for not backing up the TIF's for Ballpark Village (as opposed to KC for P&L), yet you would consider doing this for McKee at a much larger scale and for a much riskier development.

A couple reasons:



1) I believe that the BPV is valuable enough that it would be developed with relative density with or without public money. I do not believe that the same is true for North St. Louis. (After all, that is what TIF is supposed to hinge upon)



2) The NorthSide project has the potential to be much more transformative (of greater value) to the city and region than BPV.



One of the problems with P&L is that they have a professional sports stadium without a team and so without traffic and customers that would generate more revenue - though I don't know how many more people would be needed to cover what the city is paying.

Good points Grover.



I agree with you that TIF's would be the way to go for this development. However, I don't think we should guarantee them.



So far, we haven't seen more than an idea from McKee. At this point it's not even a plan or a concept. Heck, he didn't even know that he didn't want St. Patrick's Center.



Before we give the store away we will be needing a much more comprehensive plan and even then we should be very cautious.



If he believes in his plans, why would he need the TIF's to be backed-up anyway? It seems he's creating a win-win situation for himself. If he succeeds he'll win. If he fails, the taxpayer loses.

What is wrong with issuing bonds for the TIF and seeing if there are buyers for the bonds? If the market supports the project, the bonds will sell quickly, and more can be issued as the project develops.

^

I have no problem with issuing TIF bonds for this project.



The problem is that McKee wants half of the issued bonds backed up by general revenue in case the expected generated (incremental) taxes fail to be sufficient to pay off the bonds.



That seems risky, especially since we are talking about $ 200,000,000.



I am by no means an expert on this issue so if someone has a better understanding of constructions like these, help me out.

That's exactly what ecoabsence is saying. If the market things the bonds are a good investment, then they will be bought. If the market has no interest in making a purchase because they are so risky, then why should the city back them up?

It sounds as though you're saying that there would never be a reason for the city to back TIF for a development (or maybe any other development) since the benchmark you're asking for is whether or not "the market" thinks something is a good investment and would buy bonds.



I'm not going to claim that I know more than "the market," but I don't believe it's infallible and I do believe that there are projects that the city should support. I think some are expecting McKee to have tenants, developers, etc. lined up already, but those people need some assurance that this project has widespread support. Maybe it's a bit of a chicken or egg issue, but I don't see a problem with the city showing substantial faith in its own future development.



But again, I've simply said that I think we should have a serious discussion about the TIF and any potential city guarantees. We need to discuss how this is (or is not) different than BPV or St. Louis Centre.

So if the Bond holders think the risk is low and buy the bonds, aren't they on the hook if the project fails? Or is it the city? If the city is taking the risk, why wouldn't the bond holders buy the bonds?



If the bondholders are at risk, why shouldn't the city back this, since they don't bear any risk? What am I missing here?

The bondholders are only on the hook if the guarantor of the Bonds goes bankrupt. So if the developer is the one guaranteeing the TIF and for some reason cannot pay due to shortfalls in tax revenue, the bandholders are stuck. However, if the City backs the bonds with full faith and credit, the developer risk is removed because the City will almost surely not file for bankruptcy. Instead, other services will be cut to pay off the TIF bonds. This takes a lot of the risk out of the bonds (never all), so the bonds have a lower interest rate and are easier to market. The only two guarantees the City have ever done both ended up requiring the city to pay out of general revenue, because tax revenues did not cover the notes. It's just not something I would like to see happen, especially at the level of $205 million plus interest spread over 23 years.

MattnSTL wrote:The bondholders are only on the hook if the guarantor of the Bonds goes bankrupt. So if the developer is the one guaranteeing the TIF and for some reason cannot pay due to shortfalls in tax revenue, the bandholders are stuck. However, if the City backs the bonds with full faith and credit, the developer risk is removed because the City will almost surely not file for bankruptcy. Instead, other services will be cut to pay off the TIF bonds. This takes a lot of the risk out of the bonds (never all), so the bonds have a lower interest rate and are easier to market. The only two guarantees the City have ever done both ended up requiring the city to pay out of general revenue, because tax revenues did not cover the notes. It's just not something I would like to see happen, especially at the level of $205 million plus interest spread over 23 years.

The reason the city is now paying for St. Louis Centre is that the TIF was based on retail sales tax. That's a bad idea and is much higher risk (in my opinion) than betting on rising property values (and as a result increased property tax revenue) from the NorthSide project.



Yes, TIF is an economic tool and the economics should make sense. In this case I think that evaluating NorthSide is incredibly difficult as a purely economic venture. That said, property tax revenue in North St. Louis is clearly much less than it would be were development to be spurred by new infrastructure. I think this may be a case where the city needs to lead "the market." I also believe that the city stands to benefit from development adjacent to the project area - revenue that is not considered when typically evaluating the TIF.

What is this? A rational, mature discussion of the pros and cons of the NorthSide TIF proposal? Am I in the right Forum?

^Give it time. Today was just a fluke