Prestwick planners postpone meeting with commission

Wednesday, October 16, 2002

By Bob Miller ~ Southeast Missourian

Negotiating continues in Cape Girardeau's first tax-increment financing project, but the Prestwick Group's progress has slowed again, this time due to a financial analysis report submitted by an independent consultant.

There is a $17 million difference between what the developers asked for in their initial proposal and what the report says the developers need in order to complete the 900-acre residential development surrounding a golf course off Bloomfield Road.

The developers were immediately concerned with the report. They asked to have Tuesday night's TIF Commission meeting canceled while they absorbed the data, which they received last week.

Tax-increment financing is an economic tool used to attract development. It uses the extra tax revenue generated by a particular district to help fund projects in that area. In this case, the incremental taxes would be used to build infrastructure like city sewers and streets.

The developers are in the process of dissecting the information and are trying to set up a meeting with independent consultant Chauncy Buchheit of the Southeast Missouri Regional Planning Commission, TIF Commission chairman Al Spradling III and with the attorneys of the involved parties to find an explanation behind the methodologies Buchheit used to come up with his conclusions.

Bob Suelman, who is handling much of the financial business for the Prestwick Group, said Tuesday that the project could not be completed as designed if the developers received only $7.2 million for infrastructure reimbursement. The developers originally asked for $24 million.

"What we asked for was what was needed to do the planned community in the matter the development plan called for," Suelman said.

He said the report is just a draft and he wants to hear more from Buchheit and other TIF leaders before he comments publicly about the report.

Favorable figures

Buchheit said he sees the numbers being favorable for the developers.

The $7.2 million figure, he said, is above what the TIF Commission broadly outlined in a few policy guidelines at its last meeting. The $7.2 million involves some infrastructure inside the development -- something the commission has not approved or forbidden yet -- including $1.5 million for streets, curbs and gutters, $1.6 million for sanitary sewer and $1.2 million for storm sewers.

It will be up to the TIF Commission, and ultimately the city council, to approve these measures.

The report by Buchheit includes 31 pages of spread sheets.

Buchheit determined that $12.8 million of the project is eligible for infrastructure that will surround the development, including a Bloomfield Road expansion.

The $12.8 million will also cover extra capital costs, like more city police cars to serve the area. These types of expenditures fit within the guidelines set by the TIF Commission.

These potential TIF expenditures include $4 million to the school district to help pay for a new school, $580,000 toward city safety equipment, $1.1 million toward city water, valves and hydrants and $4.8 million toward Bloomfield Road improvements.

Buchheit also came to the conclusion that there was a financing gap of $7.2 million that the developer would need for the project to move forward.

This figure was determined based on the following assumptions:

  • A reasonable return on the developer's cash investment was set at 25 percent

  • That a loan of 70 percent -- the going rate of most developments --of the overall cost for land and development could be obtained from conventional sources.

    Buchheit said that if the developers show that a 70 percent loan is not possible, then the amount of eligible TIF funding could be changed..

    Working for compromise

    While the developers are looking into the report, they are simultaneously working with the school district to come up with a compromise.

    After a long period of time with no or very little communication with the school district, Cord Dombrowski, one of the developers, said he is optimistic about the ongoing communication with school officials even though superintendent Mark Bowles said recently the school will not support the original Prestwick proposal.

    Among the hang-ups with the developers and the school district is the amount of money that would go toward a new school and the length of the TIF.

    The report appears to side with the developers on the amount of money that the district should receive.

    Buchheit said he thought $4 million was reasonable. The report's summary states that the school district stands to benefit greatly from the TIF project, although the analysis does indicate a $20 million TIF could be retired in 17 years, six fewer than what the developers asked for.

    The Cape Girardeau School District is projected to receive a total income minus expenses of $26.9 million over a 23-year period of time if TIF is enacted. This figure does not include the proposed $4 million to go to the new elementary school. Without TIF, the report says, the school district is projected to receive $11.9 million over the same period of time.

    Rob Huff, chief financial officer with the school district and the school district's TIF Commission representative, said the models he has seen have shown impressive increase in funds to the school district. However, he said that most of that increase happens in the final few years of the TIF.

    His goal is for the school district and the developers to agree on a plan that would protect the school during the middle years of the TIF so at no point in time would the school receive less money with the TIF than it would without it.

    He said he disagrees with Buccheit about the $4 million figure because that would not pay for the entire school. He added that the school would not have to be built if not for the development.

    The city of Cape Girardeau is projected to receive total income minus expenses of $3.8 million with TIF as opposed to $1.2 million without it.

    bmiller@semissourian.com

    335-6611, extension 127

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