Prestwick developers search for buyers for city revenue bonds

IN A TIF

By Bob Miller ~ Southeast Missourian

The Prestwick Plantation developers, a group wanting to use tax increment financing to help build infrastructure for a 900-acre residential development in Cape Girardeau, is in a mode of persuasion.

With the city's TIF Commission, the school district, the city council and the public uncertain about the city's first formal TIF proposal, the Prestwick group knows it has many questions to answer.

But perhaps the most difficult convincing has already been done.

Bob Suelman, who is spearheading the development, said he has financial entities who have shown a "willingness, or at least an interest" in purchasing city revenue bonds up front to get the project started.

Suelman did not elaborate on the financial entities.

However, questions have been raised by some about the mechanics of selling city bonds without the city being held responsible if the project stalls.

Chauncy Buchheit of the Southeast Missouri Regional Planning and Economic Development Commission, who has been hired by the city as an independent consultant and has dealt with several TIF projects in the past, said understanding the financial terms is the key to comprehending the city's obligations.

The key issue to understand, Buchheit said, is the difference between general obligation bonds and revenue bonds.

A general obligation bond, which wouldn't be used for this project, are bonds backed by the city. These are the types of bonds that must be approved by voters, because the voters' tax dollars go to pay off the bonds.

If the council were to grant TIF status, revenue bonds would be sold. Revenue bonds do not require a vote, because no one's taxes would be raised. The money to pay off the bonds, which will be kept in a separate account, comes only from the extra revenue generated from the TIF district.

That means the city would not be held accountable if the project failed.

"The buyer is buying the bonds knowing there is a risk out there," Buchheit said.

Missed communication

The TIF process has been delayed due mostly to scheduling conflicts.

Suelman said he made several attempts to arrange meetings and negotiate terms with the school district and the city, but it was difficult to get everyone's schedules together with so many people taking summer vacations.

The city received the developers' proposal on July 26, a couple of weeks later than was expected. The city council and TIF Commission representatives didn't get the proposals until this week.

The TIF Commission will meet Tuesday, more than a month later than was hoped for in a rough itinerary submitted by Mark Grim, an attorney hired by the city to assist in the TIF process.

During the month delay, there was not much communication between the developers and the entities involved with the TIF process.

He said it is especially important for the developers to meet with the school district since earlier discussions occurred before July 1, when Dan Steska was superintendent of schools. Mark Bowles took over the post in July.

The developers have proposed a $4 million allocation to the school district to help offset the costs created by additional students who might be brought in as a result of the new housing area. However, the two parties have not agreed on anything in writing, including the time frame of that $4 million payment.

"We've had some conversation," said Cord Dombrowski, another one of the developers. "We know what our numbers are, and as soon as the school and the city tells us what their numbers are, we'll be ready to go. Hopefully at the commission meeting, some of that can start."

Bowles, the new superintendent, said he wants to proceed cautiously.

"I don't want to do anything until the TIF Commission meets again," he said.

Suelman said that in most TIF cases, schools are not given any money up front. This TIF is rare in that it is residential and would be generating property-tax revenue. Most TIF projects are commercial and are funded through increased sales taxes.

Bigger numbers

The developers' proposal asks for $24 million to $28 million in TIF funding. That's double the $12 million to $15 million that was reported earlier.

Dombrowski said the $15 million figure would cover the first phase of the project and the up-front costs required to get the project started. There are four phases to the project.

Suelman said the numbers they have discussed with the city have always been close to $28 million.

"Until you put the stuff out for the bid, you don't know exactly," Suelman said. "Phase 1 is right at $15 million."

bmiller@semissourian.com

335-6611, extension 127