Bull Street Development

Columbia leaders ready to tackle ways to pay for big-ticket Bull Street expenses

cleblanc@thestate.comFebruary 3, 2014 

The sprawling Bull Street campus.

FILE PHOTOGRAPH — The State

  • Funding options

    Columbia City Council Tuesday is to receive an update on plans for the proposed Bull Street neighborhood, including ways to pay for the public commitment to the project. The meeting begins at 6 p.m. in council chambers on the third floor of City Hall, 1737 Main St. An overview of the funding package under consideration shows how the city would come up with $90.4 million for the large project that will take 20 to 30 years to complete.

    Revenue bonds*

    $57 million to be repaid from various sources, including small, annual general obligation bonds.

    Hospitality taxes

    $27 million to be repaid from taxes patrons pay to eat in Columbia restaurants or drink prepared beverages.

    Cash

    $9.5 million to be withdrawn from utility accounts, including unallocated money in water, sewer and stormwater services.

    * Installment purchase revenue bonds, rarely used by the city of Columbia

    SOURCE: Columbia’s chief financial officer, Jeff Palen

Columbia City Council on Tuesday takes up its first in-depth discussion of how it would pay for the public commitment to the Bull Street neighborhood and for a city-owned baseball stadium.

The starting point for what surely will be hotly debated is a $90.4 million, three-part pot of money cobbled together by the city’s chief financial officer at council’s request. That money would be spent over the next 20 to 30 years of construction in the neighborhood – not up front, chief financial officer Jeff Palen said.

It’s unclear whether council is going to cast the first of two required votes that would answer the question many residents have been asking since last summer: How will Columbia pay for water and sewage lines, roads, street lighting, stormwater drainage and other services for the expansive project?

Several council members have questioned the funding package.

Palen has proposed the city raise the $90.4 million by issuing an unusual $57 million revenue bond, by getting a $24 million loan that would be repaid through taxes on prepared meals and beverage and by withdrawing $9.5 million in cash from city coffers.

“We’re working on a goal of not having rate increases or tax increases on water, sewer, parking, general fund, or property taxes for this purpose,” Palen said Monday of the financing package that would offset an estimated $90,236,000 commitment to the planned neighborhood, including a minor-league ballpark.

That $90.2 million figure is $23 million more than what Palen called a “preliminary, subject to change” estimate he presented council in July. That’s when the divided body voted to sign the master development agreement with Hughes Development Corp. of Greenville for it to control construction of the entire project.

The ballpark – projected to cost between $35 million and $42 million – consumed $15 million of that $23 million increase.

Even the new figures are estimates, and council could opt to change Palen’s three-part package, he said Monday. The city has 18 funding sources available, ranging from imposing higher fees to public/private partnerships it could tap, according to a list Palen has released.

The single biggest source in Palen’s most recent package, submitted Jan. 21, is the $57 million installment purchase revenue bond. Columbia has not issued such a bond since at least 1993 and maybe never, Palen said.

The towns of Barnwell, Blythewood and Georgetown along with Clarendon, Fairfield and Lancaster counties have issued such bonds to pay for buildings, Palen said.

The attraction of a 30-year installment bond is that the city could tap many income sources to pay it back, he said. For example, Palen said, any lease payments Columbia would receive for the stadium could go toward repayment, along with meal, beverage or hotel taxes or money in the city’s general fund, which is used to pay most of Columbia’s expenses.

But the repayment method Palen mentions most is issuing general obligation bonds each year.

“We don’t have the capacity to issue $57 million in GO (general obligation) bonds,” he said to critics who ask why the city would not simply issue one large general obligation bond. General obligation bonds are repaid through revenue from taxes.

State law sets Columbia’s general obligation bond limit at $41,428,000, Palen said. As of Monday, the city has used $40.5 million of that total, he said.

But in June, the city will have paid off $5.1 million, which would allow council to incur that much more in general obligation debt.

Currently, the city pays $5.5 million annually to pay down the $40.5 million debt, Palen said.

The second-largest piece of the $90.2 million package would come from a $24 million hospitality tax or “H-tax” bond that would be repaid over 30 years by patrons who dine in city restaurants or sip a mixed drink or iced-tea in bars or anyplace that serves prepared meals in Columbia.

The $24 million bond would wrap around a 2004 bond that still has $12.8 million due. The combination would mean Columbia would owe $36.8 million over 30 years in H-tax bonds.

The financial effect on taxpayers of wrapping the two bonds is that the annual repayment amount would increase by $1.1 million for 30 years from the $1.35 million the city spends now on paying off the first bond in 11 years, Palen said.

In other words, the repayment amount would be $2.45 million annually for 30 years rather than $1.35 million annually for 11 years.

Council might want to structure the bond to pay more for the 11-year balance of the first, say $3.12 million yearly, and then lower the annual sum starting the 12th year, Palen said.

The smallest part of the package is the $9.5 million in cash.

The option Palen presented last month suggested council take $6,125,000 million in unallocated money from the city’s water and sewer accounts and $3,275,000 from the stormwater account.

The water/sewer accounts – which are the city’s cash cows, especially the water system – have about $150 million in unallocated money, Palen said.

Unallocated funds in the stormwater account could not be readily determined Monday, he said.

Reach LeBlanc at (803) 771-8664.

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