Columbia residents’ bill for Bull Street projects pushing $200M over 30 years

cleblanc@thestate.comMay 11, 2014 

— When the final payments are made 30 years from now on announced public commitments to the Bull Street neighborhood, the price tag could be $199 million – and that bill for taxpayers could grow.

That assessment is based on current estimates from City Hall finance officials who have projected the overall cost of borrowing to cover $86.1 million in projects:

•  $57.1 million for roads, water and sewage lines, two parking garages and other basic utilities.

$29 million to build a city-owned stadium.

Repaying $86,126,000 in loans would cost $198,809,599 by the year 2052, according to estimates from Columbia’s chief financial officer, Jeff Palen, and the city’s loan consultant, Brent Robertson.

The biggest contributor to the long-term bill is $104.4 million in interest on the loans, figures that Palen and Robertson have released show.

Robertson used a 4.44 percent interest rate in reaching his estimates of the cost of borrowing to cover the first five years of construction in the proposed neighborhood.

Palen stresses the figures are estimates subject to change depending on when loans are issued and interest rates at that time. The timing of the loans depends on when Bull Street master developer Bob Hughes begins to unveil construction plans.

Final price tags also could change if, for example, the city opts to pay for the projected $5.25 million in the first year of installing utilities with cash on hand, Palen said. That would keep the city from borrowing that much less.

“The important thing for everyone to remember,” Palen said, “is that this isn’t set in stone. When it’s time to spend, we will look at all options and use what’s in the best interest of the city.”

Another factor that could influence the projections is that City Council has yet to make final decisions on the kinds of loans and the repayment methods for any borrowing required for Bull Street.

Although it hasn’t voted on how to pay for them, council has made binding commitments to the $86.1 million in projects. That money would be spent during the first five years of construction, the city’s calculations show.

Last week, council was scheduled to cast the first of two votes to pay for construction of a year-round stadium using meal taxes.

But council delayed that at the request of Mayor Steve Benjamin.

Council publicly has discussed no alternative financing plan for the ballpark other than the one it endorsed last month. That plan requires Hardball Capital to contribute $6 million toward a $35 million baseball facility. Council has agreed to a separate, 30-year contract with Atlanta-based Hardball Capital to bring a minor-league baseball team to town and to run the stadium.

Projections

Projections for the stadium are that the city would have to borrow $32,180,000 to net the $29 million it needs.

Interest on $32.1 million would amount to $28.9 million though 2044, when meal taxes would pay off the ballpark loan, estimates from Palen and Robertson show.

The city’s 2 percent tax on prepared meals and beverages – which this year is projected to generate $10 million – would pay off the $32.1 million borrowed.

In addition, it would cost $693,000 for loan issuance expenses such as legal fees, underwriters’ fee, Robertson’s fee and other fees.

Walda Wildman is a Columbia CPA who worked 25 years auditing the books of state and local governments and has closely monitored financing plans for the stadium and the surrounding neighborhood. She said the interest rate for a stadium might be higher than Robertson calculated because publicly owned ballparks are risky investments. Wildman has met with Palen to discuss the plans and also advises some members of council on municipal finances.

Council has yet to spell out how to pay for basic public services or the two 800-space parking garages on the converted state mental health agency campus. Benjamin and City Hall staffers are in the early stages of a plan to privatize the garages, which might reduce the already controversial taxpayer investment in the planned neighborhood.

Are installment bonds the way to go?

Despite council’s lack of a vote on how to pay for public utilities on the 165-acre property, members have been focused on using installment purchase revenue bonds. That’s a method of borrowing that school districts traditionally have used for new schools, Robertson has told council. But he said installment loans are becoming more common for municipalities.

Installment loans would be repaid using a series of short-term general obligation bonds, Palen said.

Wildman characterized the installment loan plan as “the equivalent of putting a mortgage on your house and making monthly payments with your credit card.”

She worries that money used to pay off the loan will siphon revenue from other city needs such as repairs in parks or roofs of public buildings.

“GO bonds,” as they are nicknamed, require much lower interest rates because they are secured with taxes and would appear to be a better deal for the city.

But Palen said the city does not have enough GO bonding capacity to borrow $57 million without raising property taxes. State law sets each municipality’s bonding capacity and bars exceeding that capacity without a public referendum approving more debt.

Palen said by issuing short-term GO loans to make payments on the installment purchase bonds, the city would remain below the legal debt limit and would be able to use slightly fewer tax dollars to meet payments throughout the life of the installment loan.

That holds true, Wildman counters, only if the city does not borrow more money for other projects or for ongoing expenses.

Long-term costs

The city of Columbia has committed to spending $86.1 million for public utilities and a year-round stadium in the proposed Bull Street neighborhood. City Hall will have to borrow money to keep those commitments. City Council has made no final decisions on exactly how it will come up with the money. But Columbia’s financial experts have projected the overall costs, including interest on the loans.

Utilities

$57.1 million

Commitments so far for utilities such as roads, water/sewer service, streetlights

$75.5 million

Interest over 30-year life of loan

$137 million

Total that taxpayers face to repay loan, interest and related costs

Stadium

$29 million

Commitment of public money toward a $35 million ballpark

$28.9 million

Interest over 30-year life of loan

$61.8 million

Total that taxpayers face to repay loan, interest and related costs

The State is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service