New financial projections suggest the Carmel Redevelopment Commission will have enough annual revenue to pay its debts for the next 15 years before dipping into reserves.
But property taxes from the city’s two-dozen TIF districts could fall more than $1 million short as soon as next year—something City Council member Rick Sharp says is cause for alarm.
Municipal-finance adviser H.J. Umbaugh & Associates estimates the CRC will collect about $18 million in so-called tax increment in 2015, applying all of it to debt payments that total $19.1 million. The difference—plus about $630,000 that’s being called a “surplus”—is expected to come from other, much smaller income streams.
According to the analysis, prepared at the commission’s request, total revenue should exceed debt obligations by at least six figures every year until 2029, when the redevelopment areas begin to expire and tax revenue drops by $10 million a year.
By then, the CRC should have more than $27 million in a “special reserve” fund the Carmel City Council mandated in 2012, when it refinanced $184 million in redevelopment debt. More than $1.9 million a year is expected to flow into the account from an existing TIF district that is about to retire its debt.
CRC President Bill Hammer said the report shows the commission is capable of meeting its obligations, avoiding a citywide special-benefits tax that would kick in if it missed a payment. The extra property tax was offered as a belts-and-suspenders fallback to get a better bond rating in 2012, he said.
“We never really intended to use that as the first source of payment,” he said. “And we think that given the projections of today, it will never happen.”
He praised the City Council’s “great foresight” in establishing the reserve fund to cover any future shortfalls, adding that the agency has adjusted its spending plan to conserve cash and found additional savings by refinancing more bonds this year.
Sharp appreciates the kudos, but the former council president is concerned about tax proceeds failing to keep pace with debt—to the tune of an estimated $43 million by 2037. The more other revenue goes to bond payments, he said, the less the CRC has to do its redevelopment work.
“Are we folding up shop? Are we done?” Sharp asked. “If that’s the case, I can accept looking at the debt versus total revenue. Otherwise, the only prudent thing to do is look at TIF revenue.”
And the message there?
“It was a mistake to go right up to the edge of the cliff,” he told IBJ.
During the meeting, Hammer called the revenue estimates conservative, saying officials are confident the targeted areas "will continue to attract a great deal of private development."