The Unified Government Commission will vote Thursday on issuing $74 million in sales tax revenue (STAR) bonds for the new auto mall plaza near 98th and Parallel Parkway.
Commissioners heard Monday night at the Economic Development and Finance Standing Committee meeting that the original plan for one bond issue for the auto mall area has now been split into two parts and will be two separate bond series.
Besides part of the auto mall plaza at 98th and Parallel, this bond issue up for approval on Thursday night also includes the original Schlitterbahn waterpark at 94th and State. The auto mall area includes some pads that may be used for a convenience store and other small retail developments.
“The request is to split that area 2 (the proposed auto mall area) into 2a and 2b,” George Brajkovic, UG economic development, said. “The reason for that is there are favorable bond market conditions now, and the developer doesn’t have some of these projects in a state where they’re ready to move forward with that financing. So we have a large portion ready to go, and that’s why from a staff level we’re supporting making that split.”
Originally, the bond issue was not to exceed $95 million, and was for the entire auto mall area.
The first bond series, at $74 million, now would include $63 million of reimbursement for project expenses for the developer, plus $930,000 to the UG for a new traffic signal at 98th and State and improvements to Marshall Creek sewer interceptor, said Lew Levin, UG chief financial officer. A subordinate series would pay for $10 million of street costs to the UG.
The bond issues for the new development areas have some interesting features. Levin said there are about $650 million of retail sales at Village West and The Legends area currently, and the local and state sales taxes will remain with the community. “What is being pledged under this scenario is future growth in that base,” Levin said.
Some sales tax funds are coming from Village West, where the STAR bonds used to build The Legends project have almost worn off. Levin said funds in excess of the current sales tax revenues will be applied toward the new U.S. Soccer training center development.
The Vacation Village STAR bond project (started for Schlitterbahn about seven years ago) was increased last year to add development projects including the U.S. Soccer training center, Dairy Farmers of America headquarters building project, and the auto mall.
The first bond series currently being considered for the auto mall will be backed by project revenues, Levin said. A $1.3 million sales tax base is based on the first $15.5 million in sales, and the $1.3 million is split between the state and local government, according to Levin. The local EMS and dedicated sales tax would still go to the UG.
The second series will have additional backing with annual appropriation backing, he said. Any excess revenue after paying the debt service on the first series will go toward paying debt service on the second series, he said. Also, the UG has negotiated with the state, and of the $15.5 million base, the state is pledging a percentage of $10 million, equivalent to $650,000, he said. The UG is also pledging a portion of the base, he said.
Those funds would be held in reserve to cover the debt service payment on the second series if there is a shortfall from excess revenue from the first series.
“That gives us confidence that we’re not going to have to use our annual appropriation backing,” he said. If not used, the funds would be distributed back to state and local general funds, he said.
Commissioner Hal Walker asked what would happen, for example, if a furniture competitor opened in Johnson County, steals business from the Village West area, and the sales tax diminishes.
Levin said the UG is not backing the U.S. Soccer STAR bonds, which are receiving these incremental amounts of tax, and those U.S. Soccer STAR bonds are solely backed by project revenues. Any shortfalls would be to the detriment of the bond holders, he said. The sale of those U.S. Soccer bonds is scheduled to occur Aug. 11, and close in about two weeks, he added. The risk would be on the bond holders who are investing, and not on the UG, according to UG officials.
The bonds for the auto mall project now go to the full UG Commission on Thursday for a public hearing and a vote.