This Redevelopment Plan Makes a Poor Christmas Gift
by David Penticuff
Like too many others, my community and its associated agencies, plus the county’s redevelopment commission, continue to borrow money to pay off previously borrowed money in an attempt to stay ahead of default, a richly deserved default.
It is beyond parody. Fiction writers would have such a story rejected on the face of its incredulity. Someone, someplace in local government surely must have the fortitude to say we are wrecking ourselves financially — to the point that taxes will be absorbingly high for our grandchildren, who, in the middle of the century, will still be paying off misspent bond issues that never created the projects that they were imposed on taxpayers to create.
In fiction — at least the believable kind — someone gets fired, demoted or in trouble with the law for actions such as this. The citizens who expose officials seeking self gain through the malpractice of their public service are vindicated.
Well, this is the real world. Instead, the redevelopment commission votes unanimously to pledge public funds to repay two new sets of bonds, whose proceeds will pay off three Bond Anticipation Notes (BAN).
These are a type of short-term loan intended to be repaid through the proceeds of development. My county took out a total of more than $9 million in such notes in 2009, 2010 and 2011 to jump-start various projects, many of which failed to launch.
Because they failed to get off the ground, tax revenue from those projects never materialized and the money to pay off the BANs doesn’t exist. So, holding our nose and borrowing long-term was likely the only viable choice to avoid default — though a modicum of good government would have prevented such a breakdown.
Exactly how much of the money was spent remains an open question since the records for many expenditures are unavailable at this writing. We do know that a politically connected relative got at least some of the money to help create a park downtown and the contract for work on refurbishing an old YMCA there into a boutique hotel, a project never finished.
And because the transaction has not been completed, details on the two long-term bond issues, including their amount, the interest rates or the repayment schedule, have not yet been released. A city consultant anticipates a mid-December closing date. Our city development director says each of the three bond anticipation notes will come due in January or February.
To summarize, at the end of 2012, my county’s outstanding debts totaled $31.3 million, with the three bond anticipation notes comprising $9.2 million, or about 30 percent, according to the latest state audit.
To repay this, our redevelopment commission members approved a resolution that pledges tax increment financing (TIF) revenue to pay “all principal and interest” on two new revenue bonds. TIF revenue is a type of property-tax revenue that can be diverted from local governments — in this case, my county — to fund development.
That’s yet more money going to keep my city out of the poorhouse rather than to create economic growth.
Merry Christmas taxpayers. At least a lump of coal would have kept us warm for a time.
David Penticuff is editor of the Marion Chronicle-Tribune. A version of this article was published as an editorial in the Dec. 8th edition of his newspaper.