|
City Attorney Bill Bates led the
opening discussion. He warned that this isn't something that will
get done quickly. "There's a lot of issues which I do not have
answers to," he said. As legal counsel to the city he recommends
caution and close examination before the city commits to such a
large sum of money.
The developer, Diversified Acquisition
LLC, is requesting that the city fund $665,000 of the $1
million-plus project.
Goody's
Plaza project costs
| Traffic signal |
$155,000.00 |
| New facade, storefronts |
225,000.00 |
| Parking lot reseal, re-stripe |
20,000.00 |
| Dollar Tree -- tenant finish |
175,000.00 |
| Goody's -- tenant finish |
475,000.00 |
| Legal and administrative |
50,000.00 |
| Commissions paid to tenant
representatives |
65,000.00
|
| Total cost |
$1,165,000.00 |
| Funding request from city |
$665,000.00 |
| Developer contribution |
$500,000.00 |
A table was provided with the proposal
by the developer calculating the payback of the loan. It used the
estimated sales tax revenue against the principal and interest on
the loan.
That chart, however, was based on a
mistaken figure of 1.75 percent sales tax revenue to pay back the
loan. The city receives only 1 percent sales tax revenue at present.
Sales tax revenue will go to 1.5
percent after the first of the year, but 0.5 percent is earmarked
for infrastructure development only (streets, sidewalks and the
like). So the 0.5 percent will not affect this project. Only 1
percent can be used for the loans.
Bates explained that there are a number
of issues to look into with this project. Some are "ifs." Such as
the developer believes that if the city could make an
ordinance declaring the area a "Business District," then they
could get certain types of financing. Alternate bonds will have to
be sold in order to meet the terms. These are not tax-free bonds.
Alternate bonds would be issued for the
amount the city agrees on as the "Project Fund." If they agree to
finance the project with $665,000, then a 10 percent debt service
($66,500) is added to it.
An initial contact with the financial
company that the city typically works with, First Midstate, did not
result in an affirmation of the "Business District" information.
They are still looking into it.
City Treasurer Les Plotner ran
projections on the estimated retail sales tax income figures.
Ten-year projected sales tax revenue
from Goody's and Dollar Tree
First-year sales: $5,800,000.00; Goody's at $3.6 million and Dollar
Tree at $2.2 million
|
Year |
3%
growth |
Estimated
retail
sales |
Sales
tax
rate |
Tax
revenue |
| 2004-05 |
First year |
$5,800,000 |
1% |
$58,000 |
| 2005-06 |
$174,000 |
$5,974,000 |
1% |
$59,740 |
| 2006-07 |
$179,220 |
$6,153,220 |
1% |
$61,153 |
| 2007-08 |
$184,596 |
$6,337,816 |
1% |
$63,378 |
| 2008-09 |
$190,134 |
$6,527,950 |
1% |
$65,279 |
| 2009-10 |
$195,838 |
$6,723,788 |
1% |
$67,237 |
| 2010-11 |
$201,713 |
$6,925,501 |
1% |
$69,235 |
| 2011-12 |
$207,765 |
$7,133,266 |
1% |
$71,332 |
| 2012-13 |
$213,998 |
$7,347,246 |
1% |
$73,472 |
| 2013-14 |
$220,418 |
$7,567,664 |
1% |
$75,676 |
|
Totaling $664,502 |
At 1 percent sales tax, the estimated $5.8 million retail with a
projected 3 percent per year growth would accumulate to $664,502.
Running the retails sales estimates out one more year gives:
| 2014-15 |
$227,029 |
$7,794,694 |
1% |
$77,947 |
|
For a total $742,449 |
The sum of the principal ($734,278) and
interest ($285,543) on a $665,000 loan at 6.25 percent is
$1,019,822. This does not include the 10 percent debt service.
[to top of second column in this
article] |
Summary:
The first year the businesses are
expected to have $5.8 million in retail sales. At 1 percent sales
tax the estimated $5.8 million retail with a projected 3 percent per
year growth accumulates to $664,502. At the end of the suggested
10-year period the revenue will still fall short of the principal on
the loan repayment if the full 1 percent sales tax is used. So it is
going to take longer than 10 years. There will be new estimates
formulated.
Then there is the matter of protecting
the city from debt liability, should things not work out for the
stores. Diversified has said that they or the stores occupying the
space will guarantee repayment of the portion of the bonds not
related to the traffic light. This is saying that if the stores pull
out before the loans are repaid, they will pay for the remaining
amount owed except for the estimated $155,000 traffic signal.
Bates cautioned that a close look needs
to be taken to be certain this covers the full debt, including
accrued principal and interest and the 10 percent debt service.
On the upside, Bates pointed out that
there are other financial considerations when you look at the whole
impact on business here. It could result in positive growth beyond
what these businesses will bring in.
Right now sales taxes would need to
increase by 125 percent over what we are currently bringing in to
support the project. It is possible that the sales taxes that these
businesses and the ones that they may draw in will cover this. Not
only that, but there could be a number of other revenue increases if
a new "Business District" were to take hold, such as increased
property assessments and thereby more property taxes.
The
general responses from the council were favorable toward continuing
pursuit of this project.
Glenn
Shelton: “I'm in favor of Goody's and Dollar Tree. I heard the
developer say that this proposal is “just a starting point” and that
it's open to negotiation. Let's see if we can do this and look at it
from a negotiation standpoint. If we need to negotiate, let's
negotiate.”
Dave
Armbrust: Would like to discuss sales tax percentage needed to repay
bond issue.
Verl
Prather: Feels this is negotiable, would like to look closer.
Steve
Fuhrer: Favorable to sorting this out and moving on it in accordance
with what the people of Lincoln think.
Mayor
Beth Davis: In favor of the possibilities.
Fuhrer
spoke on behalf of the council, requesting that citizens contact
their alderman or any other alderman to express their feelings on
this project. What the people of Lincoln think is really important
in this matter.
Lincoln City Council
- Mayor Elizabeth Davis, P.O. Box
353, Lincoln, IL 62656; 735-3912
- Benny Huskins, 1st Ward, 412 N.
Madison St., Lincoln, IL 62656; 732-3894
- Pat Madigan, 1st Ward, 110 Park
Place, Lincoln, IL 62656; 735-3724
- Steve Fuhrer, 2nd Ward, 1203
Eighth St., Lincoln, IL 62656; 732-6679
- Verl Prather, 2nd Ward, 700
Broadway St., Lincoln, IL 62656; 732-4778
- David Armbrust, 3rd Ward, 700
Broadway St., Lincoln, IL 62656; 732-4261
- Jonette "Jonie" Tibbs, 3rd Ward,
1650 Pulaski St., Lincoln, IL 62656; 732-8332
- Orville "Buzz" Busby, 4th Ward,
220 Peoria St., Lincoln, IL 62656; 732-7935
- Rev. Glenn Shelton, 4th Ward, 920
Pekin St., Lincoln, IL 62656; 732-8749
- Derrick Crane, 5th Ward, 540
Maywood, Lincoln, IL 62656; 735-4726
- Martha "Marty" Neitzel, 5th Ward,
525 Southgate, Lincoln, IL 62656; 732-9320
[Jan
Youngquist] |
