Wheeling city officials want to refinance about $6.5 million in outstanding Tax Increment Financing debt, saying it will provide the city a financial safety net for the future.
The move would extend a portion of that debt that was to be retired by 2023 over a period of 10 additional years through 2033. But City Manager Robert Herron said doing so will free up about $392,000 per year that Wheeling can use to pay off other debt or help fund downtown development projects.
It also will provide some additional insurance as the city looks to maintain basic services for residents while dealing with looming issues such as pension obligations and uncertainty over future federal funding.
Tax increment financing is a tool that allows local governments to borrow money for development projects in a defined district, on the promise they will repay the debt with the proceeds from future gains in property tax revenue within that district.
Since City Council first established a TIF district in 2003, Wheeling has issued a total of about $7.97 million in bonds - $4.12 million in 2005 to redevelop the Stone Center; $715,000 in 2008 to purchase the now-demolished G.C. Murphy, Rite Aid and River City Dance Works buildings in the 1100 block of Main and Market streets; and $3.14 million in 2011 for various downtown projects.
A proposed ordinance calls for the city to consolidate its 2005 and 2011 bond debt under a single new bond issue due to be paid off by 2033 - the same year the 2005 debt was to be retired. The 2011 bonds currently are set to be paid off by 2023, while the 2008 bond issue was repaid in full a year early.
The city has spent about $1.4 million from the 2011 bond issue on projects, including $958,000 for additional property acquisition and demolition in the 1100 block, $300,000 to help Wheeling Jesuit University move its physical therapy program into the Stone Center and $140,000 for the purchase of a downtown parking lot which it hopes to market for development.
Future projects to be financed through the 2011 bond issue include a $500,000 renovation of Market Plaza and $200,000 for upgrades at the Capitol Theatre, with about $1 million still undedicated.
The total assessed value of property within the TIF district is $154.3 million, up from $100.8 million in 2003. The $53.5 million difference is what's known as the city's "increment", or the amount of increased valuation from which the city can use tax revenue to repay its TIF debt.
Although TIF allows cities to incur debt based on expected gains, Herron said Wheeling has taken a more cautious approach.
"We do not rely on future increment for any type of financing," he said, noting the city in its three previous bond issues has financed only what it could afford to repay even if property values remain flat.
In fact, Herron said, if City Council approves the refinancing, the city would be able to absorb a cumulative reduction in value of $13 million within the TIF district and still meet all its debt obligations.
That could be particularly important in the face of potential skyrocketing flood insurance premiums under a federal law passed last year to shore up the FEMA-run National Flood Insurance Program. Much of Wheeling's TIF district is along the Ohio River, where higher premiums could have a negative impact on property values unless Congress acts to delay the increases.
"All the more reason to create as much flexibility as possible," Herron said.
Herron said refinancing also would guard against any major reduction in Wheeling's annual Community Development Block Grant entitlement through the U.S. Department of Housing and Urban Development. Wheeling spends about $180,000 of its CDBG allocation each year to pay off the roughly $1.38 million it still owes on a $2.25 million Section 108 loan it obtained through HUD in 2005 to bring the Lowe's store to Center Wheeling. That debt is scheduled to be retired by Aug. 1, 2020.
Because the city cannot stockpile its TIF surplus from year to year, it's likely most of the additional $392,000 made available through the refinancing will go toward debt reduction, Herron said.
Mayor Andy McKenzie and Vice Mayor Eugene Fahey, sitting as City Council's Development Committee, approved the refinancing. A third member, Councilwoman Gloria Delbrugge, was absent.
If all goes according to schedule, City Council would hear first reading of the debt-consolidating legislation Dec. 17 and vote on it during a special meeting before the end of year.
Cities can issue up to $10 million in tax-exempt bonds per year under West Virginia law, so getting the refinancing done prior to Dec. 31 would allow Wheeling to have the bonds count against its 2013 total - retaining full flexibility should any major development opportunity surface in 2014, Herron said.