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HomeMy WebLinkAboutSBTD Extension Public Hearing 20260922Public Hearing on Extending the Tax Increment Financing (TIF) Provision of the South Bozeman Technology District Public Hearing Tax Increment Financing Provision Extension South Bozeman Technology District MSU Innovation Campus •2012: District Created and establishment of TIF Provision •Technology District •Encourage the location and retention of technology infrastructure development projects •Infrastructure Deficiency Delayed Projects •2017: Competitive selection of developer •Innovation Campus Partners / Charter Realty and Development •2022: Development Agreement with the City for Public Infrastructure •2026: Submission for Reimbursement South Bozeman Technology District Infrastructure Improvements •Developer Installs all the public infrastructure at its expense •Creation of new taxable value (Aurora, EngineWorks) •Reimbursement of developer for public infrastructure •No compensation for time value of money Tax Increment Provision 7-15-4292.Termination of tax increment financing -- exception. (1) The tax increment provision contained in an urban renewal plan or a targeted economic development district comprehensive development plan terminates upon the later of: a)the 15th year following its adoption; or b)the payment or provision for payment in full or discharge of all bonds for which the tax increment has been pledged and the interest on the bonds. Why 25 Years? •Longer term reduces repayment risk for the City. •Longer term lowers the yearly payment •Longer term increases debt service coverage ratio (DSCR) •Longer term reduces concentration risk •Maximum Term of Bond is 25 years. •25 years reduces risk for the city. What is Debt Service Coverage Ratio? •Measures the money you have to repay debt. •1.0 = exact amount •1.7 = $1.70 per dollar owned •Higher debt service coverage •Mitigates city repayment risk •Attract bond purchasers 5 Year Outlook •Big Sky Science Center 2029 – 40,000+ SF Biotechnology Lab •For next 4-5 years •Staff recommends minimal district activity •Accumulate cash to reduce risk •Keep district expenses to administrative costs •Monitor new tax generation •City Commission approves annual Work Plan and Budget •City Commission approves future development agreements •Staff does not recommend new development agreements prior to completion of Big Sky Science Center or similarly taxable project Suggested Motion I move to adopt a Resolution Determining that Fulfillment of the South Bozeman Technology District Comprehensive Development Plan Requires Pledging Tax Increment to the Payment of Bonds that will Extend the Termination of the Tax Increment Financing Provision Beyond the 15th Year. Resolution Authorizing Negotiated Sale •Private negotiated placement is the most cost-effective way to sell a smaller amount of bonds •Issuance of $3,894,000 •Funds a debt service reserve account •At least 1.7 debt service coverage required •25 year term •Reimburses the developer for public infrastructure