The city is preparing to issue the most debt it has had at one time in at least the past 12 years.
On Monday, the Seymour Redevelopment Commission and Seymour City Council moved forward with the process of issuing $20.35 million in two bonds.
The largest will be for $18.35 million and will be used to fund several major upcoming city projects.
One of those costs is the city’s portion of construction for Phase I of the Burkart Boulevard southern bypass, which is $3.82 million. That bond also will reimburse the city for money spent to purchase property and engineering costs for the project, which total $5.2 million.
Another $3.5 million will be used to pay off the city’s 2018 debt for the southeast sewer interceptor project, $1.21 million for construction of a trail along East U.S. 50 (Tipton Street) and $1.7 million in matching funds for the state’s Community Crossings grant program, which helps the city repave local streets.
“It’s the biggest bond I’ve ever asked to be issued, but it does a multitude of different projects all in one, getting us a better interest rate and getting a lot of things done in the community,” Mayor Craig Luedeman said.
Other more minor expenses to be paid from the bond include $300,000 for engineering costs for Phase II of the southern bypass, $785,000 for lighting and sewer relocation for the U.S. 50 trail project, $230,000 for engineering costs for a roundabout at Fourth and O’Brien streets, $570,000 for the city’s portion of the One Chamber Square renovation and $817,410 in contingency costs. There also is a $175,000 cost to issue the bonds.
A second bond of $2 million will fund the purchase of emergency vehicles, including $1.45 million for a new firetruck and $390,000 for nine police cars. There is a $100,000 cost to issue that bond and $55,000 in miscellaneous costs.
Both bonds will be repaid by the redevelopment commission using tax increment financing revenue, which comes from established TIF districts in Seymour.
In a TIF district, tax money is captured from new industrial development or increased property values in the district and is set aside to fund infrastructure improvements and economic development.
Local residential property taxes will not be used and therefore will not increase as a result of the bonds. The bonds will have a tax backup, however, in order to get a better interest rate, said Richard Starkey, bond counsel with Barnes and Thornburg in Indianapolis.
“We have plenty of TIF to cover it, but the tax backup gives you a lower interest rate because it’s more secure,” Starkey said.
The $18.35 million bond will pay off in 20 years, while the $2 million bond will pay off in 10 years because the useful life of the vehicles is a lot less than the other projects.
Because the amount of the bonds puts the redevelopment commission over the state’s allowed 2% debt limit, the city is using a financing mechanism that allows the redevelopment commission to lease debt from the Seymour Redevelopment Authority, which will actually issue the $18.35 million bond next month.
The lease financing is not subject to the 2% debt limit because leases are not considered debt under Indiana law, Starkey said.
The $2 million bond will not be part of the lease but also will have a tax backup, he added. It will close and sell by the end of November.
The redevelopment commission will have a special meeting for a public hearing at 4 p.m. Nov. 11 on the lease as required by the state. Afterwards, the redevelopment authority will meet to approve the lease and issue the larger bond, which will close and sell by the end of December.
“We’d like to have it close this year just because interest rates are incredibly favorable right now, and we just don’t know what’s going to happen as we get into the first of the year,” Starkey said.
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Seymour 2019A Tax Increment Financing Bond
Total;$18,350,000
Uses:
Southeast sewer interceptor debt payoff; $3,500,000
Property reimbursement;$2,100,000
Engineering reimbursement;$3,100,000
Southern bypass Phase I;$3,816,000
Southern bypass Phase II (engineering); $300,000
U.S. 50 trail construction;$1,208,400
Lighting relocation;$425,000
Sanitary sewer relocation;$360,000
Community Crossings (road paving);$1,700,000
Fourth and O’Brien streets roundabout engineering;$230,000
One Chamber Square renovation;$570,000
Construction contingencies;$817,410
Cost to issue bond;$175,000
Bond placement agent fee;$45,875
Miscellaneous;$2,315
2019B TIF Bond
Total $2,000,000
Uses:
Firetruck;$1,450,000
Police cars;$390,000
Cost to issue bond;$100,000
Bond placement agent fee;$5,000
Miscellaneous;$55,000
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