No. 0821 finding/determining that payments of property tax proceeds from the allocation fund to the respective taxing units shall not be authorized

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SPRINGSTED EXHIBIT A Public Finance Advisors 251 North Illinois Street, Suite 1510 Indianapolis, Indiana 462041942 317.237.3636 November 12, 1987 Mr. F. Jay Nimtz, President Members, Redevelopment Commission Mr. Jon R. Hunt, Executive Director Department of Economic Development City of South Bend 1200 County -City Building South Bend, Indiana 46601 RE: Passing Through Tax Increment or Incremental Valuation In recent amendments to I.C. 36- 7- 14 -39(b) and I.C. 36 -7- 15.1- 26(b), P.L. 393- 1987(ss) required redevelopment commissions to notify the County Auditor annually of the amount, if any, by which property taxes payable to the allocation fund in the following year exceed the amount of property taxes necessary to pay all obligations payable from the fund in that following year. That excess amount would be paid to the respective taxing units in which the allocation area is located. The amendments in this law also provide that the commission may not authorize a payment to the respective taxing units if to do so would endanger the interests of the holders of bonds payable solely or partially from allocation area taxes. The tax increment revenue bonds issued by the City of South Bend Redevelopment District in 1985 and 1986, and the bonds currently contemplated to be issued in 1988, are bonds payable solely from allocation area taxes. The holders of these bonds can look only to the tax increment revenue stream as security for their investment, since it is not permitted to levy any general obligation or special tax to support these issues. The holders of such pure revenue bonds have traditionally looked to a demonstrated annual excess of revenue over debt service, designated reserve funds, and the ability to accumulate funds from year to year as security against the risk that some unknown circumstance in the future may drastically reduce or eliminate their source of payment. Annual coverage ratios of 150% for tax increment revenue bonds are not uncommon, to guard against annual fluctuations in tax rates or tax delinquency patterns. A debt service reserve equal to the maximum annual debt service is very common to provide security in the event of major delays in collection, such as a breakdown in the county's computer system, resulting in a several month delay in producing and /or mailing tax statements. The ability to accumulate excess funds from year to year is looked upon as an additional security to protect against a more protracted revenue problem, such as a major decline in the number of taxpayers within the district. In such a case, the revenue shortfalls may not have been foreseen when the bonds were issued, but may begin, for example, ten years after issuance, and persist for several years thereafter, or throughout the remaining term of the bonds. Home Office W =sconsin Officc 85 East Seventh Place, Suite 100 500 Elm Grove Roac. Sint, 101 Saint Paul, Minnesota 551012143 Elm Grove, Wisconsin 531220037 6122233000 414.782 8222