HomeMy WebLinkAboutNo. 0851 finding/determining that payments of property tax proceeds from the allocation fund to the respective taxing units shall not be authorizedRESOLUTION NO. 851
A RESOLUTION OF THE SOUTH BEND REDEVELOPMENT
err COMMISSION FINDING AND DETERMINING THAT PAYMENTS OF
PROPERTY TAX PROCEEDS FROM THE ALLOCATION FUND TO THE
RESPECTIVE TAXING UNITS SHALL NOT BE AUTHORIZED
WHEREAS, the South Bend Redevelopment Commission (the "Commis-
sion") on the 23rd day of August, 1985, adopted a Resolution entitled
"A RESOLUTION OF THE SOUTH BEND REDEVELOPMENT COMMISSION AUTHORIZING
THE ISSUANCE OF TAX INCREMENT REVENUE BONDS FOR THE PURPOSE OF
RAISING MONEY FOR PROPERTY ACQUISITION AND REDEVELOPMENT IN THE SOUTH
BEND CENTRAL DEVELOPMENT AREA" (the "Series 1985 Bond Resolution ")
authorizing the issuance of "Tax Increment Revenue Bonds of 1985"
(the "Series 1985 Bonds ") pursuant to I.C. 36 -7 -14 (the "Act "); and
WHEREAS, the Commission on the 23rd day of May, 1986 adopted a
Resolution entitled "A RESOLUTION OF THE SOUTH BEND REDEVELOPMENT
COMMISSION AUTHORIZING THE ISSUANCE OF BONDS ON PARITY WITH THE CITY
OF SOUTH BEND REDEVELOPMENT TAX INCREMENT REVENUE BONDS OF 1985 FOR
THE PURPOSE OF RAISING MONEY FOR PROPERTY ACQUISITION AND REDEVELOP-
MENT IN THE SOUTH BEND CENTRAL ALLOCATION AREA" (the "Series 1986
Bond Resolution ") authorizing the issuance of "Tax Increment Revenue
Bonds of 1986" (the "Series 1986 Bonds ") pursuant to the Act and as
provided for in Section 6 of the Series 1985 Bond Resolution on a
parity with the Series 1985 Bonds; and
WHEREAS, the Commission on the 12th day of November, 1987,
adopted a Resolution entitled "A RESOLUTION OF THE SOUTH BEND REDE-
VELOPMENT COMMISSION AUTHORIZING THE ISSUANCE OF BONDS ON PARITY WITH
THE CITY OF SOUTH BEND REDEVELOPMENT DISTRICT TAX INCREMENT REVENUE
BONDS OF 1985 AND THE CITY OF SOUTH BEND REDEVELOPMENT DISTRICT TAX
INCREMENT REVENUE BONDS OF 1986 FOR THE PURPOSE OF RAISING MONEY FOR
PROPERTY ACQUISITION AND REDEVELOPMENT IN THE SOUTH BEND CENTRAL
ALLOCATION AREA" (the "Series 1988 Bond Resolution ") authorizing the
issuance of "Tax Increment Revenue Bonds of 1988" (the "Series 1988
Bonds ") pursuant to the Act and as provided for in Section 6 of the
Series 1988 Bond Resolution and the Series 1986 Bond Resolution on a
parity with the Series 1985 Bonds and the Series 1986 Bonds; and
WHEREAS, the Series 1985 Bond Resolution created an Allocation
Fund in which certain property tax proceeds in excess of those des-
cribed in Section 39(b)(1) of the Act, from an Allocation Area pre -
viously created by a declaratory resolution of the Commission, in
accord with the Act, would be deposited to be used by the Commission
for the purposes provided for in Section 39(b)(2) of the Act; and
-1-
WHEREAS, the Series 1985 Bond Resolution, the Series 1986 Bond
Resolution and the Series 1988 Bond Resolution (collectively referred
to hereafter as the "Bond Resolutions ") provide that such tax pro-
ceeds shall be held in trust for the benefit of the holders of the
Series 1985 Bonds, the Series 1986 Bonds and the Series 1988 Bonds
and shall be applied, used and withdrawn only for the purposes
authorized in Section 5 of the Bond Resolutions; and
WHEREAS, the Commission may issue additional Tax Increment Reve-
nue Bonds on parity with the Series 1985 Bonds, the Series 1986 Bonds
and the Series 1988 Bonds pursuant to the provisions of the Act and
in accord with Section 6 of the Bond Resolutions; and
WHEREAS, Section 39(b)(3)(B) of the Act provides that before July
15 of each year, the Commission shall notify the County Auditor of
the amount, if any, of the property tax proceeds as described in
Section 39(b)(1) of the Act that the Commission has determined may be
paid to the respective taxing units as provided for in said Section
39 (b) (1) of the Act; and
WHEREAS, said Section 39(b)(3)(B) further provides that the Com-
mission may not authorize a payment to the respective taxing units if
to do so would endanger the interest of the holders of Bonds des-
cribed in Section 39(b)(2) of the Act; and
WHEREAS, the Commission has received an opinion from its finan-
cial consultant, Springsted, Incorporated, that states that the
authorization of payment of such tax proceeds to the respective
taxing units would endanger the interest of the holders of the Series
1985 Bonds, the Series 1986 Bonds, the Series 1988 Bonds and other
Bonds issued on a parity with such Bonds, a copy of which opinion is
attached hereto, made a part of this Resolution and marked as Exhibit
"A".
NOW THEREFORE, BE IT RESOLVED, by the South Bend Redevelopment
Commission as follows:
SECTION 1. The Commission hereby finds and determines that the
authorization of payments to the respective taxing units pursuant to
Section 39(b)(3)(B) of the Act would endanger the interest of the
holders of the Series 1985 Bonds, the Series 1986 Bonds, the Series
1988 Bonds and other Bonds issued on parity with such Bonds.
SECTION 2. The Commission hereby finds and determines that, in
accord with Section 39 (b) (3) (B) of the Act, no such payment shall be
made.
SECTION 3. The Secretary is directed to provide a certified copy
of this Resolution to the County Auditor.
Adopted at a regular meeting of the Commission held on July 8,
-2-
1988, in the offices of the Commission located at 1200 County -City
Building, 227 W. Jefferson Blvd., South Bend, Indiana 46601.
ATTEST:
14
Roman Piasecki, Secretary
SOUTH BEND REDEVELOPMENT COMMISSION
-3-
RE: Passing Through Tax Increment or Incremental Valuation
Recent amendments to I.C. 36- 7- 14 -39(b) and I.C. 36 -7- 15.1- 26(b), require
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. 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, 1986 and 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: Wisconsin Office:
85 East Seventh Place, Suite 100 500 Elm Grove Road, Suite 101
Saint Paul, Minnesota 55101-2143 Elm Grove, Wisconsin 531220037
612.223.3000 414.782.8222
Fax: 612.2233002 Fax: 414.782.2904
SPRINGSTED
PUBLIC FINANCE ADVISORS
251 North Illinois Street, Suite 1510
Indianapolis, Indiana 46204.1942
317.237.3636
Fax: 317.237.3639
7 July 1988
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
Recent amendments to I.C. 36- 7- 14 -39(b) and I.C. 36 -7- 15.1- 26(b), require
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. 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, 1986 and 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: Wisconsin Office:
85 East Seventh Place, Suite 100 500 Elm Grove Road, Suite 101
Saint Paul, Minnesota 55101-2143 Elm Grove, Wisconsin 531220037
612.223.3000 414.782.8222
Fax: 612.2233002 Fax: 414.782.2904
Mr. F. Jay Nimtz, President
7 July 1988
Page 2
In such a circumstance, the accumulation of excess funds may permit the early
redemption of the issue several years prior to maturity, thus protecting the
bondholder against the unknown risks of holding the bonds in the later years
of the issue.
It is our opinion, based on our experience as financial advisor on
approximately 200 bond issues per year, and as specialists in the area of tax
increment financing, that with respect to tax increment revenue bonds secured
solely by tax increment revenue, any payment of tax increment revenue to the
respective taxing units prior to the accumulation of sufficient funds to
defease outstanding bond issues, does endanger the interests of the holders
of those bonds. The endangerment is caused by a reduction in the resources
and security which would otherwise be available to the bondholders as
protection against risks such as were described in the preceding paragraph.
Respectfully submitted,
SPRINGSTED Incorportaed
r