HomeMy WebLinkAboutNo. 0821 finding/determining that payments of property tax proceeds from the allocation fund to the respective taxing units shall not be authorizedRESOLUTION NO. 821
A RESOLUTION OF THE SOUTH BEND REDEVELOPMENT
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
"Commission ") 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
REDEVELOPMENT 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 Series 1985 Bond Resolution created an Allocation
Fund in which certain property tax proceeds in excess of those
described in Section 39(b)(1) of the Act, from an Allocation Area
previously 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
WHEREAS, the Series 1985 Bond Resolution and the Series 1986 Bond
Resolution provide that such tax proceeds shall be held in trust for
the benefit of the holders of the Series 1985 and the Series 1986
Bonds and shall be applied, used and withdrawn only for the purposes
authorized in Section 5 of the Series 1985 Bond Resolution and the
Series 1986 Bond Resolution; and
WHEREAS, the Commission intends to issue additional Tax Increment
Revenue Bonds on parity with the Series 1985 Bonds and the Series
1986 Bonds pursuant to the provision of the Act and in accord with
Section 6 of the Series 1985 Bond Resolution and the Series 1986 Bond
CW Resolution; 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
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WHEREAS, said Section 39(b)(3)(B) further provides that the
Commission may not authorize a payment to the respective taxing units
if to do so would endanger the interest of the holders of Bonds
described in Section 39(b)(2) of the Act; and
WHEREAS, the Commission has received an opinion from its
financial consultant, Springsted, Inc., 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 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 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, that 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 November
12, 1987, in the offices of the Commission located on the Twelfth
(12th) floor of the County -City Building, 227 W. Jefferson Blvd.,
South Bend, Indiana 46601.
ATTEST
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Roman Piasecki, Secretary
SOUTH BEND REDEVELOPMENT COMMISSION
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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
EXHIBIT A
Mr. F. Jay Nimtz, President
November 12, 1987
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