Park Ridge hopes to save up to $1.8 million over the next nine years by refinancing some of the debt incurred to redevelop its downtown.
Aldermen on Monday unanimously approved the first of two formal votes authorizing the city to issue new debt of between $16.4 million and $17 million so it can refund bonds issued in 2005 and 2006.
Officials said the refinancing will save from $1.3 million to almost $1.9 million, depending upon interest rates and other factors.
“By all accounts, under any of these scenarios, this is a refinancing worth doing,” said the city’s bond adviser, John Peterson of William Blair and Co.
Officials said aldermen will have to choose a savings option before March 2. City Manager Shawn Hamilton said on Tuesday that he will likely ask them to decide during the Feb. 17 budget workshop, when the city’s debt is on the agenda.
The city still owes $6,705,000 and $7,925,000 in principal on two different bonds used to pay for infrastructure improvements in the Uptown Tax Increment Financing district.
The 12-year bonds issued in 2006 are due now, while the 20-year bonds issued in 2005 that can be refinanced this year because they’ve reached their 10th “anniversary.”
Aldermen unanimously gave the refinancing plan their preliminary approval on Jan. 26, as the City Council’s informal committee-of-the-whole.
Refinancing the 2006 bonds was an option first mentioned in December, when Hamilton said the city could save about $200,000 annually over their remaining four years by either issuing new debt or getting a bank loan to pay them early. At the time, aldermen asked for more information while some said they were uneasy with the comparative lack of public transparency for a bank loan versus selling new debt.
But they signaled an endorsement of an early payoff when they factored that savings into the 2014 combined city/library property tax levy of $21.7 million, abating $200,000 in property taxes that would have gone toward the bonds’ debt when they approved the levy on Dec. 16.
That delay actually worked to the city’s advantage since that meant the 2005 bonds could also be refinanced and the two sets could be packaged together, saving administrative costs, Hamilton said.
Hamilton said other sets of TIF bonds will become eligible for refinancing in coming years, starting next year with two other sets of bonds issued in 2006.
Officials have said the Uptown TIF district’s soaring debt was the driving factor of the 22 percent jump in the combined levy. Of the more than $3.9 million increase from the 2013 levy, $2 million is slated to pay that debt.
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Aldermen were warned in March 2014 that Uptown TIF costs will increase by an average of $400,000 in six of the next eight fiscal years because the district cannot support its debt from its own property tax base – a difference that must be paid by general property tax revenue.
In a TIF district, property values are frozen. Taxes above that level can be used to borrow against or pay for public infrastructure improvements, land acquisition and other allowed costs.
Under most circumstances, TIF districts expire after 23 years or when their debt and other obligations are paid off, whichever comes first.
The Uptown TIF district was created in September 2003. TIF-backed debt was issued from 2004 through 2006, and was projected to be paid off by 2027.