This bond sale, which will close on March 20, was “really the linch-pin to make the rest of it go,” Brossart said.
“It’s the hardest debt to place,” agreed Greg Daniels, the Columbus attorney who represents the community authority.
The authority early last year authorized the sale of tax-increment financing (TIF) bonds, plus another group of subordinate TIF bonds that were to be backed by special assessments to be placed on the project.
“A purchaser of the bonds has been identified,” Daniels told the panel before it made the adjustment. “They wanted a slightly different structure, though. What they wanted is to buy both the senior and subordinate bonds … combined as one, in order to get tax-exempt treatment for them all.”
The board voted 5-0, with two Spooky Nook officials not present, to make that happen. Originally, the bonds were going to finance only “Mill 1”, the former Champion Paper mill building located west of B Street. Now, they will be used for both Mill 1 and Mill 2, which is the one between B Street and the Great Miami River.
Also, the authority previously had decided the subordinate TIF bonds should be able to be “called” by the city no later than 10 years after the bonds were issued. When bonds are called, they are bought back by the seller, who pays accrued interest to that point and stops paying interest after that point. The buyer didn’t want the subordinate TIF bonds to be able to be called.
In another change, the investment company wanted to stipulate that if the project does not get built as expected, and is not valued by county appraisers at the amount as high as now estimated, it wants the ability to convert the subordinate TIF bonds back into taxable bonds, Daniels said.
“This investor wants to shift it over, all be tax-exempt,” Daniels said. “But they want the ability to shift it back (to taxable) if the project doesn’t get built as expected, and that just protects their interests, in terms of being able to get repaid.”
With TIF bonds, local governments dedicate future property taxes that will be paid to assist development projects, such as Spooky Nook. If the project’s valuation is not high enough, there would not be enough property taxes to be diverted to repay the bonds.
The tax-exempt bonds are to be repaid using special taxes based on the assessed value of the sports complex, which is to open in late 2021. Daniels said the valuation necessary to reap the tax amounts needed to repay the bonds is between $15 million and $25 million less than officials believe the auditor’s office will value the project, “so we feel safe.”
An advantage to the authority, Daniels said, is tax-exempt bonds have lower interest rates than having some of the bonds be taxable. Daniels and Brossart said rather than an interest rate officials expected earlier of 7 percent or 8 percent. Now, it will be below 6 percent, they said.