Adams Dairy Landing developer wants Blue Springs to back bonds

The developer behind the ambitious retail project Adams Dairy Landing has asked the city to consider backing bonds for street improvements within and surrounding the project.

Dan Lowe, a spokesman with RED Development, asked the Blue Springs City Council Monday to consider the request, which would allow the city to back the bonds and to apply its credit to enhance them.

“We’ve experienced tremendous success in capturing tenants,” Lowe said, “but today’s bond market is difficult.”

Businesses who have signed leases or who are on the list to sign include Target, Lowe’s, Kohls, Books-A-Million and other shops. Lowe said the project is about 90 percent committed to. Only Target has a scheduled opening date of October 2009, with remaining tenants opening in the first quarter or summer of 2010.

By pledging support, the city could issue a first series of bonds for $13.9 million. The first issuance would be used to reimburse RED for off-site road improvement costs, which according to RED are critical in keeping those tenants who have signed and others who plan to.

But there’s risk, according to city officials.

Should tax increment financing, or TIFs, from Target and three existing transportation development districts, or TDDs, not meet consultants’ estimates, the city would be responsibile for making up the difference, according to the city.

City staff estimates that revenues could be short by up to an average of 41 percent but still produce enough revenue to cover the debt service on the bonds. Two debt service reserve accounts would also be created to protect against declines in revenue over the life of the bonds.

TDDs are designed to initiate and fund public transportation improvements through a collection of taxes and borrowing of funds.

Those businesses participating in the TDDs include Wal Mart, which plans to enact an additional half percent sales tax soon; Home Depot, which enacted a half cent sales tax and plans to add another half percent; and businesses within the Coronado Place development and Meiner’s Market, all of which have enacted their 1 percent sales tax.

By backing the bonds, underwriters could use the city’s credit rating when they sell bonds. The partial bond issuance  would also allow RED to continue to borrow money from its principle lender, Hillcrest Bank, which recently indicated it had reached its lending limit for this project.

Council members Ron Fowler and Sheila Solon expressed their concern that by backing the bonds, Blue Springs was changing its policy and setting a dangerous precedent.

“This can be called a backstop, which the taxpayers would be responsible for,” Fowler said. “The bank doesn’t want to loan on this, nor do they think the backing of Wal-Mart and Home Depot cash registers is good enough.”

Solon agreed.

“The city isn’t a bank,” she said.

“They are coming to us to back their bonds without collateral being offered. This is a bail out.”

Solon said Kansas City backed bonds for the Power and Light District, but with lagging sales tax, it’s become difficult to repay the bonds. These are hard economic times. We should learn from their mistakes.”

Lowe said there is a difference between Blue Springs and Kansas City, most notably in that Kansas City agreed to back bonds before any tenants agreed to locate in the district.

“In my opinion your comments may be a bit half-baked and certainly aren’t on target,” Lowe said.

Council Member Kent Edmondson said it’s important to weigh pros and cons. He said the city can expect (and currently enjoys) road improvements in the area.

“And we also get jobs,” he said.

Lowe said he estimates that the development would, once completed, create 1,600 new jobs; produce a total of $69 million in property, personal property and sales tax revenues for all taxing districts over the life of the TIF; and it would stop the estimated $364.6 million in sales leakage to surrounding cities.

Council Member Lyle Shaver said he typically doesn’t support a policy change, “but this is an exception.

“Once you lose momentum, it never gets back to where it was,” he said. “I’m reluctantly supporting this.”

Lowe said if the city decides not to back the bonds, the project could be jeopardized. He said construction could stop.

“And those who have expressed interest (in coming to the parkway) could terminate that interest, their lease,” he said.

Council Member Jeanie Lauer said the city has a responsibility to look at the bigger picture. She said the city has a responsibility to help with job creation.

By a vote of 4-2, city staff was directed to prepare documents related to the proposal. It’s unknown at this point when City Council will vote on it.