Independence's City Council and city staff agree – an audit of much-maligned “Bass Pro TIF” is a good idea, particularly since the city wants to refinance the project bonds again soon.
The council Monday directed the city manager to find an outside auditor for a compliance audit of the Falls at Crackerneck Creek tax increment financing district, the commercial development including and surrounding Bass Pro Shop near Interstate 70 and Missouri 291.
The development, which started a couple years before the 2008-09 recession, had been financed with city-backed bonds and quickly became a millstone around the city's neck as tax revenues from the project failed to cover bond payments. The city covered bond payments to maintain its credit rating, but that zapped millions of dollars from the general fund.
Since the latest refinancing four years ago, though, the city has not had to make a bond payment from the general fund. Bryan Kidney, director of finance and administration, said the goal of any upcoming refinance deal would be to keep it that way.
“Interest rates are as low as they've been since World War II, so thought it would be a good time that maybe we had audit and see where all this money's going,” Council Member Mike Huff said in seeking council support. “This was supposed to be a revenue generator and not a liability.”
Besides Bass Pro Shop, the development includes Mardel, Hobby Lobby and Duluth Trading Co. stores, Cheddar’s, Pizza Ranch and Los Cabos restaurants and Stoney Creek Hotel & Conference Center that have been added over the years.
“This is a TIF that underperforms, but we have refinanced several times that allowed us to stop the bleeding in the present tense,” City Manager Zach Walker. “We have some balloon payments coming up that are just not realistic with the revenues. This audit would be a good precursor on how we can best manage and mitigate our losses.”
The city had also had refinanced bonds in 2013. When Kidney's predecessor, Brian Watson, informed the council in 2015 he had refinanced five of the seven bond series, he said the city would have faced an average of $3.5 million debt payment through 2029.
The entire city manager's office and City Council have changed over since the city put together the tax financing deal in 2004. Walker has said Independence's deal and subsequent result have led other metro area cities to shy away from similar development deals.
“When the mayor and I came on the council (in 2012), we pushed for a refinance,” Council Member Curt Dougherty said. “We knew we couldn't predict the future as far as real estate, so it was a short-term fix. If we were going to borrow the money, we're going to have to do this (audit) anyways.”
As opposed to a financial audit, which would give an opinion on the financial statements as a whole, Kidney said, the proposed compliance audit would include all the various transactions associated with the TIF, making sure they're all in good within the various rules and contracts. The development area also includes the Crackerneck Creek Transportation Development District, in which a 1 percent sales tax goes toward transportation improvements, and the city has used revenues from other, more successful tax-financed districts in the city.
“I looked at the transactions when I was considering the job here,” Kidney said. “This has been on my radar for a long time. To say it's complicated, it's an extremely complicated transaction.
“I've been wanting to simplify and make it more transparent, not just for citizens but to investors. We're going to be able to tell the market, when we're ready to refinance the bonds, 'Here's what you're getting into.'”