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The Economic Development Income Tax is officially off the table.
Monday night, Warsaw City Council began to consider alternate means of funding a new $10-million sewage treatment facility with the help of South Bend law firm Baker & Daniels.
Attorneys Richard Hill and Randolph Rompola laid out the options for the city to fund the project and the advantages and disadvantages of each.
The city could use a rate-based, general obligation bond issue as the financing mechanism, Hill said. That avenue has its drawbacks, however, he said.
"While there is no impact on the property tax, the city would have to guarantee the bond holders the sewer rates would be sufficient to meet the bond payments," he said.
That guarantee could lead to higher sewer rates for city customers and higher interest rates paid on the bonds, Hill said.
Tax Increment Financing can also be used to fund a new treatment facility, Hill said.
"You can pretty much fund any facility if it falls into a redevelopment area. This is fairly typical to have TIF fund this type of project," Hill said. "You're essentially letting the growth in a certain area finance the improvements."
Warsaw recently established a second redevelopment area that includes the proposed location for the new treatment facility, so it would qualify for TIF financing, Hill added.
Under TIF, the city declares a development area and the assessed value and tax rates are frozen at the levels existing when the development area is established. Any infrastructure improvements in that area are then paid for by the increase in assessed value above the frozen rates as development takes place.
According to Hill, a variation of the TIF option, and one he recommends for the city, is redevelopment lease financing.
"With lease financing, you can use a variety of sources for funding, and with the approval of the state tax board, you can use tax dollars and other revenues to make up any shortfall in revenue from utility receipts," Hill said.
According to Hill, redevelopment lease financing also would allow the city to avoid falling under the constitutional limit on municipalities of 2 percent of their net assessed evaluation. Warsaw's net assessed value for 1999 is $199,445,758, according to City Clerk Elaine Call. That translates into a $4 million debt limit for the city.
When using lease financing, Hill said, the city creates a Redevelopment Authority and enters into a lease agreement with the Redevelopment Commission.
Once a lease in in place, the Redevelopment Authority can issue bonds for the construction of the treatment facility and use the rent payments from the Redevelopment Commission to pay the debt service on the bond.
This option also allows the Redevelopment Commission to use other sources of funds, such as TIF revenues and sewer revenues, to make the lease payment. If those revenues are not sufficient, a tax levy backup may be needed, Hill said.
A final option the city could consider, but one not recommended by Hill and Rompola, is the establishment of a Conservancy District.
"They're difficult to create, in terms of the process you have to go through," Rompola said. "Generally, you find municipalities or other areas forming conservancy districts who are at a desperation point in providing sewer services."
In other business, the council received a report from representatives on Marcus Cable on the upcoming system upgrade planned for its Warsaw service area.
Tim Ransberger, government relations manager for Marcus Cable, said in addition to the ability to offer more channels, those channels will be more reliable and Marcus will be able to offer more services.
"We're putting in a fiber optics system to replace a coaxial system. This will enable us to expand our number of channels to 82," he said. "And, with the broadband capability, we will also be able to offer cable-based modem service for computers."
Other improvements include upgrading the electronics on the system and adding uninterruptible power supplies to decrease storm-related outages.
The council also approved a 10-year tax abatement request of Jon Shively and Michael Welborn for the Munson Building at 120 E. Center St.
Finally, the council approved the friendly annexation request of Robert M. Schneider for 491 S. Circle Drive. The area contains several offices and will carry the C-3 commercial zoning classification.
