Financial analysis falls short
By Pat Sunderland
Published Thursday, September 28, 2017 7:50 am
The Delta Urban Renewal Authority has reached agreement with Delta County, but is falling short of the total pledges needed to meet bond obligations anticipated for a hotel development.
DURA may have to scale back site development, which could jeopardize negotiations with a hotel developer, or pursue other projects in the plan area, which includes downtown Delta and property adjoining Confluence Drive.
A "pro forma," or financial analysis developed by Better City anticipated first-year tax increment revenue at $220,462, an amount that would increase annually to cover yearly bond payments of $170,080.
But anticipated revenue has taken several hits, including $30,000 in lodging tax from Delta County. The county's special counsel advised the county commissioners the lodging tax can only be used for marketing and promotion, not for infrastructure.
Additionally, Delta County modified plan boundaries and committed county sales tax at a level that declines every five years.
Property tax contributions from the mosquito control district and the fire district, which total nearly $12,000, are off the table until mediation takes place.
That brings anticipated revenue down to $178,028, which on paper covers the estimated bond payments of $170,080, but doesn't provide the cushion financial institutions expect. "Based on my discussions with bonding companies, it's going to look pretty bleak," said city manager David Torgler.
"I wouldn't say the deal is dead; far from it," said DURA attorney Carolynne White. "There are a number of potential strategies we might use to shore up the pro forma and still make it be credit worthy."
She said DURA may have to find a way to scale back site improvements, do them less expensively, defer some of them until later in the project development, or ask the developer to bring more to the table. The first step is to formally adopt a project plan, a multi-step process that involves DURA, the Delta Planning Commission and the Delta City Council.
Once the project plan is approved, DURA can invite proposals and begin to have "meaningful conversations" with the developers, White said.
A draft plan circulated among the taxing entities "very generically" discusses the types of projects the DURA board may wish to address. White said she would be making some revisions to the plan and presenting it to the DURA board Tuesday night. The proposed project plan is posted on the city website with the DURA meeting notice.