City Bonds?
- Thread starter Peja3point
- Start date
Actullay that idea was shot down previously. It was one of the suggestions a few years ago. The issue is that bonds are a loan. The City (and/or County) would guarantee payment to the investors. Muni bonds, at certain market times, are attractive to investors. The interest they earn is not taxable income.
But the City has to have a means to repay the borrowed principal and the interest owing to the investors. It could be with sales tax, hotel tax, food and beverage tax, but it has to come from somewhere. The rent generated from the lease of the arena is likely not enough.
If this falls thru, they may try this again, but it may not be any more popular.
But the City has to have a means to repay the borrowed principal and the interest owing to the investors. It could be with sales tax, hotel tax, food and beverage tax, but it has to come from somewhere. The rent generated from the lease of the arena is likely not enough.
If this falls thru, they may try this again, but it may not be any more popular.
The problem with some of the more creative funding ideas is that the money is needed before and during the construction phase. That is why the general tax works the best is because the majority of the building is paid as it's being built. Imagine the cost savings involved since it really avoids a good deal of the interest of borrowing money. This was also one of the major problems with the private idea of re-zoning land and setting aside a percentage. The money has to be borrowed up front and that takes a secured loan. How do you secure that with an unpredictable real estate market? So if there isn't enough money flowing in, who's left holding the bag until it does?
I wish there was enough tax revenue in rental car and hotel taxes, but that never seemed to fly far. When the food and beverage tax idea was floated, the downtown resturant owners threw a fit and didn't support it. Maybe the problem with that is that they were trying to do this a city deal.
My suggestion would be to break this out a bit and avoid the general tax:
County and City rental car and hotel tax.
County and City food and beverage tax.
To my knowledge this has only been discussed publicly at a city level and never a city & county combined. I have no access to the numbers and couldn't tell you if that would get the required revenue to build and pay off in 6-7 years. I'm guessing not. So that would mean that loans would have to be secured and interest paid over long term. It's more costly, but I think this would pass voter scrutiny.
I wish there was enough tax revenue in rental car and hotel taxes, but that never seemed to fly far. When the food and beverage tax idea was floated, the downtown resturant owners threw a fit and didn't support it. Maybe the problem with that is that they were trying to do this a city deal.
My suggestion would be to break this out a bit and avoid the general tax:
County and City rental car and hotel tax.
County and City food and beverage tax.
To my knowledge this has only been discussed publicly at a city level and never a city & county combined. I have no access to the numbers and couldn't tell you if that would get the required revenue to build and pay off in 6-7 years. I'm guessing not. So that would mean that loans would have to be secured and interest paid over long term. It's more costly, but I think this would pass voter scrutiny.
Actually, even with a sales tax, there's a good chance they will have to come up with some of the money upfront by borrowing against the future revenue stream. That's why they are talking about using all of the sales tax revenue to pay of the loan first. They estimated that would take about 7 years. The reason to pay the loan off as fast as possible is to reduce the amount of interest that would have to be paid.
At the end of that approx. 7 years, the City would own the land and arena free and clear. After that, its all lease money, but more importantly equity.
At the end of that approx. 7 years, the City would own the land and arena free and clear. After that, its all lease money, but more importantly equity.