San Diego Mayor Jerry Sanders and downtown redevelopment officials today celebrated the initiation of a $109 million bond deal, marking one of the few borrowing transactions the city has been unable to enact since it lost its credit rating in early 2004.
The city’s Redevelopment Agency and the Centre City Development Corp., the city’s downtown redevelopment arm, partnered in the borrowing deal. To secure the loan without a credit rating, officials have leveraged a share of downtown’s tax increment – which is the extra tax money that a city is able to collect after deeming an area “blighted” and turning it into a redevelopment zone.
Officials said the usually stable stream of tax increment dollars enabled the city to reap the highest credit rating available. That rating won’t carry over when the city returns to Wall Street after clearing up a myriad of financial and legal issues, as the city’s overall financial health will be measured, not just the reliability of property tax streams in downtown.
To repay the loan, the city will pay about $7.9 million a year for about 26 years.
The financing vehicle was one of few options for public borrowing currently available to the city.
Among other things, the bond proceeds are slated to be spent on:
– Low and moderate income housing in downtown – $30 million. Officials said they don’t know yet what form the housing will take or if it will be privately or publicly owned, or some mix of the two. They said CCDC owns several plots of land downtown that could house the developments.
– Community parks and fire stations – $35 million to $45 million. Downtown hasn’t built a new fire station since the massive influx of residents made downtown a trendy neighborhood again, but there are plans to put one where the taco shop is currently located on Cedar Street and Pacific Highway. (Sanders and a number of reporters noted a distinct disappointment that the taco shop would no longer exist.)
– Downtown main library – $10 million to $30 million. Oh yeah, the new library. City administrators have been saying for at least a year and a half now that the announcement of private donations needed to make the new library a reality is right around the corner. Still, those deadlines have come and gone with no result.
The total construction of the library has been priced at $185 million. A state grant is to cover $20 million, CCDC has pledged $80 million and private donors are being sought to cover the remaining $85 million. The plans for the library were finalized by the City Council in 2002, but only $3 million in private funds have been announced to date.
CCDC President Nancy Graham said she was told that private donors would be announced in the fall.
The remaining funds are split between C Street improvements, a pedestrian bridge at Harbor Drive and a number of other infrastructure improvements and amenities.
About $34 million of the bonds will be sold as taxable. Officials estimate those bonds, which go to the subsidized housing, will fetch interest rates of about 6.2 percent or 6.3 percent. The remaining $75 million or so are nontaxable and expected to get around 5 percent interest rates.