$71 million in nonrated bonds slated for FC mall
In addition to $53 million in public improvement costs, the bond issue will cover $8 million in capitalized interest, a $7 million reserve fund and $3 million in issuance costs, for a total cost of $71 million, according to the city.
The city opted to use the metro district model, rather than issuing the bonds itself, in order to protect itself from risk should the redevelopment fail, according to Mike Beckstead, the city’s chief finance officer.
The bonds are expected to be issued at an interest rate of 7 percent, significantly higher than the 3 percent to 4 percent that standard municipal bonds command at current market conditions.
Interest rates have risen dramatically since the mall agreement first was approved by the city May 8 and if, as the project goes through another round of reviews, interest rates on the nonrated bonds reach 8.5 percent, the agreement must be re-evaluated, Beckstead said. The bonding also must be approved by City Manager Darin Atteberry.
Mall developer Alberta Partners did not respond to requests for comment. The metro district will be governed by a board of mall property owners, most of whom will be represented by Alberta Partners, Beckstead said.
In total, this will mean $151.4 million in revenue for the metro district over the next 25 years, according to the presentation.
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However, in order to protect the city’s books and credit rating, from risk, the city decided to issue the bonds through the metro district, which as a newly created entity will have no credit rating.
Still, improvements in real estate, job creation and consumer confidence nationwide, however slight, have buoyed investors, Heckman said.
“In general,” he said, “things have improved enough for nonrated bonds to attract investors, given the right type of project and environment.”
In addition to $53 million in public improvement costs, the bond issue will cover $8 million in capitalized interest, a $7 million reserve fund and $3 million in issuance costs, for a total cost of $71 million, according to the city.
The city opted to use the metro district model, rather than issuing the…
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