EVANSVILLE - Evansville officials say the twin pillars of new Downtown development — a convention hotel and a medical education campus run by Indiana University and other partners — will positively transform the area for years to come.
The public cost, though, will be substantial. City government’s subsidy on the hotel and related construction will be $20 million, while $57 million in local debt has been committed to the medical campus. Those notes are on top of the $127 million Ford Center bond the city recently started paying.
Property taxes collected within a Downtown district are to help retire those bonds. The fund collected $5.63 million last year, and city officials expect it to increase as the hotel and medical campus open. Development begets more development, they say.
But the fund is also taking a big hit local officials did not anticipate.
Two years ago, one of the Downtown Tax Increment Financing district’s major properties, the Old National Bank headquarters at Main Street and Riverside Drive, appealed its approximately $1.9 million tax bill. The Vanderburgh County Tax Assessment Board of Appeals ruled in the bank’s favor.
As a result, Old National’s bill was knocked down to about $900,000, and the Downtown TIF is expected to drop from that $5.63 million in 2013 to about $4.6 million this year.
“Anytime someone wins (an appeal), there’s some change. This one just happened to be in a TIF,” Vanderburgh County Assessor Bill Fluty said.
Construction on the hotel project is supposed to start any day, with completion in 2016. State financing of the medical campus is to be considered by next year’s General Assembly, with a fall 2017 opening planned.
Republican Mayor Lloyd Winnecke pushed hard for both projects. Public financing for each was approved in 9-0 votes by the Democratic-controlled City Council, although the council had resisted Winnecke’s overture for a larger public share on the hotel project.
In interviews last week, City Controller Russ Lloyd Jr. and City Council leaders showed general agreement Evansville will fund both major Downtown projects while also making its annual Ford Center payments.
However, those officials also said city finances had to be reexamined because Old National’s successful property tax appeal.
“The TIF had to tighten its belt,” Lloyd said.
The Hilton Doubletree Hotel and an apartment tower that’s also part of the project are expected to generate about $600,000 per year for the Downtown TIF, helping to pay off the $20 million hotel bond.
“Twenty million (for the hotel bond) is a big amount to the average person, but it’s not like the arena bond — $127 million,” Lloyd said. “It is pretty doable.”
However, paying the $57 million owed for the medical campus “will be more of a challenge,” Lloyd said. “We need to grow revenues in the TIF, whether it’s land-based gaming or business expansion. The medical campus will not be a property taxpayer, but the ancillary stuff around it should be, and that would be helpful.”
City officials have unanimously called for Gov. Mike Pence to expand land-based gaming in communities that have riverboat casinos. Pence has rejected those entreaties.
“(Tropicana Evansville) is a property taxpayer,” Lloyd said. “If (land-based gaming) comes to pass, the feeling is they would build a larger casino than what they have, and that would be more revenue for the city, county and state. It would be a good thing.”
Lloyd said Downtown is seeing residential growth, and it’s hoped that renovations of the Old Post Office and the Kunkel Group’s plan to refurbish the former Hotel McCurdy can make those entities more valuable in the future.
Officials say that in 2018, Evansville’s financial obligations will loosen — if only slightly.
That’s when bonds on the Old National Events Plaza (formerly The Centre) are to be retired. Vanderburgh County government since 2003 has been funding the events plaza’s debt via lease payments to the City-County Building Authority, issuer of the bonds. County government uses local food and beverage tax revenue to make those payments.
When the events plaza is paid off, Evansville government will receive about $450,000 in annual food and beverage tax revenue that it did not have previously.
The revenue will be used on Ford Center debt, freeing up more TIF dollars for payments the two newer Downtown development projects, according to city officials.
“There is nothing simple about these bonds,” Lloyd said.
City Council Finance Chairman Conor O’Daniel, D-at-large, said discussion about funding the two new Downtown projects underlines why the city must watch its overall spending.
The council and Winnecke administration had a lengthy debate about that while planning the 2015 budget. Council leaders wanted substantial cuts to Winnecke’s budget proposal, citing the need to protect cash reserves.
The approved budget was $5 million less than its original version.
O’Daniel said funding the hotel and medical campus “has been a concern of ours, both mine and (President John Friend and Vice President Dan Adams) throughout the entire budget process. It’s one of those reasons why were so forthright in saying we’re spending too much money, and if we continue down this path it could jeopardize the funding mechanisms (for the Downtown projects).
“That being said, we spoke to Bob Swintz with London Witte Group, our bond counsel, and he believes that currently, at the current TIF and under funding sources, we have the ability to bond that $77 million (for to the hotel and medical campus). He said, however, it does make it extraordinarily tight, and when you’re that tight, you can’t have anything go wrong.”