ACTION REQUESTED:
Title
Communication from the City Manager with a Request to ADOPT the following:
A. An ORDINANCE proposing the creation of a PEORIA SPORTS CENTER PROPERTY TAX SPECIAL SERVICE AREA in the city of Peoria, Illinois, and providing for a PUBLIC HEARING and other procedures in connection therewith;
B. An ORDINANCE proposing the creation of a PEORIA SPORTS CENTER HOTEL TAX SPECIAL SERVICE AREA in the city of Peoria, Illinois, and providing for a PUBLIC HEARING and other procedures in connection therewith;
C. An ORDINANCE proposing the creation of a PEORIA SPORTS CENTER SALES TAX SPECIAL SERVICE AREA in the city of Peoria, Illinois, And providing for a PUBLIC HEARING and Other procedures in connection therewith;
D. An ORDINANCE proposing the creation of a HOLIDAY INN PROPERTY TAX SPECIAL SERVICE AREA in the city of Peoria, Illinois, And providing for a PUBLIC HEARING and other Procedures in connection therewith;
E. An ORDINANCE proposing the creation of a HOLIDAY INN HOTEL TAX SPECIAL SERVICE AREA in the city of Peoria, Illinois, and providing for a PUBLIC HEARING and other Procedures in connection therewith; and,
F. An ORDINANCE proposing the creation of a HOLIDAY INN SALES TAX SPECIAL SERVICE AREA in the city of Peoria, Illinois, And providing for a PUBLIC HEARING and other Procedures in connection therewith
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BACKGROUND: If approved by the City Council as an earlier, separate agenda item, the First Amendment to the Annexation Agreement (originally between the City, Chambers family and other third parties and dated September 7, 1999), requires that the City create Special Service Areas (SSA) in conjunction with the construction and opening of the Louisville Slugger Sports Complex and Holiday Inn and Suites (beginning with Section 4 of said Agreement).
An SSA is an economic development tool established by state law that allows municipalities to create defined geographic areas in which special services, such as conduit financing, can be provided. These special services are paid for by additional revenues generated exclusively by properties and/or businesses within the SSA. For this project, the City would use the SSAs to borrow $9.6 million through a general obligation bond, provide the proceeds of that bond to the Developer, allowing the Developer to construct the project. While there would likely be only one bond issuance, the proceeds would be divided between the project elements: $7.6 million would be loaned to the sports complex and $2 million would be loaned to the hotel construction. The City would then repay those bonds with revenue generated by additional property, hotel and sales taxes generated exclusively by the project (see below).
Per the amended annexation agreement, the City needs to create SSAs for two separate geographic areas:
· The "Peoria Sports Center Special Service Area" would include the sports complex property as well as the other four hotels owned by the Developer (Hampton Inn, Wingate, Country Inn and Suites, and Candlewood Suites) and the public right-of-way to establish contiguity.
· The "Holiday Inn Special Service Area" would be a one-parcel SSA that would allow for the construction of a new, 114-bed Holiday Inn and Suites. This must be a separate SSA from the first because there is no method by which contiguity to the other parcels can be achieved with public right-of-way.
A map of the proposed SSAs is attached.
Within these two separate areas, there would actually be three separate SSAs (for a total of six SSAs). For each geographic area, there would be a separate SSA for additional property taxes, additional hotel taxes, and additional sales taxes.
The property tax SSAs would levy an additional property tax on all property within the SSAs in an amount equal to the annual bond repayment. The hotel tax SSAs would increase the hotel tax in the area by 3% (from 6% to 9%). The sales tax SSAs would increase the sales tax by 1% (from 8.25% to 9.25%). It is important to note that these tax increases only impact the properties within the SSAs. Sales taxes at retail establishments in the Shoppes at Grand Prairie, for example, would remain the same. Should a new hotel be constructed that is not within the SSA, its hotel tax would only be 6%.
Under the terms of the Agreement, the cost of annual bond repayment will be levied as an additional property tax against the properties within the SSA. The revenue generated by the SSA hotel and sales taxes would be collected and used first to make annual payments on the bond. If those revenues are enough to cover the cost of bond repayment, no additional property tax will be collected. Should the hotel and sales tax revenues be insufficient, the shortfall would be collected from the additional property taxes. In effect, the property taxes serve as a "backstop" against the risk of insufficient revenues being generated. The chart attached to this communication lays out the process.
If for some reason the property owners were to fail to pay their property taxes, a tax lien would be placed upon the properties. Property tax liens are superior to even mortgage notes. In a worst-case scenario, the City could foreclose upon the delinquent properties and sell them, using the proceeds to repay the bonds.
The process to create an SSA starts with a request from a land owner(s) to create one. On February 6, 2014, the City received such a request. The next step is for the City Council to approve an ordinance (or in this case, ordinances) that propose the SSAs and set a public hearing. By this action, the City Council is proposing the SSAs and setting the hearings for April 22, 2014. It would be staff's intention to request a vote to create the SSAs that same night or at the May 13, 2014 City Council meeting. The creation of an SSA can be contested by a majority of the impacted property owners, but the impacted owners in this case are making the request.
Upon creation of the SSA and the approval of any other associated actions, the City would issue the bonds. The annexation agreement provides some flexibility so that another entity, such as the Tri-County River Valley Development Authority, could potentially issue the bonds. It is anticipated that hotel and sales taxes would increase on July 1, 2014 and the first levy of property taxes would be January 1, 2015.
FINANCIAL IMPACT: The adoption of these ordinances merely proposes the SSAs and sets the public hearings. However, this is a critical step in the overall financing of the sports complex and hotel. Further, the First Amendment to the Annexation Agreement, if passed, binds the City (itself, or potentially through an alternate source) to this financing mechanism. The revenues generated in the SSAs will be sufficient to cover the annual costs of bond repayment.
The project as a whole will benefit on the local economy. The sports complex will draw thousands of out-of-town visitors to Peoria each year. This will have a positive impact on hotels in the immediate area and throughout the City, as well as other retail, restaurant and amusement establishments.
NEIGHBORHOOD CONCERNS: The project as a whole has been subject to considerable public scrutiny, including a public meeting held on January 13, 2014 at the North Branch of the Peoria Public Library and public hearings before the Planning Commission (February 5, 2014) and the Zoning Commission (February 6, 2014). There has been opposition voiced regarding the project as a whole (though not necessarily the financing mechanism) by some residents of the Timberbrook subdivision. The ordinances provide an additional opportunity for input at the established public hearings on April 22, 2014.
IMPACT IF APPROVED: The public hearings would be set.
IMPACT IF DENIED: The public hearings would not be set. If approved earlier, the City would be in violation of the terms of the First Amendment to the Annexation Agreement.
ALTERNATIVES: None.
EEO CERTIFICATION NUMBER: Not applicable.
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL'S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Grow Peoria: Businesses, Jobs, and Population
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Grow employers and jobs.
DEPARTMENT: City Manager's Office