The Crested Butte News Serving the Gunnison Valley since 1999
From bonds to cash
The Mt. Crested Butte Downtown Development Authority (DDA) is switching gears in order to maintain its financial commitment to the proposed Mt. Crested Butte Performing Arts Center (MCBPAC).
The DDA had committed to issue $6 million in bonds to help finance the MCBPAC, which has $17.9 million in pledges thus far. The $6 million bond is part of the pledge amount.
The DDA is comprised of a portion of Mt. Crested Butte. Through an instrument known as tax increment financing, the DDA collects and keeps tax monies based on a 1996 baseline. Tax funds collected from properties located within the DDA above the 1996 baseline are paid to the DDA. The DDA then makes use of the funds for capital projects within the DDA such as for MCBPAC. The idea is to reinvest that money so that in the long run a more vibrant downtown generates more taxes.
But the recent decline in real estate values in Mt. Crested Butte have put a crimp in the plans of the DDA to issue bonds.
In a report to the Mt. Crested Butte Town Council on Tuesday, June 3, MCBPAC board member and council member Gary Keiser said the bond counsel had advised them that “based on projected DDA cash flows, bond counsel estimates we would only be able to issue $3,350,000 of bonds…” But the report stated that the DDA is projected to generate $7,700,000 through 2026 when the DDA’s current term expires.
So the council voted to approve the adjustment from supporting a DDA bond to supporting a financial commitment total of $7.8 million over the life of the DDA. If the DDA were to issue $6 million in bonds the total expenditure of DDA funds would be at least $7,800,000, including bond issue costs and interest payments. The DDA has already spent $250,000 on organization and legal costs through the end of last year. It is expected the DDA will spend $500,000 this year for architectural and design costs. There is the possibility that the DDA could extend its life past 2026 with some changes in the financial agreements but that can’t even be discussed until 2016.
MCBPAC board member Bill Ronai said the board is considering financing alternatives as a way to bridge the timing inflows of pledges and the up-front capital costs of construction so the facility could open sooner. In this regard, the board is investigating the possibility of obtaining a 30-year low-interest loan from the U.S. Department of Agriculture. They have cleared the first step and are moving into the more thorough and complicated application process. A state program is also being considered for a low interest loan.
It is hoped that construction on the performing arts center will begin in July 2015.
