The Terre Haute Redevelopment Commission on Wednesday approved an inter-local agreement for financing of the city's new convention center — but not without some pointed questions and observations from Commissioner Brian Conley.

The commission also took the first step toward adding the center to its central business district urban renewal and tax allocation area, action required if it is to be involved in funding the project.

The agreement calls for the Redevelopment Department to provide $3 million up front toward the $32.5 million cost of the center and $500,000 for 19 years in backup financing in the event the city itself is unable to meet its obligations. 

The department will use downtown tax increment financing funds to meet its obligation toward the convention center. 

The city and Vigo County earlier agreed to pay $10 million each from local income tax receipts and the Terre Haute Convention and Visitors Bureau committed $5 million from the county innkeeper's tax.

But that was when the cost of the project was pegged at $25 million, an estimate now about four years old, said Steve Witt, the city's director of redevelopment.

“At that time, there were some costs we just couldn't estimate because we didn't know where it was going to be located exactly,” Witt said. “Secondly, the cost of construction has gone up over the last few years.”

Witt also serves on the Capital Improvement Board, which is overseeing construction of the convention center.

The interlocal agreement must also be approved by the city and county councils.

Debt incurred by local governments in Indiana is limited to 2 percent of assessed value, said Jason Semler of Baker Tilly financial advisers, formerly H.J. Umbaugh and Associates. Lease-purchase agreements can exceed that limit but are more costly and take more time to execute, Semler said.

The city's available debt capacity is $5 million, Semler said. That's because local income tax receipts are pledged as backup to property tax increment financing for $7.2 million in bonds for the Indiana 46 development area. The Redevelopment Commission has about $12 million in debt capacity.

While Vigo County has so far contributed $730,666 to the project, the city has paid less than half that amount, $339,858.

“The city of Terre Haute hasn't contributed much of anything, in terms of the whole project,” Conley said. “It's relying on the redevelopment department to pick up its share.”

But the intent, Semler said, is for the city to meet its $500,000 annual commitment using local income tax receipts and redevelopment money would be tapped only if needed.

“The county didn't feel comfortable just having a handshake [agreement]” with the city, he said.

“That's a surprise,” Conley quipped, later expressing genuine concern the city might come to rely on redevelopment funds as it has done for several years prior to meet operating expenses. 

But the city tapped fewer redevelopment dollars last year and Mayor Duke Bennett has pledged to eliminate transfers to the city general fund by the end of 2019.

Parking garage financing

The financial agreement also calls on the commission to “use its best efforts” to issue $4.5 million in bonds for construction of a parking garage to serve two new hotels adjacent to the convention center.

It is still to be determined whether increased property taxes generated by the hotels will be sufficient to pay off the bonds, said Witt and Semler.

It is also “still being discussed on who is actually going to own and operate the parking garage,” Witt said in response to a question from Conley.

“So we don't know who's going to own it … but we know who's going to pay for it,” Conley said.

But Witt and Lou Britton, commission attorney, noted that additional steps, including a public hearing, will be required before any bonds can be issued.

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