A fourth agency has been added to fund a new downtown Terre Haute Convention Center, projected to cost about $32.5 million, including bond issue expenses and land acquisition costs.
The Vigo County Capital Improvement Board on Wednesday signed an interlocal joint financing agreement adding the Terre Haute Redevelopment Commission, which can utilize downtown tax increment financing (TIF) money for the project.
The redevelopment commission is to pay $3 million from TIF funds, while the city of Terre Haute and Vigo County each will pay $10 million from Economic Development Income Taxes. The Terre Haute Convention & Visitors Bureau will pay $5 million, with that money coming from an increase in the county’s innkeeper tax.
Additionally, the Terre Haute Redevelopment Commission will seek to issue a $4.5 million TIF bond “to facilitate the construction of the hotel parking garage, on the northwest (section) of the property,” CIB attorney Brian Bosma told the board.
Bosma is also the Indiana House Speaker.
“That is what the money is for in the TIF,” Mayor Duke Bennett, a member of the CIB, said after the meeting. “We have the cash on hand, we don’t have to borrow anything. We have structured it in a way that really works pretty well, as there are so many different pieces,” the mayor said.
Bennett said this will also enable the city to move forward with a proposed new Terre Haute Police station as far as funding capability.
“We wanted to make sure that this is all part of the calculation — that none of this would jeopardize that police station project, so we are good for both projects,” Bennett said.
“Now we are going to finalize the financing for the police station. It will be in the next couple of months (that) we will finalize that. The design is good to go, and we have already moved all the utilities. We just have to bid out the project once we get that financial structure in place,” Bennett said.
Bennett said a new convention center, with a new hotel, along with a proposed new police station “will be a game changer for downtown.”
The interlocal agreement, required to sell bonds for the project, must be approved by the Terre Haute City Council and the Vigo County Council, as well as the Terre Haute Convention and Visitors Bureau.
In all, financial costs for the downtown center are projected at $31.5 million, excluding property acquisition, which adds another $1 million, Bosma told the board.
The project will require four city lots.
Of those, one lot would be donated from Fontanet Land Co., owned by Terre Haute businessman Greg Gibson. However, three other lots are to be acquired — two lots from Dora Hotel Company and one lot from Clabber Girl Corporation.
Breakdown of project costs
The project anticipates having more than an estimated $32.45 million in revenues, which includes the bond issue.
A breakdown on costs has Vigo County paying $500,000 annually to the CIB, plus making a one-time up front cash transfer of $5 million to the CIB by June 1.
The county has already contributed $730,666 to the project, including $457,482 in 2018 and $273,83 in 2017, said Jason Semler of H.J. Umbaugh & Associates, the accounting firm working on the project.
Aaron Loudermilk, president of the Vigo County Council, asked if the county could appropriate more, such as $6 million, to reduce bond cost and leave more bonding capacity for the county.
Bosma said that is up to the County Council.
Loudermilk then asked Bosma and Semler to make a presentation to the full County Council in a special meeting to be scheduled prior to its April 2 regular meeting.
At that April 2 County Council meeting, the interlocal financial agreement and bond issue resolution would be introduced for assignment to a council committee, then brought back to the full council at its May 14 meeting.
The Terre Haute Redevelopment Commission, under the agreement, is to make an one-time cash allocation of $3 million to the CIB by June 1 and work to issue a $4.5 million TIF bond.
Terre Haute is to pay $500,000 annually to the CIB. The city has paid $339,858 to the project, including $164,577 in 2018 and $175,280 in 2017.
The Terre Haute Convention & Visitors Bureau is to contribute $250,000 annually to the CIB. The CVB has already contributed $1.25 million to the project.
The food and beverage tax is estimated to raise an average of $1.7 million, but Semler thinks that tax could generate $2 million to $2.5 million, based on current tax collections. In five months, starting November, through the first of March, the tax has collected $829,314, Semler told the board.
The project will require a bond issue of at least $22 million, issued by Vigo County for at least 18 1/2 years. That’s because the county has the most bonding capacity of the entities.
Vigo County has $26.9 million in debt capacity, but it has two outstanding bonds, leaving the county with $22.2 million of debt capacity to work with.
The city of Terre Haute has a $5 million debt capacity remaining out of $12.4 million. The Terre Haute Redevelopment Commission has a debt capacity of $12.4 million, Semler said.
Additionally, Semler said a $5 million up front payment by the county will keep the county under its debt/bonding capacity.
Semler said a general bond obligation is the easiest and fastest method to fund the project. In comparison, Semler said that while the use of a lease purchase agreement, which requires establishing a building corporation, does takes the project outside of the county’s bonding limit, bond payments cannot be paid until construction is completed, Semler said.
That requires interest payments to be paid, which for a two-year estimated construction period, would add $1 million to $1.2 million to the total cost, he told the board.
Vigo County Commissioners are already proposing using a lease purchase agreement to construct a new jail.
Annual operational costs for convention center are projected to be short nearly $502,000 annually, as catering and events will not cover its full operational costs.
“That is an estimate based on an examination of seven similar facilities, taking an average of those. It is very typical not to cover your expenses through your fees and catering, so it has to be supplemented,” Bosma told the board.
That shortfall in operational costs will be met through the county’s food and beverage tax, Bosma said.
After the meeting, CIB President Jon Marvel said officials have been aware of an operational shortfall since the project’s inception, which made a local food and beverage tax essential for the project.
Marvel said the influx of people into the city, with the addition of a new hotel, will bring a larger economic impact to the city than the deficit of operating a convention center.
A timetable for the project includes a March 20 notice, published in the Tribune-Star, of a public hearing on an additional appropriation of at least $5 million, which would go before the Vigo County Council in May.
If the interlocal agreement is approved by the city, county and CVB, bonds could be sold in June and closed on in mid July.