The City of Toledo has been working to develop its waterfront...something that should have been done quite some time ago, but at least it's getting done. Several grants and loans have allowed for the clean-up of this former industrial site and developer Larry Dillin has agreed to take on the project.
The agreement for the Marina District was for Dillin to come up with $50 million in private funds and the city of Toledo to contribute $10 million for infrastructure, etc.
Dillin has met his commitment and plans to make an announcement on Oct. 10th. And the city has its $10 million - but that's where the problem comes in.
Originally, Toledo was short. And then they got a $5 million loan from the state's Infrastructure Bank. According to this June article in The Blade, the loan brought the amount the city had to $9 million, leaving them short only $1 million.
"The loan is guaranteed by funds from the city’s capital improvements budget over the next 10 years, the administration said. The administration has said it hopes to obtain a $5 million grant from the Ohio Cultural Facilities Commission that would offset the loan."
Okay, follow the money ... we'll apply for and accept a $5 million loan, and we won't have to use it when we get our expected grant from the Cultural Facilities Commission.
But, just to reiterate the point, there is this Blade article from earlier in June which said:
"In a memo distributed to city council members over the weekend, the administration said it would ask council to vote today for authorization to borrow up to $5 million against an expected $5 million grant from the Ohio Cultural Facilities Commission.
Todd Davies, commissioner of development for Mr. Finkbeiner, said the $5 million loan from the State Infrastructure Bank would temporarily fill the place of a $5 million grant the city hopes to obtain from the Ohio Cultural Facilities Commission. He said the city is highly confident that the grant will be approved, but confirmation may not come until August."
But the city was still short $1 million, prompting this comment from Davies:
"As things stand we're $1 million short. The idea is not to borrow that money," Mr. Davies said. "We want to make sure we're covering all our bases. This is a backstop."
Except, the city couldn't come up with another $1 million and yesterday decided to approve accessing part of the Infrastructure Bank loan.
According to today's article, council voted 11-1 to tap into the $5 million loan to reach their $10 million commitment.
"The $1.1 million loan from the Ohio Department of Transportation's State Infrastructure Bank would be paid back over 10 years at 3 percent interest, with zero interest the first year, and with payback deferred for 30 months, according to the legislation.
Councilman Betty Shultz cast the no vote, saying she objected to pledging the city's gasoline tax revenue as collateral.
Fran Song, the city's debt management officer, said gas tax revenue would be pledged for legal reasons, but the loan likely would be repaid from capital improvements funds."
(Note: we've got 10 years to pay back the loan and we don't have to pay interest for the first year. However, the loan terms say we don't have to make a payment for 30 months - meaning that we'll incur 3% interest for 18 months before we ever have to make the first payment. That's $33,000 - and how much does a new police car cost?)
However, in looking at the original ordinance (378-07) passed June 12th, you find the following explanation of how the loan will be repaid:
"As of the date of this ordinance the City has applied for several multi-million dollar grants from Federal and State agencies, including a $5 million reappropriation of a grant already awarded from the Ohio Cultural Facilities Commission. However, in order to ensure timely construction the City intends to borrow from the State Infrastructure Bank pending receipt of grant monies. This loan will have a 10-year term with a 30-month deferment. It is the intention of the City to repay the loan through any one of the above-mentioned sources prior to the expiration of the 30-month deferment."
Here's my concern: we have the flexibility in the CIP fund to pay interest and principle on this loan, but we don't have the flexibility to just use the CIP to come up with the $1.1 million that we're short for this project? Long-term, is it better to just use existing CIP funds or to take out a loan and pay interest?
The answer to that question would depend upon our priorities and whether or not we, as a city, are willing to forgo something else in order to meet an obligation made to the developer of this project.
The only good aspect of this is that the loan is more like a line of credit and, according to mayoral spokesman Brian Schwartz, the city will only request $1.1 million - and not the full $5 million that is available. But that means that the remainder is available to be accessed for other expenses.
I understand the decision that's been made, but I don't like it. City Council and Mayor are spending money - some of it necessary, some not - with little prioritization or anticipation of future needs. Knowing that the city needed to come up with $10 million to meet our obligation to this project, shouldn't council and mayor have NOT spent other monies previously? That's what you and I would have done ... but with a loan readily available, they didn't have to prioritize or pick and choose among spending. And that's the problem.