TIF Question Answered On City website

Question: Where is the $14+ million that the City approved for the TIF that was supposed to pay for development of the old mall? Where is that money going? Who has that $14 million? Who is going to pay the $14 million back if we don’t have a development on that property? Who’s supposed to pay for the TIF? All the tax revenue from the commercial and the residential buildings there was supposed to pay for the TIF over a 30-year period. When does that TIF come due? When do the payments stop? Have they already started? Where is the money coming from, where is the TIF money right now, who has that $14 million and how is it going to be paid back if the development doesn’t go through?

Answer: The bonds were issued as combined tax increment financing/special taxing district bonds. The purpose of the bond issuance is to provide funds to pay for specific public improvements for the (old mall) site that are in the nature of infrastructure improvements; bond proceeds will not be applied to fund private development activities.

The bonds were issued in April 2007 in the form of draw-down bonds and sold to Salisbury Mall Associates, LLC (SMA) as the initial bond holder. While the bonds are in draw-down mode, SMA will actually transfer to the bond trustee from SMA’s own funds any "draws" on the bonds; the bond trustee will place such moneys in the project fund and then apply the moneys to project costs in accordance with requisitions approved by City officials. Other than the costs of issuance and an initial deposit to the administrative expense fund drawn down on the date the bonds were issued, no funds have been advanced against the bonds, to date. SMA, as the holder of the bonds advanced those funds at closing. Before additional draws may be made on the bonds (which will be advanced by SMA), the City’s bond counsel will have to approve the contracts for the specific infrastructure improvements or specific project costs.

No interest is due on the bonds until July 1, 2012, or any earlier conversion date, and the first date that principal is due on the bonds is July 1, 2013. SMA has until July 1, 2012 to effect a successful conversion and remarketing of the bonds to private investors. If SMA is able to effect such a successful conversion, the funds received from private investors to purchase the bonds from SMA will be deposited with the bond trustee and applied to pay costs of the conversion and remarketing, to fund a debt service reserve fund, to pay capitalized interest on the bonds (if the public improvements have not been completed) and to fund project costs. SMA is responsible for paying any such costs in excess of those covered by the conversion and remarketing proceeds.

Please be advised that the developer paid for the demolition of the old mall building and site cleanup and no funds were utilized from the special obligation bonds for those activities. Also, current legal considerations, between the developer and the builder, have no bearing on the special obligation bonds and the repayment thereof.

Money to pay debt service on the bonds will be generated through future incremental ad valorem real property tax revenues from the project, and, to the extent such revenues are insufficient, special taxes levied by the City on the project site. No funds are coming out of current tax revenue and this project is not a general burden on City taxpayers. The City has not pledged its full faith and credit or its general obligation taxing power to the payment of these bonds. The only impact to the City of Salisbury will be the reduction of incremental ad valorem real property tax revenue from the project that would normally flow to the City, until the bonds are paid in full. To the extent the owner of the property in the project site (which constitutes the tax increment development district and the geographically coincident special taxing district) fail to pay their normal ad valorem property taxes or any levied special taxes, the City has the power to foreclose on such properties, but the City is not liable for any deficiencies.