Presentation on theme: "Ketchum Urban Renewal Agency 101 and Factual Corrections Presented by Gary Marks, Executive Director, Ketchum Urban Renewal Agency September 30, 2013."— Presentation transcript:
Ketchum Urban Renewal Agency 101 and Factual Corrections Presented by Gary Marks, Executive Director, Ketchum Urban Renewal Agency September 30, 2013
What is Urban Renewal?
Urban Renewal: The process where a neighborhood or area is improved, developed and/or rehabilitated. The renewal process can include: Demolishing old or run-down buildings Constructing new affordable housing Installing new public infrastructure Building public facilities Remodeling and reinvigorating blighted or under-utilized properties/facilities Attracting or retaining businesses Promoting job creation Other community improvements
How does the Urban Renewal process work in Idaho?
Idaho law provides for the creation of Urban Renewal Agencies (URAs). Cities may create URAs by ordinance. Once created, URAs are separate agencies apart from the city that created them. Once created, the City Council adopts an Urban Renewal Plan that establishes the objectives of an Urban Renewal Agency. URAs are governed by a board of commissioners appointed by the Mayor.
Ketchum Urban Renewal Agency Legal History: City Council approved Resolution on April 3, 2006 creating the Ketchum Urban Renewal Agency. City Council approved Resolution on April 3, 2006 establishing the Ketchum Urban Renewal Area. City Council adopted Ordinance 992 on November 15, 2006 establishing the urban renewal plan. City Council adopted Ordinance 1077 on November 15, 2010 affirming the plan and revising the urban renewal map to include River Run properties.
Ketchum Urban Renewal Agency Legal History: Section 3.2 (entitled “Urban Renewal Plan Objectives”) of the Ketchum Urban Renewal Plan establishes the objectives for the agency as follows: “Urban Renewal action is necessary in the Revenue Allocation Area to combat problems of deterioration and economic underdevelopment. The area has a history of a lack of affordable housing, underdevelopment, inadequate parking, inadequate way finding, a dangerous pedestrian environment, economic underdevelopment and other deteriorating factors.”
Setting the Record Straight about the Ketchum Urban Renewal Agency Two s sent to a long list of recipients on September 17 th made the following statements in reference to KURA’s sale of bonds in 2010: “Appears the KURA gambled on the future, borrowed $5.56 million in anticipation of incremental growth in real estate revenues sufficient to retire the debt. I “sense” the KURA’s dilemma is that they are way out over their financial skis by virtue of their mega gamble on growth in tax revenues.”
Setting the Record Straight about the Ketchum Urban Renewal Agency “When an inexperienced gambler/ trader/portfolio manager falls behind, a common first reaction is to either attempt to “trade” out of the loss or to freeze and lock down. KURA has embraced both paths…” The reality is that KURA has “embraced” NEITHER path and the assumptions expressed are false. These statements seem to assume that the bonds are collateralized by the property located at 211 First Street East. They are not.
Setting the Record Straight about the Ketchum Urban Renewal Agency And they assume KURA is in financial trouble and has insufficient revenue to service the bonds. These assumptions are false. In fact, the bonds are secured by KURA’s revenue stream which met legal coverage requirements at the time of sale and continue to do so. KURA’s incremental revenues have increased by 33% since the bonds were sold; rising from $532,380 in FY2010 to $708,763 in FY2014. With FY2014’s debt service for principle and interest at $400,343 KURA will have no trouble servicing the debt.
Setting the Record Straight about the Ketchum Urban Renewal Agency It should be noted that KURA’s bonds were sold in compliance with municipal bond law, guided by professional bond counsel and advised by an experienced bond broker. When the bonds were sold KURA’s financials were so attractive to investors that the issuance sold out within two hours – a significant accomplishment in 2010 amidst the anxieties that existed in the bond market at the time.
Setting the Record Straight about the Ketchum Urban Renewal Agency It should also be noted that since the bonds were sold three annual audits performed by an independent auditor have shown KURA to be financially stable. Additionally, the bonds are secured by two reserve funds. The first, in the amount of $549,698, is held in a trust account at U.S. Bank and the second, in the amount of $478,588, is held in KURA’s Urban Renewal Debt Service Fund. These reserves exist to assure an ability to pay annual debt service payments in the event of financial difficulty.
Setting the Record Straight about the Ketchum Urban Renewal Agency A guest editorial appeared last week in the Idaho Mountain Express. It states, “According to its own official documents, the URA has invested more than $3 million in 211 Washington.” (i.e. the legal address for this property is 211 First Street East.)
Setting the Record Straight about the Ketchum Urban Renewal Agency The $3 million figure is incorrect. KURA ultimately paid $2,423,577 to acquire the 211 First Street property. This figure includes the sale price of $2.25 million plus closing costs and interest that accrued while the original owner carried the contract. The down payment, closing costs and accrued interest were paid for through affordable housing revenues from the City in an amount of $855,831. The balance of $1,567,746 was paid for through a loan from Idaho Housing and Finance Association.
Setting the Record Straight about the Ketchum Urban Renewal Agency In 2010, the Idaho Housing loan was paid off and the balance rolled over into a bond issuance consolidating the agency’s outstanding loans. In FY2011, $640,000 in housing funds previously invested in 491 Sun Valley Road was transferred to the 211 First Street property to consolidate the City’s affordable housing investment into a single property. As part of this transaction, which was simply a trade of value, an equal amount of KURA’s outstanding debt was transferred to the Sun Valley Road property. The net impact on the investment in both properties was a zero-sum wash.
Setting the Record Straight about the Ketchum Urban Renewal Agency Presently, the investment in the 211 First Street property consists of the initial $855,831 affordable housing monies plus $640,000 in transferred affordable housing monies plus a remaining financed debt of $927,746. Thus, the $2,423,577 amount referenced earlier. (i.e. $855, ,000 + $927,746 = $2,423,577.)