DATE: May 31, 2016
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
Russell Truell, Assistant City Administrator
SUBJECT:
title
Review of Tax Increment Financing (TIF) District
body
Purpose
The purpose of this memo is to provide information to the Franklin Board of Mayor and Aldermen (BOMA) concerning McEwen Economic Development District, commonly referred to as the TIF District.
Background
The McEwen Economic Development District was created in 2005 to assist the City of Franklin Industrial Development Board (IDB) execute financing of a headquarters building for the Nissan North America. The IDB issued bonds to finance the purchase of fifty acres of land for the Nissan site. In the process, the City agreed to dedicate any incremental property taxes from the Nissan property, and from the immediately surrounding area, to the repayment of the bonds that were issued for the land purchase.
In the ensuing years, the original amount of the bonds has been reduced from slightly under $15 million to $11.1 million. In April, 2015, the bonds were refinanced into two segments: a note for $5.2 million at a fixed rate of 2.26%, and a variable rate note for $7.2 million which follows a bank index that is currently set at 1.1875%. The fixed rate note will be paid in April, 2020. The variable rate note matures in 2025 but can be paid at any time without penalty for prepayment.
2015 property taxes in the TIF district totaled $1.3 million. Approximately $1.1 million is devoted to principal reduction. The current forecast is for tax collections to rise, on average, approximately $100,000 per year based on conservative estimates of construction. That forecast translates to a payoff of both the fixed and variable rate notes in roughly nine years. That time frame could be expedited by faster build out of projects in the District, or by increases in receipts due to tax rate increases or valuation changes or...
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