PE Board Agrees To Public Hearing
PRINCE EDWARD – A planned new hotel and conference and training center just south of Farmville could soon have a complicated financial structure with an OK from the County. With the clock potentially ticking closer, Supervisors considered and-on a split vote-agreed to hold a public hearing prior to action.
Farmville District Supervisor Jim Wilck specifically proposed that the board hold a public hearing on the Granite Falls pro-ject four weeks in advance of the second bond vote and have the developer at the hearing to detail his associates and who the lending institution is.
While a public hearing would apparently have to be held in any event, the four-week advance timetable is a new wrinkle.
Granite Falls CDA (Community Development Authority) members-consisting of the eight board of supervisors representa-tives-met in March and-following a lengthy report on the progress of the Granite Falls Hotel and Conference Center project as well as financial information in March-approved a resolution of support on the project. (It was the first of three votes for final approval.)
Supervisors subsequently gave their own preliminary approval in a resolution of support and, again, will need two other votes for final approval.
The resolution approved by both entities notes that the preliminary financing package for the project includes the issuing of approximately $17 million of CDA bonds by the CDA. Proceeds, it outlines, will be used to finance construction “of certain public infrastructure related to the Project” including the approximately 35,000 square feet of the proposed conference center and related project and site infrastructure costs (not the hotel itself).
As part of the effort, a debt service reserve fund would be set up and projected at $1.7 million so that, if there is insufficient revenues available to service the debt on the CDA bonds, the funds may be drawn down on an annual basis to service the debt payments due on the CDA bonds.
The approved resolution states: “To enhance the marketability of the CDA Bonds the developer has requested, and the board has determined it is in the best interest of the County, to provide its indication of support for the County to replenish all or any deficient portion of the DSR (Debt Service Reserve) Fund in the event Project funds and other reserve streams pledged or to be pledged to support the repayment of the CDA Bonds (including, without limitation, payment by the owner of any required spe-cial tax assessments) are insufficient to pay annual payments of principal and interest on the CDA Bonds.”
It would be subject to appropriation.
“Subject to the finalization of the complete financing package sufficient to finance all elements of the Hotel/Conference Cen-ter in a form and substance acceptable to the Board and CDA,” the resolution states, “the Board acknowledges its intention, in principle, to enter into a contractural agreement, subject to annual appropriation, as provided by applicable state law, to replen-ish the DSR Fund as established for the CDA Bonds, on an annual basis, to the extent such fund becomes depleted.”
It was explained at the CDA meeting that the bonds are not the liability or debt of the County; they are the debt of the dis-trict. It was also cited that there are 21 CDAs in Virginia that have issued CDA bonds. John Markowitz, of bond underwriters Stone and Youngberg, noted that at the CDA meeting that his firm is the largest distributor of “these bonds in the country.”
As proposed, bonds would be issued and in any given year, taxes (as they apply to properties in the CDA district that essen-tially includes the hotel, conference center and training center project) agreed upon in an economic development agreement go to pay the bonds. If the taxes were not enough, the assessment was levied and the developer and the owners did not pay it, Mar-kowitz explained at the CDA meeting, the debt service reserve fund would be drawn upon.
“And because it's a tough economy and we have a single project here, to sell these bonds, we would need a moral obligation from the County to say within a given year…tax revenues are down, something happened that we couldn't foresee, there was a war with Iran or something like that and the County would agree to replenish the debt service reserve fund and then would get…reimbursed the next year from taxes paid for the project,” he said.
CDA Chairman (and PE Lockett District Supervisor) Robert “Bobby” Jones also pointed out at the CDA meeting that the on-ly way the County could be liable for $1.7 million is if the hotel did not do any business.
“After that, if the project wasn't going well, the project would be foreclosed upon and there'd be a tax sale, so there'd be no liability past that…The project would be now in the hands of bond holders. But the County would be reimbursed for that year because there would be a tax sale and the County would get repaid for that,” Markowitz said.
Wilck, at last Tuesday's meeting, made the motion for the board to have a public hearing on the Granite Falls project four weeks in advance of the second bond vote, that they have the developer at the meeting to “tell us who his associates are and who the lending institution is.”
Wilck also that he would like to have a public hearing and then people have time to think about it before they vote on it.
Supervisor Don Gantt added that he liked the idea of four weeks.
Enough board members concurred, though it was noted a public hearing would have to be held (even without the board's ac-tion to schedule one), though it was uncertain about the specific timeline.
The proposal passed on a 5-3 vote with support from Supervisors Charles McKay, Gantt, Wilck, Howard “Pete” Campbell and Pattie Cooper-Jones.