By Ken de la Bastide Kokomo Tribune
---- — The city will finance the construction of a parking garage and apartment complex by issuing up to $15 million in bonds.
The city currently has no debt, and with cash reserves of $16.2 million in several funds and a reserve of $2.9 million in Economic Development Income Tax funds, it could pay for the estimated $15 million development in cash. Doing so, Kokomo Mayor Greg Goodnight said, would tie up most of the city’s available money.
“This is a good investment for our community,” Goodnight said. “We have bonded in the past for the city hall building 30 years ago, Kokomo Beach, Chrysler and sewer projects.
“This is no different than going into personal debt,” Goodnight added. “You borrow because it is worthwhile when buying a home, paying for education or transportation.”
A public hearing has been set for 1 p.m. Nov. 18 in the conference room on the third floor of city hall. The Kokomo Common Council then will consider adoption of an ordinance to issue the bonds at 7 p.m. Nov. 18 in the council chambers of the city building.
The city is planning to begin construction on the four-story parking garage and 35-unit apartment complex this year and finish it in 2014. The projects will be financed separately, with the parking garage estimated to cost $9 million and the apartments another $4 million.
Lawrence McCormack, city attorney, said Thursday the city is considering spending up to $3 million from its cash reserves on the garage project. The rest of the funding will come from a five-year bond that will be backed by the city’s share of the 1 percent EDIT revenues, he said.
Goodnight said the city is opting for a short repayment time in order to avoid incurring long-term debt. McCormack said with the city’s AAA bond rating (the highest available) and the short term of the bond, the city should get a low interest rate. The garage portion of the project will be repaid for with either EDIT funds or general obligation funding. No tax increase will be necessary, Goodnight said.
Another bond will pay for the apartment complex that will be built atop the garage. Its design calls for 35 apartment units including 16 lofts, 10 two-bedroom and nine one-bedroom apartments.
A group of developers known collectively as the Kokomo Urban Development LLC will be responsible for repaying the $4 million bond through the collected rents on the units, McCormack said. The developers have already spent approximately $300,000 on design work and market studies, he said. The length of the bond has not been determined.
He said the developers must have an 18-month reserve for bond payments. If the project fails, the city will be the first to recover any funds and the city’s Community Development Corporation will own the facility.
The CDC is an independent corporation with three directors overseeing the project, McCormack said.
The city transferred the property on the west side of Union Street between Sycamore and Walnut streets to the Kokomo Redevelopment Commission which will then pass ownership to the Community Development Corp., which is a holding company.
Goodnight said the city could decide to pay off the garage bonds early from reserve funds, but the intent is to save the city’s cash reserves for future projects.
The city will be able to retire the bonds early with no penalties.
The parking garage will consist of 396 spaces with 43 reserved for the apartments. The plan is to allow two-hour free parking on the first floor of the garage and all-day parking on the second through fourth floors at no cost.
The parking garage and apartment complex is part of a $27-million investment in downtown Kokomo that includes the YMCA’s plan to construct a new facility on the former Button Motors property.