Columbus will use about $15 million in Tax Increment Financing (TIF) money to pay off a series of bonds early, which is expected to save the city $2.5 million and remove certain requirements from one of the city’s TIF districts.
The Columbus City Council has approved a resolution authorizing the Columbus Redevelopment Commission to pay off and retire a series of bonds using funds from the Cummins, Inc. Allocation Area. Councilwoman Elaine Hilber abstained from the vote, as she is a Cummins employee.
“This is a proposal relating to the 2009 bonds that were issued for a Cummins project where Cummins purchased their own bond,” said Bruce Donaldson at the commission’s December meeting. “We created a standalone, separate allocation area, TIF allocation area, to encompass the Cummins plant, to help facilitate an expansion, a lot of improvements, a lot of new equipment.”
TIF districts allow the commission to siphon off increasing property taxes in an area to fund projects intended to benefit the community.
Without early payoff, the bonds would not reach final maturity until 2031. According to Andrew Lanam with Stifel Financial Corp., the remaining payments scheduled from Feb. 1, 2023 to Feb. 1, 2031 total $17.485 million.
However, as stated in the commission’s resolution, Cummins — which is the owner of all outstanding 2009 bonds — has agreed to accept a payment price “discounted to the pay-off date at a discount rate” of 4%.
Assuming the early payoff takes place on Feb. 1, the new cost is estimated to be approximately $15.029 million, which saves the city about $2.5 million, said Lanam. He added that the exact price could change if the payoff date is delayed.
“The bond documents were written in such a way that all of the increment that was captured in that TIF district was to go towards the repayment of the bond,” Redevelopment Director Heather Pope told the council. “And now that the bond is satisfied, the allocation area will remain and continue to capture increment, but the redevelopment commission will now have authority over that increment on projects within that TIF district or immediately surrounding it.”
Lanam estimated that once the bonds are paid off, there will be about $5 million left in the TIF. By the end of the year, this will have increased to about $10 million, assuming there are no other expenses paid out of the fund.
