The city is one step closer to creating its first public improvement district, after the City Council agreed in principle to allow Rayzor Ranch to develop the public funding option.
RED Development, the retail developers of Rayzor Ranch, asked the city for the district to provide upfront money that would pay for public infrastructure needed on the south side of University Drive. The City Council heard a presentation during its Tuesday work session after developers gave a similar presentation to the city’s economic development partnership board.
A public improvement district applies a special assessment — in Rayzor Ranch’s case, $1 per $100 in property valuation — to repay bonds issued for things such as roads, and water and sewer lines.
Collecting to pay the bonds is the city’s responsibility. If any property owner in the district defaults, the city can foreclose on the property to collect.
Scott Wagner, of RED Development, told the council that development on the north side has progressed despite the depressed real estate market.
“It’s been pretty good considering the access to capital and capital markets,” Wagner said.
Plans for the south side include an open-air shopping mall, a park, apartments and single-family homes on about 200 acres.
The entire project encompasses about 410 acres, and its development, announced in 2006, has been fitful, in part, because of the economic downturn. Developer Allegiance Hillview took over the project from the original developer and renegotiated the original economic incentive agreement.
That agreement provided for the developer and the city to split sales tax collected at the shopping center to pay the developer back for the public infrastructure, up to $62 million.
About $20 million has been triggered under the original agreement with the development of Rayzor Ranch Marketplace, the shopping center on the north side of University Drive, anchored by Walmart and Sam’s Club. Another $42 million remains for the south side.
Linda Ratliff, the city’s director of economic development, told the council the PID could be constructed so that anything paid for with the bonds wouldn’t be considered for reimbursement under the original agreement. The PID would not apply to all of the southern side, just portions of it.
Rick Rosenberg, of Austin-based DPFG, Development Planning & Financial Group Inc., which is assisting the developer with the bond funding proposal, told the council that PIDs offer developers the only upfront financing at long-term, tax-exempt rates.
Rosenberg told the council that the bonding capacity would be determined by the property values in each assessment district. But he estimated that the total capacity would be about $20 million, with about $8 million needed for the first phase of construction on the south side.
Council member Chris Watts questioned whether PID bonds would allow the developers to fund the rest of the costs that would have been paid for under the original sales-tax agreement.
Wagner told him that because the original agreement expires after 20 years, they may not get back the entire $42 million.
Mayor Mark Burroughs asked Rosenberg whether other PIDs his group had helped set up had failed.
Rosenberg said the percentage is very small because banks know the bond debt gets paid back before any bank debt, and if the property goes to foreclosure, the bank risks not getting its money paid back at all.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is firstname.lastname@example.org .