Effingham Industrial Development Authority members have approved a fiscal year 2012 budget that cuts 15 percent from its operating expenditures from the current budget.
Among its non-operating capital expenditures, the IDA will ramp up its spending on development of its I-16 tract. Park development spending there will increase from $100,000 last year to $1.7 million for FY12 as the IDA plans to put a 500,000 gallon water tank out at its I-16 holdings.
“We want to get a water tower at I-16 and get started out there,” said IDA member Chap Bennett. “We’re spending some money and we’re spending it in such a manner so we can get users on the ground and grow jobs. Now we’ve got a budget that will allow us to get water to that site — that’s four years in the making.”
In its operating revenues, the IDA is estimating $3.2 million from ad valorem taxes and expects an operating revenue budget of just under $3.7 million. The amount of ad valorem revenue is expected to be down from last year’s $3.497 million.
The IDA also will be using more than $3.27 million out of its capital reserve, for a total revenue and capital income of almost $7.4 million. The IDA will be directing $3.47 million toward refinancing and debt reduction.
“I think it’s both prudent and responsible,” IDA member Dick Knowlton said of the budget.
The IDA also has agreed to engage tax attorneys as it begins the process of issuing bonds. The IDA originally proposed having all its bonds at the non-taxable rate.
“One of the things we liked was the land was not tied to the debt,” Bennett said of the bond issue. “It’s easier to make deals that way.”
Under its arrangement with Wells Fargo, the bank was slated to get a sizable chunk of the proceeds from land sale. But under the bond statutes, the IDA may face tax liability for land if it’s covered by the tax-exempt status.
“It was great not to pledge the real estate to the bond,” IDA attorney Marvin Fentress said. “It turns out that’s not going to work. You want to get as cheap a rate as you can, but you don’t want to tie your hands, either.”
Lands held under non-taxable bonds have to be used for public purposes, and that interest was 4.58 percent last week. Taxable bonds had an interest rate of 5.2 percent.
The IDA owns the southern parcel of its I-16 tract outright but has financing on the larger northern tract and on the Research Forest Tract. IDA members also decided how much of the Research Forest Tract to place under tax-exempt bonds and how much to place under taxable bonds.
“It’s essentially the same deal, only it’s a little bit better,” IDA CEO John Henry said, “because we don’t have to re-pay the 85 percent back to Wells Fargo.”
Said Bennett: “I don’t think it changes any of our intent. I still think we’re going down the right road.”
The IDA will put land it believes is more marketable in its taxable bonds and land in its long-term plans in tax-exempt bonds. It has to stay in tax-exempt status for seven years before the IDA can move to taxable bonds and market it.
“We need to make sure our re-financing allows us to have ready sites,” Knowlton said.
Said Henry: “We need our sites we can market in the next three to 10 years out to be available to us to get in there and work on.”
Henry said 80 percent of the prospect market is looking for tracts that are rail-served — the Research Forest Tract has two rail lines bisecting it — and he believes the IDA can meet the needs of nearly all of the prospects it’s seen in the last few years.
Salaries and wages will remain the same in next year’s IDA budget and the IDA will reduce its line item for consultants and professional services by nearly 62 percent.
“With Erin Rahn on staff, we do a lot of stuff in house that we used to have to hire out,” said IDA Chairman Dennis Webb.