NEW PORT RICHEY — The city had embarked on a speculative spree.
From 2004 to 2006, officials had spent about $6.4 million total to buy the Hacienda Hotel, the First Baptist Church and the First Church of Christ Scientist.
To help with the investment, officials took out a $9 million line of credit from Bank of America, thinking the three sites would quickly flip and sell for a profit. They figured that by this year, the properties would be off their books and onto their tax rolls.
What a difference a few years makes. The city still owns all the properties. The city's big investment has yet to pay off. In the past two years the city, hampered by a crashing tax base, has been able to pay only interest on what is now $7 million in principal, due in full by August.
On Tuesday, with no way to repay the outstanding debt, the City Council agreed to refinance the note with a $7 million loan from SunTrust Bank. In doing so, the city will extend its due date until 2025 at an annual fixed interest rate of 5.27 percent.
Still, the move doesn't solve the city's financial crunch. Officials will need to budget about $700,000 a year to keep up with the loan payments, along with another $1.4 million per year in debt service for two other loans taken out mostly for the city's recreation center.
In total, that's a $2.1 million annual payment to be taken from the city's tax increment financing, or TIF. The problem? Next year, the TIF account will have only $2.2 million.
That's a tiny TIF, especially since four years back the city boasted nearly $5 million in redevelopment funds. That means new projects that depend on the money could be delayed — or canceled.
The TIF works like this: The city in 1988 declared its downtown "blighted" — a state designation for parts of town largely abandoned, dilapidated or in decline. In 2001, officials expanded the designation across the entire city.
That year, officials enacted the citywide TIF and set a property tax revenue baseline. As the years passed, a percentage of tax revenues in excess of that baseline went into a special redevelopment fund set aside to fight the blight with new capital spending.
As property values and tax revenues have sunk, so has the amount reserved for redevelopment. There are no new projects in the upcoming budget, finance director Rick Snyder said. The city's sole redevelopment project, the second phase of Railroad Square, will be funded by Penny for Pasco and federal Community Development Block Grant funds.
If the city-owned properties sell, the profits will go toward retiring the $7 million debt, Snyder said. But unless property tax revenues increase, the TIF — and the city's ability to fund new projects — will remain stifled.
"Nobody ever thought we would be keeping those three properties on our books for so long," Snyder said. "We need a couple years of healing."
Contact Drew Harwell at email@example.com or (727) 869-6244.