The city may issue its first-ever taxable bond in early February in order to repay itself for the $7.4 million it has spent so far on the downtown mall.
Comptroller Glenn Klocko said the city typically sells tax-exempt bonds because they are used to pay for civic improvements that fall within the norm of municipalities, such as schools, roads and parks.
But when the city bought the mall for $5.3 million in 2005, it leaped into a commercial enterprise that required different handling than the city’s other ventures.
It has since poured at least another $2.1 million into the property in order to demolish the decrepit building and pay for studies, lawyers and more.
Since the city needs to sell at bonds for at least $15 million worth of civic improvements, as well as the $7.4 million for the mall, it is eyeing a bond or financial note sale in the first week of February in order to take advantage of cheap borrowing rates, Klocko said.
The money taken in from the bonds will be used to replenish various accounts, particularly the $17 million rainy day fund that is full of IOUs at the moment.
Klocko said that bond sales are complex, but this one presents more challenges than others because of the mall.
“It’s not as clear cut as it’s been in the past,” Klocko said, because of the need to sell taxable bonds to recoup the mall money.
The difference to taxpayers is that one-year tax-exempt notes currently earn little more than 1 percent interest. Taxable notes pay more than 3 percent.
That adds up to some real money for taxpayers over the 17 years or so the city is likely to take to pay off the entire mall debt.
Klocko said the city hasn’t decided for sure that it will sell bonds for the debt, as it normally does. It has the option of selling one-year notes that it can roll over annually for as long as a decade.
“It’s a big choice that we’re going to have to talk about,” the comptroller said. “There are a lot of options that are available to us.”
One part of the discussion is how to value the mall itself in the paperwork that accompanies a sale of bonds.
“The problem is we have no idea what that property is going to sell for, if it sells at all,” Klocko said.
The nonprofit Bristol Downtown Development Corp. is overseeing an effort to revitalize the 17-acre mall site, but so far it has no luck in finding a potential developer.
Currently, the city plans to sell between $15 and $18 million in bonds along with the mall bond. But if it buys the land for two new schools during the next few weeks, which is likely, that tab would almost certainly be included in the bond sale as well.
City Attorney Dale Clift said the land purchases should occur soon.
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