Committee backs $2.57M IFA loan to fund infrastructure at Drewry and Elwood sites to spur housing

The Community Investment Committee voted to forward a favorable recommendation to the full Common Council for resolution 25-28, authorizing the issuance of tax-increment-style bonds to support a $2,570,000 loan from the Indiana Finance Authority’s residential infrastructure fund.

Caleb Bauer, Executive Director of Community Investment, told the committee the loan would be a 20-year, low-interest instrument purchased by the Indiana Finance Authority and repaid by the City of South Bend. Bauer said the current estimated fixed rate at closing would be 3.15 percent but that the loan agreement authorizes a maximum rate not to exceed 5.5 percent. He said the city would begin interest payments within six months of loan closing and that principal payments would begin 12 months after substantial completion of the project.

Why it matters: Staff said the financing would pay for environmental remediation, demolition, public utilities and street/sidewalk infrastructure so two redevelopment sites — the Drewry site and the Elwood Shopping Plaza (the former Martin’s grocery location) — can be made shovel-ready for housing development projected in the application at roughly 110 units for the first phase.

Bauer briefed the committee on past cleanup work: after city acquisition of the Drewry property the U.S. Environmental Protection Agency’s Region 5 removed demolition debris and contaminants at an estimated cost of about $2 million; the city completed two demolition phases and is preparing a third phase to remove foundations that will require additional environmental testing. Bauer described possible future site elements including utilities, streets, sidewalks and a concept showing a mix of housing and some commercial activation on Portage Avenue.

On financing and complements: Bauer said the redevelopment commission has approved preliminary and final actions (April 10 and April 24). The city is also in tentative approval for a $3,500,000 REDI 2 blight and redevelopment grant from the Indiana Economic Development Corporation; those REDI funds are reimbursement-based and the loan can act as local public match. Bauer estimated total debt service on the loan would be $3,570,000 over 20 years and said coverage ratios would exceed 250 percent across maturity.

Committee members asked several technical questions. Matt Eckerle, municipal advisor with Baker Tilly, said the loan would be a fixed-rate issue at closing and that although a reset mechanism exists he did not expect large swings from the current 3.15 percent estimate. A committee member asked whether interest accrues on the full authorized amount at closing; staff confirmed interest would begin at closing and on the amount actually closed. Committee members also discussed an estimate of about $6,000,000 for utilities and street work; Bauer said the IFA loan and the tentative $3.5M REDI grant together could conceivably cover the current $6,000,000 infrastructure estimate, but that additional funds might be needed for developer incentives or higher design costs.

Questions of timing and development: Bauer said the city expects to close within roughly 60 days from authorization and that the Indiana Finance Authority is moving quickly. He said the city would seek development partners this summer, revisiting community development corporations that had worked on the federal grant scoping and inviting competitive developer proposals for portions of the larger site.

No members of the public spoke on the record. The committee moved resolution 25-28 to the full council with a favorable recommendation on a 6-0 roll-call vote (Committee Member Gooden Rogers; Committee Member Bolden Simpson; Citizen Member Kane Kujeski; Citizen Member Thomas Gray; Committee Vice Chair White; Committee Chair Warner). The item will appear on the full council docket at 7 p.m.