Millcreek reviews $24 million East Block bond proposal to fund parking, hotel, retail and affordable homeownership

Millcreek City Council members on May 12 heard a staff presentation on a proposed East Block redevelopment package that would generate roughly $24,000,000 in bond proceeds to fund a 272-stall parking structure, a hotel, retail condominiums and land set aside for owner-occupied affordable housing.

The proposal matters because it combines large upfront borrowing with public land use decisions and ongoing revenue pledges. Jason Birmingham, financial adviser with LRB Public Finance, told the council, "What we're looking to generate is approximately $24,000,000," and said the Millcreek Community Reinvestment Agency (CRA) would be the bond issuer to preserve flexibility for the redevelopment effort.

City economic development director and city manager Mike Winder laid out how the East Block components would fit together: moving the Fine Art tenant temporarily, renovating a 1930s building, condominiumizing ground-floor retail, and building a parking garage estimated at about 272 stalls. Winder said the parking structure would be used during construction and later provide much of the project’s parking supply.

Staff described the financing specifics the presentation used. Birmingham said the plan assumes issuance of slightly less than $23,000,000 in par bonds and noted there is currently "about 1,300,000" in premium expected from investors. The plan relies primarily on city sales tax as the bond security but anticipates additional offsets from project revenues: sale of air rights and hotel parcels, monthly parking rents and retail rents. In one example staff cited, Ensign’s letter of intent would pay $1,400,000 for air rights above ground-floor retail and $1,500,000 for the hotel corner.

Key numbers presented by staff included: a proposed parking-rent credit of $150 per month per stall; a pro forma retail rent assumption of $35 per square foot; basement storage rent at $10 per square foot; an estimated parking-structure construction cost of about $37,000 per stall; and a long-range revenue window that staff described as producing "$80,000,000 plus" over 30 years in aggregate revenue. Birmingham also showed a debt-service coverage example using last year’s $15,300,000 in sales tax receipts, producing about 2.9 times coverage at a conservative projection.

Market and legal questions remain. Birmingham and staff said they are working with bond counsel and tax counsel (Gilmore & Bell was named) to confirm whether the financing can be structured entirely as tax-exempt debt, and they expect a rating visit with Standard & Poor’s and Fitch. Interest-rate assumptions in the presentation ranged from about 4.5% to 5.0% depending on timing and term, and staff said a conservative internal assumption was 5.25%.

Staff outlined a near-term schedule: a parameters resolution for the RDA with city ratification is proposed for May 27, a required public hearing on the bond is scheduled for June 23, a planned bond sale date of Aug. 7 and a projected closing Aug. 14. Birmingham said the agency intends to finalize documents and market the bonds after the council and RDA set parameters.

No final financing authorization was taken at the meeting. Instead, staff asked the council for questions and said they would return with parameters and legal confirmations. The council then adjourned the work meeting on a motion by Tom, seconded by Sherry; the motion carried and the meeting was adjourned.