Orland Park will nearly double its bond debt to finance a 295-unit luxury apartment complex, though staff says money from the Tax Increment Finance district, home rule sales tax and from the complex's renters will keep property taxes from being affected.
The $63,348,138 million needed to fund the project will include a $38 million loan to developer Flaherty and Collins.
The loan is scheduled to be repaid over 10 years as a mortgage. At the end of 10 years, the balance is due in full.
The remaining project money, about $24 million, will be considered an incentive package that must be repaid to the village. In 10 years, the entire property will be assessed. If the property is not valued high enough to generate that $24 million, the village will remain lease holders on the property and Flaherty and Collins will continue to compensate the village for up to 10 more years.
Orland Park will set a line of credit with a bank of about $30 million to start paying the project costs, and when spending on that credit reaches about $15 million, the village will issue between $20 million to $25 million in general obligation bonds.
When spending on the credit line reaches about another $15 million, the village will again issue between $20 million to $25 million in bonds.
These additional bonds will nearly double the village’s debt, which is now at about $79 million.
The village says it will not push the cost of the debt onto village property owners through taxes, however. Annual abatements, as well as money coming from the apartment complex itself, TIF money and home rule sales tax money, will cover the cost, said Finance Director Annmarie Mampe during a press conference Wednesday morning.
“We have no reason to believe project revenues, increment and home sales tax, if necessary, aren’t sufficient to cover the costs of those bonds,” Village Manager Paul Grimes said during the conference.
But this project is not without risk.
“You’re asking me hypothetical, and I’m not going to give you a guarantee on anything,” Grimes said in response to SouthtownStar columnist Phil Kadner’s question whether taxpayers will never be at risk. “Every (general obligation bond) issue in America is pledged to the full faith and credit of the community. That’s a fact of life. This isn’t any different. That said, we’ve strapped this deal with belts and suspenders to ensure there is no impact on taxpayers.”
Orland Park’s village board is expected to vote on the development agreement on Sept. 6. Construction is expected to begin in early October with the board’s blessing, said Flaherty and Collins CEO David Flaherty. While building the entire complex is expected to take about three years, enough units should be built 14 months into the construction that lease-holders could begin moving in then, Flaherty said.
Money from the TIF district, which is expected to net about $650,000 a year, should start arriving in 2015, Mampe said.
Orland Park’s strong credit rating of Aa1 according to Moody’s and AA+ from Standard and Poor’s allows for the village to take out more bonds and still hold a strong rating, said Kevin McCanna, president of Speer Financial, Inc.
The village’s debt ratio, which is a comparison of debt to equalized assessed value, without this project is at about 2.85 percent, and with the project it would go up to about 5.5 percent. Orland Park has a debt ratio limit policy of no higher than 8.625 percent.
A public forum will take place at 6 p.m. Monday, Aug. 29, at the to discuss the apartment complex deal.