CHICAGO -- Mayor Stephen Goldsmith of Indianapolis has proposed refinancing $230 million of revenue bonds the city sold in 1988 to help build a controversial retail mall.
Jim Snyder, the city's director of strategic and financial planning, said the mayor proposed the refinancing of the Circle Centre Mall last week to the Metropolitan Development Commission, which passed a preliminary resolution in favor of the plan.
He added that the plan would still need a approval from the City-County Council and from the board of the Indianapolis Local Public Improvement Bond Bank, which issued the bonds in 1988 and which would be the conduit issuer for the refinancing.
Snyder, who is also executive director of the bond bank, said approval from all the bodies is expected, given the "significant savings" anticipated from the refinancing.
The city hopes to save $20 million to $30 million by refinancing the bonds at the current low market rates, compared to the 8.5% rates currently on the bonds, according to Snyder. The savings may be funneled back into the project, he said, pointing out that the structure of the deal has not been finalized.
If approved, the bonds would be priced the first week of November, depending on market conditions, in a deal headed by Lazard Freres & Co., Snyder said. Other firms have yet to be selected, he added.
The bonds, which are backed by revenues from a downtown tax increment finance district and the city's moral obligation pledge, represent Indianapolis' share of the financing for the mall. Bond proceeds were earmarked for acquiring and clearing the site, relocating utilities, and building three parking garages to accommodate 4,000 vehicles. Snyder said the city has spent about $70 million of the proceeds so far, mainly for the land and its preparation.
Shortly after taking office in January, however, Goldsmith ordered a halt to construction of the garages until the final portion of the mall's financing plan was in place, Snyder said.
Michael Murphy, a spokesman for Circle Centre developer Melvin Simon & Associates, said the company is working with a consortium of banks to finalize a loan of approximately $70 million to complete the mall's financing. He added that the financing should be
completed "in a matter of days or V
Simon and a group of 13 private investors have already committed $64 million to the project, according to Murphy. The project has been estimated to cost a total of $300 million.
A 730,000-square-foot mall slated to cover three and a half blocks in downtown Indianapolis, Circle Centre has suffered a number of setbacks since it was proposed in the 1980s. Though the mail was scheduled to open this year, the date has now been pushed back to late 1994, Murphy said.
Simon officials have said the delay is due to the recession, problems in the retail industry that have seen major retailers going into debt to buy competitors or thwart takeovers, and the consequent reluctance of banks to lend money to
large-scale retail developments. V
Mall developers also have had a difficult time getting commitments from major retailers to anchor the mall. Murphy said Nordstrom's and Parisian, two chain stores, have signed on as two of the three anchors.
City officials have expressed frustration about the delay, noting that the mall may not be completed by the time the first debt service payment is due in late 1994. Goldsmith, who inherited the project from his predecessor, Mayor William Hudnut, has said he is cautiously optimistic about the mall's future and recognizes its importance in strengthening the downtown area.
Snyder pointed out that the tax increment finance district set up to support the bonds encompasses most of the downtown area in addition to the mall. He said the city has commissioned a study of incremental property tax revenues in the district that is expected to show enough revenues are available from the non-mall portion of the district to support the bonds. The bonds were sold in 1988 with a one-to-one ratio of tax increment revenues to debt service.
Kenneth Gibbs, a senior vice president at Lazard Freres, said the refinancing should be "a pretty clean deal." He explained that, for security reasons, investors will look to the revenue from the rest of the district and to the city's moral obligation pledge, which requires the City-County Council to consider appropriating money to make up for any deficiency in the reserve fund.
The bonds are rated A-plus by Standard & Poor's Corp. and AA by Fitch Investors Service Inc.