As excitement builds for the proposed mixed-residential housing development and new 88-acre park on the Meadowbrook Country Club property, one significant hurdle remains to making the vision a reality: The city of Prairie Village will have to approve the issuance of several million dollars worth of general obligation bonds — bonds that have to be paid off by the city whether or not the taxes generated by the new development yield enough to cover them.
And at this point, members of the city council don’t know exactly how many bonds they’ll need to issue to purchase the land, or what the bond payment structure will look like.
Prairie Village City Administrator Quinn Bennion said this week that VanTrust has agreed to sell the property at or below the appraised value. Once the city purchases the land, it will be immediately transferred to the county, which will be charged with maintenance and administration of the new park in perpetuity. But Prairie Village will be the entity required to actually pay for the park land.
The Tax Increment Financing (TIF) deal that’s on the table as part of the proposal would direct most of the new property taxes on the developed parts of the land toward retiring the bonds. This Tax Increment Financing solution will see the additional property tax diverted for 20 years.
At this point, the city has engaged an appraiser for the land and has a good idea of the prospective sale price. Current estimates are between $14 and $20 million for the bond amount, which will cover the purchase and much of the park development. Some of the bonds will be special use bonds, which have more flexibility in their repayment schedules. But half the new tax revenue will be directed to retire general obligation bonds, which have a lower interest rate, but must be repaid by the city no matter what.
Should the funds from the TIF deal prove insufficient to retire the general obligation bonds, Prairie Village would be required to raise its citywide property tax rate to cover the shortfall.
That requirement has at least some members of the council taking a cautious approach to the deal. Councilor Eric Mikkelson, a partner at Stinson Leonard Street LLP, said he wanted to ensure Prairie Village taxpayers wouldn’t get stuck with the bill for the parkland in the event that a financial crisis, like the one that struck in 2008, put a dent in the TIF revenue stream.
“If I thought there was a significant risk that the dedicated tax increment might miss the mark…due to an economic downturn, excessive appraised land purchase price, or development failure, that would certainly give me pause,” Mikkelson said.
Councilor Dan Runion, an attorney and CPA with Shaffer Lombardo Shurin, echoed those concerns. He said he would need to see substantial evidence that Prairie Village residents would not bear undue risk of having their own taxes raised to pay for the bonds and that issuing the bonds would not substantially harm the city’s ability to borrow money.
But, Bennion pointed out, even if the unthinkable — another financial crisis, for example — were to occur, the city would be in a good position, because it would be buying a park with a bond issue – not losing any investment.