Redevelopment Bonds sold
After a decade-long trudge, the Park Avenue Redevelopment is now racing ahead.
Last week, just days after city officials and developers signed a disposition and development agreement, the city of South Lake Tahoe priced its development bonds. The next day, about $34 million in bonds sold at an interest rate of 7.3 percent.
“I’m very pleased,” said Councilman Tom Davis, chairman of the Redevelopment Agency. “I understand they sold within a few hours on Tuesday.”
“It’s terrific,” said Mayor Judy Brown. “I’m glad they sold as quickly as they did.
“The success of this has been due to the tremendous cooperation with our partners and the city and the willingness to compromise.”
Davis said that a few months ago the city gave tours of the project area to prospective developers.
“They go through projects with a microscope when they’re investing that kind of money,” he said, adding the speed with which the bonds sold demonstrates investors’ confidence in the project.
The bonds sold quickly but the interest rate was above the 7 percent that city Redevelopment Manager Judith VonKlug hoped for.
“We paid a fair market rate,” VonKlug said. “It’s a riskier financing and the rate reflects that. We had hoped for 7 percent but (the project) could have been perceived as so risky, we couldn’t sell them.”
The project is considered risky because the money to pay for the bonds won’t be received the first phase of project is completed. That could take one to two years. The bond total includes enough to make payments on the bond and to pay the agency’s consultants for two years.
“7.3 is an affordable rate. We can support that,” she said.
That leaves $27 million to actually get the project rolling. With the funds in hand, the agency can begin negotiations to purchase the businesses and buildings that will be demolished early next year for the first phase of the project.
The bond rate, though more than what was hoped for, is considerably lower than bonds purchased for the Ski Run project at 8 1/4 percent.
VonKlug compared the difference to someone getting their first credit card.
“The first time you get a credit card, you only get a $500 credit line. Then, if you keeping paying your bills on time, in five years you have $5,000.”
The income of the Ski Run Project and Embassy Vacation Resort gave the agency a financial track record.
“Even with the Hodge (hotel project originally planned at the foot of Ski Run Boulevard) bankruptcy, we didn’t default,” VonKlug said.
The city’s financial record instilled enough confidence that one investor in the previous bonds came back to be a major purchaser of the Park Avenue bonds.
The 34-acre project includes the area on U.S. Highway 50 from Park Avenue to just west of Embassy Suites Resort.
By February, the city expects to begin asbestos removal and demolition of the buildings needed for the first phase of the 34-acre project, expected to break ground May 1.