By PETER HUSSMANN
The Newton City Council approved a multi-faceted plan on Monday that allows the city to meet its financial obligation to pay the interest costs for the next two years on the bonds issued to make infrastructure improvements around the Iowa Speedway and complete a significant lighting project to finish the city's infrastructure installation in the Speedway area, all without the need for general taxpayer assistance.
Since last October, the Newton council has been struggling to find a way to meet both obligations. The problem was that the council had been allocating funds remaining in the tax increment financing (TIF) bond for infrastructure improvements at the speedway to pay the interest costs on those bonds. As the city prepared to enter the coming fiscal year, it found itself with a TIF fund balance of about $500,000 and interest payments owing in the next two years of about $780,000. No money was left for the lighting project included in the plan, which was estimated at about $816,000, half of which would be paid by a previously secured state Revitalize Iowa's Sound Economy grant.
Over the course of the past several months, the issue returned to the council several times though each time the council tabled action and asked that city staff look for additional ways out of the financial conundrum.
At a workshop prior to the council's regular meeting Monday, city administrative staff lead the council through a series of steps that when combined enable the city to meet its obligations without the need to tap general funds.
The linchpin element of the strategy is the use of funds in the escrow account of the Iowa Speedway Economic Development grant issued by the city as part of the development. The speedway had been paying a $1 per ticket surcharge to make interest payments on the bond, however the escrow money is not needed to make the interest payments in the next two years. By agreeing to use these funds, the city is able to offset more than $344,000 of the funding gap for the infrastructure bond interest payments in the coming two years.
The council also discussed the possibility of merging the Iowa Speedway Tax Increment Financing District with the adjacent Prairie Fire TIF District. By doing so, the city could have used the approximate $250,000 in unencumbered fund balances from the Prairie Fire District for use in paying the infrastructure bond interest payments.
That idea, however, was shot down by the council due to the uncertainty involved in the messy foreclosure action being taken against the former developers of the Prairie Inn Suites motel project and the numerous contractors owed money on the project, as well as the City of Newton.
Even without merging the districts, city officials told the council, the unencumbered funds in the Prairie Fire District could be used to assist with the lighting project costs since a large number of the lights planned for installation actually fall within the confines of that district.
By taking these steps, council members were told, approximately $325,000 would remain in the infrastructure bond account to go toward the lighting project. And with the dollar-for-dollar match the city will receive from the state RISE grant, the plan unveiled Monday will allow the council to move forward with a lighting project of up to $650,000 without running any account deficits.
After reaching a consensus to move forward with the strategy at the workshop, the council voted to remove from the table and act on a resolution to seek bids for the lighting project during its regular session.
Council members reiterated that no property taxes from the general fund will be used to finance the project. Only those taxes paid within the TIF districts will go toward the projects.
The council also said they would be remiss if they did not attempt to take advantage of the opportunity to double the scope of the project through the matching funds from the state. If the grant had not been used this year, it would have been lost.
"We still have an obligation to provide lights," councilman Mike Hansen said. "We haven't done it yet. You would look at me as incompetent if I didn't grab the RISE funds that we all pay through our gas taxes."
In seeking bids, the city will seek six alternates. The city will seek bids using an aluminum pole with a cantilever arm and a galvanized steel pole. The bids will seek alternates on the full scope of the project (74 poles), for a slightly scaled back project with no lighting south of Rusty Wallace Drive (59 poles) and one that encompasses only the intersections (27 poles).
The lighting project will allow for the lights to be turned on as needed.