Despite excitement about the state’s willingness to help Quincy pay for its downtown revitalization, city councilors on Monday expressed concerns that local taxpayers may be on the hook if the revitalization doesn’t generate expected state tax revenue.
The state’s Infrastructure Investment Incentive Program (I-Cubed) will offer $50 million in bonds to the city to help pay for three core infrastructure improvements – the Adams Green, the Burgin Parkway Access Bridge, and the relocation of the Town Brook.
As part of the revitalization agreement, all three projects are necessary in order for private development to begin in the downtown.
Yet the money is given to the city under the assumption that once the revitalization starts generating new state tax revenue, that the incoming money would be used to pay off the state’s debt.
But if the project doesn’t generate the expected tax revenue, the state turns to the city to fill that gap. Therefore, the city must set up a reserve that would hold two years of finance charges.
That money can be funded several ways, such as by taking out more money through the I-cubed program, receiving a letter of credit from a bank, or taking out an insurance policy.
The establishment of such a reserve and an overall approval of the I-cubed funding are both necessary in order for the application to move on to the final round of review with the state.
However, the idea that the city would have to set aside more money, even if just for hypothetical purposes, to ensure the downtown revitalization moves forward was unnerving to some councilors.
According to Councilor Joseph Finn, who supports the project, the plan to pay off the infrastructure projects is innovative, but things can easily fall apart.
“All of these things are fantastic as long as they work. It’s when they don’t that they become problematic, and it becomes the liability the taxpayer assumes moving forward,” Finn said.
Attorney Paul Hines, who works for the city, said that it was unlikely that the project wouldn’t generate expected tax revenue. Even under conservative assumptions, the project is expected to make well over 1.5 times what is needed to pay off the bond, a requirement for the I-cubed project to move forward.
Those assumptions have further been vetted by the Executive Office of Administration and Finance and by the Department of Revenue, and again looked at by an independent consultant.
If there is a surplus in tax revenue, that money rolls forward to future years to help pay off the bonds sooner.
Finn was still unsure why the city would take on all of the risk associated with a potential shortfall of tax revenue, with the developer merely waiting at the sidelines.
Hines said the city was in discussions with the developer, Beal/Street-Works, on how to share that burden, but nothing had yet been decided.
It made Councilor Brian Palmucci question the need for the I-Cubed funding in the first place.
“We talk about this project quite a bit on a continuous basis. And I never contemplated, until we first started discussing I-cubed money, that we would have to incur any obligation for any other debt for implementing core public improvements,” Palmucci said. “Ultimately the residential taxpayer will have to come up with the money if this falls apart.”
Yet options of where to get additional funding for the projects are limited, Hines said.
Hines reminded councilors that there truly isn’t an appetite for giving out grant money at the federal level, and that the city was continuing to seek more local grants in addition to the $10.1 million already received.
Additionally, under the Land Disposition Agreement signed between the city and the developer, still looming is the June 30 deadline to have the $50 million acquired for the core public improvements.
If the city doesn’t have the money by that deadline, the developer could extend the closing of Phase 1, or the purchase of the Ross Garage.
The money would need to be worked out by January 2014, however, or the entire deal falls through.
Planning Director Dennis Harrington said although it would have been preferable to receive true grants with no strings attached, this is a workable solution.
“It’s a grant, there’s no question about that, [though] it has performance requirements,” Harrington said. “The original projections were aggressive… We could have received federal money if earmarks were available, but everything has strings. The cost of doing the job with federal money would be significantly higher due to the cost of federalizing the project. We’re better off as a city to have I-cubed money.”
Councilor Margaret Laforest was more optimistic about the process, saying that with grant money already received, that the city would be on the hook for less than $50 million, which would make paying off the bond easier.
Councilor Kevin Coughlin agreed that the city was lucky to have such a program, and the risks of entering in to the I-cubed arrangement were no more than when the city signed the initial agreement with the developer
“This is an important component of that in terms of bringing it to fruition. None of us anticipated that there would be some other mechanism we’d have to look to to complete the core improvements. We thought there would be another pot [of money] out there. We’re fortunate that this program exists,” he said. “Going forward there is confidence that the city will be able to handle these funds.”
The city will host a public hearing on the I-cubed funding on May 31 at 7 p.m. to further discuss the proposal.