Funding the Cafritz Bridge: TIFs and Taxing Districts

Riverdale Park's mayor and council are voting on two pieces of legislation Monday night that could help fund the Cafritz bridge.

Lindsey Rader, of Baltimore-based Funk & Bolton, P.A. explained on March 25 to council and work session attendees how the letter of intent with Calvert LLC helps the town ensure the developers will pay for any costs associated with planning and building the bridge.

Rader said the developer has asked the council to delineate a development district in the Cafritz Property and create an account specifically for the proposed Cafritz bridge at the CSX crossing. The money in the account comes from the developer, she added, noting the inital deposit would be $25,000. 

The special taxing designation resolution creates the district, Rader said. The resolution would create a special fund as the tax increment fund without committing the town to fund any aspect of the project.

The fund would also pay for the $475 an hour rate for the bond lawyer.  

Once the bonds are issued for the project, the fund will be used as bond insurance at an estimated interest rate of 8 percent. That number is based on other developments the group has worked with before in Prince George's County like National Harbor, where the roads, public garages and sidewalks were all paid for by increment financing. In Monday's meeting both Councilmembers Ebbeler and Alan Thompson expressed concerns that the going interest rates have dropped substantially since those projects were financed and expressed confidence that as negotiations progressed, the actual rate would be less than the proposed 8 percent.

Residents Joe and Kate Kelly said they were "flabbergasted" by the legislation and believed the town shouldn't be committing to financing anything without any real numbers.

"When you issue the bonds, someone buys those bonds, and with that money they build the bridge. Then the bond holder gets reimbursed for those bonds plus 8 percent," Joe Kelly said. "(Residents') taxes are paying to building the bridge."

Councilman Jonathan Ebbeler disagreed with that point and said Monday the financing helps the developer pay for the development and " holds their feet to the fire" regardless of how the council pays for the bridge with a TIF, Special Taxing District or bonds. 

Ebbeler pointed out that the sentiments being expressed were valid if the bridge were financed with regular town-wide bonds otherwise through a TIF the project is financed solely by the businesses and/or residents in the TIF district only - not all residents.

Thompson clarified what the council is voting on Monday night below.

He said he understands why some residents are concerned that the bridge will cost the taxpayers a lot of money, but he said that "the TIF financing ensures that the only money financing the bridge will be revenue coming from the increased value of the property as it is developed."

But, it's hard to estimate how much the bridge might cost because the council does not have solid numbers in front of them yet, but his projection is it may cost somewhere between $11 to $16 million. Calvert, LLC has agreed to put $5 million dollars toward the crossing.

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Riverdale Park Patch: What exactly is the council voting on April 1 in regards to a TIF for the Calvert Tract?
 

Alan Thompson: There are two items—a TIF District designation and a Letter of Intent to use the revenue from the TIF district to fund a crossing over the CSX railroad tracks. The TIF district would allow the council to use the incremental tax revenue from the district in ways consistent with the State TIF law and say exactly which property will be in the district. The letter of intent would then allow the council to use the revenue from the TIF district to fund a crossing over the CSX railroad tracks (i.e., the "bridge") to connect the Cafritz Development to Rivertech Court and River Road. That intent will be consummated if (and only if) the Town Council approves of everything about the bridge and financing at the time the bridge is ready to be financed.  

Patch: Why does the council believe this is necessary?

AT: This is a step along the way to keeping the Cafritz Project moving forward - the Cafritz team needs to "establish a funding mechanism..." for the bridge, and this is the first step in doing so.  

Patch: The council said that the taxpayers money won't be put into the TIF and that it'll be fully funded by Calvert, LLC. But then when the bonds are taken out to build the bridge, taxpayer dollars could be used then? I wasn't clear on that.

AT: Right now, we want to keep open as many options as possible for financing the bridge, and that means keeping the TIF option available.  When the time comes to actually fund the bridge and issue bonds, the project may be at a point where we (well, the future council, to be exact) feel comfortable issuing general obligation bonds (the sort of bonds we have now for funding streets, police cars, etc.).  

We might do that because the revenue stream looks more solid at that time, for instance, and we would prefer (again, at that time in the future) to save interest money by issuing a lower-interest-rate general obligation bond instead of the riskier (to the investor), higher-interest TIF bond.

If we pass the legislation we have in front of us now, the future council will have the option of a TIF or general obligation bonds, otherwise they won't be able to choose a TIF (and we would have to issue a Letter of Intent to use general obligation bonds to fund the bridge, which, given the current state of the project, I would not be comfortable doing).