The more money that the Sparks Redevelopment Agency borrows for The Legends at Sparks Marina, the less money it will have for other economic improvements within that redevelopment district.

This was the basis for a discussion led by Sparks Finance Director Tom Minton on Monday.

The Sparks Redevelopment Agency is cautiously moving forward on preparations to possibly approve the issuance of $13 million in Tax Increment Financing (TIF) bonds. The bonds are issued based on taxes collected within the redevelopment district for improvements within that district. The agency will vote on the funding in early March.

Minton spelled out what this could mean for the Sparks Redevelopment Agency.

Redevelopment Area 2 - including Sparks Marina, Conductor Heights and the Oddie Boulevard corridor - was formed in 1999 and will expire in approximately 20 years from now, staff said.

During this time, some taxes will be used to improve the economic condition of these specific neighborhoods, in order to eventually raise the overall value of the city. So, the agency has a limited amount of time and money to help improve the economic conditions within these redevelopment districts.

For The Legends development at Sparks Marina, the Redevelopment Agency and Sparks staff have been forced to use their best educated guesses to weigh financial risk versus the benefit that could be received.

Minton said the most significant factor - "the 800-pound gorilla" - in determining the value of The Legends development, is The Legends at Sparks Marina Casino-Resort. The size and value of Olympia Gaming's casino-resort at the Sparks Marina will determine how much in property taxes Olympia can be charged.

In turn, if a large amount of property taxes is collected, then the city-issued $13 million in TIF bonds would be paid off sooner. The sooner the financing is paid off, the more time the redevelopment agency can collect taxes to use on other redevelopment projects. The city has a limited amount of time to improve economic conditions within the redevelopment district.

"If it takes 6 to 7 years to (pay back) the TIF bonds, it only leaves the Redevelopment Agency 13 years to leverage those revenues," Minton said. "It defers and cuts down on bonds you can issue for other projects in the (redevelopment) district."

Another complicating factor is the potential risk that city taxpayers could be on the hook financially, if The Legends does not meet high expectations for bringing in tax revenue.

Two other actions spiked the amount of city TIF bonds needed from $5 million to $13 million.

Some financial issues have extended past the agency's control, said Councilman Ron Schmitt and City Manager Shaun Carey, including the $2.7 million spent to raise portions of the Legends project above the flood plain. This was done during the time when the Federal Emergency Management Agency (FEMA) was considering putting Marina lands back into the flood plain. In January, FEMA decided flood control measures are sufficient to keep Marina lands out of the flood plain, but the $2.7 million can not be recouped.

"A lot of issues have come up in the last 6-8 months that needed to be done - $9 million will go to paying the prevailing wage (for constructing) the entire project," Schmitt said.

The prevailing wage is considered the fair hourly wage that a skilled tradesman earns with respect to their skill, education and the cost of living.

Rising interest rates for government bonds were an unwelcome surprise.

"Nobody expected the interest rates to jump on bonds," Schmitt said. "It's ironic that mortgage interest rates are going down, while bonds for governments are going way up. We're dealing with what we're dealt. In 12-18 months, our financial position will be clearer. I think the market will settle down."

Some members of the agency expressed worry about the potential risks.

"When we went to the Legislature for this project, we did it because there was no significant risk to the taxpayer," Carrigan said. "First, there were $151 million they were asking for; now it's $166 million. In the beginning, the agency was taking on $5 million in TIF bonds; now it's $13 million."

"All of a sudden, the burden is sitting on the backs of the taxpayers and that is really scary," Carrigan added.

"When they build this project, if it doesn't lease, they (RED Development) still have risk in their construction loan," Minton said. "We're definitely sharing in that risk. It's definitely a judgment call about if we want to assume that risk."

Carey said the agency and staff have worked hard to protect city taxpayers from excessive financial risk.

"We worked diligently to protect the citizens of Sparks," Carey said. "Your direction today would authorize us to proceed down the path, continue the dialogue and continue to bring closure to this project."

The Sparks Redevelopment Agency directed staff to move forward on preparing to finance $13 million toward The Legends at Sparks Marina project.

Councilmen Phil Salerno, Ron Smith and Ron Schmitt voted in favor of the staff direction. Councilmen John Mayer and Mike Carrigan voted no.

In early March, the city will consider approval of issuing $5 million in TIF bonds within the first series of bonds that are issued. This would allow the issuance of the first series of Sales Tax Anticipated Revenue (STAR) bonds financing by April 1, Minton said.

"This has not been an easy deal," Schmitt said. "The alternative to not moving this forward is not very good. But the agency can be reassured that each portion of the TIF bonds will come back to us for approval."