Vote No Mason City
On Public Measures B & C on November 7th
Mason Citians are being told to vote “yes” for a multi-million dollar general obligation bond debt to fund nearly 80% of the River City Renaissance Project costs. This project has been on-going in one form or another since 2013. The city has already spent hundreds of thousands of dollars on this dream – and not a shovel of dirt has been moved.
Total estimated costs are listed at approximattely $38,000.000. City will pay thousand’s of dollars to issue GENERAL OBLIGATION bonds up to $32 million to cover the up-front costs to complete the Renaissance project, which includes: a hotel, arena, pavilion, skywalk, museum and re-hab the Music Man Square into a convention center.
WHY VOTE NO? Here’s why:
FROM AHLERS & COONEY P.C., CITY’S LAW FIRM & BOND COUNSEL:
“Both the lease agreement and all the bonds being considered are general obligation, secured by a debt service levy. To the extent funds are received from other sources (such as TIF), the debt service levy can be abated. If those funds do not materialize, the entire obligation is payable from a debt service levy (tax levy). These are NOT urban renewal revenue bonds secured soley by TIF revenue.”
- Up to $14,750,000 in INTEREST over the years to pay off the $32 million in general obligation bonds. Taxpayers are responsible to back up the bonds. The project fails – WE PAY.
- There is NO “lump sum” check from the state for millions of dollars, as you have been led to believe. What actually happens is, tax dollars from NEW CONSTRUCTION businesses in the 25-acre downtown district are collected and sent to the state. The hotel would be an example. Then, those dollars are sent BACK to Mason City periodically. There is a 20-year time limit on this. If the downtown district never reaches the dollar amount allocated by the state within this time frame, Mason City is stuck with that lesser amount instead.
- This project does nothing to serve the needs of the citizens and puts taxpayers at risk if the downtown area underperforms. It is merely a short-term cash cow for bankers, construction companies and politicians. Once it is built, it will lose money and WILL NOT ‘save’ Southbridge Mall.
- The Gatehouse entity who claims to be the hotel developer has NO BANK FINANCING at this time and no dollars into the project. BUT – Gatehouse has been given $150,000 from the taxpayers. David Rachie is a one-man show, working from home, who nearly had his house re-possed in 2015.
- Gatehouse stands to receive a $4.2 million dollar interest free loan for 20 years. Cost to taxpayers: $1.9 million in interest.
- Southbridge Mall has fallen into dis-repair. The owner, M. Kohan, has a notorious history of unpaid bills, including upwards of $60,000 right here in Mason City RIGHT NOW. Just Google ‘Mike Kohan malls’ and see for yourself.
- The current City General Obligation (GO) outstanding debt is approximately $24,500,000. These two measures would more than double the city GO debt plus make the city responsible for up to $14,750,000 of added interest cost that will be fully elgible to be re paid from the city tax levy authority when all the other tax sources they intend to get millions from fail to be sufficient.
- Total costs of ballot items B & C if each receives a minimum of 60% Yes vote on Nov. 7th:
- $46,750,000. Figure based on $32,000,000 of new GO bonds sold at a 4% interest rate for a 20 year debt service period to retire this massive new debt.
- The so-called new private investment this public money is bait for?Possible $1,500,000 equity investment from Rachie’s Gatehouse Mason City, LLC and a Senior Lender loan to Gatehouse MC, LLC of $9 million – IF – they can find such lender who will sign on. As of October 20, no such lender had emerged, and no $1.5 million investment funds had been shown to the public by Gatehouse.
- No need for another hotel in M.C. An honest, professional market analysis would prove that. In fact, there are several hotels already operating in Mason City and paying taxes. Should their taxes fund a competitor? We say no.
- Gatehouse had to beg the city to pay for their “made as directed” version. A fake market analysis added to a financially weak project developer results in the need to drag public money in to rescue the project. Such as this $4.2 million so-called “gap loan” from the city to Gatehouse. The one that requires NO payment on it to the city for 20 years and makes the city cover the $1.9 million of interest the city bond debt that funds this loan will add. Expect the city to be stiffed out of ever being re-paid the $4.5 million loan by Gatehouse – it is an LLC, limited liability. The senior lender (bank) – if one ever emerges – will have first right to the foreclosurer sale proceeds. Tough luck City of M.C.
- A $14,000,000 gift to the Southbridge owner for an ice arena and pavilion. WHY? The first scheme cooked up in city hall was in part to avoid a public referendum on any bond financing for these two gifts. Mayor and council have no trust in the voters. So Mayor/Council set off to avoid such public vote by use of Tax Increment city bonds vs the GO bond that requires public referendum approval in Iowa at minimum 60% yes vote. Now that scheme to keep avoiding any public vote fell apart and we have these two Public Measures, B & C, to vote on come Nov. 7, 2017.
- The Measure B is for the lease between the city and mall for arena. Approval sets in motion the sale of GO bonds up to $18,000,000 for 20 years to pay off – this builds the arena and other pieces of the Renaissance project. Then, the city RENTS the arena FROM Kohan, the mall owner. Cost begins at $12,000 per month and escalates sharply from there. The rent money comes from the LESSEE (City of Mason City). Where will the city find this rent money? From YOU the users of the arena in the form of fees, ticket sales, sponsors and additional city revenues when these operating revenues fall short of covering annual operating cost the Lessee is responsible for under this Lease.
- Consider: The owner of Southbridge bought it from U S Bank for $1,500,000 in a foreclosure sale. To date he has done nothing to improve the mall except wait for this multi million dollar gifts from City Hall. YOU. Then, he gets almost all arena and pavilion operating cost paid by the Lessse/ City of M.C. via this Lease Agreement you are voting on in Measurer B. YOU, the M.C. taxpayer and user of this gift arena you paid for.
Mason City deeper in debt via the six-part Renaissance Project
Hotel = $16,970,000
Music Man Square renovation = $3,000,000
New Museum = $1,500,000
Skywalk = $2,500,000
Performing Arts Pavilion = $1,650,000
Multi Purpose Arena = $12,550,000
Approximately $38,000,000 – not including the interest cost on up to $26,500,000. of new city GO Urban Renewal bond debt.
Hotel: Gatehouse MC, LLC equity – $1,500,000 – Can they get this?
Senior Lender to Gatehouse – $11,270,000 – Who is the lender that will take this chance?
City of Mason City, loan to Gatehouse – $4,200,000.
Note: This city sweetheart loan of $4.2M has NO payment on the Principal for 20 years and NO interest cost to Gatehouse. Plus it appears to be poorly secured to protect the city from being stiffed out of the entire $4.2M.
The remaining five projects are 100% up front funded via new city General Obligation Urban Renewal bond debt proceeds if Public Measurers B & C receive a 60% yes vote.
GO Urban Renewal bond debt is legally entitled to be retired from a city debt service tax levy under Iowa law. Don’t think so? Ask the City Finance Director, or the Speer Financial Advisors firm in Waterloo who are the MC financial advisor on bonding. 319-291-2077 Att: Magie Burger, Client Representative.
Or the law firm of Ahlers & Cooney, P.C. in Des Moines, Bond Counsel to the city. 515-246-0337
Financial Facts You Should Know
Current outstanding GO city debt: approx. $24,500,000
These two issues will add $26,500,000. An increase of 108%.
Note: this Measure B re: the Lease approval with Kohan who would be GIVEN $12,500,000. of the city bond money and then paid rent by the City/the Lessee, from arena user fees and your taxes.
Seems he has had difficulty paying his taxes on Southbridge since his purchase of it. Check with the County Treasurer for the latest.
WHY give away millions of public money to ANY private party and then pay that party rent money to use what YOU just paid for 100%? So the rent will become the new tax on this facility? Skip this gift scheme that requires this $12.5M new rec. facility to be given away. Just use the rent sum toward the debt service on these GO UR bonds and KEEP the $12.5M facility the City of Mason City taxpayers fund 100% if you favor such facility.
That cost of interest on $26,500,000 over 20 years at an interest rate of 3.5% for 20 years will add $10,570,000 to the $26,500,000; at 4.0%, this jumps to $12,249,000.
Min. total Principal and Interest cost $37,070,000 up to $38,749,000 per above estimates.
Compared to pending/maybe private sum of $12,570,000 into the hotel project.
Nearly 80 % public funding necessary for these six projects. The promised $2M from MCYH is to date just a promise. Result is the city bond money has to front end it and then hope this $7,000,000. allocation from the IEDA Board.
Note that this sum of money will only become available from the diversion of a 5% and 4% sales tax on sales from new business and facility within a maximum 25 acre Urban District in downtown MC.
Up to the maximum of $7,000,000. over up to 20 years. Failure to earn the $7,000,000. from such sales leaves the city without this shortfall. So must find it from other city taxes.
This IEDA support at maximum of $7,000,000. FAILS to cover even the lesser cost of interest, $10,570,000. at 3.5% and is of no support toward retiring the $26,500,000. new GO UR bond principal debt on the city books for 20 years.
Nearly $14,200,000. (arena + pavilion) to be given away to the owner of Southbridge now or whoever may be waiting for this DEAL to be flipped to.
Plus the high risk that a Gatehouse MC, LLC will no doubt flip out as well and the next LLC will stiff the city down the road when the hotel fails to perform financially to cover all it’s operating cost and make a sufficient profit.
Similar to the Southbridge story. Ask U S Bank about that.
$37,070,000. of new city P & I debt to be fully retired over a 20 year period will require a average yearly debt service of $1,853,500. ($37,070,000 divided by 20) from the taxpayers of MC and area from various public tax sources, including the debt service property tax levy when these unspecified with dollar estimate from each per year fails to be sufficient to fully cover the yearly debt payment.
Have you seen such accounting from City Hall that adds up to paying off $37,070,000 in 20 years? Or possibly even more?
A couple of out of state panhandlers worth this kind of sweetheart gifts with millions of borrowed bond proceed to be repaid via taxes FROM YOUR POCKET?
Vote NO on Measurers B & C on Nov. 7th.
Mason City Can Do Better Than This.
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