After making interest-only payments for four years, the city of Statesboro is refinancing the $4.75 million loan it took out in the form of a bond to reimburse developers for building streets and other infrastructure in the Old Register Road Tax Allocation District, or TAD.
For up to three years more, the city government and the district’s private developers can continue making payments that cover only the interest — but at over two-and-a-half times the original interest rate. City officials hope that the TAD property tax increment, gaining from the value of the Publix shopping center and other new businesses near it, among them a Starbucks now under construction and a planned Chick-fil-A, will begin to repay the principal after that.
“If you look at what’s going out (there), we feel pretty confident with Publix and the strip center — Starbucks is going up, a new Chick-fil-A is going to be going up — I may be telling stuff that folks don’t know. … There’s going to be a new package store that’s going to be going up, and you see all of the different pads that are out there,” City Manager Charles Penny said during the Aug. 18 council meeting.
He went on to say there may be some residential development in the TAD as well, and noted that some annexations of tracts into the city — at the request of individual property owners — are also occurring.
“So we think it just bodes well for the TAD that in three more years, we certainly should be in a position that the TAD should be producing the revenue that we need in order to take out the permanent financing,” Penny said.
Almost 5 years
The Tax Allocation District, from Veterans Memorial Parkway south around Old Register Road to The Club House family entertainment center and eastward around Tormenta Way to where Akins Boulevard has now been extended, was created by the city almost five years ago at the request of South Georgia Tormenta FC soccer franchise President Darin Van Tassell and other investors.
The August 2018 TAD resolution did not increase taxes. But it set aside any growth in property tax revenue from construction and rising values occurring with the district after Dec. 31, 2018, for spending meant to facilitate development within the district. The Bulloch County government and Board of Education also agreed to contribute a set amount of their revenue growth in the Tax Allocation District.
The developers themselves then paid for contractors to widen Old Register Road, build Tormenta Way and install water and sewer lines within the district. But the city used money borrowed by means of issuing the bond to reimburse the developers’ costs.
Single-bank bond
When issued in August 2019, the bond was sold to a single bank, which is now Truist, for the $4.75 million. The annual interest rate was just 2.19%, and the city actually borrowed several of the expected interest payments as part of the bond principal to get a head start on repayment.
The new “Series 2023” bond, to be issued “on or about” this Aug. 15, also for $4.75 million, will go to Truist with a new interest rate of 5.95%, retiring the old bond. The new bond will be “payable in full” on Aug. 15, 2026, as reflected in Penny’s prediction that the TAD revenue should support permanent financing after three more years.
The TAD “increment,” or growth since the end of 2018, has so far produced only about $20,000 for the TAD fund, city officials said. But the Publix supermarket was completed and opened just last year, and the remainder of the Eagles Corner Shopping Center, where Publix is the anchor store, is still being fleshed out.
At the previous interest rate, the $4.75 million bond required about $104,000 annually in two installments, February and August, of about $52,000 each, for which the original TAD developers have been reimbursing the city. For the February 2023 payment the city used the $20,000 from the TAD fund and has requested a $32,000 payment from the developers, Penny said.
But with the bond refinanced at 5.95%, the interest payments will rise to about $300,000 a year, or installments of about $150,000 due each February and August.
City’s pledge to pay
The three City Council members present July 18 unanimously approved the bond refinancing. On a separate motion, they also approved what Doug Gebhardt from the city’s financial consultant firm Davenport & Company called an “assurance resolution” for Truist. The resolution promises that if the TAD funds do not fully cover the bond payments, the city will use general tax funds to pay them.
“Truist was generous enough to allow that provision separate from the bond documents. …,” Gebhardt said. “We’re happy with that result.”
Penny noted that the city will have “to pay some closing costs and things of that nature” for the new bond issue from its general fund, but he said these could be recovered later from the TAD fund. In answer to a question from council, Gebhardt said the closing costs should be “roughly around $130,000.”
Second Chick-fil-A
Penny’s comments about new businesses in the TAD amounted to confirmation by a city official that a Chick-fil-A restaurant, a second for Statesboro, is planned for construction in that area.
The location will be the corner of Tormenta Way and Akins Boulevard, with direct access from Tormenta Way only, city Planning and Housing Administrator Justin Williams said Monday. The project has been through the process of approval for a land disturbance permit, but the developer has not applied for a building permit yet, Williams said. The city’s contact information identifies VSB Development LLC as the developer and lists another person as contact, but the Georgia Secretary of State’s Office corporate registration database shows Van Tassell as the LLC’s registered agent.
The proposed building size is approximately 4,864 square feet, and the Chick-fil-A would have an extensive drive-thru designed “to take pressure off Tormenta Way,” Williams said.
The Starbucks, Statesboro’s third, is farther along, having a building permit and even a “coming soon” sign. It is under construction on an Eagles Corner Shopping Center outparcel in front of Publix. The developer is Halpern Enterprises, and the projected completion cost of the 2,500-square-foot building is approximately $475,000.
