Tipp City Is Looking to Purchase a Shopping Center

Our first in-depth look at what's happening in Tipp City

Today, this publication is tackling a community that we haven’t talked about a great bit — Tipp City. For our readers not in Miami County, Tipp City is in the southern tier of the county and has grown quite a bit in the last few years - a Meijer distribution center and Abbott Laboratories being some of the most well known industrial institutions in the town. The city is the smallest of the county’s three cities and is also the most prosperous with a median household income of over $74,000.

But that isn’t to say everything has always been rosy in Tipp City. The city’s main interstate interchange, which I-75 intersects with State Route 571, brings visitors right past one of the areas of greatest concern, the former Tipp Plaza Shopping Center.

The shopping center has gone through years of disinvestment, as many shopping centers of similar sizes have. Save a couple of smaller retail establishments, the shopping center is vacant and has become an eyesore.

Consultants have been brought in to explore different opportunities to revitalize the struggling shopping center, and the City has an opportunity to purchase the shopping center for redevelopment. Tonight, the city is working to create the financing mechanism to support the purchase.

How Tipp City Will Pay For The Shopping Center

The city is looking to purchase the shopping center at a total cost of $7 million. The city is going to use $2.5 million in cash and then borrow $4.5 million to finance the remainder of the project. The borrowing must be approved, and the Tipp City Council will be discussing an ordinance tonight that would allow that to happen. More than likely, once the purchase is finalized, the property will then be transferred to the City’s Community Improvement Corporation, which will undertake the redevelopment of the site.

The city pursuing an ordinance to issue bond anticipation notes for a significant economic development project. The ordinance authorizes the issuance of bond anticipation notes for acquiring approximately 12.15 acres of real property near the intersection of West Main Street and South Tippecanoe Drive. This project is part of an Uptown Revitalization effort, aimed at supporting economic development and job creation within the city.

Key Financial Details

The city is looking to borrow at an amount set at $4,500,000 with a maturity of not more than one year through a bond anticipation note. The interest rate is capped at 7.00% per year, with an anticipated bond issuance date of November 1, 2025. The estimated bond terms include a 20-year maturity and a 6.00% interest rate. The city is leveraging its authority under Ohio law, including Section 13 of Article VIII of the Ohio Constitution and Chapter 165 of the Ohio Revised Code, to issue these notes. The project is classified as a "project" under the Act, aligning with the state's goals of creating and preserving jobs, employment opportunities, and improving economic welfare.

Financing Structure

The bond anticipation notes are structured as special obligations of the city, payable from proceeds of future bonds and Non-tax Revenues pledged to the Bond Fund. This structure allows the city to initiate the project quickly while planning for long-term financing through bonds.

The notes anticipate the issuance of bonds, estimated for November 1, 2025. This approach provides flexibility and potentially lower initial interest costs. The city is pledging various non-tax revenues to secure the notes, including grants, payments in lieu of taxes, fines, fees, investment earnings, and proceeds from asset sales. This diverse revenue stream enhances the security of the notes.

Fiscal Safeguards

The ordinance includes several fiscal safeguards. These include the creation of a dedicated Bond Fund, a commitment to appropriate sufficient Non-tax Revenues, limitation on tax-based funding as the notes are not secured by taxation, and professional oversight through a municipal advisor and legal counsel.

Fiscal Stability Analysis

$4.5 million dollars is a lot of money for a municipality, and it leaves the open question on whether the City of Tipp City could handle such a large debt obligation. Looking at the city’s last Comprehensive Annual Financial Report, we can analyze whether the city is in the position to tackle such an ambitious project.

Current Financial Position

The City demonstrates a strong financial position with a General Fund balance of $8.9 million as of December 31, 2023. The city has a non-voted general obligation debt limit of $22.2 million and currently carries $7.1 million in general obligation debt.

Debt Capacity

The city has significant debt capacity remaining. The proposed $4.5 million note issuance would bring total general obligation debt to $11.6 million, still well below the $22.2 million limit. This indicates a conservative approach to debt management and leaves room for future projects.

Fund Balance Strength

The City’s last Comprehensive Annual Financial Report showed that there was an $8.9 million general fund balance, and that figure represents a strong financial position. The same report showed that the city spent $9.3 million in the general fund last year, showing that there are several months of operating expenses in reserve.

Debt Service Impact

Assuming the full $4.5 million is eventually bonded at the estimated 6% over 20 years, the annual debt service would be approximately $390,000. Given the city's strong fund balance and remaining debt capacity, this additional debt service appears manageable.

Revenue Diversification

The use of non-tax revenues to secure the notes demonstrates the city's diverse revenue streams, reducing reliance on any single source and potentially enhancing fiscal stability.

Potential Risks and Considerations

The city faces several potential risks with this project. Interest rate risk is a concern, as the 7% cap on note interest and 6% estimate for bonds may prove low if interest rates rise significantly. The success of the Uptown Revitalization Project is crucial to justify the investment and additional debt. Economic downturns could impact some non-tax revenue sources, potentially straining the city's ability to meet debt obligations. Additionally, the short-term nature of the notes requires careful planning to ensure successful refinancing or bond issuance.

Conclusion

The City's proposed ordinance for issuing $4.5 million in bond anticipation notes appears to be a fiscally responsible approach to funding an economic development project. The city's strong financial position, with a healthy general fund balance and significant remaining debt capacity, suggests it can comfortably manage this additional debt.

The use of bond anticipation notes provides flexibility and potentially lower initial costs, while the pledge of non-tax revenues offers a diverse and potentially stable funding source. The city's conservative debt management, as evidenced by its current debt levels relative to its limit, indicates a prudent fiscal approach.

However, the success of this initiative will depend on careful execution of the Uptown Revitalization Project and continued strong financial management. The city should closely monitor interest rates, economic conditions, and project outcomes to ensure the long-term benefits outweigh the costs and risks associated with this debt issuance.

Overall, based on the provided financial information and the structure of the proposed ordinance, the City appears to be in a stable fiscal position to pursue this economic development initiative.

What Do You Think?

Is this a project worth pursuing for Tipp City? Do you think the city can make this an attractive place for shopping? What kind of stores or shops need to be here? Our paid subscribers are more than welcome to leave their ideas and insights!

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