Issuance of up to $50 million in City of Sarasota bonds to pay for Phase 2 of Bay Park in Sarasota

City commissioners also approve deposit of more than $4 million for 2024 fiscal year into park trust fund, thanks to rising property values in tax-increment financing district

On unanimous votes this week, the Sarasota City Commission voted to approve the issuance of up to $50 million in bonds to fund Phase 2 of The Bay Park on the city’s 53 downtown Sarasota waterfront acres.

On a related matter, they also voted 5-0 to authorize the sale of the bonds to Raymond James & Associates, which has an office in Sarasota. That deal is expected to close around May 11, the commissioners learned from their bond counsel, Duane Draper of the firm Bryant Miller Olive in Tampa.

The interest rate will not exceed 4.5%, according to the resolution the commissioners approved this week, and the final maturity date will be no later than Sept. 1, 2049.

The ordinance involving the sale of the bonds to Raymond James & Associates says that the company was willing to purchase the bonds “at interest rates favorable to the [city] …”

Finally, the payment to Raymond James cannot exceed 0.3% of the total bond issue figure.

On Oct. 3, 2022, the commissioners seated at that time voted unanimously to approve the Phase 2 design of the park, which representatives of the Bay Park Conservancy — the nonprofit that manages the park and raises private funding for it — estimated to have an expanse of $48.8 million.

During that fall discussion, Bill Waddill, chief operating officer of the Conservancy, noted that the nonprofit had received $12 million in government grants and $5 million in private money, so the Conservancy’s leaders believed the $48-million estimate would be sufficient. He also said that the Phase 2 amenities were expected to take three years to construct, after receipt of the bond proceeds.

The bonds will be backed by revenue collected through a tax-increment financing (TIF) mechanism that the City Commission and the Sarasota County Commission approved in 2020.

The TIF district encompasses not just the park but also some of the surrounding land where development has been underway — including the Quay Sarasota. For every year that the property values in the district rise, city and county financial staff members determine how much property tax revenue each local government would receive as a result of that increase. As City Finance Director Kelly Strickland has explained, the lower of the two local governments’ millage rates is applied to the new property value and the resulting tax revenue is set aside in a trust fund for The Bay Park.

The baseline for the property values in the TIF district is Jan. 1, 2019.

The district was implemented for 30 years. However, at the recommendation of then-County Commissioner Alan Maio, the agreement that the local government bodies approved calls for a review of the funding generated by the district at the 15th year. Maio suggested that if the revenue exceeded expectations by that point — and sufficient funds would be available for park amenities — the district could be dissolved prior to the 30-year mark.

Last year, Strickland told the commissioners, the jump in property values in the city and county had resulted in the TIF funds coming in about 40% higher than anticipated.

In related action on April 17, the city commissioners also voted unanimously to approve the deposit of the TIF district revenue for the 2024 fiscal year into the trust fund. The estimated amount in that fund as of March 31 — noted in an agenda request form for the City Commission meeting — was $4,011,622. That will be added to the approximately $4,676,570 already in that trust fund, the form said. The total amount will be available to cover the bond debt, Jennifer Jorgensen, the city’s governmental relations manager, pointed out.

The Bay Park Improvement Board — which met on March 10 — already had approved the transfer of the latest TIF revenue into the trust fund, Jorgensen said. That is the first step in the process, Jorgensen explained, before the City and County commissions vote on the deposit.

The appointed Bay Park Improvement Board comprises two city commissioners, two county commissioners and former County Commissioner Jon Thaxton, senior vice president of the Gulf Coast Community Foundation for community leadership. The city commissioners on the board are Vice Mayor Liz Alpert, the current chair; and Commissioner Debbie Trice. County Commissioner Nancy Detert served as vice chair until her death early this month. The other county commissioner is Mark Smith, who was elected in November 2022.

The ’anti-dilution test’

During the April 17 City Commission meeting, Commissioner Erik Arroyo did ask the city’s bond counsel, Draper, about the section of the bond ordinance regarding an “anti-dilution test.”

Draper explained that that section is included in the document to prevent the city from over-leveraging itself. “It’s essential,” he added, to this type of borrow. The goal also is to try to ensure that the city retains its bond rating, Draper pointed out.

He did not believe the test would restrict future action relative to the issuance of bonds, Draper added.

Investopedia explains, “Anti-dilution provisions act as a buffer to protect investors against their equity ownership positions becoming diluted or less valuable. This can happen when the percentage of an owner’s stake in a company decreases because of an increase in the total number of shares outstanding. Total shares outstanding may increase because of new share issuance based on a round of equity financing. Dilution can also occur when holders of stock options, such as company employees, or holders of other optionable securities exercise their options.”

Article V of the Bay Park bonds ordinance says that the city will “not … incur any indebtedness payable from Non-Ad Valorem Revenues [the TIF funds] unless the Non-Ad Valorem Revenues for the preceding Fiscal year were at least 2.00 times maximum annual debt service of all indebtedness of the [city] payable from such sources.”

The City Commission that approved the issuance of bonds to cover the expense of the St. Armands parking garage agreed to the same anti-dilution test, bond counsel Draper pointed out to the commissioners this week.

Commissioner Jen Ahearn-Koch ended up making the motion to approve the issuance of the bonds for Phase 2 of the park, and Arroyo seconded it. No board member hesitated to vote “Yes.”