Pledge that streetcar project will be built without taxpayer dollars may no longer be guaranteed
- Jessica Wade
- Nov 27, 2022
- 4 min read
Updated: Aug 7, 2024
Published: Nov. 27, 2022
The announcement of an Omaha streetcar project earlier this year came with an assurance from city officials that taxpayer dollars would not be used to help cover the multimillion-dollar venture. As the city considers its bond options to fund the project, that may no longer be guaranteed.
Next month, the Omaha City Council will consider two ordinances that, if approved, would allow the city to issue bonds to move the streetcar project forward.
One of the ordinances calls for the issuance of up to $360 million in redevelopment bonds. The buyers of these bonds assume any risks with their investment, leaving little or no risk for taxpayers.
The other ordinance calls for the issuance of up to $80 million in lease purchasing bonds — a type of bond backed by the city’s general fund.
Lease purchase bonds are being considered in part because they’re likely to come at a much more attractive interest rate, said Steve Curtiss, city finance director. They also can be sold in smaller pieces, meaning the city could maximize their efficiency.
Curtiss noted that the City Council’s approval of the bonds doesn’t necessarily guarantee the city would use them.
“We have no clear plan at the moment to use lease purchase, we just knew that that’s an option we may want to deploy at some point and so we got that on the agenda as well so we have another enabling ordinance,” Curtiss said.
As for the potential use of taxpayer dollars, Curtiss said that in the unlikely event of a “complete meltdown” on the project, it would be up to the city to back the bonds with the general fund, which is funded through taxpayer dollars.
“Is the city behind those? Yes. But we’re anticipating plenty of revenue to cover everything,” Curtiss said.
Announced by Omaha Mayor Jean Stothert in January, the proposed streetcar will operate along a 6-mile roundtrip route connecting downtown and midtown.
The line will travel along Farnam and Harney Streets from 10th Street to 42nd Street and along 10th Street between Harney and Cass Streets. A route concept approved in September added a stretch of Eighth Street, between Capitol Avenue and Farnam Street, to the route.
Advocates of the streetcar have championed the project as a development tool that could both pay for itself and help fund affordable housing initiatives within its corridor.
City officials are anticipating a special district along the route to generate more than the estimated $306 million needed to pay back the bonds that will cover the cost of constructing and launching the streetcar system.
Council members in June approved a redevelopment agreement that establishes guidelines for the project, including the use of up to $354 million in tax-increment financing (TIF). Approval came despite the lack of a final analysis of the proposed streetcar financial plan.
Under TIF, the developer of a city-approved project takes out a loan to help cover eligible redevelopment expenses. The loan is paid back, generally over a 15-year period, by using the increased property taxes that are generated on the new development — money that normally goes to support schools and other local tax-reliant bodies.
During the TIF period, the property owner continues to pay a portion of property taxes to local governments based on the valuation that existed before the improvements. After the TIF loan is repaid, property taxes collected on the higher-value, improved property then start flowing to local governments.
The City Council in March agreed to pay Maryland-based public finance consulting firm MuniCap Inc. up to $100,000 for an analysis of the plan.
Multiple council members have said they do not intend to authorize the issuance of bonds for the project until that analysis is complete.
Curtiss said he anticipates the MuniCap report to be either completed or summarized with “significant” information before the council votes on the bond ordinances in December.
Before the council’s June vote, MuniCap did provide council members with an initial summary of findings that showed it had so far found the financial feasibility of the plan to be in line with what the city predicted.
Asked if MuniCap’s findings are still in line with what the city expected, Curtiss told The World-Herald this past week that he’s “not willing to speculate much yet” until he sees the final report.
The city intends to work with investment banking firm D.A. Davidson to determine the structure of the bond-selling process.
Approval of bonds comes with the pressure to move not only the streetcar project forward, but a Mutual of Omaha skyscraper as well.
Mutual was approached more than a year ago by developer Jason Lanoha, who proposed Mutual build its new headquarters downtown.
The developer’s focus, though, was putting the tower on the long-vacant block at 14th and Dodge where Union Pacific had its former headquarters.
Lanoha also suggested that Mutual ask the city if it would be willing to reroute its developing streetcar system to include the new headquarters site along its path. So Mutual approached the city in September 2021 with a plan.
At the time, the city was in the process of relocating the downtown W. Dale Clark Library and considering half a dozen potential developments for the site.
Rather than mess with the streetcar route, the city instead offered up the library site to Mutual.
Having the streetcar run by Mutual’s current midtown campus enhances the property’s redevelopment value, helping defray the cost of building the new $600 million high-rise downtown.
A redevelopment agreement between Mutual and the city officially tied the two projects together. The city agreed to “in good faith” pursue the development of a streetcar system.
Dust and scatterings of rubble were all that remained of the W. Dale Clark Library last week. An agreement between the city and Mutual outlined a closing date of Dec. 31 for the city to transfer ownership of the property to the Fortune 500 insurance company.
The city paid just over $1 million for the demolition.
The Omaha City Council will hold a public hearing on the bond ordinances on Dec. 6 at 2 p.m. in the legislative chambers of City Hall.
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