Attorney Mark Raymond, who has represented the Indian Trail Improvement District since the early 1990s in connection with its borrowing needs regarding bonds and bank loans, met with the ITID Board of Supervisors on Wednesday, Dec. 15 regarding the district’s R3 road plan, as well as financing for improvements in the Santa Rosa Groves neighborhood.
ITID Executive Director Burgess Hanson said that several months ago, the board asked district staff to look into bringing forward some projects to implement the R3 road plan.
The R3 road improvement plan, approved in October 2019, has the goal of paving or placing millings on certain roads that the board has deemed to benefit all residents of The Acreage, with a specific focus of improving access to schools, parks, impoundment areas, ITID facilities and Palm Beach County Fire-Rescue facilities.
“Because of construction on all the county roads in the area, we were concerned with cut-through traffic, so we brought forward the idea of having speed tables be the first phase,” Hanson said.
After discussions with Raymond and ITID Engineer Jay Foy, they decided on the R3 roads as a project that needed to be carried through. “The R3 roads need to be done,” Hanson said. “From a funding capacity, it’s much easier to go out once for everything, and in conjunction with that, bid out for the entire R3 project to do the entire road system.”
He added that the R3 plan has been in development for three years.
“Tonight, we have Mr. Raymond here to talk about some of the financing options that we have for the R3, and then also we’ll talk about Unit 20, which is the Santa Rosa Groves activation, and about how we can go about financing that unique area,” Hanson said. “Many of the lots do not have any structures on them, they are still undeveloped.”
Hanson added that the board should also look at taking out a short-term loan for litigation expenses.
Raymond said that he has been involved with ITID since the early 1990s in connection with its borrowing needs.
“When the district approves a plan like it has for R3 and decides that it wants to finance the construction of those improvements, the next step is to approve a resolution authorizing the incurrence of the debt, and then to find a lender for that debt,” he explained.
The scope of the R3 project, and the nature of the improvements being long-term capital improvements, led Raymond to suggest pursuing a 30-year loan.
“The way that occurs is for the district to engage the services of an investment banking firm, not a commercial bank, that will market the bonding issue to its customers, investors throughout the United States, and purchase all of those bonds at one time from you, and, therefore, provide you with the funds to construct the project,” he said.
Aside from simply buying the bonds, the investment banker would also help ITID achieve the best possible interest rate, which involves getting a credit rating, which the district did during financing of the R2 project funding in 2005.
“There’s no reason to think that the district won’t be successful in getting the investment rating for bonds, which will give you an even lower interest rate,” Raymond said, adding that the interest rate would be lower than a home loan or commercial loan. “One reason is that the interest would not be subject to federal tax, which immediately knocks off about 20 percent of what the rate would be if it wasn’t tax exempt.”
He added that Unit 20, Santa Rosa Groves, is not different from the R3 project, except in magnitude. The Unit 20 project is about $1 million for a project that will be financed by about 100 different property owners.
“If the district wants to borrow money for that project, I think the appropriate course is to seek a proposal from a financial institution in commercial banking, not an investment banker,” he said. “It’s not enough debt, you do not want to pay if off over 30 years, and even if you did, it wouldn’t be cost effective because it’s not enough money to justify the expense of floating the bond issue.”
Supervisor Betty Argue made a motion to schedule a meeting for Wednesday, Jan. 19 to discuss further bond counseling, which carried 5-0.
