City Outlines Tax Hikes to Pay for Projects Through 2020

Real estate taxes in Fredericksburg could grow by roughly 13 cents by 2020. More than half of that, roughly 7 cents, is the direct result of the construction of a proposed court facility for downtown Fredericksburg.

During a work session last night, the Fredericksburg City Council reviewed the fiscal impacts of building a new court facility along with information on planned capital projects in the city over the next five years, between 2012 and 2017.

"This has been anticipated," said At-Large Councilor Kerry Devine during the meeting. "I would agree that when we were looking at the different court proposals, our concern was financial. This gives us a good picture without it being as severe as we feared."

The Fredericksburg City Council has entered into contract negotiations with the design build team First Choice Public Private Partners to develop a new $35 million downtown court facility on Princess Anne Street.

The presentation, given by Assistant City Manager Mark Whitley, highlighted how the city could handle the financing of the proposed court facility.

According to the presentation, the city is planning on taking out a projected bond issuance of $35 million to fund the project, plus another $3.7 million to pay down existing debt.

The $35 million general obligation bond would be paid back over 25 years, beginning in 2013. According to Whitley, the bond paperwork is in its preliminary stages and will be sent out to bond rating agencies this week.

So far, a public hearing and first read of proposed bond issuance and comprehensive agreement is scheduled for  the Nov. 8 City Council meeting.

Beginning in 2013, the city would start to have to repay the loan, starting out at about $1.2 million for interest fees. Then, in 2014 through at least 2020, the city will pay about $2.1 million per year in principal and interest payments.

Whitley cited the current historically low interest rates on general obligation bonds available to the city. The interest on the bond is projected to come in around 3.93 percent, down from a historic average of 5.32 percent interest. That works out to about $8.8 million less in projected interest payments over the life of the loan, according to Whitley.

Whitley proposed postponing borrowing money to renovate the existing Renwick Building until after 2014, once the court functions have moved to the new facility.

The City Council discussed the impact of the debt services of the courts along and combined with projected debt levels from future capital projects. Isolating the court debts, the new facility is projected to require at least a 7.18 percent increase in the real estate tax rate. When included with other projected debt obligations, taxes are projected to rise 13.3 cents by 2020. These tax increases, Whitley stressed, could be made incrementally, so as not to hurt propertyowners with sticker shock.

Fredericksburg's real estate tax rate currently stands at 62 cents for every $100 in assessed property value.