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Credit Crunch Threatens Projects

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By CHRISTIAN M. WADE

cwade@tampatrib.com

Published: October 19, 2008

Updated: 10/19/2008 12:11 am

TAMPA - When city officials needed money for the Central Park Village redevelopment project, they turned to the bond markets.

In partnership with the Tampa Housing Authority and Bank of America, they planned to borrow more than $25 million for needed roads, sewer and stormwater work, pledging future tax dollars from Central Park's designation as a community redevelopment area.

That is, until the global credit crunch put the brakes on municipal lending.

"The project is still on hold," said Leroy Moore, vice president of the Housing Authority. "We just can't make the numbers work in the current climate. It's way too volatile."

For years, cities like Tampa have had access to easy money by issuing municipal bonds that pay historically low interest rates. But the fear of lending that has engrossed Wall Street is making it more expensive for local governments to borrow money needed for road work, water and sewer improvements and other crucial infrastructure projects.

That means city officials face the difficult decision of putting off projects, or paying higher interest rates on their bonds, a cost that ultimately would fall on the backs of taxpayers.

In the Tampa Bay area, the bond market crash is delaying or endangering several big-ticket projects like Central Park, Tampa Heights, the Avenue of Arts and a $55 million pipeline project to resolve long-standing water pressure problems in South Tampa.

"I've never seen it as bad as this," Tampa's finance director Bonnie Wise said.
Municipal bonds have long been considered among the safest investments because cities and counties can be counted on to levy taxes and repay their debt. The money is borrowed from investors on the open market, but these days backers are hard to find.

"It's increasingly difficult to get deals done," Wise said. "The investors aren't there."

The credit crunch is also threatening Mayor Pam Iorio's aggressive capital improvement program, which calls for spending more than $170 million on stormwater improvements, water and sewer maintenance and other infrastructure projects in the next several years.

Most of the funding for the projects was to come from an approved $93 million line of credit, known as commercial paper, from the Florida Association of Counties.

But city officials are reluctant to tap into the tax-exempt pool of money because the lending rates for commercial paper have nearly doubled in the past two months.

To date, the city has only used about $6 million of those funds.

"We will continue to evaluate the financial situation and would only borrow if it made financial sense for the city," Iorio said this week.

Several redevelopment projects were delayed last year after the Florida Supreme Court ruled that voters must approve the use of property tax proceeds to pay off bond debts.

When that ruling was reversed last month, city officials hoped to begin issuing bonds to get several of the projects underway. But the credit crunch put the kibosh on that.

Central Park, already more than a year behind schedule, was billed as the catalyst for widespread change across the 143-acre redevelopment area, between downtown and Ybor City. City officials say they don't know when the funding will become available.

"It's going to depend on the bond market," Moore said.

If the credit crunch lumbers on, Wise said, it could have far-reaching implications for the local economy, which is already reeling from the impact of the housing market slump.

If cities and counties can't get money to renovate buildings, build parks or repair streets, that translates into less jobs at a time when unemployment concerns are growing.

"It's trickling down into everything we do," Wise said. "These are unprecedented times."

Reporter Christian M. Wade can be reached at (813) 259-7679.

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