December 7, 2022
The Omaha City Council will vote next week on a pair of ordinances to authorize the sale of bonds to pay for the construction of the streetcar.
The City plans to use revenue generated by Tax Increment Financing (TIF) from development within a roughly six-block distance along the streetcar route to pay the bond debt. A comprehensive review of the financing plan, recently completed by Municap, shows TIF revenue will exceed the initial estimates and provide more than enough money to proceed with the streetcar project, estimated at $306 million. Municap is a public finance consulting firm, hired to provide an independent analysis of the financing plan. Omaha Modern Streetcar--Preliminary Findings Report
“The extensive and thorough Municap review not only validates our revenue projections of approximately $534 million, it increases the amount to approximately $608 million,” said Mayor Jean Stothert, asking councilmembers to approve the bond ordinances at the next meeting on December 13.
“This is more than ample to finance the streetcar,” said Finance Director Steve Curtiss.
Future development in the streetcar TIF District will conservatively generate $3.2 billion over the next 15 years, according to a conservative estimate from HDR. In an even more conservative approach, Municap based its projection on only 60% of the HDR estimate. “It’s reasonable then to expect that development in the district will actually generate $1 billion dollars in TIF revenue,” said Mayor Stothert.
Two types of bonds are being considered to finance the streetcar project, redevelopment bonds, and lease-purchase bonds, both would be fully paid with revenue from the TIF district.
“Lease-purchase bonds will not raise taxes and would actually save the city money, which is our responsibility, to be fiscally conservative,” said Mayor Stothert. Lease purchase bonds would have a lower interest rate.
Other supporters of the streetcar project testified at the public hearing including former Mayor Hal Daub, Chairman of the Greater Omaha Chamber’s Urban Core Committee and OPPD President Javier Fernandez, Omaha Streetcar Authority Chairman Jay Noddle, Omaha by Design Executive Director Scott Dobbe, Greater Omaha Chamber President Veta Jeffrey, and developers Jason Fisher, John Lund and Jay Lund, the developer of the successful Blackstone District.
“Private investment follows public investment,” said Jay Lund. “To me, this idea has always been very simple. Much like the other visionary and courageous projects downtown, FNBO Tower, CHI Center, U.P., Schwab Field, the Holland Center, and most recently, the RiverFront, Steelhouse, and Kiewit Luminarium, none of these projects had to happen but they did because of vision and leadership and the belief that Omaha can be more. The streetcar would be another addition to this list, further solidifying Omaha as a first-class city.”
“I can acknowledge that some may be more comfortable with the city as we are today, but I would suggest that leadership requires that we build not just for the city we are today but for the city we are on the path to becoming and that’s a city that’s more diverse, inclusive and vibrant, more sustainable both environmentally and fiscally, accessible, safe and easy to navigate,” said Dobbe. “Omaha by Design supports the streetcar because it is a bold move and a wise measured investment.”
Last month, Moody's Investors Services and S & P Global both reaffirmed the City’s high bond ratings.
S & P described Omaha’s strong business growth and “robust development pipeline”, specifically highlighting Mutual of Omaha’s new downtown headquarters and the University of Nebraska Medical Center’s Project Next. The two projects bookend the streetcar route and the combined value of these two developments alone is $3.2 billion.
“It is important for our community and region to act now and follow the recommendations identified in the Urban Core strategic plan in an efficient and effective manner,” said Fernandez. “The Omaha streetcar project will do just that and I urge you to approve the proposed bond issues so the city can stay on schedule, meet its commitments with the various development agreements already approved by this council, and set the stage for the prosperous and vibrant urban core our city and state deserves.”
At the Tuesday City Council meeting, MUD testified that it will raise gas and water rates to pay for moving water and gas lines along the streetcar route during construction. “MUD does not need to raise rates due to the streetcar,” said Mayor Stothert.
Many of MUD’s lines in the urban core are 100-plus years old and will need to be replaced with or without the streetcar. Omaha Public Works records show approximately 73 main breaks have occurred in the urban core in the last five years.
MUD testified that the total cost of replacement along the streetcar route is in excess of $20 million, yet MUD has not provided any documentation to validate that estimate. Three years ago, MUD estimated a much lower cost, between $7.7 and $9 million.
The City has offered MUD a viable proposal to replace its aging infrastructure along the streetcar route during construction. Included in the proposal:
MUD would spend $4.9 million already held in their reserves for work along the corridor.
The City would contribute $5 million in project costs to cover replacement costs of the newer lines along the route.
The City would issue bonds for the remainder of the costs. MUD would repay the city over a period of time that would be mutually agreed upon.
Repayment of the bonds would not start any sooner than 2025, eliminating the need for a rate increase specifically for the streetcar, and allowing MUD to accelerate its replacement program in the urban core, and save money.
The Mayor, Finance and Public Works directors, and City Attorney are asking MUD to work together to reach an agreement that will not result in a rate increase.
“The financial health of our city relies on continued growth and the streetcar is another tool to support strong development,” said Mayor Stothert.
