Parks board considers financing options for new community center

By Ralph Pokorny

Nevada Daily Mail

The Nevada Parks Board does not want the voters who approved the one-half cent park and recreation sales tax to have to wait for six or seven years to use the new community center that is the centerpiece of the projects to be funded by the tax.

Wednesday afternoon the board met with Charles Zitnik, a senior vice president with Kirkpatrick Pettis, to look at a way to speed up the construction of a new community center.

The city has a service agreement with Kirkpatrick Pettis to provide financing advice.

Zitnik, whose expertise is in public financing, told the park board that unless state law changes there are only two ways for the city to pay for the community center.

"You can either save up the money or borrow the money under a lease structure where the city council makes payments annually," Zitnik said.

In 2002 the city council established the Nevada Facilities Authority, Inc., which is a nonprofit corporation that provides a financing mechanism to purchase buildings.

The city has estimated that it will take about six years to collect enough sales tax to pay cash for a new community center.

Zitnik told the board that current state law does not provide any mechanism to secure a building paid for with sales taxes. The city only collects the sales taxes and it is up to the city council to annually make the payments on the debt.

"There are two schools of thought on which method is better," he said.

As an advisor to the city we are impartial as to which method is best he told the board.

"Personally, if you save money to do something and I paid the tax and die before using it, I paid all that tax and had no benefit," Zitnik said.

"If you borrow money to pay for something, then everyone who is paying the taxes can enjoy using it," he added.

Zitnik said that it looks like the tax will generate about $4.5 million over its life; however, because sales tax collections are variable, you do not want to borrow the total estimated tax revenue.

Typically a lender will want to see $1.25 in tax collections for each $1 in payment, he told the board.

Historically, facility authorities have been able to finance things like county courthouses and jails, he said.

Using this method the Nevada Facility Authority would borrow the money to build a new community center, then the city would collect the sales tax to rent the building from the facility authority, he told the board.

Doing the financing this way makes the debt tax exempt, Zitnik said.

"You have already done the hard part of setting up a facility authority and passing the tax. Now there is a process to follow," he said.

Since the tax and the facility authority are already in place, it will take about five weeks go through the process, he told the board.

The one thing you want to be sure to do is to borrow enough money for your needs in the first place. To go back and borrow another $500,000 three or four years later will cost more in fees than in interest if the additional money was borrowed the first time, he told the board.

"The ability to pass a nine-year park tax that involves capital improvements is remarkable," Zitnik said.

That could not be done in most Missouri towns, he said.

"It is a pretty remarkable feat," he said.