Despite revenue shortfalls, Liberty Center expected to pay back Butler County

Credit: DaytonDailyNews

A state audit obtained by the Journal-News Tuesday shows the Liberty Community Authority owes Butler County nearly $840,000 for infrastructure bond repayments made in 2018 on the mega mixed use Liberty Center.

A shortfall of $211,000 in infrastructure bond payment revenues was uncovered this summer when a county Tax Increment Financing fund was tapped to make the bond payment. An earlier TIF payment was reported to total $140,000, made in December, for total TIF payments of $351,000.

The state audit shows that last year, $697,637 and $142,105 were used from the county fund to make two separate bond payments. So it looks like LCA owes the county just over $1 million with the latest shortfall.

Each month, LCA takes in revenue from two sources, a facilities charge from commercial activity and a property assessment charge. Those revenues are designed to provide the funding necessary to cover bond payments. The county TIF is only used if those revenues are inadequate.

The audit shows revenues from those sources totaled $1.376 million last year, and two bond payments are almost $2.3 million.

LCA Chairman Phil Morrical said he believes the $697,637 payment from 2018 was an existing county obligation that is meant to be repaid eventually.

Judi Boyko, Butler County’s administrator, said: “Until the county can review the audit document and ensure we understand the finding, it’s premature to make any assumptions about the report.”

After the shortfall was discovered the LCA board passed a resolution to levy a “core retail valuation” charge on Liberty Center property owners to cover the $142,105 shortfall, and that bill was to be paid by the developer JLL within 30 days of the June resolution. It was according to Morrical.

As for the $211,000 shortfall, the LCA’s financial advisor Kerry Roe solved the mystery.

“I don’t know if anyone has done the 10-mill assessed valuation billing,” Roe told the board. “That was handled by Steiner in the past so I don’t if that’s been done. I don’t believe we’ve seen any of those flow through the lock box in 2019.”

At that same meeting Liberty Center attorney Greg Daniels confirmed the oversight and said “that’s one of the things on the timing side for the June payment… there would have been enough to cover that payment, that’ll get fixed just from a cash flow timing standpoint.”

Morrical said the billings have gone out and he expects the LCA will be able to make the December bond payment.

“The facilities charges are coming in and the charges estimated to come in for the rest of the year we should have the resources available,” he said.

The LCA board is made up of members appointed by the county commissioners and representatives for Liberty Center. It is in place to safeguard taxpayer money involved in the development. The total investment on the mixed-use Liberty Center project was more than $350 million, paid for with public and private sources. The project ended up receiving more than $49 million in funding backed by taxpayer dollars, including a $12 million loan approved by Ohio Water Development Authority.

The audit notes that the TIF money and funds owed the developer are secondary to debt payments, so it is unclear whether LCI must replenish the county TIF money as earlier board discussions had suggested.

“Under funding agreements, Butler County tax increment financing (TIF) revenues are utilized in the event operating revenues are insufficient to pay debt service, which occurred during 2018,” the audit reads. “Both liabilities to the developer and the county are subordinate to debt service requirements, and with expected operating revenue shortfalls expected in 2019, were classified as noncurrent.”

The change of management teams appears to have caused an issue in collecting assessments from property owners. Apollo Commercial Real Estate Finance Inc., which provided a $165 million construction loan for the mega mixed use project, switched management of the retail side of the development from Steiner + Associates to JLL last fall. Steiner is continuing to develop about 60 acres adjacent to Liberty Center.

Mall Manager John Taylor said previously that officials have faced challenges gaining access to all the financial information they need from a “lock box” account of revenues coming in.

“We don’t have the online access to drill into it,” Taylor has said. “We have the overall statement that we have a total amount each month that we have been getting via mail from Steiner.”

When county-appointed members of the volunteer board said they were surprised by the shortfall, John Turner, a consultant for Apollo, expressed disbelief.

“This is what I’m a little confused about is all the surprise, because there is amortization kicking in on the bonds that had nothing to do with the revenue stream,” Turner said.

Officials from JLL and Steiner could not be reached for comment.

Board member John Kirsch noted members of the board are all volunteers. The structure of the massive development deal is extremely complex, and members need others to help them keep track.

He said the board had asked Steiner to help them understand the “waterfall” of funding mechanisms, but apparently that never occurred.

“We had requested from Steiner, help us understand the waterfall of the cash flow for all the bonds this authority is responsible for, we have a limited scope of authority here, it’s not universal,” Kirsch said.

The board also approved expanding the role of accounting firm Clark Schaefer Hackett.

“This has gone on for awhile, and we keep finding land mines,” Chairman Phil Morrical said at the meeting. “I don’t know why we keep finding land mines, but they are hindering our operations as a board. Again I’ll say what I’ve said three times already, I’m uncomfortable with it, I think it will be more stabilizing for us to what we’re proposing here.”

About the Author