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Friday, January 25, 2019
Frisco approves up to $6 million in bonds for marina improvements
Major upgrades are coming to the Frisco Bay Marina this year after the town council passed an ordinance authorizing the issuance of up to $6 million in bonds at their regular meeting Tuesday night.
On Feb. 6, the town will begin selling Marina Enterprise Revenue Bonds — somewhat different from typical municipal bond issuances, in that they're backed by the revenue generated from the marina. The bonds will fund a number of projects outlined in the Frisco Marina Park Master Plan that was adopted last year. The ordinance passed in a split vote of 5-1, with Deborah Shaner standing alone as the dissenting party. Councilwoman Melissa Sherburne was absent for the vote.
The bond sales will fund marina projects over the next two years, namely grading for the Big Dig, an up to 75,000-cubic-yard excavation of the marina's lake bed to improve navigation and expand recreational facilities at the marina. Other expenses include site preparation and new infrastructure for the dig. The money will also go to a new $2.5 million office set to be built in 2020, new parking areas and paths, slip improvements and more. The town is targeting $5.6 million in bond sales, a major dent in the almost $8 million in improvements scheduled through 2020.
The bonds are available to anyone, but the town is hoping to attract locals to the investment opportunity.
"We're hoping that there's a lot of local interest in these bonds," said Frisco's finance director Bonnie Moinet. "We did the Marina Master Plan last year, and we had a lot of community involvement in that. So we hope those people are invested in this project."
The bonds will be sold in $25,000 denominations through Feb. 26. Of note, the bonds are not rated, in large part due to the unique nature of Marina Enterprise Revenue Bonds (which are relatively scarce on the market). Interest rates and the payment schedule for the bonds haven't yet been set in stone, but the current plan is for the town to pay back interest only, about $360,000 a year, for the first two years before ramping up into principal payments on top of interest (up to 6 percent a year) in year three. The current payment schedule has the town paying off bonds through 2048, though Moinet noted the town could potentially utilize a "call feature" after seven years to restructure payments.
Moinet said that the ascending payment plan will help the town build reserves, and assure that its able to make payments over the coming years.
"There are many safeguards in place to make sure the town is able to make its payments," said Moinet. "We have a debt service reserve account funded out of the bond proceeds, and a surplus account we'll fund from additional revenues from the marina over the years." Moinet continued to say that of the $5.6 million being borrowed, about $500,000 will go into the reserve account.
Moinet also said that the upgrades to the marina should begin showing significant increases to the marina's revenue as early as 2021, with potentially a small dip in revenues over the next two years due to construction. Most notably, Moinet said she expects a 25-percent jump in slip revenue, spurred by increased capacity along with improvements to the slips such as Wi-Fi and power utilities. Additionally, the town expects rental numbers for kayaks, canoes and other watercraft to jump considerably. Currently, the marina brings in about $1.5 million in revenue each year, compared with about $900,000 in expenses.
"Because of the revenues generated currently, and as we've seen this amenity grow, we feel it can support that debt payment over a long period of time," said Moinet. "These projects are also worthy because they'll generate additional revenues, and new amenities we want."
But the project isn't without some risk. The funds raised through bond sales won't be enough to complete the Marina Master Plan, meaning in 2020 the town may be on the prowl for more money. However, this isn't necessarily the case. Moinet said that the town would analyze the revenues and impact of the improvements, and it could be possible to afford more upgrades by using existing revenue streams. Otherwise, projects related to the marina may be deferred or may include additional borrowing.
With an investment expected to last for almost 30 years, Councilwoman Jessica Burley also raised concerns about the potential effects of climate change on the amenity, though it's a consideration already intertwined with planned improvements.
"There's always a possibility of long-term drought conditions," said Moinet. "We think our staff is capable of mitigating those conditions that may decrease our revenues. One of the main purposes of the project is to deepen the bay, and with more slips and rentals, we'll be able to operate during a normal season probably 30 days longer. Making the bay deeper will mean we can open earlier, and droughts won't have the same impact that they do now."
Also of concern is that the U.S. Army Corps of Engineers hasn't issued a renewed permit for the Big Dig, which, though unlikely, could interfere with the timing of construction.
But the biggest question for the council was still the hefty price tag for the projects. Councilwoman Shaner, who also voted against the ordinance on first reading, expressed concerns that the town was overextending itself financially, calling the ordinance "out of control spending," which could place a burden on future councils.
Though, other council members didn't share her assessment of the potential risks.
"If this was year one, and we didn't know we could make it work this would be a more difficult decision to make," said Councilman Dan Fallon. "But we have a staff dedicated to seeing this through."
Moinet said that informational packets for investors will be available through the town's website, and noted that investors could contact her directly for more information.
"The revenues we generate are mostly from visitors, and we want to have them have a good experience when they're here," said Moinet. "There was a great deal of community involvement in coming up with the master plan, and personally and professionally I think it's going to be a really successful enterprise."