NORWALK — The City Council has decided to sell about $16 million worth of bonds to fund housing for senior citizens and other redevelopment projects in the city.
The bond issue approved Monday will be the first by the Norwalk Community Facilities Financing Authority, which was formed by the City Council last August. The financing authority is a funding tool that combines revenues from the Redevelopment Agency, parking and other sources to back larger bond issues.
The bond sale will provide the Norwalk Redevelopment Agency with $7.3 million in immediate cash, and another $7.3 million in about five years, city officials said. City officials plan to use at least some of the bond money to build about 100 apartments for low- and moderate-income senior citizens, said Sanford M. Groves, assistant city manager.
The agency is negotiating to buy land for the housing project along San Antonio Drive, the heart of one of the city's redevelopment zones, he said.
The council will consider a formal proposal for the housing for senior citizens in the next two months. The project would be built by a private developer with financial assistance from the agency, Groves said. There are about 400 housing units for senior citizens in the city.
The council also will consider subsidizing other housing, such as single-family homes for first-time buyers, Mayor Grace F. Napolitano said.
"We do need senior housing," Napolitano said. "That much we know."
The bond sale, which is scheduled to be completed by Feb. 22, will increase the Redevelopment Agency's debt to about $46 million, up from about $30 million.
The agency will increase its annual debt payments by more than $950,000, according to a city report. The new bonds are scheduled to be repaid in 30 years.
The report by the city's financial consultant, GRC Municipal Finance Inc. of Seal Beach, said the Redevelopment Agency will generate enough property tax revenue to make the larger payments with an annual cushion of $50,000 to $80,000.
The projection assumes that the value of property in the city's redevelopment areas will rise by 2% a year. Property values in the city's first redevelopment area have risen an average of 26% over the past four years. Property values in the city's second and smaller redevelopment area rose after the zone was formed in 1987 before dipping slightly last year.
A reserve of $1.2 million will be set aside from the bond sale in case growth in the redevelopment areas is slower than expected. Rod Gunn of GRC Municipal Finance said it would take seven years of no growth in the redevelopment zones to deplete the reserve.
The cost of issuing the bonds is about $450,000, Groves said.
The council voted unanimously to sell the bonds. Councilman Luigi A. Vernola, who owns property in a redevelopment zone, abstained.
"It's a very calculated risk in favor of the community," Napolitano said.
Norwalk's two redevelopment zones cover 972 acres. The city's older commercial cores, including the San Antonio Drive and the Firestone Boulevard corridor, are included in the redevelopment zones.
Of the $7.3-million initial payment, $4.8 million has been earmarked for senior citizen and other housing. The other $2.5 million already has been budgeted this year for other redevelopment projects, including the construction of a community sports complex.
The remaining $7.3 million from the bond sale will be held in an escrow account. That money will be released once the city's redevelopment zones grow and generate more tax revenue to repay the additional debt. There is no cost to the city while the money is in the escrow account, Groves said.
City officials estimate the interest on the bonds will be 7.9%, but the exact interest rate will be determined at the time the bonds are sold. The council must approve the final terms of the sale.
The bonds are to be repaid with property tax revenues generated by the Redevelopment Agency. No sales tax or other revenue that is used to pay for general city expenses, such as police and fire protection, has been pledged to pay off the debt, Groves said.