Financing for Main Street plan; council members comment on project

By Rick Palsgrove
Groveport Editor

Proposed Rarey’s Port building.

Groveport City Council took another step into making the 1847 Main Street project a reality with the passage of legislation to fund the project.

On March 22, council voted 5-1 on two bond issuance ordinances to fund the construction, furnishing, equipping, and improving the proposed Rarey’s Port and Wert’s Grove buildings on Main Street. Councilman Shawn Cleary voted against both ordinances.

By the numbers
One ordinance was for $3.8 million in non-tax revenue bonds and the other is for $3.8 million in tax revenue bonds. According to Groveport Finance Director Jason Carr, non-tax revenue bonds equal taxable bonds and tax revenue bonds equal tax-exempt bonds. He said the project will be funded by general obligation bonds, which are bonds from the bond market and are not property tax bond issues that would be voted on by the residents.

Proposed Wert’s Grove building.

“The debt interest paid on tax-exempt bonds issued by state and local governments is generally tax-exempt at the federal level, unless more than 10 percent of the proceeds are used for a trade or business (taxable bonds),” said Carr. “A local government will generally issue taxable bonds to finance projects that do not meet IRS tax exemption requirements and in the case of the city of Groveport, space devoted to tenants where a trade or business will be conducted.”

Carr said tax-exempt bond principal and interest may be paid from income taxes collected by the city, which beginning in December 2021 will be from the city’s debt service fund.

“Taxable bond principal and interest cannot be repaid from income taxes and the city must use non-tax revenue sources, such as fees, licenses and permits, interest earnings, charges for services or other revenues received,” said Carr. “Generally, the debt service interest paid by the city on tax-exempt bonds will be lower than taxable interest based on risks involved/repayment source.”

Carr said the city devoting the first floor of each building to commercial use is why taxable bonds are required to be issued.

“Currently, second floor space will be for government use which allows the city to issue tax-exempt bonds” said Carr.

The bond issuances indicate that the estimated cost for the two structures combined will be approximately $7.6 million, which is up from the previous estimate of $6 million.

“The original $3 million (for each building) was a preliminary number based on a shell building,” said Groveport City Administrator B.J. King. “As finishes, including plumbing, HVAC equipment, etc., became more defined, the cost increased. Additionally, the $3.8 million per encompasses costs associated with the issuance of the debt to fund the project.”

When asked if the increase in cost jeopardize the project considering the city’s income tax revenues are down, King said, “The debt payment will be split between tax revenue (income tax) and non-tax revenue (money collected by the city that is not a tax). So income tax will be used to pay half of the debt issuance. We continue to monitor our income tax collections and anticipate they will rebound. We feel that through the annual budget creation process, we will be able to dedicate income tax revenue for the construction of these two buildings.”

Groveport Economic Development Director Jeff Green said the starting construction and building completion dates are not yet determined.

“We’re still negotiating the contract and there are some variables we need to pin down, like the availability of steel,” said Green.

Regarding potential occupants for the buildings Green said, “Right now we have verbal commitments from, and floorplans drawn up, for three businesses: two restaurants and a bakery/café.”

About the 1847 Main project
The 1847 Main project involves the construction of two new, two-story brick, mixed-use commercial buildings: one to be built at the northeast corner of Front and Main streets next to Ace Hardware (674-716 Main St. and known as the Rarey’s Port building); and the second at the northwest corner of College and Main streets (480-490 Main St. and known as the Wert’s Grove building). The city is the developer for both sites.

The Wert’s Grove building will be about 12,184 square feet. The first floor will have five separate storefronts with the interior space divisible according to space requirements for potential new businesses. Second floor space for now will be open.

The Rarey’s Port building is tentatively planned to be 14,145 square feet, with 7,017 square feet of space on the first floor and 7,128 square feet on the second floor. The second floor space will be open for now and the first floor have six individual storefronts facing Main Street and the interior space divisible as required.

Council and mayor viewpoints
The Messenger asked Mayor Lance Westcamp and Groveport City Council members if they favor constructing both 1847 Main Street project buildings now, building just one building now, or waiting to tackle the entire project later when the economy improves, and also what they think the city’s prospects are of attracting businesses to the buildings.

Jean Ann Hilbert: “We purchased the property for development. We are bringing to Groveport businesses the community has requested in several surveys over several years. Three viable businesses are extremely interested in locating in Groveport. We have talked about this for years and it’s time we do what the residents want. Groveport has been blessed to have a multi-million dollar annual budget. This would cost a very small portion of the budget annually for the next 20 years. The recreation center will be paid for next year. That will release some debt monies. If we don’t think to the future, we become stagnant.

Becky Hutson: “This may be an expensive project, but now is the time for what we have promised our residents.We can afford it and maintain what we have. It is time for our employees to step up. The rec center is almost paid off, however the rec center and golf course both need subsidized each year? To me that is not paid off and we need to look at how we can improve. The city has been stagnant for years. I’m tired of that and so are the residents, so I feel now is the time to make things happen. It is a solid plan and we have people wanting to set up business here. There is nothing signed on the dotted line, but I feel they will soon, it is exciting we have some great opportunities to make our little city a place to be.”

Shawn Cleary: “I think building one building now at Main and College streets is the way to go due to our financial situation. We’ve never been in economic times like this. We can learn from the first build, this way the second building will be better than the first. My biggest concern is the city would get in a financial situation where we might have to cut some city services. I don’t want to gamble with city services and employee benefits.”

Ed Dildine: “I am optimistic the economy will rebound and we will come out stronger than before. I am in favor of doing both buildings now. The cost of the project is not going to go down and will only increase as time goes on. If we can’t invest in ourselves, who can we expect to do it for us. We as a city have taken chances before – the recreation center, aquatic center, golf course – and we always find a way to make it work. We are in talks with tenants and hopefully that brings investors who will bring unique options to our city not found anywhere close. We have done study after study, survey after survey and they all say the same thing: our residents want more options. Our goal is to garner renewed interest into our downtown for not only the new buildings, but also our current businesses. Any increase in foot traffic will enhance their businesses. Our current businesses are fantastic and provide an awesome service to the community. One trip in to them and I’m sure they will gain new customers. It’s now up to our administration to get to work and hit the ground running to fill these buildings and I have the utmost faith in them to accomplish this goal.”

Chad Grashel: “We listened to the feedback from the residents and saw a desire for development such as these to improve the downtown and enhance the experience of living in Groveport. The city has invested so much into these exciting projects to this point, and as we are seeing, the cost of completion isn’t going to go down by waiting. Groveport is primed to attract small business. We have a growing community, which also brings many people into the city for work on daily basis from around Central Ohio. This should create a lot of interest in the market and is especially true when we have the infrastructure in place to promote.”

Scott Lockett: “Pre-COVID, our income stream was solid, the economy was good, and everybody felt optimistic about development in Groveport. I favored moving forward with both buildings simultaneously. Once COVID hit it was apparent that our income stream was likely to come in below what was budgeted. Our administrator and finance director met with council to discuss possible budget deficits and implications. When it came time to vote initially whether to move forward with two buildings or one building, I felt we should develop only one property at a time. However, my mind was changed and I supported developing both properties simultaneously. The businesses presented to us would be well received and fit nicely in our community. Recently our administrator and finance director again reached out to council providing us with financial information. My thinking changed and my preference was to build on the Main and Front site first, get that property leased and up and running. With that success under our belt, we could move on to the second building. My fear was, although there were a number of possible tenants for both buildings, none had been formally secured, as a result, we would be in a situation where we could possibly have unleased space sitting vacant. It became clear the majority of council felt developing two buildings simultaneously was the preferred choice. Because we needed to pass the ordinance as emergency legislation, a super majority was needed requiring my vote. I have respect for the other members of council and their choices. So, I voted yes so we could pass the legislation because, with building costs and other factors, time is of the essence. My desire is, once these buildings are occupied with market rate leases they will become marketable and attractive to a potential developer, we sell them. I don’t think the city needs to be in the development for business long-term. We have a professional staff that specifically addresses economic development. The task of filling the spaces will fall on them and the resources they can access. My hope is that we have all the spaces under lease before the end of construction.”

Mayor Lance Westcamp: “I am in favor of both buildings now. I am afraid if we only construct one, the other may not be constructed. I believe this is what we promised our residents. I am confident that the city will attract at least two well know businesses.”

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