The Hardin City Council voted during a Nov. 17 meeting to approve a financial option for covering about $2 million owed in interest for city services installed in the Industrial District. The city owes money on bonds for infrastructure that includes the paving of Sugar Factory Road, installation of street lights and storm drains.
The option approved by council members would add the taxable value for Rocky Mountain Power to taxes generated from other property in the plant’s Industrial Infrastructure District. This district is located on the northeast side of Hardin. The District also includes the Sugar Factory Subdivision and Two Rivers Regional Detention Facility.
Finance Officer Michelle Dyckman said the change would not increase property taxes in the area, aside from the usual cost-of-living increase, and no money would be drawn from residents’ base taxes. Base taxes are allotted to school, city and county expenses.
Until a total of $12.6 million is repaid for the infrastructure, all tax revenue from the power plant will be used to pay bondholders.
“None of them are ideal options, but it’s reality,” said City Attorney Robert Snively as council members looked through financial memorandums. He and Dyckman offered the recommendations the council eventually adopted.
Adjusting financial projections
According to Dyckman, the bond paying process is more complicated since tax revenue from Rocky Mountain Power proved substantially lower than initially expected.
City financial records show the plant’s tax revenue – projected in 2006 to be over $4.9 million by 2015 – shot down to an estimated $850,000 after the company declared bankruptcy in April 2012. This leaves the city with about $1.5 million to raise.
Following the 2008 economic recession, the plant’s value dropped from an estimated $240 million to about $24 million.
The city had not drawn taxable revenue from the plant in previous years for the bonds, as an agreement between owners of Rocky Mountain Power and the city stipulated the facility would not be taxed until 2015.
“Nobody thought that this would be an issue,” Dyckman said. “They thought there would be plenty of money to [pay the bond].”
Dyckman said the option chosen by the council had the best opportunity to “maximize the tax increment” and would be the simplest to administer.
The first interest payment is due on March 1, 2015.