Although tax increment financing and improvement revenue bonds issued in 2002 are not a general obligation or indebtedness of the city of Ballwin, local officials are examining data indicating there may not be a large enough revenue stream to meet future principal and interest payments.

The bonds were issued to finance costs associated with the Ballwin Town Center Redevelopment Project on the south side of Manchester Road between Ries Road and Ballpark Drive. The Bedrin Organization, a New Jersey firm, now owns the property and operates it under the name Olde Towne Plaza.

According to Ballwin officials, the shortfall stems from two primary factors.

Successful appeals to St. Louis County by some tenants about property tax assessments have cut revenues dedicated for bond payments.

In addition, initial economic projections for the development have not been met, lowering the portion of sales tax receipts pledged to retiring the bond debt.

“The operation has done well and the current situation definitely is not an indication of the project’s failure. But it hasn’t met the original projections that were made,” noted City Administrator Eric Hanson.

“The projections made in 1999 were before 9-11 and before the housing bubble burst, the banking crisis and the recession,” added Denise Keller, Ballwin’s finance officer.

While yearly principal and interest amounts were covered in full from available revenues through 2012, unscheduled draws from the debt reserve fund have been needed in the years since then to meet the required payments.

Tapping debt reserves is likely to happen again this year to meet principal and interest payments of some $1.9 million. Barring major changes in current trends, 2018 could be the year when available revenues and depleted reserves fall short of meeting the bond payment schedule.

While Ballwin is not responsible for paying off the bonds, it is obligated to contribute $250,000 annually for bond repayment purposes.

Hanson noted that a number of scenarios could change the current picture. Among other possibilities, the bonds could be refinanced at a lower interest rate, with repayment spread over a longer period. In addition, higher sales could boost sales tax revenues available to retire the debt.

The final installment on the bonds is a balloon payment of $2.9 million, due in 2022.

Ballwin’s Board of Aldermen has not yet made any decisions and likely will examine and discuss the issue further before any new course is charted.

What would happen if there were a default is uncertain. What does seem clear is that the alternative of doing nothing is not one Ballwin officials will entertain, because the city could become embroiled in costly litigation and/or see an adverse impact on its bond rating.