Too good to be true?

The Covington News - - Original scenario moderate scenario resumé class l -

New pro­jec­tions on the amount of ho­tel/mo­tel taxes, which lo­cal of­fi­cials plan to use to pay down the $23 mil­lion in bonds for the civic cen­ter project, have been dras­ti­cally scaled back.

Ini­tial fig­ures put to­gether by in­vest­ment bank­ing firm Mer­chant Cap­i­tal fore­casted a $19.9 mil­lion sur­plus from ho­tel/mo­tel taxes by 2040. The bonds, which will be taken out by the county and city of Cov­ing­ton, were pro­jected to be­come rev­enue neu­tral (or to stop run­ning at a deficit) by 2021.

Af­ter the ini­tial pro­jec­tions were pre­sented to the Cov­ing­ton City Coun­cil and the New­ton County Board of Com­mis­sion­ers in Au­gust, some mem­bers of the com­mu­nity with back­grounds in fi­nance and math­e­mat­ics be­came skep­ti­cal of the pro­jec­tions say­ing they painted an overly op­ti­mistic pic­ture of what would hap­pen over the next 32 years.

Jerry Bouch­illon, a for­mer at­tor­ney for the city of Cov­ing­ton, told the Cov­ing­ton City Coun­cil on Mon­day that the ini­tial pro­jec­tions are “too good to be true.”

He took is­sue with sev­eral fac­tors in the pro­jec­tions, in­clud­ing the fore­casted ho­tel room oc­cu­pancy rate and the av­er­age rate of ho­tel rooms in the county. Bouch­illon said the pro­jec- tions also as­sumed there would be no fur­ther in­crease in construction costs of the project or construction de­lays. Any de­lays in the project would likely in­crease the amount of in­ter­est that must be paid on the bonds.

Bryan Huske, vice pres­i­dent of Mer­chant Cap­i­tal, said the ini­tial pro­jec­tions were put to­gether af­ter his firm sought in­for­ma­tion from “var­i­ous pro­fes­sion­als in­volved” on av­er­age and ex­pected ho­tel oc­cu­pancy rates and ho­tel room rates.

Af­ter their ini­tial pro­jec­tions were ques­tioned, Mer­chant Cap­i­tal re­vis­ited their ini­tial pro­jec­tions and came out with two new sets of fig­ures, both of which sig­nif­i­cantly down­sized the tax rev­enue fore­cast.

In their ‘moderate’ case sce­nario, the bonds do not be­come rev­enue neu­tral un­til 2029 and the to­tal sur­plus from the taxes by 2040 is only $400,000. An in-be­tween ‘ag­gres­sive case-re­vised’ sce­nario shows the bonds not be­com­ing rev­enue neu­tral un­til 2025 and run­ning a to­tal sur­plus of $8.6 mil­lion.

“We’re re­ally just try­ing to run dif­fer­ent sce­nar­ios to keep both gov­ern­ment bodies in­formed as best as pos­si­ble,” Huske said.

Sub­mit­ted photo

Above) A con­cept draw­ing shows what the in­te­rior of the the­ater of the civic cen­ter will look like upon com­ple­tion. (Be­low) A con­cept draw­ing shows what the in­te­rior of the the­ater of the civic cen­ter will look like upon com­ple­tion.

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