Hobart is targeting a bond to avoid a potential tax disaster

HOBART — The city is preparing for a property tax refund to Southlake Mall.

The city council took interim action Wednesday to approve a general commitment statement not exceeding $5.8 million.

“The reason we’re doing this today … relates to the possibility that the mall’s tax refund will be withheld from the city’s tax distribution in December,” Bond adviser Randy Rompola said Wednesday. “If that were to happen at the proposed level, it would be catastrophic for the city.”

Rompola said the Hobart Redevelopment Commission is following a similar bond issue that is before the council.

The bonds are in response to separate cases in which Indiana courts ruled to reset the mall’s ratings for tax years 2011 through 2016 to their 2010 rating.

City leaders have estimated Hobart could suffer $9 million in financial damage if the mall is given a property tax refund.

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If the city decides to issue bonds, they would be bought by the Indiana Bond Bank, Rompola said.

The bonds would provide a financing mechanism whereby Hobart could be reimbursed for past expenses and provide working capital at the end of the year.

“So if the tax distribution is withheld by the county auditor to pay the tax refund, then the city would have cash going forward,” Rompola said.

He said the maximum rate on 10-year bonds would be 6%, but the rate is expected to be around 4%.

The bonds require a public hearing that could take place during the December 7 city council meeting. The board may consider adopting the bond regulations at this meeting.

Though Hobart is continuing to pursue bond issuance, Rompola said Hobart is exploring other potential funding options if the December tax refund is withheld.

“Think of [the bonds] as a failover in case it becomes necessary,” he said.