Akron City Council joined Summit County Council Monday in approving a new private financing structure for the first phase of the Goodyear Tire and Rubber Co. redevelopment project which reduces the previously anticipated risks to both parties by $2.5 million.
National City Bank, now a part of PNC Bank, has agreed to purchase the $17.2 million in taxable development revenue bonds issued by the Summit County Port Authority in March - and backed by the city and county - to help developer IRG Rubber City LLC purchase Goodyear properties to be redeveloped as part of the Goodyear Akron Riverwalk Project.
Under the terms of the initial financing agreement Council approved in March, the city and county would each have been obligated to pay back $7.4 million of the Port Authority's loan to IRG if it were to default when the bonds matured in three years.
Council's Economic Development and Job Creation Committee Chair Terry Albanese said the private purchase of the bonds will result in a lower interest rate for the financing, assures that the bonds will be sold in an uncertain market and reduces the city's financial obligation in the remote chance that IRG should default.
"The city and county negotiated private placement of the bonds with PNC related to the acquisition of Goodyear property for redevelopment, and we received a better rate than we initially anticipated," Albanese said. "PNC provided a 4.25 percent interest rate; whereas the prior interest rate would have been closer to 7 percent."
The Port Authority loan enables IRG to purchase the Goodyear headquarters, Goodyear Hall, Goodyear Technical Center and other properties for redevelopment. Goodyear will still lease the properties from IRG for five to 10 years (depending on which facility), but under the new terms, IRG will put up four additional properties as collateral, Albanese said.
The prior financing agreement assumed a $1.5 million annual debt service payment to be taken from the Goodyear lease payment and paid directly to the bond trustee, U.S. Bank. Any excess would be remitted to IRG. Now, the annual debt service payment would be $2.1 million, but the amount left owing after three years will be just under $13 million, as opposed to nearly $15.5 million under the previous terms. The increased initial debt service payments - the payments on interest and principal - will result in less money owed at the back end, Albanese said.
Council initially approved the alternate financing agreement with the Port Authority because tightened credit markets made it difficult for IRG secure private financing. The loan is intended to offset a portion of the costs to acquire the properties to begin the first of a multi-phase Goodyear redevelopment project to include a new World Headquarters, retail office space, recreation facilities and a hotel.