Thanks to a TIF, BP Plays the Good Guy in This Indiana City

CHICAGO — Whiting, Ind., is selling $18.3 million of tax increment revenue bonds Thursday to finance a development on the city’s Lake Michigan lakefront.

The bonds are payable from a property tax increment generated in the lakefront’s TIF district in northwest Indiana. The TIF’s largest taxpayer is BP, which runs an alternative energy facility and owns other real estate in the district connected to the BP Whiting Refinery.

The plant, which is located just outside the TIF district, is the Midwest’s largest oil refinery and one of the largest asphalt producers in the country. The plant’s daily processing capacity of 405,000 barrels placed it fifth among the 143 operational U.S. refineries in July 2009, the U.S. Energy Information Administration said.

BP accounts for roughly 72% of the TIF district’s collections, according to Whiting’s financial adviser, Cender & Co.

The bonds are unrated. The Whiting Redevelopment Commission is the issuer. Indianapolis-based City Securities Corp. is underwriter and Ice Miller LLP is bond counsel.

The debt is tentatively structured as three series of term bonds, including $6.8 million that matures in July 2015, $2.8 million that matures in 2022, and $8.7 million that matures in 2032.

The redevelopment project — which features a historical museum, infrastructure, bike paths, sidewalks, and band shells — is expected to cost $44.3 million. The city’s lakefront is located near downtown and overlooks Chicago’s skyline.

The new park is a partnership between Whiting and the Northwest Indiana ­Regional Development Authority, which is providing about half of the financing with a $19.5 million grant. BP is contributing $2 million, with $4.5 million coming from other grants and local funds.

Despite BP’s troubles with the massive Gulf of Mexico oil spill, the company is expected to continue on track with its $3.8 billion upgrade to the main refinery, members of the finance team said.

“They’ve got a great history, and it’s almost impossible to start a new refinery anywhere in this country,” said James Merten, a vice chairman of public finance at City Securities. “They’re making major improvements to it, and we believe strongly it’s going to continue to be important.”

The refinery expansion is scheduled for completion in 2011. Karl Cender, the deal’s financial adviser, said he is not concerned BP will halt the improvements given its substantial investment in them.

The bulk of the proceeds will go toward the lakefront project, with $1.8 million set aside for a debt service reserve fund. Another $366,800 will go for the underwriter’s discount and $200,000 for other costs of issuance, bond documents said.

The bonds are payable solely from revenue generated from the TIF. In 2009 the city collected $3.9 million of tax. Over the life of the debt, officials expect to collect up to $4.9 million in 2011 and $2.03 million for the years 2020 through 2032. Maximum annual debt service — including payments for a $7 million bond issue in 2006 — will reach a projected $3.15 million in 2012, and will total roughly $1.35 million from 2020 through 2032.

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