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Mr. Tinklenberg explained the Mn/DOT procurement process when a project costs more than <br />Mn/DOT has in hand, resulting in a delay while waiting for the future appropriation cycles and <br />federal authorizations. He noted this long delayed process occurred with the Stillwater Bridge <br />and completion of Highway 610, which impacted economic development. In addition, by the <br />time the funding was actually acquired, the cost of the project increased due to inflation. Mr. <br />Tinklenberg explained this innovative financing plan accelerates the time period by allowing <br />Mn/DOT to go to the contractors to build the project and also finance the project. He noted with <br />the $250 million Crosstown project, Mn/DOT had asked contractors do a design/build/finance <br />program but none responded because if the contractor has to finance on their balance book, they <br />will not be able to do any other projects. Or, if the contractor goes to the bank for financing, it is <br />very expensive and ties up their capital. Mr. Tinklenberg explained that Oppenheimer put <br />together a plan that allows the contractor to finance the project by using tax exempt bonds with a <br />very low interest rate and the bonds are non - recourse. This means the guarantee for the <br />repayment comes not on the basis of the credit worthiness of the contractor or full faith of the <br />State of Minnesota, but is specifically related to Mn/DOT's commitment to pay for the project. <br />Then Mn/DOT can reset the financing for the project, put payments in for a few years, eliminate <br />payments when cash strapped, and/or adjust the amount of the payment depending on level of <br />funding available. Mr. Tinklenberg stated that is why this is an attractive financing alternative <br />for the State and contractor; more projects can be undertaken sooner. He stated the important <br />thing is that none of this involves the City. The City has no responsibility to the financing plan <br />other than what it may wish to have in terms of a cost sharing arrangement with Mn/DOT. This <br />is a financing plan for Mn/DOT, not for the cities involved in the project. Mr. Tinklenberg noted <br />the City indicated in the past it may be wiling to consider cost sharing with Anoka County but <br />that is a separate discussion and consideration. He assured the Council that the City of Ramsey <br />would not be "on the hook" for repayment of this type of financing. He stated it is an exciting <br />process, enables Mn/DOT to do more projects and much sooner, and a great place to demonstrate <br />how it can work is in Ramsey. <br />Acting Mayor Backous asked where this type of financing has been used successfully. <br />Andre Lubervich, Oppenheimer, described the two Florida projects. He explained the <br />repayments were decided by the Florida Department of Transportation (DOT) and the <br />contractors set their draw schedule with the Florida DOT. <br />Acting Mayor Backous noted the risk is then whether the State pays back the contractor as <br />promised. <br />Mr. Lubervich explained a surety company would back the contractor should they default so a <br />new company can be brought in to complete the project. In addition, a letter of credit for non- <br />asset items and a small debt service reserve fund would be required. <br />Mr. Tinklenberg stated the surety part is important because when banks are involved, there may <br />be an argument about who can complete the project. He advised that the majority of surety <br />companies that have reviewed this type of financing project are willing to do so. <br />City Council Work Session / May 28, 2013 <br />Page 2 of 8 <br />