Agenda - Council - 05/26/2015 - Laserfiche WebLink

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CC Regular Session Meeting Date: 05/26/2015 By: Diana Lund, Finance Information Title Authorization of Amendment to Deposit Requirements of Conduit Debt Policy 4. 10. Purpose/Background: Purpose: To amend the City's Conduit Debt Policy by updating language regarding applicant deposit requirements. Background: The city adopted its current Conduit Debt Policy on May 10, 2005. Conduit Debt is known as pass through debt. Definition: Conduit debt is usually issued by a government agency that issues municipal securities (bonds) to raise capital for revenue -generating projects where the funds generated are used by a third party (known as the "conduit borrower") to make payments to investors. The conduit financing is typically backed by either the conduit borrower's credit or funds pledged toward the project by outside investors. If a project fails and the security goes into default, it falls to the conduit borrower's financial obligation, not the conduit issuer (city). Not -For Profits and other entities may approach the city to help finance its project via conduit debt to take advantage of the city's tax exempt status which offers a lower bonded interest rate. (Not -For -Profits cannot issue tax exempt bonds). The city has most recently issued conduit debt for the refinancing of the Pact Charter School in 2013. As the city's current policy was drafted in 2005 staff has been researching other communities conduit debt policies and sought the recommendation of the city's bond counsel in regards to adequate deposit requirements. Briggs and Morgan, the City's current bond council, recommended that a conduit debt applicant must make a deposit equal to one-half of one percent (currently 1%) of the proposed bond issuance amount with a minimum deposit of $10,000 (currently $500). They found this deposit requirement to be fair and adequate in other conduit debt issuances they have handled for neighboring cities. Observations/Alternatives: Option #1: Amend Deposit Requirements to one-half of one -percent of bond issuance amount with a $10,000 minimum as recommended by City Bond Council. Option #2: Leave 2005 Policy as is. Option #3: Amend 2005 Policy with the following deposit requirements: % of bond issuance amount with a $ minimum. Recommendation: Staff recommends Option # 1. Bond Council has worked on several conduit debt issuances with other cities and this is their recommendation of fair and adequate deposit requirements for conduit debt applicants. Action: Adopt Amended Deposit Requirements for the City of Ramsey's Conduit Debt Policy.