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FINANCING OPTIONS FOR RIGHT-OF WAY ACQUISITION FOR THE <br />FUTURE NORTHWEST METRO CORRIDOR AND RIVER CROSSING <br />(BOIKE PROPERTY) <br /> By: Diana Lund, Finance Officer <br /> <br />Background: <br /> <br />At the May 23, 2006, City Council worksession and meeting the consensus of the City <br />Council was in favor of purchasing the Boike property for the future river crossing and to <br />cost share the funding of the purchase with Anoka County through a Joint Powers <br />Agreement. <br /> <br />Staffwas directed to compile possible financing options and bring it back to council at a <br />future date. <br /> <br />Staffhas been working with the City's finance consultant for possible funding scenarios. <br />It was determined that the following are three possible funding sources: <br /> <br />General Obligation Bonds issued by the City's Port Authority. This would <br />have been a viable and preferable bonding mechanism, but it was discovered <br />that major language was left out of the recently adopted legislation and made <br />it site specific only. That site being the Sunwood Grand Ramp only. <br /> <br />General Ob!igation Tax Abatement bonds. The City would need to create a <br />Tax Abatement District around existing properties and designate those <br />property tax collections to the repayment of the debt service. A key limitation <br />is that the principal amount of the bonds cannot exceed the sum of the total <br />estimated abatements. A copy of the Tax Abatement law is attached. The <br />bonds would be financed over a 20-year fixed rate at an average rate of <br />4.20%. <br /> <br />Annual Appropriation Lease Revenue Bonds. These bonds would be issued <br />by the City's HRA (this is the same procedure that was taken when the City <br />issued the Municipal Center bonds through the EDA). The security pledge <br />would be an annual appropriation of lease payments by the City (usually via <br />tax levy) to the HRA to meet debt service. A mortgage on the property would <br />also need to be considered. The maximum marketable term on these bonds <br />would be 15 years with an average interest rate of 5.00%. The rate is higher <br />as they are not GO bonds. An appraisal of the property is required. <br /> <br /> <br />