Agenda - Council - 07/11/2006 - Laserfiche WebLink

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.". FC# Authorize Acquisition of Boike Property By: James E. Norman, City Administrator Background: At the Finance Committee meeting of June 13, 2006, staff presented the following financing options for the purchase the Boike property for the future river crossing: 1. General Obligation Bonds issued by the City's Port Authority. This would have been a viable and preferable bonding mechanism, but it was discovered that major language was left out of the recently adopted legislation and made it site specific only. That site being the Sunwood Grand Ramp only. 2. General Obligation Tax Abatement bonds. The City would need to create a Tax Abatement District around existing properties and designate those property tax collections to the repayment of the debt service. A key limitation is that the principal amount of the bonds cannot exceed the sum of the total estimated abatements. A copy of the Tax Abatement law is attached. The bonds would be financed over a 20- year fixed rate at an average rate of 4.20%. 3. Annual Appropriation Lease Revenue Bonds. These bonds would be issued by the City's HRA (this is the same procedure that was taken when the City issued the Municipal Center bonds through the EDA). The security pledge would be an annual appropriation of lease payments by the City (usually via tax levy) to the HRA to meet debt service. A mortgage on the property would also need to be considered. The maximum marketable term on these bonds would be 15 years with an average interest rate of5.00%. The rate is higher as they are not GO bonds. An appraisal of the property is required. Options 2 and 3 were the only viable methods currently allowed, and both would affect the City's tax capacity rate, as the debt service amount would become a yearly levied amount. The Finance Committee was in agreement that they wanted to see the numbers from the 2007 General Fund budget and the budgets effect on the City's tax rate before they could authorize this purchase. The case was tabled until a later date. As the 2007 General Fund budget is still being prepared, staff has examined two other options of financing the Boike property with Tax Increment Financing. The first option would be a five- year Contract for Deed (See attached) with Boike. Based on the current balances in TIF 1 and TIF 2 the payment structure under this option would be sporadic with two large balloon payments in 2010 and 2011. The second TIF financing option would be to issue a GO Tax Increment Bond for a six year term pledging TIF revenues to pay the debt service (See attached). Again, the projected debt service schedule is left with two large balloon payments in 2010 and 2011. Under both financing options, TIF Districts 1 and 2 would be utilized to make all payments. The ability of these two districts to pay debt service is based on the projection of future tax increment revenues within these districts.