06/13/06 - Laserfiche WebLink

Home

· 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. The bonds would be financed over a 20-year fixed rate at an average rate of 4.20%. · Annual Appropriation Lease Revenue Bonds. These bonds would be issued by the City's BRA. The security pledge would be an annual appropriation of lease payments by the City (usually via tax levy) to the BRA 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 of 5.00%. The rate is higher as they are not GO bonds. An appraisal of the property is required. Finance Officer Lund reviewed financing Options A, B, C and D for the general obligation tax abatement bonds and the annual appropriation lease revenue bonds. She advised the City needs to finance $294,000 as part of the first payment on the scheduled closing date of June 30th. This amount is rolled into Option C. Staff recommends that Option C - the issuance of a GO tax abatement bond is selected for the purchase of the Boike property. This incorporates a lower interest rate and includes the City's first required payment, and keeps the overall abatement amount at approximately the same amount as originally proposed in the JP A, which language will need to be amended. She indicated the County has changed language in the JP A to state the County will pay 50% of the City's bonding amount. Councilmember Jeffrey questioned how the City will make the $133,000 payments every year. Finance Officer Lund replied there will be a levy; the levy of the parcels around the bridge crossing will go towards this bonding. Councilmember Jeffrey requested clarification that there will be a $133,000 shortfall from the general fund to make up because the taxes brought in from the levy for the properties in this area will go towards this bond payment. Finance Officer Lund indicated the $133,000 will be added to the overall amount that is certified for the levy; it will be added into the tax capacity rate that goes across the City. Chairperson Strommen noted essentially this budget decision is being made now for next year. Councilmember Jeffrey stated he supports this purchase, but the Council needs to take a long look at the budget; $133,000 here means $133,000 that cannot be used somewhere else. Finance Officer Lund advised another option would be to utilize the BRA or EDA levy and not apply it towards other projects in the future; however, this $133,000 would use up almost half of the $300,000 BRA levy. Chairperson Strommen asked when the budget check-in is scheduled for the Council. City Administrator Norman replied the budget check-in will be scheduled in July. Finance Committee / June 13, 2006 Page 2 of5