06-13-01 Council Special Minutes

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MINUTES CITY COUNCIL JUNE 13, 2001 Fifield reviewed his letter dated June 13, 2001 that outlined the issues facing the City in issuing bonds to finance redevelopment in the Rice Street/Little Canada Road area. Ile pointed out that item #6 in this memo demonstrates the potential fora 40% reduction in TIF assistance available to a redevelopment project. Fifield did note that the Legislature is considering holding cities harmless for this loss of revenue through a grant program that would be available for pending TIF projects for which bonds have been issued prior to July 1, 2001. Therefore, Fifield suggested that if the City immediately issue bonds for a redevelopment project at Rice and Little Canada Road, that project may qualify as apre-existing condition and be eligible for the gratrt program. Fifield indicated that the worst-case scenario would be that the City would be out the cost of issuing bonds should the redevelopment project either not materialize or not prove economically feasible. Fifield pointed out that there are three options available to the City in issuing a bond, and these are outlined in item #] 0 in his June 13°i memo. They include: 1. The City sells bonds to au underwriter and simultaneously purchases the bonds as an investment; 2. The City sells bonds to an underwriter and escrows ("parks") the proceeds until legislative and development issues are resolved; 3. The City sells bonds to an underwriter in a conventional bond issue. Fifield indicated that the first option is preferred if the City has the funds available to purchase the bond as an investment. The second option would generate more up-front costs for the City, and the third option is the least likely to happen given there are only 12 business days left until July 1~`. Fifield reviewed a debt service projection fora $1,500,000 bond issue, and pointed out that there is a $25,000 to $26,000 annual gap. Fif eld indicated that even with the gap, this would be a reasonable bond issue. He also indicated that there may be some increment from Country Drive that would be used to reduce or eliminate the gap. Fifield indicated that given the potential actions the Legislature may take with regard to the property tax system and TIF, it would be in the City's best interests to issue bonds and preserve the ability to provide assistance to a redevelopment project in the Rice Street/Little Canada Road area. The City Administrator reported that he met with the City's auditors regarding the audit report, and discussed the potential for liquidating some assets to cover Option 1 and the repurchase of the bond issue as an investment. The Administrator reported that Option 1 provides the City with the most 3