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Mayor & City Council <br />October 14, 1992 <br />Page 2 <br />* Fire Department could borrow funds from a <br />commercial lending institution. The loan would be <br />repayed with future charitable gambling revenues. <br />The concern in doing this would be the higher <br />interest costs the Department would be paying <br />thereby reducing the availability of charitable <br />gambling proceeds for other purposes. <br />* Another option would be for the City to make the <br />loan to the Fire Department. The City would use <br />this as an investment instrument funded by <br />available funds on -hand within the building <br />account. The advantages of doing so would be that <br />interests costs would be payable to the City <br />rather than a lending institution thereby <br />maximizing the impact of available charitable <br />gambling proceeds. The negative to this option <br />would be the documentation necessary to make this <br />a legal investment instrument for the City. <br />* The last option would be for the City to provide <br />the funds from the Fire Department building <br />account to finalize the purchase. This option is <br />acceptable (legal) in that $325,000 of donated <br />funds were provided to this account for the <br />construction of the fire station. In discussing <br />this with our Bond Counsel, Mary Ippel of Briggs & <br />Morgan, she indicated that the donated funds do <br />not have the restrictions that bond proceeds have <br />and therefore could be utilized for the purchase <br />of the truck. Since the purchase of the truck <br />serves the residents of the City, the public <br />purpose requirement for the expenditure of City <br />funds has also been fulfilled. Another advantage <br />of this option is the goal that the $125,000 would <br />be recovered through proceeds generated from the <br />sale of the truck and from future charitable <br />gambling proceeds (90% of total raised). These <br />funds would then come back to the City and be set <br />aside in a newly established Fire Equipment <br />Capital Expenditure Fund to help offset future <br />purchases in this area. <br />The last option makes the most economic sense from the <br />City's standpoint. We have maximized the use of a scarce <br />resource (i.e. charitable gambling proceeds) by not paying <br />high interest costs to a private lending institution. It <br />Page 4 <br />