06/07/2018 EDAC Packet - Laserfiche WebLink

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ECONOMIC DEVELOPMENT ADVISORY COMMITTEE AGENDA ITEM 3B STAFF ORIGINATOR: Michael Grochala EDAC MEETING DATE: June 7, 2018 REQUEST: Private Activity Tax -Exempt Financing Guidelines BACKGROUND Love To Grow On, a Minnesota nonprofit corporation, who operates early childhood education centers in the City of Lexington and the City of Circle Pines, received approval to construct a new facility located in the City of Lino Lakes. As part of their financing Love To Grown On requested City assistance to issue tax-exempt conduit bonds. Under state statutes that authorize these bonds, the city issues the bonds and loans the proceeds to the private entity. In actuality, the loan is handled entirely by a separate bond trustee and the city has almost no role in payment or administration. While creating no risk for the City, issuance allows the private entity to obtain lower interest rates. The City was not able to provide the conduit bonds for this project due to other proposed debt issuance for street reconstruction. However, the City of Columbia Heights issued a revenue note, which is allowed under state statutes, subject to the local city's approval. The City Council approved the issuance at the May 29, 2018 council meeting. As part of the discussion the City Council requested EDAC review of the city's policy and consideration, not only as an economic development tool, but also a potential revenue source to assist with economic development activities. While limited to non -profits, affordable housing and some manufacturing facilities, the city does charge a fee for issuance. The City currently charges a one-time administrative fee equal to 1% of the bond issue amount. EDAC CONSIDERATION Staff is requesting EDAC discussion and recommendations regarding the use of conduit debt. ATTACHMENTS 1. Conduit Debt summary, League of Minnesota Cities 2. Tax Exempt Bond Guidelines, adopted 2005 1