06/22/2005 Council Packet - Laserfiche WebLink

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City of Lino Lakes YMCA Financing Options June 22, 2005, page 2 We have been asked to recommend options for financing the City's $1,500,000 share of the facility and to discuss options and considerations related to the $2,500,000 to be financed by the YMCA. Financing the City's Portion of the Facility The City has committed to share in the project by financing $1,500,000 of the project cost. In order to obtain the authority to bond, there are three viable options the City may consider: 1) Referendum General Obligation (GO) Backed Bonds a. The City could ask the voters to approve the sale of bonds, however, the City has already committed to the $1,500,000 payment. The City is financing only 20% of the total project cost and, in return, will have a recreation facility to serve the community. A referendum is expensive, time consuming and unnecessary as there is already authority for the City to carry out its commitment (as noted in the other options presented herein). Referendum bonds would be subject to debt limits but would allow the City to obtain GO backing and lower interest rates as a result. 2) Lease Revenue Bonds issue by the City a. In our report written in 1999, we recommended Lease Revenue Bonds for up to $1,000,000 to avoid inclusion in debt limit calculations with the remaining $500,000 paid from cash. If the City is able to reduce debt by using cash on hand the bond issue may be outside of debt limits. If not, the City's debt as a percentage of market value would grow from .86% to about .95 %. This is well below the 2% State cap. Lease Revenue Bonds would also result in higher interest rates as the bonds would be Lease Bonds without GO backing. While this tool is a viable option, the ability to issue abatement bonds (see item 3 below) for community centers has evolved since we last studied the financing for this project and may be a more appropriate fit to the City's needs. 3) Abatement Bonds a. The City has used abatement for public improvements in the past. This tool allows the City to issue GO Abatement Bonds repaid from a special tax levy outside of levy limits (should they be reinstated). Authority for the abatement is obtained by identifying properties that benefit from the public improvement to be financed. If the City's share of annual taxes generated by these properties equals or exceeds the annual debt service, an abatement may be created by resolution.