06/22/2005 Council Packet - Laserfiche WebLink

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City of Lino Lakes YMCA Financing Options June 22, 2005, page 3 The City may ask the County or School to abate their share of taxes if the planned expenditure also benefits these entities. There is a 20 year limit if at least one other entity declines the City's request to participate. If all three entities participate, or if the City participates alone without requesting participation from other taxing jurisdictions, the time limit is 15 years. The abatement may be phased in with the Village project so that the levy is offset by added tax base. The maximum abatement cannot exceed 10% of the City's levy (not including debt levy). The City has sufficient capacity under this authority. GO abatement bonds do not count against the City's debt limit and will allow the City to obtain lower interest rates. The abatement could last 15 years with an average annual levy of $155,000 or last 20 years with an average annual levy of $130,000. Since there is sufficient property growth projected to absorb the additional costs, we are recommending that the City use a 15 year time frame to repay the bonds in order to maintain financial flexibility in the future. Under separate cover, Steve Bubul, Kennedy & Graven, has opined that the abatement tool to finance the City's share of the YMCA is an appropriate use and meets the legal requirements necessary to allow creation of the abatement. From a financial standpoint, Springsted believes that abatement bonds are most advantageous for this portion of the transaction in that (1) it produces the lowest interest rate possible (2) it is a simple transaction compared to a lease transaction (3) the abatement levy is offset by growth anticipated in the Village project and (4) the authority for an abatement for this project already exists in State law. Assisting the YMCA with Financing their Share of the Facility We have also been asked to consider ways that the City could assist in financing the YMCA's portion of $2,500,000. There are good reasons for the City to consider such assistance, especially where it allows some control or protection of the City's initial investment. We have looked at two options. 1) Lease Revenue Bonds a. Lease Revenue Bonds could be issued by the City and repaid by a lease payment from the YMCA to cover 100% of the debt. The interest rate would be 20 to 30 basis points higher than a GO backed bond and a debt service reserve